Photo Credit: reynermedia

Earnings season can be difficult to navigate for many investors. Even the slightest miss or cut in guidance can be enough to send a stock into a tailspin. A handful of companies experienced this fate in the third quarter, but none worse than Fitbit and GoPro. The two companies committed the worst offense of all, missing analyst’s target on the top and bottom-line and significantly lowering guidance for the key holliday months, a triple whammy. Shareholders responded to each report with a swift 20 to 30% selloff of the stock. While Fitbit and GoPro will continue to struggle, a handful of other names stand out as potential short candidates for the fourth quarter. They include Twitter, Match Group, Qorvo, Weight Watchers, and IBM, all of which have a history of declining prices during the earnings period.

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Twitter (TWTR) Information Technology – Internet Software & Services

It’s not surprising that Twitter tops this list of perennial losers, after posting consecutive quarters of slowing user and revenue growth. Despite its past misfortunes it looks as though the worst has yet to come. In the past two months, 5 key executives parted ways with Twitter, signaling a lack of confidence in CEO Jack Dorsey’s vision for the future. With management in a state of flux and a handful of unsolved problems, investors are concerned about what 2017 may bring. Many investors are still holding out hope that Jack will step down or will decide it’s time to make a sale. In the meantime, new partnerships with Bloomberg and Cheddar, along with President Elect’s Trump volatile use of the platform will drive engagement in the early part of the year. Twitter also indicated that it will implement features to minimize and filter abusive tweets. That said, the company’s recent track record speaks for itself. It’s reasonable to expect the stock to drop by its historical average of 5% following its fourth quarter report.

Match Group (MTCH) Information Technology – Internet Software & Services

Match Group blazed the trail for online dating with its catalogue of apps which includes Match, OKCupid and Tinder. But its rise to prominence also led to a number of new competitors emerging on the scene. Match Group now faces pressure from all corners with Coffee Meets Bagel and eHarmony actively stealing market share. Its attempts to monetize online dating continue to improve with the number of total paid members increasing each quarter, but growth has failed to meet shareholder’s expectations. As a result, the stock consistently falls by 6% immediately following an earnings report. With a string of new services popping up it should only get more difficult for the old players to make a splash.

Qorvo (QRVO) Information Technology – Internet Software & Services

Qorvo’s over-reliance on Apple iPhone’s puts investors in a precarious position heading into earnings season. The new iPhone 7 came out of the gates hot, but new reports claim that sales were not as good as previously expected. As demand for the phone continues to fall, don’t expect to see QRVO sales to surge in the fourth quarter. Fortunately, like other Apple chipmakers, the company positioned itself into many other high growth markets such as 5G technology and Internet of Things. Revisions activity for the fourth quarter continue to edge down making the stock’s historical 5% decline during earnings season a realistic possibility.

Weight Watchers (WTW) Information Technology – Internet Software & Services

Shares of Weight Watchers soared last week after Oprah revealed she lost 42 pounds on the program but in 2016 investors suffered a 50% loss as membership growth declined. A large portion of the weakness came from international markets which struggled with currency headwinds. With the U.S. dollar reaching new peaks, investors shouldn’t expect its troubles to be alleviated moving forward. Fortunately, News Years resolutions will be in full force to start the 2017, so Weight Watchers should see an uptake in signups this month. The possibility that this translates to robust fourth quarters results looks unlikely based on current estimate activity from Estimize. Analyst’s are currently calling for 19 cents per share on the bottom line on $280.73 million in revenue. Typically the stock falls by 4% through the print and 2% in the next 30 days following the report.

International Business Machines (IBM) Information Technology – Internet Software & Services

IBM maintains its streak of 10 consecutive quarters of negative growth on the top and bottom line. This comes amidst a steady downturn in the PC market, currency headwinds and weak IT spending. Meanwhile, IBM continues to focus on the cloud to offset any losses from its legacy business. But this transition puts pressure on overall growth as cloud sectors slowly gain steam. Stagnant revisions activity over the last 3 months suggest more trouble looms heading into the fourth quarter. Additional competition in high growth markets from Amazon, Microsoft and Google also pose a threat to growth prospects moving forward. The increasing number of factors working against IBM continue to bode favorably for investors ahead of earnings season. It won’t be surprising if IBM fails to post positive growth in Q4 and shares decline by its historical average of 3% or more.