by Tom Taulli | July 30, 2012 2:50 pm
So far, the second-quarter earnings season has been a boon for short sellers. Investors have been teeing off on bad earnings news[1] for a number of big-name companies, such as Facebook (NASDAQ:FB[2]), Starbucks (NASDAQ:SBUX[3]), Chipotle Mexican Grill (NYSE:CMG[4]) and Zynga (NASDAQ:ZNGA[5]). Even Apple (NASDAQ:AAPL[6]) saw a nearly 5% dip[7]!
Well, if you’re worried about missing out on the short-selling fun, worry no longer. A look ahead at this week’s earnings reports shows the shorts should have a number of interesting opportunities. Here’s a look at four:
Pitney Bowes (NYSE:PBI[8]) provides a wide array of business services, such as postage metering and document management. However, these businesses are in a constant state of erosion.
After all, the U.S. Postal Service continues to see deterioration in volume. Plus, there are alternative services, like those offered by Constant Contact (NASDAQ:CTCT[9]), Stamps.com
(NASDAQ:STMP[10]) and Google. Pitney Bowes has been trying to move into other categories, but the results have been mixed.
Pitney Bowes has been driven down nearly 30% this year and roughly 70% in the past five years. The fact it’s trading at roughly 4 times earnings despite a fantastic yield of 11% is merely a reflection of how little confidence Wall Street has in Pitney Bowes’ core business. Short interest — the total of shares currently short — is 35% of the float. Considering anything above 10% represents a glaring red flag, you might want to consider adding to that number before Thursday evening’s earnings report.
OpenTable (NASDAQ:OPEN[11]) operates an extensive online platform that allows consumers to book restaurant reservations. Unfortunately, the company has seen a weakening in revenue growth. Some of the factors include saturation in the U.S. market, as well as increasing competition, such as from Livebookings and Rezbook. Even Google (NASDAQ:GOOG[12]) could make a play for the market.
Short interest is 56% of the float, but expectations still are high considering OPEN still trades at 40 times trailing earnings. Expect that to change if OpenTable disappoints after the bell Thursday.
Blue Nile (NASDAQ:NILE[13]) operates a popular site for diamonds and fine jewelry, but the company has suffered a grueling 2012.
The company missed first-quarter earnings by more than 80% and has disappointed for four straight reports. Frustrated investors have pounded the stock to nearly 40% losses so far, but with a short interest at roughly 56% of the float, investors apparently think the carnage at Blue Nile will continue.
Not helping NILE is a still-high price-to-earnings ratio of nearly 40, the headwinds from the U.S. economy and the rising cost of diamonds, which has been pinching margins.
Blue Nile also reports Thursday evening.
Skullcandy (NASDAQ:SKUL[14]) is a manufacturer of headphones and other accessories for iPhones and iPads, so the company could see some vulnerability thanks to the slowing at Apple.
SKUL company has done a great job in keeping its brand fresh, but customer loyalty could wane. Ponying up to continue getting Apple’s latest expensive products is difficult enough in a middling economy; it could be difficult for consumers to justify spending some more on Skullcandy’s products.
The short interest in Skullcandy is a whopping 72% of the float. If the news after the bell is ugly, there’ll be more than a few celebrations.
Tom Taulli runs the InvestorPlace blog IPOPlaybook[15], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling”[16] and “All About Commodities.”[17] Follow him on Twitter at @ttaulli[18]. As of this writing, he did not own a position in any of the aforementioned securities.
Source URL: https://investorplace.com/2012/07/4-stocks-to-short-ahead-of-earnings-skul-open-nile-pbi/
Copyright ©2025 InvestorPlace unless otherwise noted.