Throughout September and October, the market bagged impressive gains as strategists started to view the economy as healthy enough to avoid the dreaded “double-dip” recession. More recently, the market has lost a bit of that luster as investors realize that we’re not necessarily set for impressive growth in 2011 either. A just released survey from the National Association for Business Economics (NABE) highlights expectations that the U.S. economy will grow just +2.7% this year and +2.6% in 2011. Their conclusion: “To a large extent, the latest NABE forecast reflects the view that the economy will struggle against financial headwinds.”

And the absence of robust growth means many companies will struggle to boost sales in 2011 and some companies may actually see sales pull back next year. With that in mind, here’s a profile of five companies that are expected to see sales slump next year.



AOL (NYSE: AOL)
A year ago this week, this former Internet powerhouse came public again, and it has not been the hot stock that some had hoped. In the past four quarters it’s become increasingly clear that sales growth is hurting as AOL’s legacy dial-up access business shrinks, and its ad-based websites aren’t showing much revenue prowess either. That’s why analysts expect sales to fall -25% this year and another -10% in 2011. Profits are expected to drop at an even faster place, with forecasts calling for earnings per share (EPS) to drop -40% in 2011.

The dial-up business, which had more than 13 million subscribers in 2006, now has less than four million, and could be gone completely in three to four years. As a result, EBITDA of $2 billion in 2006 at this division should fall below $500 million by 2011.

To offset this lagging division, AOL aims to become a major player in free, ad-based web sites. Trouble is, the online ad business is not robust enough to take up the slack. Ad sales are expected to fall about $100 million a year, according to Hudson Square Research, from an expected $1.26 billion this year to around $1 billion by 2012.

Shares of AOL have rebounded recently on hopes that a link-up with Yahoo! (Nasdaq: YHOO) will improve its profile. But if a deal fails to materialize, then shares might quickly fall back to the $20 mark. Shares are also at risk from the potential realization that synergies between these two firms may have been overstated.

Alnylam Pharma (Nasdaq: ALNY)
Investors love to see a fledgling biotech company find major Big Pharma partners. The big boys have global sales teams that can turn modest market opportunities into major ones. But it cuts both ways. When Big Pharma walks away, the scope of sales can shrink. And that’s happening what’s with Alnylam, which just ended a five-year relationship with Novartis (NYSE: NVS). Adding insult, Roche Holdings (Nasdaq: RHHBY) abruptly terminated a drug-development deal with Alnylam.

Alnylam is researching the biological pathways within cells to identify how various genes turn on and off. By tinkering with certain genes, they could alter the way some diseases are treated. It’s a promising field, though investors are left to wonder why Roche thinks it’s no longer part of its long-term game plan.

The good news: Alnylam’s $380 million in cash is almost as much as its market value. That’s enough to fund operations for almost three years, even if milestone-related payments from partners falls to zero. So this is an unusual case where the news is bad, 2011 revenue is likely to be even lower than analysts’ current forecasts, but shares still hold long-term promise.

iStar Financial (NYSDE: SFI)
The real estate sector is still feeling the heat of a slow economy. I recently took a look at iStar Financial, which is a key lender to real estate developers, and noted that the company appeared to have dodged a bullet by re-scheduling some debt obligations. [Read my analysis here]

And though you can make a compelling case that shares would sharply rebound if the economy picks up, the NABE forecast cited above may throw water on that thesis. If the economy is growing a subpar rate of just +2.6% next year, then the real estate sector will still be saddled with too much unused space. I like this stock for the potential upside, but weaker-than-expected GDP numbers in coming quarters could push shares down sharply once again.

RealNetworks (Nasdaq: RNWK)
Before there was an iPod, before there was the buzzword of “media streaming,” there was RealNetworks, which was an early pioneer in the field if digital music downloads. But this company may be headed for the dustbin, unless a new game plan can take root in 2011.

And a new plan is surely needed. Sales peaked at $600 million in 2008 and will likely fall below $400 million this year, with further declines projected in 2011. And as sales slump, the company’s once-impressive cash balance has dwindled, from $780 million in 2005 to a recent $330 million. The entire company is valued at just $460 million, so investors are no longer giving the company much credit for the company’s technology or its customer base.

In a bid to stay relevant, RealNetworks is hopping on the “cloud” bandwagon, with plans to launch a web-based media storage offering that allows users to access their music, videos and other files from a range of devices. It’s an intriguing move, but if successful, could easily be replicated — and out-marketed — by the likes of Amazon.com (Nasdaq: AMZN), Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG).  Yet with all that cash and so much pessimism, this stock could have a second life if sales stabilize and turn up. That’s a big “if,” but certainly worth watching.

SEACOR Holdings (NYSE: CKH)
Environmental disasters cost lots of money to clean up, and the recent Gulf oil spill was no exception. It created a sudden massive windfall for Seacor, which offers a range of offshore drilling services, including emergency response services. The company typically earns $1 to $2 a share every quarter, but earned a hefty $7.19 in the September, 2010 quarter. With the Gulf oil spill cleaned up, earnings should return to normal, but the company’s stock price remains in the stratosphere, thanks to that one-time profit spike. In fact, 2010 will have been such a good year for Seacor that 2011 sales are expected to fall more than -25%.

Shares trade for more than 25 times next year’s projected profits, even as those profits are expected to fall by more than half when compared with 2010. The abundant cash flow from last quarter led Seacor to announce a one-time $15 dividend, but beyond that, there’s little reason to explain why shares deserve to trade at all-time highs when business is about to cool.

Action to Take –> All of the above stocks have a shot at turning things around after 2011. But investors may still not understand just how vulnerable they are to a further cooling in the economy. Some of the stocks mentioned above are prime short candidates, while others will simply take a while to rebound.