November, 2018

Trajectory of Company Seasonality

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Company Seasonality is a very important factor to keep in mind while researching the revenues of a company. 

Canada Goose makes expensive, high-quality coats that perform well in cold weather.  Naturally, their sales in the 2nd quarter (ending in June) are going to be much lower than their sales through the winter months.  It’s almost a guarantee that sales will fall in the 2nd quarter compared to the 1st quarter.

Quarter over quarter comparisons of consumer purchase intent mentions highly seasonal companies are virtually meaningless.

Trajectory Matters

What really matters is how the company performs year over year.  Instead of asking how sales in Q3 compare to Q2 (always better, in GOOS’s case!), we need to be looking at how sales in Q3 of 2018 compare to Q3 of 2017.

One of the easiest ways to see this visually is by looking at the trajectory of the “peaks and valleys” on the LikeFolio Research Dashboard.

As you can see, in Canada Goose’s case, the trajectory is very strong.  Every seasonal peak in purchase intent mentions (and reported revenues) is higher than the prior year’s peak — indicating that overall demand for the company’s products is growing.

On the other hand, some seasonal businesses show the opposite pattern… where every year their “busy season” is a little less…well…busy.  Such was the case for Tiffany’s jewelers for several years:

Spotting Opportunities

Shifts in the trajectory of company seasonality can result in massive moves in the stock.  We’ve seen it play out first hand in Weight Watchers, Crocs, and dozens of other “turnaround stories” that we were able to see happening via social data before Wall St. took notice — always a good time!

Company Seasonality Trajectory reversals are usually the most lucrative plays, and can be bullish or bearish.

There are even ways to use LikeFolio consumer purchase intent data to project company seasonality midway through a company’s busiest season.

When we craft our Opportunity Alerts, shifts in company seasonality trajectory are some of our highest potential (and sometimes longest duration) trades. 

Likewise, using these shifts in purchase intent to make Earnings Predictions has proven to be a very, very effective trading technique.

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