Wall Street warned that results from this earnings season would be bleak. However, some stocks have pleasantly surprised investors. So far 76% of companies in the S&P 500 index have exceeded profit expectations, which is above the historical average. Average earnings are up just 0.9% from the previous year, as strength in Communications Services names is being offset by the Materials sector.
Positive quarterly results have sent a select few’s share prices soaring, with many analysts saying these stocks have the momentum they need to keep rising in the coming months. Here are the 4 stocks flying high after earnings.
Snap Inc. (SNAP)
After SNAP reported its Q2 2019 earnings on July 23, share prices jumped by almost 12% in after-hours trading. In just the last five days, shares have gained over 14%.
The social media app beat the Street’s expectations for not only revenue and daily active users but also posted much smaller EPS losses. Its quarterly revenue increased 48% year-over-year to $388 million, surpassing the $360 million consensus estimate. Daily active users were up 8% year-over-year, reaching 203 million versus the predicted 192 million. Not to mention the company posted an EPS loss of 6 cents instead of 10 cents.
Management attributed this user growth to its augmented reality lenses feature. SNAP has also been steadily gaining users thanks to its Android version upgrade which in turn has helped drive the revenue increase.
“Today, more than 75 percent of the 13-34 year-old population in the United States is active on Snapchat, making us larger than services like Facebook and Instagram among this audience, and demonstrating the broadbased appeal of our service,” said CEO Evan Speigel.
Five-star analyst, Mark Mahaney, agrees that more growth is in store for SNAP. On July 24, the RBC Capital analyst reiterated a Buy rating while raising his price target from $17 to $20, suggesting 18% upside potential. “SNAP posted Beat and Raise Q2 results, with Revenue and EBITDA strongly better than RBC/Street, with DAUs well ahead of expectations and up the most Q/Q (13MM) since Q2:16. Revenue growth accelerated, DAU growth turned sharply positive, Gross Margin expanded nicely & EBITDA loss narrowed materially – a 4- part Summer Cocktail,” he said. The analyst gets a 24% average return per rating and has a 68% success rate.
Another top analyst, Scott Devitt, believes traction from advertising and the company’s investment in improving the app will pay off in the long-run. On July 24, he reiterated his Buy rating and raised his price target from $17 to $19, indicating 12% upside potential. “While Snap plans to continue investing to support its long-term strategic objectives, the company demonstrated meaningful operating leverage during 2Q, highlighting the incremental margin potential of its business model,” the Stifel Nicolaus analyst said. The analyst boasts an impressive 71% success rate and gets a 22% average return per rating.
The Street is cautiously optimistic. SNAP has a ‘Moderate Buy’ analyst consensus, with it receiving an additional upgrade to a Buy from Jonathan Kees after its earnings release. It has an average price target of $17, suggesting 1% downside.
Alphabet Inc. (GOOGL)
GOOGL’s strong second quarter earnings release on July 25 caused shares to surge 9% in after-hours trading. The stock is up over 8% in the last three days, and many analysts are saying a slowdown isn’t coming anytime soon.
The company beat the consensus estimate of $38.2 billion in revenue, with actual revenue being $38.9 billion. EPS was $14.21, surpassing analysts’ $11.19 estimate.
Management says advertising sales and its growing cloud segment drove the earnings beat. Revenue from advertising reached $32.6 billion, up 16% year-over-year. Its cloud computing and hardware revenue also saw a gain of 40% year-over-year, with it hitting $6.2 billion.
While Microsoft Corporation (MSFT) and Amazon.com (AMZN) have a strong grasp on the cloud computing market, GOOGL is making headway. After former Oracle executive, Thomas Kurian, came on board late last year, its cloud sales and support have drastically improved. In June, GOOGL announced that it would acquire the data platform Looker for $2.6 billion.
On July 26, Raymond James analyst, Aaron Kessler, reiterated his Buy rating and raised his price target from $1,300 to $1,360, suggesting 11% upside potential. “Cloud computing and good, old-fashioned search and advertising, a key element driving our bullishness. We expect search growth to slow to low double digits but mobile monetization and traction in new areas should help sustain solid growth,” he said. The analyst has a 72% success rate and gets an average return of 24% per rating.
