The moment of truth is here. Earnings season is heating up and experts are predicting the first earnings decline since 2016.
So far, we have had mixed reports from the big banks. Declining revenue from Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) gave a bearish note to the season, following a resounding beat from JPMorgan Chase (NYSE:JPM) last week. The bank reported record Q1 profit and revenue thanks to higher interest rates. Post-report, JPM stock spiked 5%.
So, which stocks should you be keeping an eye on in the coming weeks?
I used TipRanks’ market data to identify the strongest stocks into earnings. As you will see, the following stocks boast a ‘Strong Buy’ Street consensus. That’s based on all analyst ratings received over the last three months.
Let’s dive in now and see what makes these three stocks so special:
Strong Buy Stocks: Twilio (TWLO)
Earnings Date: May 14
Twilio Inc (NYSE:TWLO) stock has exploded by more than 40% year-to-date. So it is remarkable that analysts still see further growth ahead. Twilio’s ubiquitous APIs allow software developers to easily build and operate real-time communications (voice, messages, video and e-mail) within software apps.
Five-star Oppenheimer analyst Ittai Kidron (Track Record & Ratings) has just ramped up his price target from $125 to $150. From the current share price, that suggests shares can surge a further 18%. “We remain bullish on Twilio, as expansion and SendGrid synergies remain underappreciated,” writes Kidron. Twilio recently acquired email marketing platform SendGrid for about $2 billion, in a savvy move to boost its previously limited email offerings.
As for earnings specifically, Kidron gives this upbeat analysis: “We expect a strong quarter and guide, reflecting robust new customer growth/ expansion and a full quarter of SendGrid contribution.” The key point to bear in mind is that the SendGrid acquisition closed earlier than anticipated. That raises the likelihood of 2H19 synergies, which were not incorporated materially into expectations.
“Our proprietary analysis suggests consensus still materially underestimates Twilio’s expansion rates after 2Q19; our upside case is supported by growing adoption of Application Services and new customer activity” concludes the analyst.
Overall this “Strong Buy” stock scores 15 buy ratings from the Street in the last three months. That’s versus just two hold ratings. “Note that TWLO exceeded revenue consensus by 11-13% in each quarter of F2018, so we see upside to our estimates” chimes in FBN Securities’ Shebly Seyrafi. He also has a $150 price target on shares.
Want to learn more about Twilio? Get the free TWLO Stock Research Report.
Earnings Date: April 25
E-commerce giant Amazon (NASDAQ:AMZN) is a top pick for the print, according to RBC Capital’s Mark Mahaney (Track Record & Ratings). Bear in mind this is an analyst with a notably strong track record of successful stock picking. Out of over 5,100 tracked analysts, Mahaney is ranked an impressive #32.
He has a $2,300 price target on AMZN, indicating further upside potential of 25%. “We have been very, very consistently positive on AMZN over the last decade… [and] we view the AMZN long thesis as very well intact” cheers Mahaney in his Q1 earnings preview.
According to Mahaney, out of all the large-cap internet stocks, Amazon is one of the stocks with the least risk going into the print. The analyst writes “the ongoing mix-shift to higher margin AWS and AMS revenue, along with leverage in Fulfilment expenses should generating Operating Income upside.”
He is predicting $58.6B in Revenue, $3.0B in GAAP Operating income and $5.03 in GAAP EPS. That beats the consensus expectations of $4.71 GAAP EPS. As for Amazon’s rapidly growing cloud unit, Amazon Web Services (AWS), Mahaney is looking for revenue of $7.7B, growing 41% Y/Y and AWS GAAP Operating Profit of $2.2B (a 28.7% margin).
Taking a step back we see that this “Strong Buy” stock is one of the Street’s favorite stocks right now. Out of 37 analysts who published a rating on AMZN in the last three months, 36 are bullish. Meanwhile, the average analyst price target of $2,125 suggests upside potential of over 15%.
OrthoPediatrics Corp (KIDS)
Earnings Date: May 13
From one of world’s largest stocks to a relatively under-the-radar small bio-science company. OrthoPediatrics Corp (NASDAQ:KIDS) focuses on the neglected field of orthopedic implants for children. As the company’s motto states, “Children are not just small adults”; and it designs all its products specifically for children.
So far this approach has paid off. Since 2006, OrthoPediatrics has received regulatory clearance for 26 surgical systems for trauma, long bone deformity and correction, scoliosis and sports medicine.
“Entering 1Q19, shares have pulled back from their highs in the mid-40s but we believe there has been little fundamental change to the story and would look to add on weakness leading into the quarter,” five-star BTIG analyst Ryan Zimmerman (Track Record & Ratings) told investors. Indeed, shares put on an incredible 70% sprint in 2018 but are now down 13% in April.
While expectations are elevated, he believes KIDS has multiple drivers through FY19 (including into 1Q19) that suggest upside. Planned capital expenditure $17.9 million for 2019 could lead to beats of a few hundred thousand dollars above expectations each quarter. Plus there are ~50 accounts that have the potential to grow from six-figure accounts to multiple seven figures. “We will be looking for progress related to these large customer agreements on the 1Q19 call and beyond,” says the analyst.
As for valuation, KIDS shares continue to trade at a premium to small-cap orthopedics. However — and this is the key point — the stock continues to trade at a discount to high-growth medical technology peers. “We feel that the appropriate comparison is high-growth medical technology peers given the large market opportunity, lack of competition, and continued execution,” concludes Zimmerman.
With a “Strong Buy” consensus, KIDS has received only buy ratings from the Street over the last six months. Get the KIDS Stock Research Report.
Extra “Strong Buy” Stock: Proofpoint (PFPT)
Also keep an eye out for cyber-security stock Proofpoint Inc (NASDAQ:PFPT). The company is set to report earnings on April 25. “We are expecting PFPT to report solid results for CY1Q19; our channel checks indicate continued strength … with a positive Q/Q inflection for Proofpoint partners,” enthuses Baird’s Jonathan Ruykhaver. He likes the email security market and views the 12-24 month risk/reward as attractive for Proofpoint.
TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.