5 stocks to watch next week

MasterCard, Apache and3D Systems report earnings. June construction report is due. Facebook soars on mobile revenues.

By MSN Money Partner Jul 26, 2013 11:03AM

Stock index © Image Source/Getty ImagesBy Michael Fowlkes, InvestorsObserver


MasterCard reports earnings Wednesday

What's happening: Payment processor MasterCard (MA) will report second quarter results before the market opens on July 31. Analysts expect earnings of $6.30 per share. During the same period last year the company reported earnings of $5.65 per share. The stock has been strong so far in 2013, gaining 21.9% year to date.


Technical analysis: MA was recently trading at $597.13, down $17.72 from its 12-month high and $183.95 above its 12-month low. Technical indicators for MA are bullish and the stock is in a weak upward trend. The stock has resistance under $603.00. Of the 29 analysts who cover the stock 15 rate it a "strong buy," three rate it a "buy," and 11 rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: I expect another strong quarter from MasterCard. The company has outpaced analyst earnings estimates in each of the last 13 quarters, and I see no reason to expect this streak to be broken during its second quarter. The U.S. economy continues to improve, which is good for credit card processors, and following the recent recession, credit card issuers have become much better at lowering their credit risk. I believe the stock will continue its recent strength after its quarterly report.


Stock-only trade: If you're looking to establish a long stock position in MA, consider buying the stock under $595, and sell if it falls below $560 or take profits if it gets to $660.


Option trade: If you are looking for a hedged options trade on MA, consider a September 545/550 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (176.3% annualized*) and the stock would have to fall 7.6% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $580 call. If MA rises just 3.5% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Facebook gets much needed boost after Q2 report

What's happening: Social media giant Facebook (FB) has been less than stellar since going public last year, but the stock finally rewarded investors with a better-than-expected second quarter report. The stock soared as much as 28% on the day after the report, hitting a new 52-week high in the process. The strong move was enough to put FB up 24.5% year to date.


Technical analysis: FB was recently trading at $33.15, just $0.85 below its 12-month high and $15.60 above its 12-month low. Technical indicators for FB are bullish and the stock is in a strong upward trend reversal. The stock has support above $29.00. Of the 29 analysts who cover the stock 22 rate it a "strong buy," two rate it a "buy," and five rates it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: After its much-hyped public offering, Facebook has done little to impress Wall Street. The biggest concern that investors have had was Facebook's trouble growing mobile ad revenues. But the company is finally starting to put those concerns at ease. During its second quarter, total ad revenue rose by 61% year over year. Most impressively, Facebook's mobile ad revenues accounted for 41% of its total revenue after last year it had no mobile ad revenue. So the growth is amazing, and if it continues, the stock will finally be the standout that everyone expected it to be when it went public.


Stock-only trade: If you're looking to establish a long stock position in FB, consider buying the stock under $33.50, and sell if it falls below $31 or take profits if it gets to $37.


Option trade: If you are looking for a hedged options trade on FB, consider an August 28/31 bull-put credit spread for a 30-cent credit. That's a potential 11.1% return (176.3% annualized*) and the stock would have to fall 6.7% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the September $32 call. If FB rises just 3.2% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



June construction spending due Thursday

What's happening: Heavy machine manufacturer Caterpillar (CAT) has had a tough year, but a strong report on June construction spending could help breathe life back into the stock. A weak mining industry has put pressure on the company, but its construction sales have not been too bad. CAT's second quarter report showed how much mining weakness has hurt sales, but there was a more modest 9% dip in construction related sales. The stock is down 7.7% year to date.


Technical analysis: CAT was recently trading at $81.65, down $18.05 from its 12-month high and $2.16 above its 12-month low. Technical indicators for CAT are bearish and the stock is in a strong downward trend. The stock has resistance below $85. Of the 19 analysts who cover the stock 11 rate it a "strong buy," one rates it a "buy, and seven rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: June's construction spending report will likely show continued strength in construction, which should lead to interest in companies such as Caterpillar that cater to that industry. Caterpillar recently reported disappointing second quarter numbers, but the primary weakness in the report was its mining business. The mining industry is going to continue to be weak through the remainder of the year, but if construction continues to improve, Caterpillar will benefit. I expect the stock to start to find support and trade slightly higher through the remainder of the year.