Analyst, Stephen Ju, also reiterated his Buy rating and raised the price target from $1,400 to $1,500, suggesting 22% upside potential. “While I was preparing to wait until the first quarter of 2020 to see possibilities for revenue growth acceleration, the narrative now shifts from fears of ongoing deceleration to possibilities of incremental ad budget share capture as the company turns on monetization of its Discover feed and other new products recently announced at Marketing Live 2019 gain adoption,” he said on July 26. The Credit Suisse analyst has a 69% success rate and an average return rate of 20% per rating.
The Street’s sentiment remains bullish after earnings. It has a ‘Strong Buy’ analyst consensus and a $1,389 average price target, suggesting 13% upside potential.
United Parcel Service Inc. (UPS)
Since its better than expected July 24 earnings release, UPS shares have been surging. Shares were up 9% at the close of after-hours trading on the 24th and have gained 14% in the last five days.
In its second quarter, the company generated $18.05 billion in revenue, up 3% year-over-year. Analysts had originally predicted $17.97 billion. Adjusted EPS was $1.96, surpassing the $1.92 consensus estimate.
CFO Richard Peretz said, “Our performance was driven by the efficiencies created by investments in our network, the success of ongoing initiatives and our ability to execute in an ever-changing environment. We expect to carry this momentum through the upcoming quarters.”
Following the release, Merrill Lynch analyst, Ken Hoexter, upgraded UPS to a Buy and gave the price target a boost, raising it from $115 to $130. He believes share prices could increase by 9% over the next twelve months. “We are impressed that UPS was able to end an 11-quarter decline in its overall operating margin, even with costs related to its automation projects and a big jump in next-day e-commerce business, which has historically dragged on margins. The company’s network transformation and secular gains equal a powerful story,” he said on July 25.
UBS analyst, Thomas Wadewitz, said, “We believe that the company's rising visibility of margin expansion and higher earnings should support more upside in its stock. Its solid Q2 results signaled the company can process the strong e-commerce growth while also offering better visibility toward improving its Domestic package margins,” he said. On July 25, he reiterated his Buy rating while raising his price target from $110 to $128, suggesting 7% upside potential.
UPS has a ‘Moderate Buy’ analyst consensus and $124 average price target, indicating 4% upside potential.
Chipotle Mexican Grill, Inc. (CMG)
Chipotle shares gained 4% in extended trading after its earnings release on July 23. The stock has surged 9% in the last five days, with analysts saying more growth is coming.
The company reported second quarter revenue of $1.43 billion which beat the Street’s expectation of $1.41 billion. Adjusted EPS was $3.99, much higher than the $3.76 consensus estimate. Same-store sales grew by 10% versus the expected 8.3%.
CMG’s impressive revenue growth was driven by an increase in digital sales, up 99% from the year-ago quarter.
Not to mention management increased its full-year guidance for same-store sales, with sales at locations open for at least one year expected to grow at a high-single digit rate, up from a mid-to-high single-digit increase.
Analyst, Katherine Fogertey, agrees that CMG has the potential to grow even more in the long-term. On July 29, the Goldman Sachs analyst initiated her coverage with a Buy rating and set a $1,000 price target, suggesting 24% upside. “Our bullish view is based on our expectation that same-store sales trends will remain stronger for longer than the market expects. Our price target is not dependent on multiple expansion, but rather, we take a view that with food safety overhangs in the rear view, the stock performance will be driven by management’s ability to execute on sales driving initiatives,” she said.
Another top analyst, Nicole Miller Regan, reiterated her Buy rating and raised her price target from $824 to $900, indicating 12% upside. “We remain confident that Chipotle is positioned to support recent sales momentum and, over time, drive potential upside to consensus expectations. Chipotle has best-in-class metrics across a series of sales, operations, cost margins, marketing, and long-term return categories,” the Piper Jaffray analyst said on July 31.
CMG has a ‘Moderate Buy’ analyst consensus and $753 average price target, suggesting 6% downside.