3 Predictions for This Week
I went out on a limb last week and held up pretty well.
- I predicted that shares of Vail Resorts (NYS: MTN) would fall on Wednesday after posting its quarterly results. I was right, though not by much. The stock was off by a mere 0.1% as the ski resort operator posted a widening quarterly loss but stuck to its guidance for the fiscal year.
- When a company beats Wall Street's profit targets for 13 quarters in a row, the smart money is on its stretching that streak to 14 quarters of market-thumping results. In this kind of climate, I figured that a strong quarterly report would find Men's Wearhouse (NYS: MW) shares closing higher Wednesday. Boy, was I right. The stock soared nearly 20% on Wednesday after its strong report.
- My final call was for AutoZone (NYS: AZO) to beat Wall Street's profit targets, the way that the auto parts retailer has consistently done over the past year. AutoZone earned $4.68 a share in its latest quarter, easily driving past the $4.44 a share that analysts were expecting.
Three for three? Nice!
Let me once again whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.
1. Zynga shares will close higher on Friday
Everyone seemed to be looking forward to Zynga's IPO this summer. Potential valuations topped $20 billion for the social-gaming darling, making Zynga worth more than even software leader Activision Blizzard (NAS: ATVI) .
Well, cooler heads are prevailing. Zynga's been scaling back its offering, and now the company may hit the market closer to a more reasonable $7 billion.
Disappointing debuts in recent months are weighing on the deal's pricing, but I think that the company behind Empire & Allies, FarmVille, and Words with Friends is in for a strong pop at the open.
There's a real business here. Zynga is drawing 227 million active monthly players, and it has been racking up healthy profits on $828.9 million in revenue through the first nine months of this year. Fear has made Zynga realistically priced, but the growth story will move it nicely higher when it prices on Thursday night and begins trading Friday.
2. Shares of Best Buy will fall tomorrow
I don't trust Best Buy (NYS: BBY) .
The consumer electronics retailer reports its quarterly results tomorrow morning. The past year has treated investors to year-over-year declines in profitability and same-store sales. Best Buy has come up woefully short on the bottom line in two of the past four quarters.
I have nothing against Best Buy's strategy to open smaller Best Buy Mobile locations that specialize in wireless. However, I see nothing but pain for its bread-and-butter superstore concept. You don't want to be in this retailing niche when even Toys R Us is selling tablets and most forms of physical media are cutting out the bricks-and-mortar middlemen through the migration to digital delivery.
I don't see any reasons for Best Buy to be optimistic as it reflects on the past and weighs its holiday prospects. I'm sorry, Best Buy. You're going down.
3. VeriFone Systems will beat Wall Street's earnings estimates
Payment solutions provider VeriFone (NYS: PAY) has been humbling the pros for years. You have to go all the way back to 2008's fiscal fourth quarter to find the last time that the company didn't land ahead of the profit that Wall Street was targeting.
If analysts say that VeriFone earned $0.51 a share in its latest quarter, I'll whip out a "greater than" sign. History's on my side!
One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over VeriFone's past year of earnings reports.
Source: Thomson Reuters.
Everything seems to be falling in place for another strong quarter out of VeriFone, even though I realize that the level of beats has been decelerating over the past year. Are analysts finally catching up to the company, or is it just slowing down? Either way, it's a chance that I'm willing to take.
Well, that's three predictions right there. Let's see how I fare this week.
At the time this article was published The Motley Fool owns shares of Best Buy and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard. Motley Fool newsletter services have recommended writing covered calls in Best Buy and creating a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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