To any traders who haven’t been initiated yet — welcome to Q2 earnings season.
Are most day traders planing on listening to full conference calls, conservatively backtesting prior reports, and buying shares for the long term? Not quite.
Instead, day traders bet on earnings season like it’s a horse track. Each company is a different pony, ripe for speculation. The unique positioning around earnings reports can create huge volatility in share prices … and the occasional five-star trading setup.
With that in mind, let’s take a look at five Q2 earnings reports that are shaking the entire stock market.
Table of Contents
- 0.1 Snapchat Inc. (NASDAQ: SNAP)
- 0.2 Advanced Micro Devices, Inc. (NASDAQ: AMD)
- 0.3 Tesla Inc. (NASDAQ: TSLA)
- 0.4 Corsair Gaming, Inc. (NASDAQ: CRSR)
- 0.5 SolarEdge Technologies, Inc. (NASDAQ: SEDG)
- 0.6 Discovery, Inc. (NASDAQ: DISCA)
- 0.7 ViacomCBS, Inc. (NYSE: VIAC)
- 1 The Bottom Line: Should You Trade Earnings Reports?
- 2 One Platform. One System. Every Tool
Snapchat Inc. (NASDAQ: SNAP)
Disappearing-message app Snapchat Inc. (NASDAQ: SNAP) pulled off arguably the most impressive Q2 earnings beat of the entire season. Across the board, every key metric the company provided handily obliterated analyst expectations…
Analysts were bowled over by SNAP’s 293 million daily active users, a 23% increase year-over-year. But the most staggering number was arguably Snapchat’s EPS, which was reported at a whopping $0.10 vs. expectations of $(0.01). When a company beats earnings by more than tenfold, the market tends to take notice. Revenue was similarly exceptional, $982 million vs. expectations of $846 million. Snapchat’s losses also narrowed 53% to $152 million, marking a major improvement over the prior-year figure of $326 million.
The market was visibly excited, sending SNAP shares surging more than 16% following the report. SNAP is now up more than 250% in the past 12 months, potentially indicating that “smart money” has been predicting this earnings narrative for some time now.
If it keeps this trajectory up, SNAP shares could continue moving higher on strong growth and killer earnings. Keep this one near the top of your watchlist.
Advanced Micro Devices, Inc. (NASDAQ: AMD)
Chipmaking giant Advanced Micro Devices, Inc. (NASDAQ: AMD) has been going absolutely parabolic since reporting stellar Q2 earnings on July 27.
The semiconductor stalwart reported EPS of $0.58 vs. an estimated $0.48, representing a 346% year-over-year increase. Revenue was reported as $3.85 billion, while net income came in at $710 million, 352% higher than Q2 2020.
Meanwhile, the stock has taken off on a face-ripping rally, adding nearly 25% in the past week alone. The market is enthusiastically applauding the better-than-expected results as retail traders continue to load up gargantuan positions in the name.
That being said, traders should be extremely cautious when considering long trades on AMD at these levels. As tempting as it may be to clamor on to this eye-popping momentum, buying the stock when the chart is this overextended might not be a great idea. A better strategy to consider: waiting for a considerable dip in the chart before buying AMD shares.
Tesla Inc. (NASDAQ: TSLA)
Electric vehicle king Tesla Inc. (NASDAQ: TSLA) is another company making waves with its Q2 earnings results.
CEO Elon Musk’s next-gen car company reported more than $1 billion in revenue, up tenfold from a year ago. Tesla also reported EPS of $1.45 vs. an estimated $0.98, representing a beat of 147%. The strong earnings results are riding the coattails of the company’s record-breaking EV-delivery number of 201,250 in Q2.
It’s also important to note that Tesla’s holding a massive crypto bag, with an estimated $1.33 billion worth of Bitcoin (BTC) on its balance sheet. Musk has become a kind of de facto social media spokesperson for cryptocurrency in general. One tweet from Musk can make crypto prices go haywire.
But enough with the fundamentals — is there a trade setting up in TSLA? While this is ultimately up to you, knowing what to look for can help to see some bullish signs in the chart. Specifically, the TSLA daily chart is a perfect example of a double bottom pattern…
The share price made a perfect test of the $563 level on two separate days — once on Monday, March 8, then again on Wednesday, May 19. But it hasn’t dropped below that level any time in 2021. Mark this level as support, and use it as a flagpole for the bottom of TSLA’s trading range.
And if it ever drops below that level … you might wanna run.
Corsair Gaming, Inc. (NASDAQ: CRSR)
Gaming peripheral manufacturer Corsair Gaming, Inc. (NASDAQ: CRSR) is a huge WallStreetBets (WSB) favorite. But apparently, retail traders aren’t buying as many RGB keyboards as Corsair couldn’t meet analysts’ EPS expectations for Q2. They were looking for the company to report $0.42, but Corsair reported $0.36.
If you think about it, this earnings miss tracks with what’s going on in the global economy. Q2 gave consumers the chance to go to restaurants, movie theaters, and concerts for the first time in over a year. The hunger for real-life experience is palpable, and it’s logical that people were playing fewer video games throughout Q2 than during preceding quarters.
But moving forward, traders shouldn’t underestimate the influence of retail traders on CRSR’s share price. WSB is in love with this stock, with thousands of the subreddit’s “autists” are holding a variety of beaten-down call options in the name. This much retail positioning means that the stock can’t languish forever … at some point, CRSR will likely break out on high volume.
