Among the biggest losers in Monday's early trading are
Vera Bradley (Nasdaq: VRA)
,
Universal Display (Nasdaq: PANL)
and
Arkansas Best (Nasdaq: ABFS)
.
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Read on for our instant analysis...
Vera's tough report?
Investors continue to dumpshares of Vera Bradley, a purveyor of
women's handbags and other accessories. Shares fell 6.5% on
Thursday, Aug. 23, dropped a bit more on Friday, Aug. 24, and are
off another 6% this morning. The company is slated to deliver
fiscal second-quarter results on Wednesday, and the stockprice
action implies an imminent disappointment. Not so, say analysts at
Piper Jaffray, which came out with a note this morning predicting a
better-than-expected quarter. History is on their side. Since
coming public in 2011, the company has toppedprofit forecasts by at
least 5% in each of the past four quarters.
At least one analyst is predicting bad news beyond the second
quarter, though. Lazard's Jennifer Davis believes that
second-quarter results will be OK, but also expects management to
take down forward guidance a bit due to the current (third) quarter
showing signs of weakness. She just trimmed her
third-quarterearnings per share forecast to $0.35 from $0.40, which
the recent share price weakness seems to be anticipating.
If she's right, then this stock will take a short hit when the
numbers come out Wednesday, but that might set the stage for an
eventual rebound. If Lazard's $34price target stays intact, despite
the lower profit view, then that implies 50% upside from current
levels, and even more if the stock takes a hit on lowered
guidance.
Universal Display
It's always great to land a big new customer -- except when that
customer runs into trouble itself. That might help explain the 10%
drop in shares this morning.
Universal Display makes many of the touch screens that go into
Samsung phones. And quite suddenly, doubts have emerged about
Samsung's viability in the smartphonemarket , after the news last
week of its legal setback in a case against
Apple (Nasdaq: AAPL)
.
This challenge to Samsung (and Universal Display by extension)
may not be as bad as is feared. Apple and Samsung mayhammer out a
licensing agreement, or Samsung may simply choose to tie Apple up
in court for a long time to come. Still, it's worth watching how
these events play out before bottom-fishing with Universal
Display.
Investors may also want to wait to get a fresh quarterly
snapshot of Universal Display'sbalance sheet . The company has
embarked on a big buildup ininventory in anticipation of a big
spike in demand. That spike may not come, if Samsung's woes are
prolonged.
Arkansas Best (Nasdaq: ABFS)
Shares of this trucking firm are "only" off 3% this morning, but
that marks a five-session losing streak, taking it all the way down
to a multi-year low. Shares have been dropping ever since a judge
ruled on Aug. 1 that teamsters had not violated labor agreement
terms with Arkansas Best after agreeing to lower wages with rival
trucking firm
YRC Worldwide (Nasdaq: YRCW)
. (A document known as the National Master Freight Agreement (NMFA)
is supposed to equalize pay rates across the industry.)
So Arkansas Best won't be achieving the cost savings that had
been penciled in by analysts. Merrill Lynch pegs the lost chance
for labor savings at $50 million annually. Arkansas Best is
expected to appeal the decision, or may just wait until next March,
when the current NMFA expires anyway.
Still, even with the negative verdict, this freight carrier
appears capable of earning more than $1 a share in 2013 and perhaps
a lot more as U.S. economic activity picks up. So the stock's move
below $10 (levels not seen since 2001) may prove to be a solid
entry point for value investors focused on the longer-term
picture.
Action to Take -->
Put all three of these stocks on your watch list. It's too soon to
buy them, but the sell-off may be an overreaction.
Universal Display could post a solid snapback rally the moment
Apple and Samsung hammer out a deal, so if you hear a deal is in
the works, it may be time to buy. Vera Bradley looks like a solid
buying set-up -- after second-quarter earnings are released
Wednesday and the forward outlook is digested. Arkansas Best is in
the midst of shaking out its current base of shareholders. Once
that process is complete, value investors are likely to take note
and send the stock higher.
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.