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Börsipäev 18. oktoober

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  • Rev Shark:

    Buying Ahead of Earnings? Put Odds in Your Favor
    10/18/2005 8:32 AM EDT

    "There are four ways, and only four ways, in which we have contact with the world. We are evaluated and classified by these four contacts: what we do, how we look, what we say, and how we say it."

    -- Dale Carnegie

    It is that time once again when companies tell us how things went this past quarter and, hopefully, provide some insight into what lies ahead. For market participants this is more than just an exercise in evaluating factual comments. Earnings are never inherently good or bad; a number is just a number without context. Proper evaluation depends on clear understanding of the numbers, knowing the expectations and having a feel for the overall market environment.

    We have earnings reports to contemplate this morning from IBM, NVLS, MER and MMM. Tonight we have some particularly important earnings reports from the likes of INTC, YHOO and MOT. Once the numbers are out, the market reaction will depend on expectations and the broader market environment.

    Getting a handle on expectations is never easy because there are few objective measures. Analyst estimates are the most convenient and accessible way to gauge expectations, but there are often whisper numbers that are widely regarded to be the "real" expectations.

    Even if a company surpasses the expected quarterly number, there is still a slew of other things that can knee-cap investors in an earnings report. "Quality" of earnings is extremely important. One-time charges, the closing of one big deal, a ramp in inventories, receivable, payables, etc., can indicate a very different story. However, the most likely way for a company to undermine a good report is with poor forward guidance. A good number for the just completed quarter is meaningless if the future doesn't look so great.

    When considering what a stock will do after it reports, it's extremely important to look at the price action in the days and weeks leading up to the event. If expectations are high, the stock is very likely to trade up, which means there's a greater likelihood that the report will be met with selling because those who correctly anticipated the report will be looking to lock in gains.

    The poor market the last couple of weeks has resulted in quite a few stocks entering earnings season with what look like low expectations. Intel in particular is a good example.

    The chipmaker has been in a very strong downtrend since a big gap down following its last report. Interestingly, the technical patter is almost the opposite of what it was last quarter. In the June quarter the stock traded up sharply in anticipation of its report and then fell apart when numbers were merely in-line. It would seem that we are set up for just the opposite type of action this time. The stock is weak, expectations low and there is some technical support.

    Last quarter I strongly advised against buying Intel in front of earnings, as Jim Cramer suggested. In Columnist Conversation today he is suggesting that trade again, but this time, for the reasons above, the odds of it working are much better. I'm certainly not a fan of buying in front of earnings but if you are going to use that tactic, then the set-up for Intel this quarter is far more favorable than last quarter.

    Despite a market bounce over the past few days, this is still a very dangerous environment. It is possible that a good earnings season will help turn this market but technically we are still in a very precarious position, with what looks like nothing more than a brief dead cat/oversold bounce.

    There definitely is a challenging mix of considerations. We have low expectations and increasingly negative sentiment but also a poor technical picture and lots of economic hurdles, such as oil prices and inflation.

    In the early going today we have some slightly positive action as oil trades down and IBM trades up following its report. The bulls can keep this bounce going for a while but the chances that we retest recent lows are very high.

    Position: No positions in stocks mentioned

    Gary B. Smith:

  • Fit, töötab ikka, tule kolmandaks :)
  • Inteli (INTC) tulemused siis:

    Käive $9.96 mld vs $9,92 mld
    EPS $0,32 vs $0,33
    Brutokasumi marginaal 59,7% (jättes välja MicroUnity kohtuvaidluse lahendi 61,1%)

    4Q prognoos
    Käive $10,2 kuni $10,8 mld
    Brutokasumi marginaal 63% pluss/miinus mõned punktid

    Aktsia kauples esialgu kergelt plussis ning tõenäoliselt oli siin põhjuseks prognoositav brutokasumi marginaal, mis lõppenud kvartalist tugevam on. Eks turuosalised on tasapisi hakanud AMD kohalolekut serveriturul kartma ning seega on rõõmustav näha, et Inteli jaoks ei ole konkurents sedavõrd tugev, et marginaalid kannataksid.

    Konverentskõne ootuses on aktsiad aga miinusesse vajunud.

    Teen pikema kokkuvõtte tulemustest kolmapäeva varahommikuks.

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