Earnings season. It’s that time of the year when investors are faced with who did what, by how much and that sort of thing. But while today’s and tomorrow’s earnings stocks make for good headline fodder and elevated risk in those names, I’d like to review a couple more clear-cut opportunities, off and on the price chart, following recent reports now shaping up as buys.
It’s not exactly a secret, quarterly reports can be volatile events, and I’m not just talking about GameStop (NYSE:GME) theatrics. Significant profits or deeply-entrenched open losses can be erased overnight. Or not.
Today and getting past “Gamestonk!!” headlines, it’s Chevron (NYSE:CVX) or Eli Lilly (NYSE:LLY). Yesterday it was McDonald’s (NYSE:MCD) and the day prior, Advanced Micro Devices (NASDAQ:AMD). The list goes on and on.
From a company’s actual beat or miss, whisper estimates, management’s outlook, Wall Street’s favored metric of the day, analyst opinion, general market sentiment and what have you, earnings reactions can deviate wildly from underlying value, there’s a lot to digest. And mind you it’s a two-way street that doesn’t always make sense in the short-run.
But investors don’t have to play that game of chance either. In the following let’s look at three recent earnings stocks which based on what’s transpired off and on the price chart following a quarterly report, now look ready for investors to put inside their portfolios with greater authority.
Today’s picks are:
Earnings Stocks to Buy: Netflix (NFLX)
The first of our earnings stocks to buy is Netflix. The streaming video on demand giant disappointed street views calling for earnings of $1.36 per share when it reported profits of just $1.19 back on Jan 19. Sales of $6.64 billion just eked past forecasts. But that stuff wasn’t what Wall Street decided to focus on.
Investors stoked shares to all-time-highs and up nearly 18% on the session buoyed by three other key metrics.
First, Netflix’s surprisingly strong subscriber count pushed past 200 million for the first time ever. Second, the company raised its operating margin from a healthy 14.4% to an outright beefy 25% for the first quarter. And lastly, management announced it no longer requires external financing for its day-to-day operations given a markedly-improved cash flow for Netflix.
Technically, this stock has nearly unwound the entirety of its gap reaction over the last two weeks. Shares of NFLX are back inside an elongated first-stage basing pattern.
No doubt it’s been a disappointing ride lower for existing shareholders. But for today’s investors and backed by a solid bullish-looking stochastics signal, it’s time to buy a good story at price levels that spell value.
Favored Strategy: Modified Collar March $590 Call / ($500/$425 Bear Put Spread)
Earnings Buy: JP Morgan Chase (JPM)
The next of our earnings stocks to buy are shares of JPMorgan Chase. The banker hasn’t managed to garner the respect of investors or would-be shareholders since reaching an all-time-high in the session prior to releasing results on Jan. 15. That’s okay though and for a couple good reasons.
Today, the result of Wall Street’s “sell-the-news” profit-taking following this JPM’s record and analyst-busting quarter is shaping up as a slightly ill-formed cup pattern.
The provided monthly chart shows JPM has pulled back inside the base after narrowly breaching the former high. With stochastics trending higher in neutral territory, the expectation is a key low, which could form a “high handle” pattern on the weekly or daily time frame, is nearby.
Bottom line: If you’re not a believer in those types of things, this stock’s push into the emerging crypto market with JPM Coin, its blockchain efforts, or JPM stock’s more old-fashioned dividend of 2.77% and below market price multiple are a notable combination that should inspire buyers.
Favored Strategy: Modified Collar March $145 Call / ($125/$110 Bear Put Spread)
The last of our earnings stocks to buy is Intel. Yeah, I know. Advanced Micro Devices! Nvidia (NASDAQ:NVDA)!! Competition!!! Nevertheless, the world’s largest semiconductor company posted an admirable quarter that handily topped both analyst earnings and sales views, as well as the company’s own forecast when it reported on Jan. 20.
Sadly, the solid results were overshadowed by much-ballyhooed worry over a reported leak of an infographic related to the quarterly data was hacked off Intel’s PR newsroom site. The hack forced management to release earnings six minutes ahead of the closing bell and dismantling its longstanding tradition of after-hours show-and-tell.
The ‘pre-announcement’ saw INTC stock racing higher by roughly 6.50% in the regular session. However, shares reversed course to erase the entirety of those gains following word of the hack…and then some in the days that have followed.
Technically, this stocks’ price weakness has allowed shares to pull back near the high of October’s engulfing monthly candlestick which formed a key low within INTC’s uptrend of the past several years.
Coupled with an oversold and bullish stochastics signal, this looks like a compelling spot to pick up Intel shares for capital gains ahead and a healthy dividend of nearly 2.50% to boot.
Favored Strategy: Slightly above-the-market April $57.50 Put / $65 Call Collar
Stocks owned: On the date of publication, Chris Tyler held, directly or indirectly, positions in Advanced Micro Devices (AMD) and its derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.