2 Stocks to Buy on the Earnings Dip
Here are two stocks that sold off that I have my eye on!
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Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.
2024-03-02 11:29

2 Stocks to Buy on the Earnings Dip
This is an article I seem to write for every earnings season. Every quarter, a couple of stocks get hammered after either under-delivering or being punished for having a high valuation. To be fair, both reasons are good ones to see a stock price fall. In my opinion, under-delivering on a quarter is less ideal than a stock running up too high ahead of its earnings report.
2 Stocks to Buy on the Earnings Dip
So which stocks am I buying the dip on this quarter? Two of the bigger sell-offs I’ve seen in quite some time. This tells us just how extended tech stocks are right now and what happens when those multiples are high, even after a good report. Sometimes it can hurt as a long-term shareholder, but believe me when I say that these resets are often healthy for the stock’s performance. Here are two stocks that sold off that I have my eye on!

Snowflake (NYSE: SNOW)
Oh boy, this wasn’t just a sell-off, it was a massacre. It was one of the worst post-earnings drops in recent memory, especially for a stock I follow fairly closely. So what happened with Snowflake’s report? Well, the company demolished Wall Street estimates for both revenue and earnings. Snowflake reported earnings per share of $0.35 which is nearly double the consensus estimate of analysts at $0.18.

But alongside its earnings, Snowflake announced that CEO Frank Slootman was retiring from his position. Slootman has been the CEO since 2019 and led the company through its IPO and successful transition to an industry leader. He will be replaced by Sridhar Ramaswamy who was Snowflake’s Senior VP of AI.

On top of that, Snowflake provided weak guidance for 2024. Revenue estimates came in well short of Wall Street expectations and would be a serious decline in sales growth. If you ask me, this reminds me of when Amazon (NASDAQ: AMZN) provided soft guidance when Andy Jassy took over. Companies can lowball guidance to make the first report look like the new CEO hit a home run. Let’s see what happens but I’m eyeing Snowflake if it continues to drop.

MercadoLibre (NASDAQ: MELI)
In one of the first weaker reports from MercadoLibre since I started following the stock, shares fell nearly 13% after the earnings were released. But was it a big red flag for the company? Or did the stock run too hot too fast? I believe it is the latter once you take a closer look at the report.

Revenue was good! It beat estimates by 42% and operating income improved by 78%. So what had investors grumpy? Meli’s gross margins fell significantly for the quarter due to lower shipping revenues and higher first-party revenue. For a company that is capital intensive, like Amazon or Tesla ($145.08|2.13%), investors focus more on gross margins and how efficiently the company can operate. Honestly, I’m not worried. I think this was more of a case of a red-hot stock running high into earnings. I know the stock is expensive on a dollar basis, but I still think MercadoLibre is a company that can continue to grow with each passing quarter. Now all we need is a stock split!


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.

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2024-03-02 11:29

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About the Author
Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

Analyst Ratings
Target Price$1276.2
# of Analysts20
Last updated2022-12-19

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