Earnings season is starting up again, but some companies took a hit and still haven’t recovered. While the market’s rally has slowed recently, the long-term trend is higher.
One simple strategy to play this trend is to look for companies that have taken a hit last earnings season. Especially if they play to trends that could lead to them moving higher in the months ahead. Those companies are ripe to trend higher .
One potential play meeting that criteria is Carnival Cruise Lines (CCL). While Carnival lost money in the most recent quarter, it fared far better than both analyst expectations and its own.
Plus, the company reported record bookings and significantly higher prices for those bookings. Chances are we’ll see a strong summer cruise trend as consumers continue to spend more on experiences such as cruises.
Even with the post earnings pullback, shares are still up 52% in the last 12 months. Trading at 12 times forward earnings, the latest drop in share price could be setting up for the next run higher.
Action to take: Investors may like Carnival shares here, with an eye towards a quick low-double-digit profit in shares over the next few quarters if the company continues to beat expectations.
For traders, the October $15 calls, last trading for about $2.25, are an at-the-money trade. They can likely see mid-double-digit returns or higher in the coming months on a rebound from the latest earnings selloff.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.