Earnings season has led to some wild swings, even in companies that tend to trade with low volatility. However, reading behind the headlines that led to a big swing – in either direction—can point to a different direction going forward once the market starts to calm down.
With many tech stocks reporting earnings, many have been hit harder than necessary on small misses thanks to the recent fears in the markets.
One such “loser” right now is Palantir Technologies (PLTR). The big-data platform reported a 34 percent surge in revenue over the past year. And the company earned 2 cents per share. However, that was only half the 4 cents expected by analysts.
That was enough for shares to drop 15 percent when the company reported earnings last week. That looks like a sizeable overreaction, one that will likely correct in the weeks ahead as market volatility comes down.
Action to take: While the company is just starting to get profitable, shares are down over 50 percent in the past year. Given the company’s growing revenues and strong balance sheet – it’s also one of the few companies holding gold as a reserve—it’s poised to weather the current market fears and come out stronger. Investors may like shares here, although they won’t get a dividend.
For traders, the May $15 calls, last going for about $0.75, look like a modestly-priced rebound play capable of high double-digit or low triple-digit returns in the coming months.
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.