Sirius XM Radio
Sirius XM Radio (NASDAQ:SIRI) is vulnerable to a significant pullback thanks to a struggling consumer looking to save money any way possible. The growth prospects for satellite radio simply are not what they once were for this formerly promising company. Still, the $7 billion market-cap company clearly has believers.
Sirius is perilously close to the break-even mark. For the current quarter, Wall Street expects the company to make a penny per share. For the full year, the estimate is for Sirius to make six cents per share, growing 30% to eight cents per share in 2012. The stock currently trades for 30 times estimated earnings.
That is a rich price considering the tenuous position of the company. Competitive threats are very real. At the same time, a previously announced effort to raise prices might backfire on the company — similar to what recently transpired with Netflix (NASDAQ:NFLX).
One slip-up by the company, and shares could tumble. Move away from this emotional stock before the earnings hit the fan before the bell Tuesday.
The Boston Beer Co.
Companies with products loved by the masses often become cult stocks and trade for reasons that have nothing to do with valuation. The Boston Beer Co. (NYSE:SAM), maker of the Samuel Adams line of beers, is one such cult stock. Despite multiple quarters of earnings disappointments, this stock maintains a hefty valuation. At some point, the bubble will burst.
Perhaps the piercing comes with Sept. 30 operating results to be released after the market closes Tuesday. Wall Street is looking for the company to make $1.10 per share in the period — eight cents per share lower than estimated 90 days ago. For the full year, Boston Beer is expected to make $3.36 per share. In 2012, profits are estimated to jump by 17% to $3.93 per share. Thanks to the cult following of SAM stock, investors must pay 26 times current-year estimated earnings.
Given the poor performance during the past three quarters, I would be worried about owning Boston Beer stock at such levels prior to earnings being released. SAM shares could drop 10% or more on a bad report.