Pick Up Slowing Companies While Markets Are Fearful

The stock market is forward looking. The selloff this year started well before companies started to show a slowdown in earnings. Now that this slowdown is being reported, however, stocks may start moving higher once again before earnings then trend higher.

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  • Traders aware of this trend can take advantage today by buying shares of great companies warning on earnings now, even though they may be poised for strong growth later.

    One such example is Palantir Technologies (PLTR). The data analytics company lowered guidance and warned on a slowdown in sales this year. That led to the stock dropping.

    But the company’s second-quarter earnings reported a 26 percent rise in revenue. Even with a slowdown, it may still be a strong grower in a slowing market.

    Action to take: Shares look like a speculative buy in the $10.00 range. That’s well under the stock’s 52-week high of nearly $30 per share. Even a move to $15 here would lead to a 50 percent jump higher. As an early-stage growth company, shares do not currently pay a dividend.

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  • For traders, the January 2023 $10 calls are an at-the-money trade. Last going for about $1.68, they could lead to mid-to-high double-digit gains as shares rebound from their latest earnings warning in the months ahead.

     

    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.