3 Growth Stocks That Should Be Going Gangbusters After Great Earnings

  • The last few weeks have seen a select group of companies report strong results and guidance, yet their stock price doesn’t move.
  • Advanced Micro Devices (AMD) is trying to lead the upside charge for semiconductor stocks.
  • Affirm Holdings (AFRM) delivered strong growth and better-than-expected guidance, and it’s been rewarded since. 
  • Global-E (GLBE) had poor headline results, but the devil is in the details -- and the details were good in this case. 
Growth stocks - 3 Growth Stocks That Should Be Going Gangbusters After Great Earnings

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Look, we get it. The performance of growth stocks has been abysmal lately! Regardless of whether they’re good or bad, names have been abandoned without a care. Many of the top growth stocks have been completely waxed, falling 70% or more from the highs. The low-quality names have seen even larger declines — if you can believe that.

However, not only did many of these stocks not deserve to fall quite this far, but many of them recently reported strong earnings results.

At times though, the market and its participants can be completely irrational. They sell good news because they feel bearish. It works in the opposite direction as well. Meaning, they can buy up companies on mediocre results because they feel overwhelmingly bullish.

This is even more frustrating when we’ve seen a significant selloff leading up to the event. For many investors, it feels unfair. However, patience can win out and we can use these occasions to weed out the good businesses from the bad.

So let’s look at a trio of growth stocks that reported strong results, but don’t seem to be getting enough credit for it.

Ticker Company Current Price
AMD Advanced Micro Devices, Inc. $106.30
AFRM Affirm Holdings, Inc. $25.10
GLBE Global-E Online Ltd $19.47

YTD Price Chart-AMD,AFRM,GLBE,SPY
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Advanced Micro Devices (AMD)

Image of the Advanced Micro Devices (AMD) logo outside of a corporate building
Source: Sundry Photography / Shutterstock.com

Advanced Micro Devices (NASDAQ:AMD) is no longer the commoditized hardware maker with negative margins and a lousy balance sheet. CEO Lisa Su has spent years whipping this company into shape and has done an amazing job. Debt has gone down while revenue, earnings and free cash flow have been on the rise.

A month ago, no one wanted to scoop up shares of AMD — or seemingly any other tech stock at that point. Then on May 3, the company delivered top- and bottom-line earnings beats and provided a strong outlook. Su said AMD is at a “significant inflection point,” as it recently closed on its deal for Xilinx.

It’s worth noting that Xilinx has generated more than $1 billion in free cash flow in each of its last three fiscal years before the buyout. So now AMD is adding even more free-cash flow into the mix.

With strong analyst estimates and a reasonable valuation — just 23 times this year’s earnings — and AMD should be performing better after a report like this. Look for the market to reward this one when tech stocks come back to life.

Affirm Holdings (AFRM)

Affirm (AFRM) logo displayed on a smartphone
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Affirm Holdings (NASDAQ:AFRM) is another stock that reported blow-out earnings, but could have more room to run. After its post-earnings pop and pullback, Affirm shares were up just 10% following its earnings result.

However, it has gained more ground since. Despite this observation, shares still remain 85% below its all-time high. If it were to recoup just half of its peak-to-trough losses, it would represent a 265% rally from current levels — almost a four-bagger!

The company reported top- and bottom-line beats in mid-May, which also included better-than-expected guidance. The biggest drawback for Affirm Holdings at this time is profitability, which isn’t there. However, the company’s press release said that it has a “Plan to Achieve Sustained Adjusted Operating Income Profitability on a Run Rate Basis by the end of Fiscal Year 2023.” So, let’s see.

An extended multi-year partnership with Shopify (NYSE:SHOP) certainly helps matters and previously expanded its partnership with Amazon (NASDAQ:AMZN).

Again, I think this is a stock that will be rewarded once tech stocks come back to life.

Global-E Online (GLBE)

cardboard boxes on conveyor belt in warehouse, 3d illustration
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Finally, we have Israel-headquartered Global-E Online (NASDAQ:GLBE). This one is definitely a bit more of a puzzle. When it reported earnings, Global-E missed on earnings, beat on revenue and provided disappointing guidance.

As such, the stock plunged on May 17, the day after reported earnings. Shares opened lower by 18%, but then in astounding fashion, closed higher by 17.7% on the day.

The company saw a hit in its e-commerce business due to inflation and supply chain problems — like every other e-commerce firm — and that made for a poor headline result. Upon further inspection though, there were several positives. Specifically, the company’s full-year EBITDA guidance was maintained. Gross profit jumped 94% year over year, easily outpacing revenue growth of ~65%.

Additionally, management was fairly bullish on its adjusted EBITDA margin guide and the implications that has on free cash flow.

The initial selloff to the stock price was the knee-jerk reaction to earnings. The ensuing surge off the lows happened once institutional investors picked through the details. That gives this name a good shot at rebounding when buyers come back to the market.

On the date of publication, Bret Kenwell was long SHOP and GLBE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/3-growth-stocks-that-should-be-going-gangbusters-after-great-earnings-amd-afrm-glbe/.

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