Earnings can be the best period of opportunity in the market, as they often set the trend for the following three months. However, it can also be a trap. Therefore, I am looking at three stocks that might be presenting opportunity following earnings on Friday
The Top Performer on Friday May Be Expensive…. But is Still a “Buy”
NIKE, Inc. (NYSE:NKE)’s near 12% rise on Friday was a result of the perfect combination of low expectations and solid fundamental performance. The company posted top-line growth of 9% and an EPS of $0.73, which was $0.05 better than expectations. Furthermore, the company announced very encouraging guidance, highlighted a launch of new brands, and saw very impressive margin growth.
Late Thursday night and throughout Friday morning I spent countless hours breaking down the earnings of NIKE, Inc. (NYSE:NKE), trying to find weakness in its quarter. However, I came to realize that Nike simply posted an incredible quarter. Of course I was discouraged by the 9% fall in Chinese revenue. However, the company’s 18% growth in North America is simply incredible considering the size of its business. With that being said, the stock’s P/E ratio of 27 may look expensive (twice as much as the S&P 500). However, you must keep in mind, this is a company that is growing three times faster than our economy, and in a large global business. Therefore, I would buy even at these high levels, because although the stock is more expensive than I typically seek, I believe its fundamental performance is worthy of the valuation.
A Good Turnaround Story Evident With Earnings
After years of disappointment, bulls of Micron Technology, Inc. (NASDAQ:MU) are getting the last laugh. Micron has rallied 60% during the last three months, and 12% on Friday after announcing earnings. However, the quarter was mixed, with revenue barely edging expectations and the bottom line missing the consensus thanks to a $182 million loss in write-downs.
The upside in shares of Micron Technology, Inc. (NASDAQ:MU) occurred because its 24% quarter-over-quarter growth in DRAM sales and its 38% increase in volume calmed worried that soft PC demand would impact the company’s earnings. The company also saw volume increase for NAND flash sales, and a 580 basis point increase over the previous quarter. These numbers are proof that the company’s operations are becoming more efficient and that demand is increasing. And after a horrible year in 2012, profitability could be a part of the company’s immediate future. Therefore, I am buying Micron, and I believe that this quarter solidified the recent rumors of improvement.