3 Beaten-Up Stocks That May Benefit From Upcoming Earnings Reports
With earnings season fast approaching, I'm considering strategic trades in hard-hit names that may have already factored in disappointing results.
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Another bout of profit-taking is hitting on Thursday morning. So far, the impact has been relatively minor, with the S&P 500 falling about 0.4% and the Russell 2000 (IWM) down 0.8%. Only about 34% of stocks are positive, but the mighty Nvidia (NVDA) is up 1.8% and offsetting losses in hundreds of other stocks.
I'm managing my positions closely and don't see any significant technical damage so far. Many very extended stocks are pulling back, but they are so overbought that they can fall quite a bit before they even encounter some support. I've taken some profits in a number of high flyers but maintain positions in names like Nvidia, AST SpaceMobile (ASTS) , and uniQure N.V. (QURE) .
With earnings season fast approaching, I'm considering strategic trades in stocks that have dropped sharply and may have already factored in a disappointing earnings report. One such name is Shift4 Payments (FOUR), which offers payment processing and technology for hospitality and retail. A recent new customer was the Detroit Lions.
Following its last earnings report, the stock saw a number of price target cuts and is down about 30% from its highs in July. Estimates remain intact, and there was some insider buying as well. I believe the recent action is an overreaction and that it will react favorably to even a tepid earnings report, which should be out in early November.
Another similar name is Dutch Bros (BROS) , which is seeing some bounce today but is down about 37% in the past month. This is likely due in part to tariffs placed on coffee from Brazil, but analysts are constructive on the name, and guidance is solid. It doesn't need a big report to regain its footing.
I have not yet bought any FOUR or BROS, but I am watching for entries.
A third name is a stock that was a very poor trade for me earlier this year. Humacyte (HUMA) had a series of problems, and I was stopped out for a sizable loss. The company did a secondary offering last week, and it is down sharply on that news.
One positive for Humacyte is that the husband of the CEO was a huge insider seller of the stock because he was overleveraged and had to pay off loans. The entity he controlled has liquidated its shares, so that pressure is eliminated. I think Humacyte stock could see some recovery when the company focused on commercial success in the next earnings calls.
The recent secondary was oversubscribed and priced at $2.11. It is currently trading at $1.59. I re-established a small position and will be watching it closely once again.
Third-quarter earnings should offer plenty of good trading for strategic thinkers.
At the time of publication, Rev Shark was long NVDA, ASTS, QURE and HUMA.
