Quarterly earnings reports are a funny thing in the world of investing and there are many professional traders that will tell you to steer clear of trading shares of a company around its call. The behavior of the stock leading up to and shortly after the earnings call is not exactly always rational. In an environment where rapid quarter-after-quarter growth is the new expectation, and any sort of regression can cause a well-inflated stock to deflate in a hurry, investors are often provided with a nice buying opportunity off of these market overreactions. Here are a couple of stocks that have been beaten down a little too much after their earnings reports:
Palantir Technologies (NYSE:PLTR): Palantir’s recent earnings report was basically a perfect storm of factors that would leave the stock nowhere to go but down. First, the results of the quarter were mixed which is usually one of the first indicators that sends paper-handed investors running for the hills. Year-over-year revenues rose by 40% for Palantir which beat Wall Street estimates by over $20 million. The earnings failed to meet Wall Street expectations of a profit of $0.02 per share, instead Palantir posted a loss of $0.08 per share. But for a software company, these are not always the main indicators of success. Gross margins for instance are a long-term sign of a road to profitability, and Palantir’s margins have increased every year since 2019. But two other factors that contributed to Palantir’s slide are the recent Reddit war with Wall Street and the impending lockup expiration. The former is fairly self-explanatory but the latter is not as obvious. The lockup expiration is basically when insiders to the company are allowed to start selling their shares after a company holds an IPO. This is almost always going to cause more shares to be sold so when putting all of these factors together, it was nearly inevitable that Palantir would dip.
Blackline Inc (NASDAQ:BL): From one of the most talked about stocks to one of the most underrated stocks, Blackline Inc has been a silent beast since it went public five years ago. Blackline is a cloud-based accounting software that is used by well over 3,000 companies around the United States. Sound boring? The stock has gained 400% since its inception and continues to be a solid winner for early investors. But last week Blackline reported some mixed results, with a year-over-year decline in revenues and full-year loss of $47 million compared to 2019’s loss of $32.5 million. Is the company going backwards? No. Like many SaaS companies it is heavily re-investing in its research and development, a well-known cash vacuum. Blackline’s founder and CEO Therese Tucker also announced she is stepping aside back in January, and investors who have made their gains decided that it was a good time to exit their positions. But several Wall Street analysts raised their price target for Blackline, showing that they expect the research and development to pay off, and the leadership to change to have minimal impact. Shares fell nearly 15% so investors who want a steady SaaS company with ten-bagger potential should take a long hard-look at Blackline before it rebounds.
Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.