Previewing Earnings for, Splunk, Palo Alto, Groupon & Others

Indie Research

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, looks at several popular stocks, including Groupon (GRPN), Splunk (SPLK), (CRM), Palo Alto Networks (PANW), Deckers Outdoor (DECK), and Monster Beverage (MNST).

Here is just a tiny sample of what wrote about Groupon:

Splunk has beaten the EPS consensus each quarter since it went public last year. During that time, the stock has risen the next session two of three quarters. ...

Last quarter, the San Francisco-based company reported an adjusted per-share loss of -1 cent per share, which was better than the -2 cents per share that Wall Street was expecting. Revenue for the growth-oriented company climbed by 67% to $52.0 million, much stronger than the $46.7 million that analysts had forecast.

Looking ahead, the company said it expects to report $58 million to $60 million in Q4 revenue, which would be a 37% increase at the midpoint. The consensus estimate prior to the new guidance was for the company to report $58 million in Q4.

Management didn't offer any profit guidance, while the Wall Street consensus is that it will report an adjusted loss of -2 cents per share.

Splunk said it added more than 350 new Enterprise customers during the quarter and launched the latest version of its flagship product, Splunk Enterprise 5.0, at the end of October. ...

Outside of earnings, we like Splunk due to the huge growth opportunity in front of the stock, the minimal direct competition it is facing, and its best-of-breed disruptive technology. Machine data is expected to grow at about a 40-50% annual clip for the foreseeable future, and Splunk is set to grow with it. However, the overall business intelligence opportunity is likely to be even greater.

Splunk is by no means a value play, but when it comes to tech, investors tend to value growth first and foremost, especially in a bull market. Big data is a huge theme, and when you're playing a growth game, one thing we've learned is that you want to invest in the company with the best products and growth, not the one with the most attractive valuation. ...

The full earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls made for Q4 so far were:

  • to be bullish on (PCLN) ahead of earnings.
  • to be bullish on Home Depot (HD) ahead of earnings.
  • to be bearish on First Solar (FSLR) ahead of earnings.
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