Investors are probably looking for a change of pace after last week’s slew of big-tech flops. Tesla Motors (ticker: TSLA) tanked. FireEye (FEYE) fell. GoPro (GPRO) gagged.
You get the point.
Next up on the earnings carousel are some companies that are on the ropes themselves, making them particularly vulnerable should their quarterly results disappoint. The list of potential pitfalls includes companies that delve in tech, discount khakis and milkshakes.
SolarCity Corp. (SCTY). SolarCity’s earnings report, out Monday after the bell, was likely going to be interesting anyway — but in the wake of a five-day plunge and comments by famed short seller Jim Chanos … well, it could spark some of the most violent action of the week.
Chanos told CNBC that SolarCity, which designs, installs and finances solar panel installations, is “losing money on every installation and making it up on volume,” and he believes the company will get into “financial trouble in 2016.” Chanos’ original negative commentary on the company in August sent shares reeling over the next few months, and his talk on CNBC sparked a nearly 30 percent selloff in just a week.
[See: 8 of the Most Incredible Investments of the 21st Century.]
SolarCity won’t be able to prove Chanos wrong in one quarter, but it’ll have to show investors something. The company has eaten larger losses every year, and it swung from generating $175 million in cash in 2013 to reporting a loss of $218 million in 2014 and hemorrhaging $790 million in 2015.
For the first quarter, SCTY stock is expected to lose $2.31 per share, expanding its loss from last year’s $1.52 in red ink. That’s estimated to come on revenues of $108.44 million, up 60 percent from 2015.
World Wrestling Entertainment (WWE). WWE’s first-quarter report is a chance for Vince McMahon’s professional wrestling organization to get shares back into the black for 2016.
After losing 40 cents per share back in 2014, WWE pivoted back into a 32-cent gain in 2015, and it’s expected to earn 44 cents this year.
Investors will be looking for gains to the company’s WWE Network subscription service, which boasts 1.45 million paid subscribers, part of a total pool of a little more than 1.8 million subscribers. And they’ll want to see gains there, given that the WWE Network is directly responsible for cutting into the company’s pay-per-view revenue stream. For instance, only 145,000 people watched the 2015 Royal Rumble on pay-per-view, down from 467,000 in the year-ago quarter when the WWE Network was not available.
The numbers to watch? WWE’s top and bottom lines are both expected to slip this quarter, with earnings estimates of 10 cents per share, off from 13 cents last year, and revenues of $170.63 million off nearly 3 percent.
Walt Disney Co. (DIS). When Disney reports earnings after the bell Tuesday, investors will be looking to see whether what has been working still is, and whether Disney has figured out how to fix what’s broken.
In other words, is Disney still killing it on the movie front, and has the House of Mouse fixed problems with ailing sports network ESPN?
Most people’s minds will immediately gravitate to “Captain America: Civil War,” a nearly guaranteed success given how on point Marvel’s Avengers-connected movies have been, or maybe even “Jungle Book,” a huge success in its own right — but those are part of the current quarter. No, the, power behind the company’s film division during the fiscal second quarter was “Zootopia” — a $900 million-plus animated dynamo that now holds the title of China’s highest-grossing animated film.
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But the biggest thing to watch will be the performance of ESPN, part of Disney’s media division, which makes up more than 40 percent of Disney’s revenues. ESPN has been in money-saving mode amid profitability issues at the sports network, and has been implementing job cuts to keep costs down. More recently, Mike Tirico and Skip Bayless have taken big-money deals at competing networks, and while Disney says those moves weren’t cost-cutting moves, the point stands that ESPN weren’t able to pony up enough to keep two of its better-known names.
Shake Shack (SHAK). It’s safe to say that Shake Shack’s meteoric rise to greatness has gotten just a little more than sidetracked. After more than doubling in its first day of trading in January 2015, then doubling again in less than half a year, shares have been shorn by more than 60 percent, and shares are now trading well below their first-day levels.
The problem isn’t that Shake Shack isn’t any good, it’s just that expectations have been through the roof, and the stock has been priced in the stratosphere for most of its publicly traded life. Shake Shack has actually made a point of beating most earnings-day expectations, and it continues to expand. And yet, despite its precipitous plunge, SHAK stock trades at more than 70 times next year’s earnings expectations and it sports a sky-high price/earnings-growth ratio of 4.
Secondary offerings after the lock-up expiration saw numerous investors try to cash in on the company’s success, putting selling pressure on shares as well.
Revenues could be a sticky point for SHAK this time around. While sales are expected to grow a healthy 38 percent this quarter, that figure is actually down from the 47 percent revenue improvement it posted in last year’s fourth quarter. A disappointment on this front could send SHAK down to its January lows, or worse.
JCPenney Co. (JCP). Through March, JCPenney appeared to be having something of a renaissance year, surging 75 percent in 2016. That was largely fueled by a fantastic fourth-quarter report that saw the retailer grow revenues 3 percent, but more importantly, it swung from an 11-cent loss to a 39-cent gain.
But things have turned a bit since March.
Shares had slowly been tailing off since notching multiyear highs, but its slide accelerated last Friday after the New York Post revealed a memo showing that the company has been implementing extreme methods of cost-cutting, including drastically reducing workers’ hours at its stores.
However, investors should question whether the cuts were worth it. The math is that the cuts saved JCPenney 800 hours per store in two weeks, which comes out to $8,000 per store, or $8.5 million across the company. In contrast, the company is expected to post a loss of $113.5 million in the quarter about to be reported.
[Read: 3 Reasons Not to Try Shorting Stocks.]
The bright side: At 37 cents per share, that’s a much narrower expected loss than last year’s 57-cent performance, and if so, JCP could be on track to swinging to an annual profit in 2016.
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5 Things to Know About Wall Street This Week (DIS, WWE) originally appeared on usnews.com
