After months of a ceaseless bid higher, have investors finally reached a turning point?
Last Thursday, the Dow Jones Industrial Average shed 353.87 points, or 2.3%, the biggest percentage drop since November 2011. The sell-off arrived following a Federal Reserve press release which stated the government will continue its $85 billion-a-month stimulus program.
Investors looked past the Fed statement, realizing the monetary stimulus will begin to wind down later in the year. The Fed’s next meeting will take place in July.
In my opinion, the rally we’ve seen in 2013 has been heavily driven by artificial liquidity. As the government begins to pull away the underlying support, we could see a change in market sentiment.
As a multi-year investor, I’ll be eager for opportunities following any short-term market shift. Here are a few developing stories to watch this week:
Earnings on Friday, June 28 before market open; EPS $0.16 / Revenue $343.4M
Finish Line Inc (NASDAQ:FINL) is a mall-based retailer of athletic shoes, apparel, and accessories. The Indianapolis-headquartered company has 651 stores in malls across the U.S.
Last September, Finish Line Inc (NASDAQ:FINL) announced it would become the exclusive provider of athletic shoes at Macy’s, Inc. (NYSE:M). This opportunity should provide a long runway of growth for shareholders.
Management expects the Macy’s, Inc. (NYSE:M) business will contribute $0.30–$0.35 in earnings per share once the 675 store rollout is completed. For perspective, full-year 2013 and 2014 earnings are modeled at $1.56 and $1.81 respectively. Finish Line Inc (NASDAQ:FINL) will operate leased shoe departments within Macy’s for 450 stores, while the remaining 225 stores will maintain their current form without Finish Line branding.
How should readers play Finish Line Inc (NASDAQ:FINL) for the short- and long-term?
For the current quarter, Wall Street is likely to have a pessimistic attitude heading into Friday’s earnings report. Investors are focused on Finish Line Inc (NASDAQ:FINL)’s same-store sales after competitor Foot Locker posted unchanged sales for May 2013 compared to the prior year. I recommend waiting until after Friday’s report in order to establish a long-term position.
Reviving handset maker
Earnings on Friday, June 28 before market open; EPS $0.04 / Revenue $3.18B
There’s no question that Research In Motion Ltd (NASDAQ:BBRY) BlackBerry was late to the party with the introduction of new handsets. Numerous analysts have criticized Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s tardiness and inability to compete with the latest Apple iPhone and Google Android devices. However, the Canadian company may be staging a comeback with the new BlackBerry Z10 and Q10.
Recent optimism for strong Research In Motion Ltd (NASDAQ:BBRY) BlackBerry sales has caused French investment firm Societe Generale (“Soc Gen”) to upgrade the stock two notches to “buy” from a previous “sell” with a $17 price target. Analysts believe that Z10 estimates will beat expectations for the May and August quarters.
The BlackBerry Q10 release was timed as sales of the touch-screen Z10 began to slow, which should be reflected in Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s August quarter. The full-keyboard Q10 became available at retailers as recently as June 23.
My personal experience with the new Research In Motion Ltd (NASDAQ:BBRY) BlackBerry supports Wall Street sentiment. I recently purchased a BlackBerry Q10 for my mother and found the device to be highly impressive.
The bottom line: Even if long-term sales have yet to be seen, I believe BlackBerry will beat estimates when it reports on Friday.