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Amazon.com, Inc. (AMZN) & Other Earnings Bears, Should You Buy In?

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Key Energy Services, Inc. (NYSE:KEG)After a big post-earnings decline, our natural reaction is to ‘sell”. However, these losses often present value, and in this piece I am looking at three stocks that saw declines on Friday to determine any potential upside.

A Validation of Weak Industry Performance

Key Energy Services, Inc. (NYSE:KEG) saw massive losses of 16.78% after the company missed badly after reporting earnings. The problem with Key Energy Services, Inc. (NYSE:KEG)’s earnings weren’t only its results, but rather it continued to validate weakness that has been seen throughout the industry. The company saw quarter-over-quarter and year-over-year losses in revenue, earnings, and EBITDA, which then sparked loss in the stock.

If we break down the company’s results by segment, then the U.S. declined 3% and Mexico reduced all of its total activity. The company did say that it expects activity to increase later in the year, but at this point, the company is making a prediction on unknown macro conditions. Personally, I find its price/sales of 0.57 and its forward P/E ratio of 7.38 to be attractive. However, its earnings were among the worst we’ve seen in the industry, meaning I’d see value in one of the other oversold and undervalued stocks in its space, and not Key Energy..

An Undervalued Stock with Low Expectations to “Buy”

Cirrus Logic, Inc. (NASDAQ:CRUS) lost 8.92% of its value on Friday after posting earnings that missed expectations. The company’s sales increased 87% year-over-year, yet the stock trades with a price/sales ratio of just 1.77. Hence common sense suggests the stock is presenting value. However, the problem is not current growth, or valuation, but rather long-term guidance and its dependence on Apple.

In FQ4 Apple made up 85% of the company’s total sales, which means that Cirrus Logic, Inc. (NASDAQ:CRUS) is highly connected to the fundamental growth and performance of Apple. While that number is expected to decline in coming years, there is a transition occurring, as the company states that it expects growth to be flat to moderate in 2014.

Personally, I love the technology of Cirrus Logic, Inc. (NASDAQ:CRUS), including its new LED controller chips, but admit that it needs to expand. With that said, the stock trades at just 7.50 times earnings, which is a 50% discount to the S&P 500 following its 55% six month decline, and I believe the market has priced in the worst case scenario. At this point in time, the stock is volatile, therefore I say wait a month for the stock to consolidate and then “buy” this cheap stock, but only a small position.

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