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Electronic Arts Inc. (EA), ValueClick Inc (VCLK), The Walt Disney Company (DIS): Three Overlooked Stocks to Buy Ahead of Earnings

What’s been the biggest surprise in earnings season thus far?

In my view, Apple Inc. (NASDAQ:AAPL) CEO Tim Cook stole the show when his company announced plans to issue debt in order to return a greater amount of capital to shareholders. Prior to the earnings announcement, the Silicon Valley giant received copious amounts of criticism that its board of directors had become deaf to investors.

Apple Inc. (NASDAQ:AAPL)

Shares of Apple Inc. (NASDAQ:AAPL) have rallied following the earnings release, a visible sign of approval from the investment community. Earnings season can often catch investors by surprise, in the case of Apple Inc. (NASDAQ:AAPL) with a positive swing to the upside. Other times, an unforeseen negative announcement may result in losses and cause one to reevaluate their investment thesis.

I encourage readers to assess the fundamentals of their stock positions heading into quarterly earnings. Here are three stocks I’ve identified that appear well-positioned ahead of upcoming reports.

Electronic Arts Inc. (NASDAQ:EA) – Tuesday, May 7; EPS $0.58 / Revenue $1.04 billion

The video game industry is a cyclical business, and I believe Electronic Arts Inc. (NASDAQ:EA) is poised to benefit from the upcoming new generation of entertainment consoles. Microsoft Corporation (NASDAQ:MSFT) is planning to unveil the next version of its popular Xbox console on May 21. Sony Corporation (ADR) (NYSE:SNE) responded to Microsoft Corporation (NASDAQ:MSFT)’s announcement by unveiling a new Dual Shock 4 (DS4) Controller for Playstation 4, also pending a fall release date.

A new generation of gaming systems with new hardware capabilities has a strong correlation with demand for video games. New York-based Brean Capital reiterated its “buy” rating and $22 price target on Electronic Arts in late March, citing benefits from the upcoming console replenishment, the potential for expanded margins, and a solid balance sheet. Analysts at Piper Jaffray have a similar opinion and maintain a $23 price target.

For the current quarter, investors will be looking for greater clarity regarding Electronic Arts’ search for a new CEO and recent layoffs reported on the EA blog and numerous media outlets. The company announced in mid-March that John Riccitiello would resign as CEO effective March 30, following an indecisive leadership strategy that was poorly received by employees and investors.

Wall Street viewed the CEO departure as a positive development for EA, and the upcoming video game cycle will allow for a “business reset.” I expect management to provide strong guidance on the conference call and the announcement of a new permanent CEO will serve as a second catalyst.

ValueClick Inc (NASDAQ:VCLK) – Tuesday, May 7; EPS $0.40 / Revenue $166.7 million

ValueClick Inc (NASDAQ:VCLK) is a digital marketing services firm that operates in four segments: Affiliate Marketing, Media, Owned & Operated Websites, and Technology.

Among its portfolio of brands, ValueClick Inc (NASDAQ:VCLK) owns Commission Junction, the undisputed leader in affiliate marketing, as well as PriceRunner, the U.K.’s number 1 price comparison website.

Management released fourth quarter earnings on Feb. 13, followed by a presentation at Goldman Sachs Technology and Internet Conference on Feb. 14. Revenue grew 14% year-over-year to $199.6 million, while earnings grew to $0.56 from a previous $0.46. The earnings strength was driven by higher margins and growth in the Media division.

ValueClick Inc (NASDAQ:VCLK)’s Media segment allows advertisers to reach 79% of Internet users, similar to the function of the Display Network offered by Google Inc (NASDAQ:GOOG), its larger competitor. ValueClick Inc (NASDAQ:VCLK) works with medium-sized businesses all the way to Fortune 500 companies such as Cisco Systems, Inc. (NASDAQ:CSCO), Toyota Motor Corporation (ADR) (NYSE:TM), and The Walt Disney Company (NYSE:DIS) in order to reach consumers through its display advertising.

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