As we reach the back half of first-quarter earnings season, here are three stocks I will be watching this week.
Results form these companies are due out Tuesday and Wednesday.
Papa John's International (May 7)
Papa John's (PZZA) has a lot to prove in its earnings release this week. Without going into the drama that occurred with the CEO, Papa John's sales have certainly suffered. Ordinarily it's wise to look at sales revenue on a year to year basis. In the case of Papa John's, the sequential revenue drops quarter to quarter thru 2018 are pretty significant. They clearly demonstrate that the pizza company lost support after poor remarks made by John Schnatter.
I think this quarter's results will be very significant in terms of developing the tone for PZZA shares through the rest of the year. The company has made efforts to improve its image. They even got Shaquille O'Neal to join the board, as well as invest in stores. Now it becomes a question of if the revenue fallout has bottomed. Analysts seem to be expecting earnings about $0.24 for the quarter, while they hold full year estimates of $1.11 per share. If that forecast is remotely accurate, Papa John's stock is extremely expensive at current prices. Trading around $53, the stock is trading at 47.7x full year earnings estimates. That's pretty pricey for a company that has suffered extreme sales woes.
The Walt Disney Co. (May 8)
Disney (DIS) is expected to report earnings of around $1.57 per share. Full year estimates have the company reporting $6.64 per share. That would mean the stock is currently trading around 20x full year earnings. That's not a bad price when you consider how much is going on for Disney right now.
I view Disney as the gem within media right now. With their control of Hulu, coupled with the roll out of their own streaming service, I think Disney is primed to start taking a big chunk of the streaming content business over the next few years. Furthermore, the company is experiencing a nice moment right now from those huge "Avengers" revenues; not to mention the $10 billion sale of regional sports networks that was announced this morning. With all my heart I wish I had bought into DIS a few months ago. I'm very curious to see what they report in the first quarter.
Roku (May 8)
Roku (ROKU) is a bit of a conundrum to me. Their platform serves as basically a "middle man" service between consumers and the ever rising plethora of streaming services available to consumers. My issue has always been the lack of barrier to entry. Why is Roku necessary? Why can't other names basically include the same sort of setup on their own devices or programming? Apple (AAPL) offers Apple TV, a box which essentially performs the same functions, which will likely be made to far better adapt with Apple's content development. Alphabet (GOOGL) has the Chromecast. Who's to say Disney wont' make a box like this? Who's to say most TV companies won't start designing their televisions to have an overall streaming platform that is superior to what Roku provides?
I think this market is evolving and changing at such a rapid pace that it's tough to pony up the premium for Roku stock. The company is expected to report losses in their earnings results next week. They're also expected to have losses for the year of $0.67 per share. To that end, the price tag of $64.15 seems ridiculous to me. If the company carried a product that had more of a barrier to entry by competitors, I'd be interested. For this to be a smart investment at these kinds of prices, more developments need to be made. There's a part of me that thinks ROKU could turn into a great short.