Stock-only trade: If you're looking to establish a long stock position in CAT, consider buying the stock under $82, but given its recent weakness we want to keep a close eye on the stock, and be ready to sell if the stock drops under $75 or take profits if it gets to $95.


Option trade: If you are looking for a hedged options trade on CAT, consider an August 75/77.50 bull-put credit spread for a 20-cent credit. That's a potential 8.7% return (138.0% annualized*) and the stock would have to fall 5.1% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the September $77.50 call. If CAT rises just 2.7% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



Apache unveils 2Q earnings Thursday

What's happening: Apache (APA) is due to report second quarter results on August 1. Analysts expect Apache to report earnings of $2.05 per share. During the same period last year, the company had earnings of $2.07 per share. The stock has not been super strong this year, but has managed to trade up 5.6% year-to-date.  


Technical analysis: APA was recently trading at $82.26, down $12.61 from its 12-month high and $14.35 above its 12-month low. Technical indicators for APA are neutral and the stock is in a weak upward trend. The stock has support above $80.00 and resistance under $85.50. Of the 23 analysts who cover the stock 11 rate it a "strong buy," two rate it a "buy," and 10 rate it a "hold."


Analyst's thoughts: Independent oil and gas company Apache has not enjoyed the strong gains that some of its peers have this year, but I remain bullish on the stock. Oil prices continue to trend higher, and as a result I see strength in the stock going forward. Oil prices recently broke through the $100 mark and are currently trading at $105.33. Apache's earnings have come in under analyst forecast each of the last five quarters, but I think this quarter will be more positive. Rising oil and natural gas prices will have a big impact on the company's bottom line, and I feel that the stock is going to trend higher through the remainder of the year.


Stock-only trade: If you're looking to establish a long stock position in APA, consider buying the stock under $82.50, and sell if it falls below $75 or take profits if it gets to $95.


Option trade: If you are looking for a hedged options trade on APA, consider an August 75/77.50 bull-put credit spread for a 25-cent credit. That's a potential 11.1% return (176.3% annualized*) and the stock would have to fall 6.7% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the September $80 call. If APA rises just 3.5% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



3D Systems reports results Tuesday

What's happening: With 3D printing getting so much attention this year, it is not surprising that 3D Systems (DDD) has been a strong performer, and it will get its chance to continue impressing with its second quarter results on July 30. Analysts expect DDD to report earnings of $0.24 per share, up from $0.18 per share during the same period last year. The stock is up 30.4% year to date.  


Technical analysis: DDD was recently trading at $46.40, down $5.54 from its 12-month high and $24.98 above its 12-month low. Technical indicators for DDD are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $44.00 and resistance below $48.25. Of the eight analysts who cover the stock four rate it a "strong buy," one rates it a "buy," and two rate it a "hold."


Analyst's thoughts: 3D printing received a lot of attention during the first half of 2013. While 3D printing is not exactly a new idea, what is exciting about the current situation is that prices for 3D printers have fallen to the point where just about anyone can do 3D printing at home. Because of the excitement surrounding the technology, 3D printing companies have been strong this year, and 3D Systems is one of the biggest players in the sector. I expect a strong quarterly report and believe that the future is bright for the company.


Stock-only trade: If you're looking to establish a long stock position in DDD, consider buying the stock under $46.50, and sell if it falls below $42 or take profits if it gets to $52.


Option trade: If you are looking for a hedged options trade on DDD, consider an August 37/40 bull-put credit spread for a 35-cent credit. That's a potential 13.2% return (209.6% annualized*) and the stock would have to fall 13.3% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the September $43 call. If DDD rises just 6.3% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



*Annualized returns provided for comparison purposes only


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At the time of writing, Mr. Fowlkes owns Facebook (FB) stock, and does not have direct ownership in any of the other stocks mentioned.

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