Holding a stock through earnings can be unforgiving. Just ask investors in Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Beyond Meat (NASDAQ:BYND) and Grubhub (NYSE:GRUB). But are GOOGL stock, BYND and GRUB still worth shorting or are they better buying opportunities? Let’s take a look a closer look at what’s really happening off and on the price charts of each company to make a stronger risk-adjusted determination.
It’s nice to think the market is a perfect pricing mechanism at any moment in time. But it’s not. Fair value is elusive and Wall Street overshoots in both its enthusiasm and contempt for stocks all the time. In Tuesday’s session, the latter attitude was manifested in shares of Google, Beyond Meat and Grubhub stock following each of these companies’ earnings.
But earnings reports are tricky business. From overall market sentiment and investor perception to results relative to Street or whisper views or guidance and other updates within the corporate confessional, there are a lot of reasons to support less-than-perfect pricing of a stock as investors absorb the new information.
Turning our attention to the earnings-driven, dollar-based price plunges which put GOOGL stock, BYND and GRUB atop the largest losers’ leader-board, where in fact and beyond yesterday’s reality might the best future opportunity be for investors?
Post Earnings Stock No. 1: Alphabet (GOOGL)
Alphabet is the first of the post-earnings stocks to make our radar after GOOGL stock sank a menacing-looking $27.38. But the decline of 2.12% certainly falls within the stock’s historical range of expected outcomes for shares.
In a nutshell, Wall Street’s initial response to the report appears tied to the company’s headline profit miss. Earnings of $10.12 per share of GOOGL stock came in well short of forecasts of $12.42. Still, revenues narrowly beat views and Google’s widely watched traffic acquisition costs of $7.49 billion largely matched estimates of $7.48 billion. Also, paid clicks grew by 18% while the cost-per-click dropped -2%.
Overall, the report was a good one for GOOGL stock and Tuesday’s reaction looks like a modest excuse for technical-based profit taking as shares grapple with a challenge of $1,300 and possible triple top pattern. The other side of the coin is Alphabet stock is in a bullish 15-month-long base. And with stochastics firming up and looking more supportive of this more optimistic interpretation, all that’s needed is a breakout next month.
GOOGL Stock Strategy: Buy GOOGL stock on a monthly breakout to new highs above $1,300. Set an initial stop-loss at $1,215 which contains risk off and on the price chart to appreciable exposure levels.
Post Earnings Stock No. 2: Beyond Meat (BYND)
Beyond Meat is the second of Tuesday’s big earnings-related losers. But the buck — or $23.42 lost in shareholder value — stops there. If investors are looking for a secular growth story, BYND stock and its strong positioning within the plant-based faux meat business fits the bill. The company delivered in spades by easily beating Street views, but an expiring lock-up period looks to have spooked investors.
Technically, the recent IPO is now testing its 76% lifetime retracement level for support. A failure would suggest a move to challenge its all-time-low and set-up a potential double-bottom pattern.
Given the bullish narrative and proof BYND stock is on track to continue delivering strong numbers going forward, I’d certainly put shares on the radar for purchase if a markedly lower share price becomes a reality. Closer to the action, buying BYND stock if shares begin to firm up and yesterday’s fears prove misplaced makes a great deal of sense.
BYND Stock Strategy: Buy BYND stock if shares can hold Tuesday’s low and put together a rally above $101. This entry waits for this week’s opening price to be cleared and puts shares above the well-watched century mark before making a purchase. Keep a stop beneath $80 and look to take initial profits between $140 and $150.
Post Earnings Stock No. 3: Grubhub (GRUB)
Grubhub is the last of the stocks to make our radar on the heels of the disastrous 43% shellacking in GRUB stock. The food delivery solutions specialist and former growth star left a very bad taste in investors’ mouths for multiple disappointing reasons following its earnings release.
GRUB’s 1-cent profit miss and modestly below-views sales data which still enjoyed year-over-year growth of 30% may have been overlooked under certain situations. But the increase also reaffirmed slowing growth amid increased competition in the space. And coupled with GRUB stock’s below views sales guidance of $325 million versus Street forecasts of $387 million, Wall Street felt compelled to aggressively reprice shares.
Technically GRUB stock is a name to short on into rallies. Shares have decisively broken the 76% retracement level and have plenty of downside before a challenge of the all-time-low near $18 is tested.
GRUB Stock Strategy: For shorting or gaining short exposure in GRUB stock with Grubhub options, the massive price drop does pose its own sort of challenges with a very large gap on the daily chart. For now, the best advice is to position into strength and keep stops tied to a pattern high, or size the bearish investment with an exit above $50.75. This strategy only closes out the position if shares reclaim the 76% level and former base resistance from 2015, which are likely insurmountable technical obstacles for GRUB stock at this point in time.
Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.