Investing in an equity before its quarterly financial results are released can be a risky move.
If you identify companies that have a track record of exceeding expectations, then the dynamics will change.
Such investments can yield good returns in a matter of days for those with a high risk appetite.
Two companies that consistently exceed expectations are scheduled to report their earnings in the next week.
ServiceNow Inc. (NYSE: NOW).
Bespoke Investment Group data shows that ServiceNow’s share price usually rises by 3.5% after financial releases.
The cloud computing company will announce its third quarter results on October 23rd.
Analysts expect earnings per share of $3.46 on revenues of $2.74 billion, representing an increase of 18.5% and 19,8% respectively.
Michael Turrin is an analyst at Wells Fargo who has a positive outlook for the stock before NOW’s earnings announcement.
His overweight rating combined with a $1,025 price target suggests a 12% increase from the current price.
“We continue to focus our attention on the highest-quality businesses with solid platform positioning, balanced profiles of growth, and management teams that have proven track records. NOW meets all three of these criteria,” he said in a research report last week.
Turrin noted that ServiceNow’s stock is well positioned to benefit from AI tailwinds after the recent launch Xanadu.
Monolithic Power Systems Inc. (NASDAQ: MPWR).
Monolithic Power Systems, another stock to consider ahead of its earnings release is worth considering as it has a track record of exceeding expectations 88% of the times.
Bespoke data shows that semiconductor stocks typically rise by more than 2.5% in value on earnings day.
The consensus estimates MPWR’s third financial quarter will bring in $3.04 per share, a 22.1% rise from $2.49.
Rick Schafer, an Oppenheimer analyst, recently added Monolithic Power’s name to his list of top picks for semiconductors. He cited its potential to gain from the ongoing demand for AI-powered solutions.
He said, “There’s a binary set-up in the group. Leading AI-exposed firms are likely to deliver positive results and outlooks while most others will be about in line, reflecting anemic non AI demand trends.”
Monolithic Power Systems shares currently offer a yield of 0.55%. This is another reason to add it to your portfolio.
In the last ten years, MPWR has been able to turn a $1,000 investment in nearly $24,000.
This post Two stocks reporting earnings soon usually beat expectations: Should you buy? This post may be updated as the updates unfold.
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