Offering earnings guidance above analyst expectations is obviously a bullish sign, as over time, earnings growth follows sales growth. And when a company predicts greater sales or profits, we expect its stock price might soon follow the upward trend.
Sometimes things don't work out as planned, though, so we'll pair up the brighter outlook with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best and brightest stock pickers think a company's long-term potential is outstanding, coupled with the company's own improved sentiment, maybe then investors should take notice, too.
Here are two stocks that recently raised guidance.
CAPS Rating(out of 5)
Prior or Consensus Estimate
magicJack VocalTel (NAS: CALL)
Michael Kors (NAS: KORS)
Don't blindly buy into their heady outlook -- you still need to do some research. Use the announcement as a jumping off point for additional research.
VoIP provider magicJack VocalTel is back once again with stupendous guidance for the market! Analyst forecasts? Pshaw! We've already blown past those piddling numbers and we've still got a whole month to go! We might do even better than $0.43 per share because our business is growing like gangbusters. Al Gore's invention of the Internet's got nothing on us: We invented VoIP!
The above is not too far from the "cloud communications leader's" recent press release touting its upcoming earnings. Even better, it's hoping the U.S. economy goes to hell in a handbasket, because that bolsters its business!
I've previously reported my disdain for magicJack's brand of self-promotion, and despite all its hype about how great its business is doing, the stock has fallen 30% over the last three months. While Vonage (NYS: VG) is also down 15% in that same time frame, enterprise-facing VoIP provide 8x8 (NAS: EGHT) is up almost 10%, so there's more to it than just a general malaise (but isn't that supposed to be good for magicJack?).
As it typically does after a rah-rah update like this, magicJack's stock has bounced higher, rising 33% since the start of June. Too bad for the CEO, who had to sell a boatload of shares "for liquidity reasons" as he'd margined his holdings, and the board thought it wise not to have debt associated with the stock. The CEO of Green Mountain Coffee Roasters just got booted from his position for selling shares in violation of company policy to satisfy a margin call.
While legions of investors swear by their own magicJack, I don't plan on hanging up my underperform rating on magicJack. But tell me on the magicJack VocalTel CAPS page if you think there's some disconnect here, then add the stock to your watchlist to get alerts on the next breathless press release it issues.
Leather and lace
Designer Michael Kors might be more restrained in its own guidance prognostications. It didn't invent the fashion industry, but its forecasted results are every bit as flashy as those of the most ostentatious self-promoter as it follows the trail blazed by handbag maker Coach (NYS: COH) . The stock, which recently held an IPO, has appreciated in value more than 70% over the last six months compared to just 8% for its rival.
But that doesn't mean it's necessarily a better investment. In addition to some impressive growth numbers, it's also benefiting from the cachet its strong brand name carries. Just look at the IPO of luxury luggage maker Tumi, which has seen its shares crater since the IPO. I think there needs to be a focus on "affordable luxury," as Coach and Kors targets, and not just luxury goods in general.
Investors have wondered whether all this competition in the leather goods market might make for tougher times for Coach. Well, the rivalries have always been there, it's only the stocks that are new. Coach also has an established presence in markets Kors is only just trying to break into. For example, it wants to double the number of stores it operates. That's going to raise its expenses tremendously as it strives to catch up to Coach.
Certainly there can be numerous winners in a particular niche; no one company has to dominate another. As might be obvious at this point, I prefer Coach's current position to that of Michael Kors, but tell me on the Michael Kors CAPS page or in the comments section below if you like one, the other, or both.
Raise your sights
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The article 2 Stocks That Just Raised the Bar originally appeared on Fool.com.
Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Coach and Green Mountain Coffee Roasters. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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