3 Predictions for the New Week

This Fool sees a limb to go out on. And another. And another.

Apr 27, 2014 at 3:00PM

went out on a limb last week, and now it's time to see how that decision played out.

  • I predicted that Netflix (NASDAQ:NFLX) would move higher on the week. After correcting 25% since peaking a month earlier I figured that the leading premium video service's earnings report should help breathe new life into last year's darling. It did, but it didn't stick. Netflix came through with stronger than expected earnings and subscriber growth. It also announced that it would be raising prices for new subscribers later this quarter, exciting investors on the profit widening potential of the increase. The stock moved sharply higher initially, but by the end of the week it had fallen to close 7% lower on the week. I was wrong.
  • The Dow Jones Industrial Average (DJINDICES:^DJI) has been clobbering the Nasdaq Composite lately, but I still think the tech-centric Nasdaq is the place to be. My second prediction was for the Nasdaq to beat the Dow on the week. It seemed I was going to come out on top, but a sharp market drop on Friday that was particularly brutal on tech darlings wiped me out. The Nasdaq Composite slipped 0.5%. The Dow moved 0.3% lower. I was wrong.
  • My final call was for iRobot (NASDAQ:IRBT) to beat Wall Street's income estimates in its latest quarter. The maker of Roomba vacuum cleanings orbs and more advanced military robotics had beaten analyst targets consistently over the past four quarters, and I was banking on a repeat performance. We saw it close out the quarter with a profit of $0.18 a share. Analysts had been projecting net income of only $0.16 a share. I was right.

One out of three? I can do better than that!

Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.

1. 3D Systems will move higher on the week
3-D printing has fallen out of favor this year, and poster child 3D Systems (NYSE:DDD) has felt the pain. The maker of 3-D printers has seen its stock shed nearly half of its value in 2014, and it will have a good chance to tell its side of the story when it reports on Tuesday. 

3D Systems hasn't been much of a treat during earnings season. It didn't beat Wall Street's profit estimates at all through all four quarters of 2013, and now the pros see profitability declining. Top-line growth has never been a problem. Given the sharp correction even a mixed quarter could be enough to trigger a rebound. 

My first call is for 3D Systems to move higher this week.

2. Nasdaq will beat the Dow this week
I've routinely picked the tech-heavy Nasdaq Composite to beat the Dow Jones Industrial Average, and it's been a bad bet in recent weeks. I went to just picking the Nasdaq or Dow to close in positive territory for the week, but I'm going to stick to my familiar prediction for the week ahead. My second call is for the Nasdaq Composite to beat the Dow Jones Industrial Average for the week.

3. LifeLock will beat Wall Street's earnings estimates
Some stocks are just flat out better than others.

LifeLock (NYSE:LOCK) is a leading provider of ID theft monitoring services. It tracks the credit of its premium subscribers, alerting them to any discrepancies that may creep up. Not everybody is happy with the product -- inviting class action lawsuits -- but it hasn't had a problem posting sequential upticks in subscribers on a consistent basis.

Another thing it does is make analysts look like perpetual underachievers. If analysts say that the company rang up a deficit of $0.02 a share in its latest quarter, I'll argue that it held up better than that. History's on my side!

One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.

Quarter

EPS Estimate

EPS

Surprise

Q1 2013

($0.01)

$0.01

200%

Q2 2013

$0.01

$0.03

200%

Q3 2013

$0.10

$0.12

20%

Q4 2013

$0.21

$0.22

5%

Source: Thomson Reuters.

Things can change, of course. The impressive streak of quarter-over-quarter membership growth can end as subscribers move on to rival offerings or just cancel without replacing the coverage. There's also the trend that finds the beats narrowing lately. It's still hard to argue against the overall trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

Three for the road
Well, there are three predictions right there. Let's see how I fare this week, as you check out three more investing ideas. As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love.

Rick Munarriz owns shares of LifeLock and Netflix. The Motley Fool recommends 3D Systems, iRobot, LifeLock, and Netflix and owns shares of 3D Systems and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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