3 Tech Earnings to Watch Next Week

NEW YORK (TheStreet) -- During the week of May 13, Applied Materials (AMAT), Brocade ( BRCD ) and Cisco (CSCO) report. All three are dividend payers, they each possess market-moving potential, but not all three are buys. In a high-unemployment economy, Cisco continues to benefit from business' investment in efficiency. Applied Materials struggles under the weight of cheap energy. Analysts expect little change in Brocade's year-over-year results.

Don't forget that as the reporting date nears, option premium typically increases, making it difficult to profit from buying options. Instead, look to sell premium through covered calls and credit spreads. All else being equal, credit spreads can provide hedging opportunities while also allowing investors to benefit from the increased option premium.

CSCO Chart CSCO data by YCharts

Cisco Systems ( CSCO) designs, manufactures and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industries worldwide.

52-Week Range: $14.96 to $21.98

Price-to-Book: 2

Cisco Systems is anticipated to report modest third-quarter earnings after the market closes on May 15.

The consensus estimate is currently 49 cents a share, an improvement of 1 cent (2%) from 48 cents during the same period last year. Estimates from analysts range from a low of 48 cents up to the highest estimate of 51 cents per share.

I believe Cisco will report slightly above the estimate with at least 50 cents per share. While the market estimate is 49 cents, if Cisco doesn't beat, anticipate initial price weakness absent impressive forward guidance.

Cisco's shares made an impressive run during the last 52 weeks, gaining over 5%. Analysts are calling for at least another 10% increase with a target price of $23.53. A strong earnings report is exactly what Cisco needs to push through to the next price level.

Cisco is a mixed bag on the chart. From a technical analysis perspective, the stock is driving down the middle of the road without a clear direction. The weekly chart is slightly bullish, with shares trading above the 200-period moving average. However, the fast moving averages are feeble, and the current price is below the short-term, technically important, nine-period moving average.

CSCO Revenue Quarterly Chart CSCO Revenue Quarterly data by YCharts

Regrettably, the daily chart isn't more promising. Similar to the weekly chart, shares are trading below the nine-day moving average as well as the 60-day moving average. Unlike the weekly chart, the faster-moving averages are above the 200-day moving average but are trending in a flat line. While we can't make a reliable directional read based on the current chart, you can assume whatever direction the stock begins to trend will probably have considerable follow-through. Position accordingly.

The company currently pays 68 cents per share in dividends for a yield of 3.3%. While a yield over 3% is attractive on its own, Cisco has a history of rising dividend payments. What is 3% today can easily turn into 6% in a few years from now. It's reasonable to assume the dividend is safe, with less than a 30% payout of profits, too. For yield-seekers, it's hard to find stocks more appealing than Cisco.

AMAT Chart AMAT data by YCharts

Applied Materials ( AMAT) provides manufacturing equipment, services and software to the semiconductor, flat panel display, solar photovoltaic (PV) and related industries worldwide.

52-Week Range: $9.95 to $15.18

Price-to-Book: 2.5

Applied Materials is forecast to report weak second-quarter earnings after the market close on May 16.

The consensus estimate is currently 13 cents a share, falling 14 cents (51.9%) from 27 cents during the same period last year. Analysts are estimating as low as 11 cents per share, up to the most optimistic estimate of 15 cents per share. The stock chart is saying something entirely different, with recent week-over-week gains in share price.

Shares are in such demand that the average analyst price target of $14.45 was reached and surpassed. Last week, Applied Materials made a new 52-week high and appears ready to challenge the highs again this week.

I think the company faces serious headwinds in the solar space. As long as energy prices remain low, and there is zero reason to believe they won't during the foreseeable future, solar will have a tough time growing. The only notable name in solar that is performing well lately is First Solar ( FSLR), and the increase in price for First Solar stock is as much to do with a short squeeze as it is with the prospects of the company.

With that said, I think Applied Materials has room to reach further, and with the diversified product offering Applied Materials enjoys, potentially low growth in solar shouldn't hold the company back.

AMAT Revenue Quarterly Chart AMAT Revenue Quarterly data by YCharts

The dividend isn't as impressive as Cisco's, but highly respectable nonetheless. Investors are receiving 40 cents per share for a yield of 2.7%. The payout ratio is elevated, especially for 2013. If they can deliver the expected earnings for the remainder of 2013 and again in 2014, the dividend appears safe. However, if they significantly disappoint or provide guidance far below estimates, you should consider the dividend to be at risk for a cut.

BRCD Chart BRCD data by YCharts

Brocade Communications Systems ( BRCD) engages in the supply of Internet-protocol based Ethernet networking solutions and storage area networking (SAN) solutions.

52-Week Range: $4.18 to $6.44

Price-to Book: 1.1

Brocade Communications is anticipated to give us a repeat performance of last year in this year's second-quarter earnings after the market closes on May 16.

The consensus estimate is currently 15 cents a share, the same as second quarter last year. Analysts are estimating as low as 14 cents per share, up to the most optimistic estimate of 16 cents per share. With estimates so tightly packed, this really is a consensus estimate. I think the company has a better-than-average chance of beating, but unless the chart technicals improve, it may not matter.

After breaking below the 200-day moving average for the third time in as many weeks, Brocade is once again testing the widely followed key price level. The 200 day moving average acts as both a support level for shares trading above it and a resistance level for shares that are below it.

Unless the shares move above and stay above after reporting, another test of $5 per share is a reasonable expectation.

The shares whipsaw higher and lower with such regularity that an investor can almost buy or short at any time other than extremes and have a real chance to profit. Short interest is higher than Cisco or Applied Materials at 3.2%, but not strong enough to influence your investment thesis.

Bottom line, if shares can move above and stay above the 200-day moving average, I am bullish, but until then, take profits when you can.

BRCD Revenue Quarterly Chart BRCD Revenue Quarterly data by YCharts

At the time of publication, the author had no positions in stocks mentioned.

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

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