Fundamentals still count and a number of leading U.S. companies have proven so with strong quarterly earnings that beat expectations and should underpin their growth as stocks to buy moving forward.
Despite the global novel coronavirus pandemic and uncertain economic outlook, many market moving companies reported blowout financial results for the fourth quarter and full year 2020. These companies prove that investors can trust and bank on strong earnings and responsible management.
Here are seven stocks to buy after they crushed earnings.
- PayPal (NASDAQ:PYPL)
- Alphabet (NASDAQ:GOOGL)
- Microsoft (NASDAQ:MSFT)
- Apple (NASDAQ:APPL)
- Amazon (NASDAQ:AMZN)
- Facebook (NASDAQ:FB)
- Qualcomm (NASDAQ:QCOM)
Stocks to Buy After Earnings: PayPal (PYPL)
PayPal is leading in two hot areas right now – digital payments and cryptocurrency. And those two segments propelled PayPal to a better than expected results in the fourth quarter of 2020 and for the year as a whole. The company added a record 72.7 million active accounts in 2020, with 16 million new accounts in the fourth quarter alone. That helped revenue increase 23% to $6.12 billion during the quarter, ahead of analysts’ estimates.
Holiday shopping was a boon to PayPal in the final quarter of 2020. So, too, was the company’s wallets that allow users to buy and sell cryptocurrencies such as Bitcoin. PayPal said total payments on its network climbed 39% to $277 billion in the final three months of the year. Venmo, the company’s popular person-to-person service, processed $47 billion in payments, up 60% from 2019.
Looking forward, PayPal forecasts that revenue in the first quarter of 2021 will climb 28%, more than the 22% analysts have been forecasting. Adjusted profits are forecast to rise 50% in the first quarter. PYPL stock has been white hot so far this year, up 16% since the start of January.
Alphabet, the parent company of search engine giant Google, reported stellar results for the fourth quarter and full year 2020. Profits were driven by a resumption in digital advertising spending during the holidays. Fourth-quarter revenue came in at $46.43 billion, the Mountain View, California-based company reported. Analysts had expected revenue of $44.2 billion.
Alphabet said that online ad sales have rebounded since the Covid-19 trough, when the economy declined and advertising experienced a broad pullback. The company expects online sales to steadily increase throughout this year as the economic recovery strengthens and companies feel emboldened to spend money on marketing again. GOOGL shares popped 10% on the latest earning results and closed above $2,000 a share for the first time.
Stocks to Buy After Earnings: Microsoft (MSFT)
Redmond, Washington-based Microsoft is killing it in the cloud computing space, and reaping big profits from its work from home products, notably its MS Teams collaborative software. The company said these products and services led to a fiscal second-quarter sales increase of 17%, a faster rate of expansion than analysts forecast. Revenue in the period ended Dec. 31, 2020, increased to $43.1 billion and was the 14th consecutive quarter of double-digit revenue growth.
Additionally, Microsoft reported net income of $15.5 billion, or $2.03 a share, for the quarter. Analysts had predicted $1.64 a share.
The good news was mostly attributed to Microsoft’s Azure cloud-computing division, which saw revenue in the quarter jump a whopping 50%. Microsoft has benefited as many corporate clients have accelerated a shift to the cloud. Online productivity tools and teleconferencing software such as MS Teams are also surging and giving renewed life to the company’s Windows operating system.
MSFT stock has broken out on the latest quarterly results, rising 13% since the start of the year and pushing the share price above $240 a share.
Apple’s latest quarterly results were a true blockbuster. The iPhone maker reported that its quarterly revenue topped $100 billion for the first time, driven by robust holiday sales of its 5G enabled iPhone 12 smartphone.
The Cupertino, California-based company reported that its sales jumped 21% to $111.4 billion through to the end of December. Analysts expected revenue of $103.1 billion. Apple’s quarterly profit was $1.68 a share, also above analyst estimates.
The hugely successful results confirm that Apple’s newest iPhone, which is capable of operating on advanced 5G networks, has thrust the company into a “super cycle.” Handset sales for the quarter came in at $65.6 billion, beating estimates of $60.3 billion. Apple’s sales were also driven by the introduction of other new devices, such as an updated Apple Watch and Mac computers.
The blowout results have pushed APPL stock up 14% since mid-January. The share price is now at just over $135 per share.
Stocks to Buy After Earnings: Amazon (AMZN)
Amazon’s incredible results were largely overshadowed by news that longtime CEO Jeff Bezos is leaving his post in the third quarter of 2021 and will be replaced by Andy Jassy, the head of the company’s cloud-computing unit. AMZN stock also fell slightly on the news of Bezos’s departure. But news of a leadership change obscured the fact that the world’s biggest online retailer posted amazing results for the fourth and final quarter of 2020.
The Seattle, Washington-based company reported fourth-quarter sales rose 44% to $125.6 billion, beating analysts’ expectations of $119.7 billion. Earnings came in at $14.09 per share, compared with projections of $7.34. Moving forward, Amazon forecast its revenue will be $100 billion to $106 billion in the first quarter that ends March 31. The company projected operating income of $3 billion to $6.5 billion.
Amazon’s record sales continue to be fueled by the Covid-19 pandemic that has closed brick-and-mortar retailers and pushed people to shop online. As mentioned, AMZN stock fell 2% on the results, but that was due to the departure of Bezos rather than the company’s quarterly results.
Social media powerhouse Facebook continues to defy its critics. The Menlo Park, California-based company reported revenue of $28.07 billion in the fourth quarter of 2020, exceeding the $26.44 billion forecast of Wall Street analysts. Earnings were $3.88 a share versus the expected $3.22 a share. And, perhaps best of all, Facebook reported that the number of daily active users on its site stood at 1.84 billion at the end of December, above the 1.83 billion that had been expected.
The positive results were due to the growing movement toward online commerce and products during the global pandemic. Results also got a lift from Facebook’s “other” business unit, where revenue came in at $885 million for the final quarter of the year, up 156% from the same period of 2019.
The “other” category includes sales of Oculus virtual reality headsets and the Portal video-chatting device. Sales of the virtual reality headsets were particularly strong during the holiday season, according to the company.
Despite the successful results, FB stock continues to underperform and has fallen 6% since the quarterly results were announced. Facebook’s share price is now around $268. However, analysts forecast the stock will rise. The median price target of analysts is for Facebook stock to reach $350 a share by year’s end.
Stocks to Buy After Earnings: Qualcomm (QCOM)
Qualcomm’s quarterly earnings require some qualifications. The company’s earnings beat expectations but its sales were slightly lower than what analysts wanted. QCOM stock fell 8% the day after the results were announced.
Despite the negative reaction, there was a lot to like in Qualcomm’s latest numbers and why it is included in this list of stocks to buy. Earnings came in at $2.17 per share, up 119% from 2019 and above the $2.10 per share that had been estimated. And, the company’s sales were up 63% year-over-year in the final quarter of 2020. Qualcomm credited growing demand for its 5G microchips and intellectual property for the strong quarterly performance.
Still, revenue in the quarter came in at $8.23 billion. This was lower than the $8.27 billion that was estimated. And that news put QCOM stock under pressure. The company’s shares dropped to just under $150 each. However, the decline should be short lived. Qualcomm gave positive forward guidance for the current first quarter. The company said it anticipates sales between $7.2 billion and $8 billion due to ongoing demand for its 5G chips. The forecast is inline with what Wall Street had forecast. Might be a good idea to buy the dip in Qualcomm stock.
On the date of publication, Joel Baglole held long positions in MSFT, FB and APPL.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.