Handicapping Wednesday's Earnings

Richard Suttmeier previews EDS, Identix and Napster, which report after the bell.
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Earnings for technology companies have been better than expected overall, and when specialty companies deliver solid results, investors take notice. This is particularly true of names such as

RealNetworks

(RNWK) - Get Report

,

United Online

(UNTD)

, both of which reported Tuesday, and

Electronic Data Systems

(EDS)

,

Identix

(IDNX)

and

Napster

(NAPS)

, which report after the bell Wednesday.

Tuesday's Earnings

After the close on Tuesday, RealNetworks reported earnings of 5 cents a share, beating Wall Street's estimate of 3 cents. Shares gained 12% to $5.66 before the open Wednesday. The company raised its EPS estimate for the full year to 14 cents to 16 cents, up from 10 cents to 12 cents.

Before these results, my model showed RealNetworks 44.1% undervalued with an oversold weekly chart profile. In Tuesday's Tech Trading Diary on

TheStreet.com

I

mentioned that the stock was showing a bottoming pattern between my monthly pivot at $5.01 and weekly value level at $4.94. If RealNetworks ends this week above its 200-week simple moving average at $5.68, shares should rally toward my monthly risky level at $6.76. (Remember, a risky level is a price at which investors are likely to reduce holdings according to my models. A value level is a price at which my models project that buyers should emerge.)

United Online, provider of Internet subscription services, beat Wall Street's expectations by a penny and was also trading higher in recent action on Wednesday. Before the results were announced, I profiled the stock in Tuesday's Tech Trading Diary. My model showed the stock 18.5% undervalued with a neutral weekly chart profile. I said that a positive reaction to earnings would result in a weekly close above the stock's 200-week simple moving average at $11.66, indicating strength to my annual risky level at $12.35. Strength this morning is even above that key level, and appears headed toward the May high just above $13.

Before profiling a few of the stocks reporting after the close today, let's review the technicals for the

Nasdaq Composite

and related indices.

In

Tuesday's closing post in the Tech Trading Diary, I indicated that if the Nasdaq holds 2204 for the remainder of the week, that level should become the new support for the rest of the month. A similar level is at $39.89 for the

Nasdaq 100 Trust

(QQQQ)

. Near-term support for the SOX is 481.43. So far today, these levels have held, setting the stage for this afternoon's technology earnings releases.

Wednesday's Earnings

For EDS, a loss of 5 cents per share is expected when the company reports Wednesday. My model shows EDS 18.8% undervalued for a fair value at $25.49. The weekly chart profile remains positive on a weekly close above its five-week modified moving average at $19.96. The key level to watch following earnings is my quarterly pivot at $20.68; above that is positive, below it is negative.

Wall Street expects a loss of 5 cents per share when Identix reports Wednesday. My model shows Identix 33.3% undervalued with a positive weekly chart profile. As long as weakness on an earnings disappointment holds my weekly pivot at $5.19, I show potential strength to my quarterly risky level at $6.26 on renewed demand for Homeland Security protection.

Lastly, the consensus expects Napster to post a loss of 61 cents per share this afternoon. My models shows a major divergence between the fundamental and technical screens, as Napster is 63.6% overvalued but with a positive weekly chart profile. This should keep shares between its weekly value level at $4.81 and its quarterly risky level at $5.93. If Napster disappoints, beware that my monthly value level lags at $3.14.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Identix to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of

TheStreet.com Technology Report

newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury Bond Trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury Strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback --

click here

to send him an email.