Just two weeks ago, I explored three companies that you would be wise to avoid this earnings season, and so far, the results have not disappointed.
More or less, it worked before, so let's try this again. Here are three additional companies that you may want to avoid this earnings season.
Good news, Netflix shareholders: First Solar
I can't really blame the company or Mr. Gillette for wanting to part ways. Since taking over the helm in October 2009, First Solar's stock has dipped some 70%. With nearly every solar company's outlook being trimmed drastically, including Trina Solar
Black gold, red books
I've long been a supporter of ATP Oil & Gas
Moody's recently stated that ATP shows a "high likelihood" of needing to restructure its $1.79 billion in net debt set to mature in 2015, saying that ATP's oil wells aren't producing sufficient cash flow to cover its obligations. Thankfully, however, ATP itself said that it expects to pump enough oil from its new wells to avoid defaulting on its debt. Despite this ever-so-cheery news, data from Bloomberg shows that ATP still boasts more debt than 97% of its peers, and analysts haven't hit the side of a barn with their earnings estimates on ATP within the past year. You may want to consider a hard hat if you're going to be holding ATP into earnings season.
There's no place like home
Close your eyes and click your heels together three times and I guarantee you the valuation on HomeAway
Every aspect of housing indicates that consumers are becoming even tighter with their spending -- perhaps even the upper echelon spenders, which is what HomeAway caters to. Home prices remain deflated, foreclosures are rising again, and mortgage applications dropped by double digits this past week, all signs which point to consumers' unwillingness to spend. And if that wasn't enough, perhaps HomeAway's trailing 12-month P/E of 493 and negative book value will take care of the rest for you. If results aren't stellar, all the king's horses and all the king's men won't be able to put this valuation together ever again.
These three companies either have a recent history of earnings misses or bear a pricey valuation that, until recently, the market had shown it was willing to support. Only time will tell if I'm right, but the momentum clearly appears to be on the pessimists' side this quarter for these stocks.
Do you agree or disagree with my analysis. Share your thoughts in the comments section below and consider adding First Solar, ATP Oil & Gas, and HomeAway to your free and personalized watchlist to keep up on the latest news with each company.
Editor's note: A previous version of this article erroneously attributed Moody's comments on ATP to the company. We regret the error.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong and on Twitter where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of Netflix and First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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 that never needs to be sold short.