When companies forecast lower sales or profits, their stocks usually take a hit. It's not always easy to tell whether they're having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!
To help tell the difference, we pair up the dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.
|
Stock |
CAPS Rating (out of 5) |
Previous or Consensus Estimate |
Current Guidance |
Period |
|---|---|---|---|---|
| Deckers Outdoor (Nasdaq: DECK) | *** | $1.46 | $1.10 | Q3 2012 EPS |
| Glu Mobile (Nasdaq: GLUU) | ** | ($0.04) | ($0.06)-($0.07) | Q3 2012 EPS |
Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.
Kicked to the curb
When the bar is set low enough, it's easy to step over it. That's partly the reason sheepskin-boot maker Deckers Outdoor was able to see its stock rise after reporting wider losses than the year-ago period and lowering guidance for the coming quarter. Analysts had expected Deckers to do so poorly that its less-bad report was received as good news.
Yet the impact of Europe's financial mismanagement continues to weigh on operations as sales plunged almost 15% on the Continent. The saving grace was domestic sales surging 37%, helping to boost consolidated revenues 13% higher, which beat management's expectations of 8% growth. Losses also beat expectations, coming in at $0.53 per share compared to the $0.59 loss Wall Street forecast, but it was much worse than the $0.19-per-share hole it had started digging last year.
Nike (NYSE: NKE) has had to restructure its Western European operations, which served as a drag on performance last quarter, while Wolverine World Wide missed profit estimates because Europe tripped it up. With the Continent in a deep, double-dip depression, not even the Olympics in London are likely to spur much of a spark.
But the Uggs brand isn't dead, as Deckers' results show, and new opportunities are opening in Asia. At less than eight times earnings estimates, the boot maker is at a cheaper spot than Nike, Wolverine, and even Crocs! When one adds in the growth prospects it has, Deckers looks cheap indeed.
I'm rating it to outperform on CAPS now, but tell me in the comments section below whether you agree that Deckers Outdoor can kick it higher.
Dialing up growth
Mobile game maker Glu Mobile got a bounce, too, despite lowering guidance, but it had also telegraphed early on what its numbers would be. As rival Zynga (Nasdaq: ZNGA) was rightly getting slammed for its poor performance, Glu was sucked down into the vortex and responded by preannouncing its results, which showed revenues coming in ahead of expectations.
Investors apparently are willing to forgive Glu the sin of saying third-quarter profits will be wider than previously expected, because it raised full-year revenue guidance from a range of $86 million-$92 million to $94 million-$96 million.
Foolish writer Harsh Chauhan pegs Glu as better positioned in the mobile gaming space than either Zynga or Electronics Arts (Nasdaq: EA): "Glu is miles ahead of these companies since it has been playing the mobile game very well for quite some time now. It has got expertise, has made some good acquisitions on the way, and is not dependent on a social network but on the smartphone and tablet boom."
I'm not a fan of Glu's "freemium" business model, or the free-to-play, pay-to-play-more way of doing things. Players don't like being nickeled-and-dimed for the game experience, and the market is littered with companies that have tried and come up short, including Electronic Arts.
I've rated the game maker to underperform on CAPS and I'll be maintaining that rating, but you can tell me by commenting below whether you think it will succeed where others have failed.
Looking under rocks
There may be a niche for mobile gaming, but for some sharp reasons that Zynga might not be worthy of a spot in your portfolio, grab yourself a copy of this brand-new premium research report on Zynga. You'll also get quarterly updates as it reports earnings and other developments occur. Sign up today.