SolarEdge Technologies, Inc. (NASDAQ: SEDG)
Solar inverter maker SolarEdge Technologies, Inc. (NASDAQ: SEDG) beat expectations, and the reaction from traders was extraordinary. The stock surged 15% immediately following the company’s Q2 earnings print, which showed EPS at $1.29 vs. estimates of $0.98.
The market seemed to be especially impressed with the company’s strong results amid a worldwide shortage of semiconductors and raw materials. These goods are vital to the solar industry, and the fact that SolarEdge is thriving in spite of such headwinds is a notable accomplishment.
Looking at the chart, the share price is holding remarkably strong following the post-earnings pop. So far, there seems to be very little backside selling, which can sometimes be an indicator that a stock is gearing up fresh move to the upside. Furthermore, Citi recently upgraded SEDG to $360, 40% higher than the stock trades for at writing. All of this is very good news for SolarEdge. Keep your eye on this compelling stock.
Discovery, Inc. (NASDAQ: DISCA)
Multinational mass media company Discovery, Inc. (NASDAQ: DISCA) is a truly fascinating stock. But before we cover the recent earnings, let’s fill in some background…
Discovery creates “factual television” geared mostly toward children and young adults. It owns legacy networks like the namesake Discovery Channel, Animal Planet, Science Channel, TLC, Food Network, and Travel Channel. But a deeper dive on Discovery reveals more than just nature shows for kids…
Back in March, DISCA shares lost over 60% of their value in one week. There was no stock offering or bad earnings report to blame. In fact, the price action had nothing to do with the internal health of the company whatsoever.
Instead, it turned out that the jarring slide in DISCA’s value was due to one hedge fund manager named Bill Hwang.
Hwang ran a fund called Archegos, through which he placed massively leveraged bets on beaten-down value stocks. DISCA was one of his prime target throughout the first half of the year, along with ViacomCBS, Inc. (NASDAQ: VIAC).
When the stocks started to crash, Hwang’s leverage was too much. He had miscalculated. When he was forced to sell more shares to cover margin calls, the share price capitulated lower. It felt bottomless.
A few weeks later, Archegos was shuttered for good, leaving the bloody remains of VIAC and DISCA in its wake. In the four months since both stocks have traded sideways, failing to recover or stage a breakout.
On Tuesday, Discovery reported Q2 earnings. The EPS numbers were a strong beat, coming in at $0.83 vs. analysts’ expectations of $0.54. Topline revenue was also a better-than-expected $3.06 billion, up from the prior-year figure of $2.54 billion. But even with the company’s solid earnings backdrop, the stock just can’t catch a break. DISCA shares shed more than 4% on Tuesday immediately following the report.
Meanwhile, the company’s Archegos soul sister, Viacom, experienced price swings based solely on its association with DISCA…
ViacomCBS, Inc. (NYSE: VIAC)
Legacy media company ViacomCBS, Inc. (VIAC) traded down 6% on Tuesday. There was no material news from Viacom to cause this kind of a drop, only Discovery’s earnings were to blame.
Then on Thursday, August 5, ViacomCBS reported their own Q2 earnings. The report was mostly in line with analyst expectations. EPS came in at $0.99 vs. the $0.97 analysts were expecting, while revenue $6.56 billion slightly edged out expectations of $6.51 billion. The standout number for many was Viacom’s reported 42 million new streaming subscribers, representing a quarter-over-quarter increase of 6.5 million.
But the market reaction to Viacom’s report is noticeably different from that of Discovery. Where DISCA traded down 6% post-earnings, VIAC is up 5.8% at writing. While these stocks are inextricably linked by their connection to Bill Hwang and Archegos, the content of the companies’ Q2 earnings prints is causing a divergence between the names that the market hasn’t seen in more than four months.
This shift is particularly notable considering the uncanny similarity of these charts over the past several months. Finally, it looks as if they’re starting to shed the Archegos elephant on their backs. Now that Q2 earnings have shaken them up, traders should watch both DISCA and VIAC very closely.
The Bottom Line: Should You Trade Earnings Reports?
Saying that Q2 earnings have been exciting is an understatement — some of these moves have been truly remarkable. Whenever share prices move this much, adding or removing billions of dollars in valuation from the world’s biggest companies, traders wonder if they should be jumping in on these high-flying trades.
So should you trade earnings reports? Only you can answer this question for yourself. It depends on your risk tolerance and trading style. But be aware that any directional bet placed prior to an earnings call is just that … a bet. You’re not trading, you’re not investing — you’re gambling.
Earnings are unpredictable with many factors at play. If a company beats expectations, there is no guarantee the stock will go up. Conversely, companies will sometimes miss expectations and the stock will rally. Sentiment, fundamentals, and recent price action all contribute to how a stock will react to an earnings print.
If you have strong conviction, you could place a small bet on an earnings report — again, it’s totally up to you. The upside and downside are both enormous, so risking a very small amount of capital will protect you from huge losses while still giving you the opportunity to potentially reap solid rewards. The key is to never risk more than you’re willing to lose.
That being said, many experienced traders completely avoid betting on earnings reports. They’re smart. Often, their strategy is to wait for the earnings trade to shake out and then position their trades based on where they think the fundamentals and technicals will take the chart next. Don’t have FOMO … instead wait for the perfect setup.
Q2 has been a doozy so far … but it ain’t over yet, traders. Strap in, study hard, and trade with DISCIPLINE.
Featured cover image credit: iQoncept/Shutterstock.com