Breakout

3 earnings plays to watch this week

Breakout

It may be disheartening to those naïve souls under the impression that Wall Street is “fair,” but the playing field is still tipped in favor of professional traders over individual investors. The pros have faster machines, better execution of their orders and more useful information.
 
At least in terms of information, Leigh Drogen and Estimize are trying to level the playing field by giving individuals insight on earnings results Wall Street really expects as opposed to the “official” published estimates.  As Drogen explains in the attached video, Estimize surveys not just the sell-side research analysts but their customers at hedge funds and institutions. That gives customers the ability to know what really constitutes an earnings beat or disappointment when corporations report.
 
In the attached video Drogen shares his insight on three high-profile companies set to report later this week.
 
Netflix (NFLX)
 
Shares of Netflix were one of the best performers of the year in ’13 but have gotten pummelled recently after expectations got ahead of reality.  After spiking to just under $40,0 NFLX shares are currently in the low-300 area and falling fast of late.
 
Wall Street is looking for 23% revenue growth, but Drogen thinks there’s a decent chance the company either misses or guides lower on margins based on some big institutional investors’ expectations for a dramatic miss.

eBay (EBAY)
 
There are some stocks where the price action is so crazy not even the most degenerate day-trading adrenalin junkies care to get involved ahead of news. Fundamentally, Drogen says the smart money is betting eBay got its lunch eaten by Amazon (AMZN) in the fourth quarter. Before contrarians get too excited about making a bullish bets they should take a peek at the one-year chart:

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The stock has moved between $58 and $49 in explosive, high volume gaps. Volatility is priced into the options but the chart looks like a very unhealthy man's EKG. In the mid-50s the stock is priced to break as many hearts as possible after reporting. In terms of the risk/reward set-up, trading eBay is akin to paying brokerage fees for the right bet on a coin flip."I would walk away from this one" says Drogen. That about sums it up.

InvenSense (INVN)

This is a company that makes the sensors that go into wearable technology. "This is definitely a cult stock," Drogen warns. Wall Street is officially only looking for growth in the mid-teens, but anyone who saw the news from CES knows wearable tech is THE big thing, at least as far as the media is concerned. The smart money thinks the story behind InvenSense could be exciting to traders even if reality isn't.

Drogen says 36% of their revenues come from Samsung which has been pushing its hopelessly clunky GalaxyGear watches for almost a year. End user sales of the Gear have been almost non-existent but InvenSense wins as long as Samsung keeps trying to refine the product using InvenSense sensors.

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InvenSense shares are down on Tuesday after a downgrade, but Drogen says the folks Estimize talks to are looking for better news than most of the Street expects when the company reports tomorrow.

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