Submitting trades based on an upcoming earnings report is a popular short-term strategy.
However, not all earnings plays are created equal.
Some corporate earnings releases pack more punch than others because they contain a pivotal news item or data. A market braced for a major catalyst often reacts by sending a stock price significantly higher or lower.
Investors have several tools at their disposal when it comes to identifying stocks that can pop after earnings. History is usually the best guide.
Stocks that are inherently volatile because of the industry they are in naturally tend to have big reactions. Biotechnology and other high growth areas come to mind.
Simply looking to see how a stock has historically moved on earnings is a good approach as well. Finally, companies that have huge investor followings and are popular in social media circles can be driven way up or down by the herd mentality.
Names that meet all of the above criteria have the greatest odds for earnings day fireworks. These three companies do just that—and have upcoming earnings announcements that should come with much fanfare.
Will Moderna Beat Q1 Earnings Expectations?
Moderna, Inc. (NASDAQ: MRNA) reports before the market opens on May 4th. The biotech is among the 10 most volatile S&P 500 constituents with pandemic and vaccine developments constantly producing wild swings.
Last time around Moderna announced fourth-quarter results that beat consensus on both the top and bottom lines. The company also announced that 2022 advance purchase agreements rose to $19 billion and that discussions were already underway with world governments regarding fall 2022 and 2023 Covid vaccine supplies.
Word of a new $3 billion stock repurchase plan was also greeted favorably by the market. Moderna shares closed up 15% on the day of the report. The move was similar to what the stock did following the previous two quarterly releases.
This week, the Street will be looking for EPS of $5.18 on revenue of $4.4 billion. The profit target represents more than 80% growth over the same period last year and will be Moderna's first comparison to a highly profitable quarter after a long stretch of pre-pandemic losses.
Is Shopify a Good Earnings Play?
Shopify Inc. (NYSE: SHOP) is slated to announce Q1 results pre-market on Cinco de Mayo. Whether the stock has a festive day will depend on if management can not only exceed the Street’s forecast but also reassure investors about its ambitious spending plans.
The e-commerce software provider is making an aggressive move into third-party retail distribution. Earlier this year it announced a plan to dish out $1 billion from 2023 to 2024 to build out its stable of company-owned warehouses. The end game is to be able to offer delivery in two days or less to at least 90% of the U.S. population. It is nothing short of a gutsy move to go head-to-head with industry behemoth Amazon.
The spending strategy spooked the market in February and overshadowed Shopify’s EPS beat and 41% revenue growth. The stock gapped down 16% on February 16th in over six-times the average daily volume. Many institutional and retail investors decided this was the last straw for a stock that three months prior was trading above $1,700.
This was followed by a brief March rally that was later washed away by the disaster that was April 2022. The bar is set low for first quarter earnings with analysts forecasting a sharp decline from the pandemic-crazed period of a year ago. It's hard to say if Shopify will exceed the lower expectations, but chances are May 5th will be a wild ride for the stock.
Will DraftKings Stock Be Volatile?
DraftKings (NASDAQ:DKNG) is up to bat on Friday morning. The online sports betting platform is forecast to announce a steeper net loss of $1.16 per share. Last year at this time, the company had a far worse than expected per share net loss of $0.87 that sent the stock on a weeklong slide back to $40.
Last quarter finally broke a streak of seven straight bottom line misses for DraftKings, but only by a couple pennies. It also hiked its 2022 revenue outlook to $2 billion at the high end. Nevertheless, the stock sunk to new lows before buyers swooped in to drive a four-day rally.
It's been downhill since. The former SPAC darling has fallen woefully out of favor with the market despite more states moving towards legalization and a huge addressable market opportunity. A wave of competition from the likes of MGM Resorts and Wynn Resorts threatens to dethrone DraftKings who some once considered the clear winner in the online sports betting space.
Sell-side research firm price targets are all over the map heading into this week’s report. Last month Needham gave DraftKings a $32 target while several firms think the stock will struggle to regain $20. Expect home run potential for one team or the other; the bulls or the bears are likely to benefit from a big swing.
Before you consider Moderna, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Moderna wasn't on the list.
While Moderna currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.
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