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3 Stocks to Watch as Earnings Season Kicks Off

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These are three great companies to put on your radar.

Earnings season is underway, and it's likely that some of your favorite stocks either have posted, or are about to post, their quarterly results. In this segment of Backstage Pass, recorded on Oct. 13, Fool contributors Brian Withers, Trevor Jennewine, and Rachel Warren share three companies they are watching closely in the current earnings period. 

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Brian Withers: We got seven minutes left and our last question, isn't going to take that long. I was clearly going to throw the bonus question in here since earnings are coming up. Is there a stock that you think needs to have a great upcoming quarterly earnings, and why? Trevor, I like this one.

Trevor Jennewine: I am going to go with Fastly (FSLY -4.22%). I am a Fastly shareholder, so I am very interested in seeing this company turn things around. But there's just been a lot of trouble in the last year or two years. There's a change in leadership, new CEO in the beginning of 2020, and the former CEO didn't leave the company, he just stepped back into position where he felt more comfortable, still very involved in the technology, so he is the founder, Artur Bergman, and Joshua Bixby took his place, and he is more of the corporate leadership type. That decision looked good. In hindsight, maybe there's actually some problems with corporate culture going on. They had another replacement recently. I believe that it was the CFO that was leaving. So they just appointed a new chief financial officer, and that was back at the end of June where they brought Ron Kisling on as CFO.

That's one thing I'm looking at to see if other management position, other executives leaving the company or are there other swaps going on in the management at the management level. But in addition to that, there's also an outage a couple of months ago that had to do with Fastly's cloud platform being down, and so a lot of websites like Amazon were down for part of the day, and that caused some headwinds in the most recent quarterly report, and it will have them to lower their guidance through the third quarter. Then just in general, they are growing much more slowly than some of their competitors, like Cloudflare.

Fastly's platform, the management paints the picture as it's designed for these big enterprises that have use for a highly functional edge platform. That should make it very valuable to these large enterprise customers that might spend more than a $100,000 per year. But Cloudflare has more enterprise customers than Fastly does, and it's also growing its customer base more quickly than Fastly is. And its revenue is growing more quickly than Fastly is. I'm looking at all those things, and I really think Fastly needs to give shareholders some good news in the near future, if not this quarter, then soon.

Rachel Warren: Very good. Yeah, I was thinking about this and I'm going to go back to a stock that we mentioned earlier, but it's one I talk about a lot, and that's Teladoc (TDOC -5.45%). I love this company. It recently announced it's going to report it third-quarter earnings, I believe, on Oct. 27. I feel like investors have been a bit antsy about this stock lately. I definitely think it needs a strong quarterly report. I would note that Teladoc had a great second quarter. Revenue was up a 109% year over year.

Its second-quarter visits were up 28% from the year-ago quarter. But even so, I think with people having more of an ability to go to the doctor in person now, while I still believe that Teladoc is the future of healthcare, I think there's been a lot of mixed consensus among investors. I think the company needs a really strong quarterly report.

I will say even though shares are down and it's been trailing the market, I still very much believe in this company. Cathie Wood, founder of ARK Invest, interestingly enough, has been buying up shares of the company right and left, going back to that principle of buying shares of a quality company when it's trading on sale. But yeah, I think the company needs to have a good quarter.

Its last report was great. I think I would like to see it narrowing those net losses that it acquired from its purchases of InTouch Health and Livongo last year, but I'm definitely interested to see what the company has to say here shortly.

Brian Withers: Yeah, Rachel, it seems like Teladoc can't catch a break.[laughs] I've seen some strong earnings reports, although it's hard from coming off for their coronavirus growth. A company that's in a similar boat, I would say is Lemonade (LMND 1.57%). They've reached a peak recently and they're down quite a bit off of their high. I don't know that Lemonade needs to hit a home run or even a triple. To me, they just got to -- I'll continue the sports analogy -- get on base, hit stuff to get on first base, and that will pay off for the long term. I see that to me, the same company and the investing thesis in Lemonade as I did a year ago, and actually I feel more positive as they've been able to grow as much as they have over the past year, and they're going to get into auto insurance, and that's going to accelerate growth even further. I am excited about Lemonade's report, but I don't think it needs to be a knock-it-out-of-the-park to have this would be a long-term winner.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine owns shares of Amazon, Fastly, and Lemonade, Inc. The Motley Fool owns shares of and recommends Amazon, Cloudflare, Inc., Fastly, Lemonade, Inc., and Teladoc Health. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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