3 Stocks to Buy Thanks to Big Post-Earnings Discounts

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In a hot broad market at all-time highs, there simply aren’t a lot of bargains to be had. But every now and then, the market overcorrects and hands investors a buying opportunity.

3 Stocks to Buy Thanks to Big Post-Earnings Discounts S VRTV AMD

There are a number of reasons this can happen — from unexpected news to downgrades to broader world news that investors fear will have an adverse effect. And of course, there’s always earnings reports.

Here are three stocks on sale due to recent post-earnings declines. In all three cases, investors are missing the forest for the trees, and reacting too strongly to short-term factors instead of the long-term case. And in all three cases, the new, lower, post-earnings price doesn’t seem likely to persist for long.

So without further ado, here are three stocks on sale.

3 Stocks to Buy After Post-Earnings Discounts: Sprint (S)

3 Stocks to Buy After Post-Earnings Discounts: Sprint (S)Shares of Sprint Corp (NYSE:S) fell 14% after Q1 earnings — a decline that seems largely due to market impatience.

After all, the numbers looked good. Sprint earnings per share were modestly under consensus, but the company posted revenue growth of 5.7%. Analysts had expected another year-over-year decline in sales. Sprint added 42,000 postpaid customers, while Verizon Communications Inc. (NYSE:VZ) saw a year-over-year drop in the same quarter.

Annual operating income hit its highest level in a decade, and is projected to rise another 20%-plus in fiscal year 2018 (ending March) at the midpoint of company guidance.

Yet S stock sold off. A key reason appears to be some level of disappointment on the M&A front. A merger between Sprint and T-Mobile US Inc (NASDAQ:TMUS) has been rumored for years now. With the companies now able to discuss a merger after the FCC mandated a “quiet period” following a spectrum auction, investors appear to have expected more concrete news than the company had to offer.

But Sprint, per CEO Marcelo Claure, has received “a lot of interest.” A deal seems likely to come at some point. The recent agreement between Comcast Corporation (NASDAQ:CMCSA) and Charter Communications, Inc. (NASDAQ:CHTR) might delay talks between Sprint and those cable companies. But Sprint will remain an acquisition target — even if that agreement pushes a deal back a year or two.

Meanwhile, the company’s spectrum holdings still exceed the value of its debt and equity. Sprint’s turnaround continued in its fiscal Q4 — yet investors acted as if the company hit a wall. That seems too pessimistic, and creates an opportunity with S stock below $8.

3 Stocks to Buy After Post-Earnings Discounts: Veritiv (VRTV)

3 Stocks to Buy After Post-Earnings Discounts: Veritiv (VRTV)Paper and packaging distributor Veritiv Corp (NYSE:VRTV) dropped 19% after its Q1 earnings report, hitting an eight-month low in the process. But here, too, the decline seems overwrought.

After all, management reaffirmed full-year profit guidance coming out of the quarter, and insisted that what appeared to be a big miss relative to quarterly expectations was a matter of timing, not performance. Veritiv’s print and publishing segments are declining — unsurprisingly — but Q1 actually was strong in the key packaging business, the company’s growth driver going forward.

VRTV isn’t a perfect stock: debt remains reasonably high and pressures in the paper business will persist. But after the 19% decline, VRTV stock is cheap, and there’s potential for a cash flow compounding/deleveraging story going forward. That story sent the stock over $60 after Q4 earnings in March. Q1 wasn’t weak enough to justify a move back toward $40.


3 Stocks to Buy After Post-Earnings Discounts: Advanced Micro Devices (AMD)

3 Stocks to Buy After Post-Earnings Discounts: Advanced Micro Devices (AMD)The story at Advanced Micro Devices, Inc. (NASDAQ:AMD) is somewhat similar to that of Sprint. Both companies are highly leveraged. Both spent years in the shadow of larger, seemingly better competitors. While Sprint lagged behind Verizon and AT&T Inc. (NYSE:T), AMD has spent years fruitlessly chasing chip leader Intel Corporation (NASDAQ:INTC). In 2016 and into 2017, both companies appear to finally have made some headway in becoming stronger competitors.

And both stocks fell after what looked like solid earnings performances. AMD had a steeper fall — 24% — off results that were largely in line with analyst expectations. As our Richard Saintvilus argued, investors acted as if the quarter was a debacle. But it wasn’t. In fact, several analysts either upgraded the stock or raised price targets based on the numbers.

Rather — again, like Sprint — expectations simply seem to have been a bit too high, particularly after a huge run in AMD stock. But the fact remains that the bull case for AMD coming out of Q1 looks reasonably similar to the bull case heading into the quarter. The only thing different is a price that is now 26% below late February highs. That presents an opportunity for investors who missed the first part of the AMD run to get back in before the next one starts.

As of this writing, Vince Martin was long shares of VRTV stock.

After spending time at a retail brokerage, Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/stocks-to-buy-post-earnings-discounts-s-vrtv-amd/.

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