Investing in companies that are good at beating earnings has been a popular strategy for decades. Some companies beat earnings once or occasionally, but others manage to deliver good news to their investors consistently. Investing in good companies should be straightforward enough, but is it better to invest in those that keep having good news or those that keep disappointing?
Investors, traders and speculators need to know that simply chasing earnings winners and stocks that rise on good news can be a dangerous game. Sometimes the gains were larger than they should have been, and sometimes the underlying stocks just do not keep moving despite the good news.
24/7 Wall St. has tracked 10 earnings reports from the last week of July in which the earnings news was very positive and the stock price surged alongside the report. Some of these might not have closed at their highest levels, and some may not be anywhere close to their all-time highs. Yet, all in all, these are the companies that investors are going to consider, at least for the time being, as serious “earnings season winners.”
While Amazon.com Inc.’s (NASDAQ: AMZN) 4% gain may not sound like much, the stock has been on a tear all year. It is winning from the cloud and from the retail apocalypse having just been vaulted forward by 10 years due to the COVID-19 shutdowns and limited reopenings.
Amazon even blew earnings away after spending that $4 billion that it committed to spend for safety and growth and after 175,000 or so in new hires. Amazon stock closed Friday up 3.7% to $3,164.68, with a consensus price target of $3,117.20. It trades in a 52-week range of $1,626.03 to $3,344.29. Goldman Sachs was the biggest bull for Amazon after the report, with a Conviction-Buy rating and a $4,200 price target.
Advanced Micro Devices Inc. (NASDAQ: AMD) is winning at Intel’s expense. The stock was running ahead of earnings after Intel’s 7nm woes, and the gains just continued onward and upward. Guidance in the report suggests this as well. AMD shares even hit a new high of almost $79 on Friday before some late-day profit-taking that was frankly overdue. AMD was just trading at $59.57 ahead of Intel’s confessional earnings report showed big 7nm delays, and analysts are chasing it up even more. AMD stock closed Friday at $77.43, in a 52-week range of $27.43 to $78.96. The consensus price target is $72.29.
Another winner is Apple Inc. (NASDAQ: AAPL). Its shares were up 10% at $425 to close out the day, hitting a new all-time high in the process. Interestingly enough, its unexpected stock split was just icing on the cake. Apple shares had been at $384.76 ahead of the earnings report, and that was already up 31% year to date, without the post-earnings gain. Apple stock has a 52-week trading range of $192.58 to $425.66. Analysts across the board hiked their targets in reaction to the report, and the street-high target of $500 a share came from Cascend Securities.
Small-cap home furnishings purveyor At Home Group Inc. (NYSE: HOME) is winning from the invest-in-home economic theme. Its stores are massive, with lots of space so you won’t have to worry about breaching your social distancing space. Its stock has been running ahead of earnings and saw some profit-taking after the last pop.
However, At Home scored two big price target hikes from analysts, and its stock was only about one-fourth of its value from mid-2018 before the news. BofA Securities upgraded it to a Buy rating with a $16.50 price objective, and Jefferies reiterated a Hold rating with an $11 price target. At Home stock closed Friday at $12.42. The 52-week range is $1.20 to $13.54, and the consensus analyst target is $9.80.