3 Stocks We're Watching, But Won't Buy Yet

By Markets Fool.com

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There's often a fine line between waiting on the sidelines for a particular stock to show signs of life, and waiting so long that an opportunity is lost. In that vein, we asked three of our Foolish contributors to find stocks that fit into the "intriguing, but no need to rush" category. For various reasons, LinkedIn , Qualcomm , and Las Vegas Sands all merit a position on your watchlist.

Tim Brugger (LinkedIn): LinkedIn shareholders were glad to put May behind them. After plummeting about 25% on the day following its earnings announcement on April 30, LinkedIn stock is still meandering. And that's precisely why LinkedIn is worthy of inclusion on a list of stocks to watch.

LinkedIn's troubles didn't stem from 2015's first-quarter results. Revenue jumped 35% to $638 million last quarter, beating both LinkedIn's internal forecast as well as the consensus analyst estimate of $636 million. As for non-GAAP (excluding one-time items) earnings-per-share (EPS), LinkedIn again outperformed, generating $0.57 a share compared to the $0.53 a share forecast.

After announcing the strong quarter, LinkedIn CFO Steve Sordello then had the unenviable job of sharing the company's revised earnings expectations for the full year. Revenue is expected to be about the same as estimated in Q4: $2.9 billion -- a 30% improvement compared to 2014. But a dramatic increase in expenses forced a revision of expected earnings before interest, taxes, depreciation, and amortization (EBITDA) and EPS: and the sell-off began.

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LinkedIn's EBITDA guidance was revised downward to $630 million from $785 million, and expected non-GAAP EPS dropped to $1.90 from the previous expectation of $2.95 a share.

So, why is LinkedIn worth watching? Because its fundamental initiatives to drive growth -- assimilating new assets like marketing solutions provider Bizo and online training leader Lynda.com, to name but two -- haven't changed.

Its share price decline is largely due to the impact of near-term expenses, not fundamental problems with LinkedIn's core business. The top line continues to soar, and at some point, investors will come to recognize the potential of LinkedIn over the long haul. When that happens, its 25% drop in share price will prove to be a gift for long-term investors.

Bob Ciura (Qualcomm): I'm watching Qualcomm but won't buy it just yet. The reason I think Qualcomm has a great deal of potential as an investment opportunity is because it's a cash-cow business. Smartphone shipments continue to grow around the world, and as one of the world's biggest chip companies, Qualcomm is a direct beneficiary of the smartphone boom.

Qualcomm grew revenue by 8% and adjusted earnings per share by 7% last quarter, year over year. This was because MSM shipments soared 24% in the same period, to 233 million units.

Qualcomm also generates a lot of cash, and since it has a relatively low amount of debt on the books, that cash is piling up. The company now holds $29.6 billion in cash, cash equivalents, and marketable investments on the balance sheet and has almost no long-term debt to worry about. With its impressive cash flow, Qualcomm aggressively returns cash to shareholders. It pays a hefty 2.75% dividend and recently upped its dividend by 14%. In addition, Qualcomm repurchased $1.9 billion of its own stock just last quarter.

The reason I haven't bought Qualcomm just yet is the uncertainty related to its licensees. Qualcomm has reported in recent quarters that it believes certain licensees are under-reporting device sales. Separately, Qualcomm lost a major customer in recent months, according to various reports. Most analysts believe this is device giant Samsung.

Because of these factors, Qualcomm expects to struggle this quarter. Management has projected that revenue will decline by 9%-21% year over year in the current quarter. I'd like to see this quarter's results before I jump into the stock, just to make sure Qualcomm is on a firm path to recovery.

Andres Cardenal (Las Vegas Sands):Las Vegas Sands is going through a difficult period. Gaming revenue in Macau is under heavy pressure for several reasons, including increased regulations and restrictions imposed by Chinese authorities in order to fight corruption and money laundering via Macau casinos.

Also, the Chinese government is trying to turn Macau into a family-oriented entertainment center, offering more attractions such as restaurants, shopping centers, and shows, and not relying so much on gaming. This transformation could be a major positive for Las Vegas Sands and other Macau casino operators from a long-term point of view, but things look quite uncertain right now.

Gaming revenue in Macau declined 39% in April, which was the 11th consecutive month of falling revenue. This is clearly hurting Las Vegas Sands stock, which is down by more than 33% from its highs of the last year.

Until there is any sign of improvement, the stock will probably remain depressed. However, Las Vegas Sands offers substantial upside potential once things turn for the better. Gaming is a remarkably profitable business, and Macau is one of the most promising markets in the world, standing to profit from the rise of the Chinese middle class over decades to come. Las Vegas Sands owns a gargantuan market share of 56% of hotel rooms among gaming operators in Macau.

At current prices, Las Vegas Sands pays a big dividend yield of more than 5%. This is quite an attractive return coming from a financially solid business generating tons of cash flow and offering plenty of room for growth when Macau demand starts growing again.

The article 3 Stocks We're Watching, But Won't Buy Yet originally appeared on Fool.com.

Andrs Cardenal owns shares of LinkedIn and Qualcomm. Bob Ciura has no position in any stocks mentioned. Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.