The fun thing about consumer stocks is that they represent pieces of the companies that almost every American has heard of. You don't need to be an industry specialist or a market guru to know what companies like Best Buy (BBY 0.73%), J.C. Penney (JCP +0.00%) or SodaStream (SODA +0.00%) actually do to earn money.
However, if you're a shareholder in any of these three companies, there is a little bit of technical knowledge that you should beef up on -- and soon. You see, each of these three companies has a lot of investors betting against them -- or shorting their stocks. That, plus the fact that each is reporting earnings means that your shares could be making huge moves in the upcoming week.
Read below to better understand why this is happening, and what you should really pay attention to when earnings come out.
|
Company |
% of Shares Short |
When |
Expected Revenue (Millions) |
Expected EPS |
|---|---|---|---|---|
|
SodaStream |
41% |
Wednesday |
$167 |
$0.01 |
|
J.C. Penney |
39% |
Thursday |
$3,900 |
($0.82) |
|
Best Buy |
10% |
Thursday |
$14,700 |
$1.01 |
Sources: Finviz.com, E*Trade.
SodaStream
This maker of at-home carbonated beverages has always been on short-sellers list. Many believe that SodaStream is both a fad and a company without any sustainable competitive advantages. Those convictions were only reinforced earlier this year, when Coca-Cola (KO 0.23%) announced that it will buy a significant stake in Green Mountain Coffee Roasters (NASDAQ: GMCR), starting a 10-year deal to work together on Green Mountain's cold brewer, and offer licensing partnerships.
The company, however, has continued to show strong revenue growth. SodaStream's guidance will play heavily in determining how the stock performs following earnings, and investors should pay close attention to what might be said on the conference call regarding the Coke-Green Mountain partnership.
However that plays out, there's no way to know what effect -- if any -- the competition could have on SodaStream sales, and investors would be wise to keep their eyes on the long-term horizon before making any buy/sell decisions.
Best Buy
Shareholders in this company saw their stake skyrocket last year, with shares up more than 250% in 2013. But was that rally caused by improvements in the underlying business, or simply investor optimism?
Indeed, although there were some positive developments coming out of Best Buy's camp last year, the bulk of the stock's ascendance was due to improved investor optimism. That's shone through so far this year, as shares have fallen by almost 40% in just seven weeks.
The holiday quarter is incredibly important for Best Buy, but the company has already announced that comparable-store sales slipped during that time. While online sales appear to have been a bright spot, if the company fails to meet expectations, it could be a rough ride for shareholders post-earnings.
J.C. Penney
Finally we have J.C. Penney, the longtime consumer stock that is trying mightily to reverse its fortunes. The past two years have been volatile, to say the least, for the company.
During 2012, holiday quarter comparable-store sales fell by more than 30%. That's unheard of! Since then, they've stabilized, albeit with a meager 2% jump. And in between then and now, the company fired former CEO Myron Ullman, hired Apple exec Ron Johnson, fired Johnson, and then rehired Ullman.
Though it will be important for investors to see whether J.C. Penney can meet expectations, an even more important thing to watch is how much cash the company burned through last quarter, and how much it has left on hand. It could be in danger of declaring bankruptcy if liquidity becomes an issue.
