Sell Facebook; Hold Amazon; Buy Exxon and Hershey

NEW YORK (TheStreet) -- Let's review four companies that are about to report earnings and how I would trade their stocks.

The four companies are Facebook ( FB), Amazon.com ( AMZN), Exxon Mobil ( XOM) and Hershey ( HSY).

Sell Facebook

Facebook had one of the most highly anticipated IPOs of all time and its first earnings report is being preceded by a similar level of excitement.

As much as I have been critical of the company's handling of its IPO, it does deserve some credit for having rebounded slightly from its recent lows of $25. However, I would highly recommend that holders of the stock sell ahead of the company's earnings report, which is scheduled for after the market closes Thursday.

The reason for the concern is simple. Facebook's user growth appears to have peaked in November, and unique visitors to the site actually declined in recent months. Remarkably, rival Google's ( GOOG) Google+ service has continued to gain traction recently.

ComScore, which specializes in Internet data and research, recently revealed a drop in Facebook's unique visitors. Although it was not a significant drop, the research firm did suggest it would last longer than anyone anticipated. This should raise a big question mark for investors.

As for the quarter, analysts are expecting earnings per share of 15 cents on revenue of $1.18 billion. Investors will focus on the company's ability to sustain user growth and on how it monetizes mobile users.

The company started its mobile initiative by incorporating sponsored stories into its newsfeeds. Any upside surprise in this area could send shares soaring. However, I think that is highly unlikely in light of the questions about user growth. The smart play here is to sell the stock ahead of the report and wait for shares to return to the $25 level or lower.

Hold Amazon

Amazon.com is without question one of the best tech stories today. It is a wonderful company, and Jeff Bezos is a top, visionary CEO. But the stock continues to trade at what I consider an expensive valuation.

I have never been a fan of so-called "premium pricing," although I will concede that it has never served as an impediment to growth stocks like Amazon.

The question for "perfect stocks" such as Amazon.com has always been whether the company can grow into its high valuation. Although Amazon has done an excellent job of that so far, what happens when that stops?

Investors got a lesson in what happens when companies that are priced to perfection stumble last week. Wall Street showed no mercy on Chipotle Mexican Grill ( CMG) and F5 Networks ( FFIV).

In the first quarter, Amazon.com averted concerns about its growing expenses by blowing away analysts' estimates on both the top and bottom lines with earnings per share of 28 cents and revenue of $13.2 billion.

The company said its rise in sales was driven largely by increased demand for the Kindle Fire. However, as great as these numbers were, I think it might be best to exercise some caution ahead of the second-quarter report and curb some enthusiasm. For the quarter, Amazon expects revenue to grow between 20% and 34%, or to between $11.9 billion and $13.3 billion, which includes the negative impact of foreign exchange movements.

Ahead of the guidance, analysts had expected second-quarter revenue of $12.8 billion. That was higher than the midpoint of Amazon's forecast of $12.6 billion. With that in mind, and considering that the company has recently launched plans to build a larger tablet and may be preparing a smartphone, it stands to reason that its capital spending may come in higher than anticipated and chip away at earnings.

As perfect as Amazon must be to maintain its lofty valuation, it seems the company is executing to perfection. And in terms of reported sales, there aren't many companies with its size that are producing the level of growth it has demonstrated. However, as a value investor, I have always thought that paying premium prices for stocks wasn't a good idea. I would recommend that holders of Amazon shares continue to hold the stock but not add to their positions.

Buy Exxon Mobil

When it comes to oil and gas, investors can't do much better than the market leader, Exxon Mobil.

As the world's second largest company by market cap ( Apple ( AAPL) is No. 1.), Exxon Mobil has very few peers in terms of its performance track record. Yet, through no fault of its own, the company often gets overlooked in Wall Street's discussions of the best-run companies.

The company is due to report earnings Thursday before market opens, and investors should expect another solid quarter. This is even though Exxon Mobil has had to deal with growing concerns surrounding natural gas. For Exxon, its management has done an exceptional job this year dealing with slower production and weaker North American prices for natural gas.

The company is still involved in all phases of upstream and downstream operations, and its portfolio of exploration and production projects should serve to mitigate concerns through lean times such as these. In its most recent quarter, the company generated net income of $9.45 billion, or $2 per share, representing a slight year-over-year drop.

As noted, this was attributable to declining production of both oil and natural gas, whereas in last year's quarter it reported $10.7 billion in net income or $2.14 per share. The company blamed the decline in production on aging fields as well as contracts with foreign governments that limited oil and gas sales.

As disappointing as these numbers were, the company did report operating cash flow of $21.8 billion -- appreciably above its earnings.

Exxon should be considered for any portfolio, but investors should have realistic investment horizons and, more importantly, patience. Among other positives, not only has Exxon Mobil recently boosted it dividends, but it has also been spending its excess cash repurchasing as much as $5 billion of its own stock.

Buy Hershey

Hershey has long been known as a "sweet" stock that rarely delivers. The stock appears expensive at its current level, particularly as other food giants such as Kellogg ( K) and Kraft ( KFT) trade at much lower valuations.

Having said that, I still can't dismiss the likelihood that Hershey will be able to break out higher, and as the company reports earnings Thursday, I will be looking to add shares ahead of its report.

In its most recent quarter, the company reported net income of $198.7 million, or 87 cents per share, on revenue of $1.73 billion. A year ago, Hershey earned $160.1 million, and the latest quarter's revenue was 10% higher than a year ago -- the third straight quarter that Hershey logged a top-line increase.

What's more, the 10% revenue growth was well in excess of expectations for 5%, while the company improved its gross margins.

As great as these numbers were, Hershey did disappoint some analysts by not raising full-year guidance.

That said, on Thursday I don't expect the numbers to be anything but impressive. With the stock sitting at $71 there is considerable value left. An analyst at Argus recently upgraded the stock, adding a projected 16% increase in value to the shares to $78. The stock is a definite buy ahead of the report as it has an outside chance at reaching $80 by year-end, while also paying a respectable dividend.

Earnings season can be both an exciting time as well as one that brings a lot of anxiety for companies as well as investors.

In a coming article, I'll look at possible earnings plays in Sprint ( S), Alcatel-Lucent ( ALU), CA Technologies ( CA) and Netgear ( NTGR).

At the time of publication, the author was long AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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