5 Stocks To Watch In November
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
As we enter November, we are just two months from the end of the year. While 2012 is almost over, there is still plenty to watch for in the next two months. Election Day is next week, which could have a huge impact on the markets. The Fed will meet again in December. Earnings season is not even over yet. While all of this occurs, a large part of the Mid Atlantic and Northeast will look to recover and rebuild from the devastation of Superstorm Sandy. Markets will look to get back to normal activity after the first two-day weather related close in over 100 years. There will be much going on this month, so here are five stocks to watch in November.
Green Mountain Coffee Roasters (GMCR):
While the tail end of earnings season is approaching, there is one name many want to hear from, and that is Green Mountain. The coffee company will report a little later than normal on Tuesday, November 27th, after the bell. Green Mountain has been one of the biggest battleground stocks over the past few years. The name has seen huge volatility and wide price swings over growth concerns, accounting issues, David Einhorn's stance against the name, etc. The stock was over $115 in 2011 but trades for just about $25 now.
Green Mountain shares hit a new low after the company warned with its latest report, but an announced stock buyback sent shares reversing sharply higher. The stock more than doubled from a low of roughly $15.25 to over $32, but has lost a lot of that momentum. The company's growth has certainly hit a wall, with 95% revenue growth in fiscal 2011 but less than 20% growth expected in fiscal 2013 (the company's fiscal year ends in September).
So when Green Mountain reports in late November, investors will be looking at several items. First, does the company warn again? It has a couple of times in the past year. Second, are they buying back shares already and how many have they bought if so. Third, there was some recent speculation that the company was about to start expanding globally. I'm sure there will be questions about that on the conference call. Finally, how does the balance sheet look? Many of these items are connected, because if the growth forecast is cut again, many will question how they will pay for the buyback, given the company's poor cash flow and balance sheet.
Currently, analysts are looking for fourth quarter revenues of $902.23 million, an increase of 26.7% over the prior year period. Earnings per share are expected to rise by a penny to $0.48. For fiscal 2013, the current expectation is for 14.9% revenue growth to $4.38 billion, and earnings per share of $2.51, compared to the expected $2.24 for fiscal 2012 (which we will get along with the fourth quarter results).
First Solar (FSLR):
First Solar now makes the list as the company was forced to push its earnings back to Thursday afternoon due to Sandy. As I've detailed in the past, First Solar is probably the best name in a bad and struggling industry right now. From the beginning of 2011 to earlier this year, First Solar saw its shares drop more than 90%. Shares recovered a little after a Q2 report was better than expected.
As I have described, this name is very seasonal, in the sense that quarterly revenues bounce around a lot. After Q1 revenues fell by double digits, Q2 revenues were up 80% from the prior year period. That pattern is expected to continue, with Q3 revenues forecast to be slightly down, and Q4 revenues expected to show 96% growth.
For Thursday's Q3 report, analysts are looking for First Solar to report a 3.9% decline in revenues to $966.5 million. Earnings per share are expected to fall from $2.25 to $1.04 as margins are coming down. First Solar shares have more than doubled off their 52-week low of $11.43, but have struggled above the $25 level recently. With more than half of the float shorted as of October 15th, First Solar shares could rally hard if the report is good.
Cisco Systems (CSCO):
The networking giant will be the last big tech name to report earnings when Q1 results are released on November 13th. Cisco shares rallied strongly after it released fourth quarter results back in August. However, the gains were not because of the actual results. Shares popped because the company announced a 75% increase in its dividend. Shares headed higher from $17 to almost $20, but have fallen back to near those pre-Q4 results levels.
Investors have been critical of Cisco in the past because the company has been buying back tons of stock, but shares have remained depressed and have lagged the market over time. Also, revenues and earnings are only growing at a mid single digits pace. But after the huge dividend raise last quarter, investors have shed a new light on Cisco. With a dividend of about 3.25%, Cisco shareholders are now getting a fair amount of income from this name. Cisco has promised to return a fair share of its free cash flow to shareholders, and that was initially seen as a positive. But since we can assume the dividend won't be increased this quarter, we have to focus on the company's actual results, and what will they show?
Priceline (PCLN):
The online travel site saw its shares plunge a few months ago after third quarter guidance was much weaker than expected, as the company noted that Europe was extremely weak. While shares recovered for a month or so, they are back to post-Q2 earnings levels. Priceline will report earnings on Thursday, November 1st.
Priceline guided to 3rd quarter revenue growth of just 9% to 15%, much lower than the 24% that was expected. The company also guided to non-GAAP earnings per share of $11.10 to $12.10, and analysts were looking for $12.86.
Since the Q2 guidance bombshell, expectations have come down significantly, but analysts are still expecting Priceline to come in at the upper end of the range. Current forecasts call for 13.9% revenue growth and earnings per share of $11.81.
Priceline does trade at a lofty valuation, and should the company's Q3 results and Q4 guidance be soft again, shares will take another hit. Priceline shares are about $200 off their 52-week high, and a good report on Thursday could help shares start to regain their footing. However, a bad report probably sends this stock down towards $500.
SodaStream (SODA):
The company that allows you to make your own soda at home will reportearnings on Wednesday, November 7th, before the bell. While SodaStream has produced very good results in recent quarters, it has been a favorite of short sellers and has not been able to gain any traction. Every time the stock tries to go higher, it just gets knocked back down. Like First Solar, more than half of the float is shorted, meaning this stock can quickly jump on good news.
SodaStream has been working on its international expansion and its expansion within the United States. I am very curious to see how they are doing in Wal-Mart (WMT). For the quarter, analysts are expecting revenues to rise by 32.6% to $103.52 million, and earnings per share are expected to rise from $0.56 to $0.72.
Of the many so-called momentum names, SodaStream is the only one that has actually been able to beat results and raise guidance. Names like Deckers Outdoor (DECK), Green Mountain, and Netflix (NFLX) have disappointed investors with their quarterly results. While SodaStream shares have not risen as much as they could have, I'd rather own a company that beats estimates and raises guidance. SodaStream has not shown too many troubles in recent years, unlike these other names.
By Bill Maurer
Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.
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