🩻 3 Stocks To Buy After Earnings Reports (Revealed Here for Free)

A Masterclass from The Pragmatic Investor

TL;DR

Earnings season is almost behind us, and we’ve seen some huge moves in stocks, both up and down.

Earnings season is a volatile time, which can be scary for investors, but it is also a time when huge opportunities can appear. 

Some stocks sell off without good reason, giving us a chance to buy at a discount for the long term.

Other stocks show strong earnings and rally, but this can also be a chance to add if the company has proven a fundamental change that justifies an even higher price.

Today I discuss three stocks that I like after their recent earnings:

• One growth stocks that rallied 40% but could double from here

• One international stock that sold off 15% but is still supported by secular growth trends

• One stock that continues to dominate the market absolutely, but investors still undervalue

But first, a little bit about me, The Pragmatic Investor

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An approach that assesses the truth of meaning of theories or beliefs in terms of the success of their practical application.

That is Pragmatism, and it guides my investment philosophy.

Through many years of analyzing markets, I have found this is what works.

The Pragmatic Investor sticks to what works. The problem is there are thousands of different strategies that CAN work for certain people.

But simplicity is key, and that is why I have narrowed down my investing ethos into three key ideas, which combined create what I like to call, The Pragmatic Investing Pyramid.

Macro, Fundamentals and Technicals

This is the three-pronged approach that has helped me beat markets over the seven years.

For long-term investing, there’s nothing better than understanding business cycles, macroeconomic trends and geopolitics.

On the other hand, when it comes to short-term moves in markets, the best tool we have is technical analysis.

And not just a specific form of technical analysis but a robust set of tools that can all work in conjunction to help us find great setups.

I actually recently designed my own algorithm, you can see it here:

My Substack is designed to guide investors of all levels in their journey.

• Understand markets with the weekly newsletter.

• Build a diversified global portfolio that will stand the test of time.

• Get actionable trade ideas to take your investment returns to the next level.

Every week I give a macro update, a technical analysis update on the main indexes and stocks and I cover a stock in-depth, looking at its fundamentals.

Reddit (RDDT 0.00%↑)

Everyone is familiar with this website, but did you know the company IPO’d back in March? Since then, the stock remained largely flat, since investors still didn't have much information on the stock, but the latest earnings changed that, and the stock rallied over 40% on the day.

Reddit’s growth in Q3 was impressive, with revenue rising 68% year-over-year to $348.4 million, boosted by user growth and international expansion via machine translation. 

Profitability improved, with a GAAP-based EPS of $0.16 and adjusted EBITDA margins reaching 27%. Expanding into data licensing and e-commerce has helped Reddit diversify beyond ads, enhancing its financial health. 

Reddit’s strengths lie in its community-driven approach and growing international reach, though it faces risks from heavy ad reliance, moderation challenges, and strong competition from larger social media platforms.

I wrote a report on this, and argued that if Reddit were to undergo a Twitter style buyout, the stock could 3x from here.

Yes, the technicals are overbought, but it’s still worth starting a position, and maybe averaging down over the next month.

Mercado Libre (MELI 0.00%↑)

Understandably, you might not want to chase a stock that just popped 40%. Fair enough, how about a stock growing 30% YoY that sold off 15% but has already bounced up around 5%?

MercadoLibre’s Q3 results showed strong revenue growth (35% YoY) despite FX headwinds, but earnings missed expectations, partly due to rising bad debt from rapid credit expansion. While operating income dropped to $557 million with margin compression.

MELI's long-term growth prospects remain intact, driven by e-commerce, fintech expansion, and digital advertising in underpenetrated Latin American markets. Valuation metrics suggest the stock is historically undervalued, making this dip a potential buying opportunity if the profitability setback is indeed temporary.

The stock has already found support and reversed at the 200 EMA. This is an ideal spot to add.

Alphabet (GOOGL 0.00%↑)

Last, but definitely not least, GOOGL, my all-time favourite stock. Google’s Q3 earnings were robust, with an EPS beat and growth driven by YouTube and Google Cloud, underscoring its diversified income sources. 

YouTube's ad and subscription revenue topped $50 billion, showing resilience and adding to Google’s revenue stability. Google Cloud grew by 35%, aided by enterprise AI adoption and streamlined costs. Although AI tools like ChatGPT pose risks to Google Search, YouTube and Cloud are potential growth areas. 

And yet, the stock continues to be chronically undervalued by my favourite measure, PEG.

There’s no stock I’d rather buy and hold for 100 years.

Final Thoughts

After a dynamic earnings season, here are three stocks with compelling post-earnings potential. Reddit surged 40% with strong revenue growth and profit improvements, thanks to international expansion and diversification into data licensing. 

MercadoLibre, despite a 15% dip, shows resilience in Latin American markets with robust e-commerce and fintech growth, offering an undervalued entry. 

Alphabet's robust results, driven by YouTube and Google Cloud growth, affirm its long-term strength even amid AI competition. 

Each of these stocks presents unique opportunities for investors with growth-oriented strategies.