- Wall Street’s Q4 earnings season gathers momentum next week as the biggest names in the world get set to report their latest results.
- While most of the focus will be on the mega-cap tech stocks, there are several companies poised to trounce their earnings expectations thanks to their innovations in artificial intelligence.
- Investors could consider adding these stocks to their portfolios ahead of their respective results.
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- Earnings Date: Monday, Feb. 5
- EPS Growth Estimate: +75% Y-o-Y
- Revenue Growth Estimate: +18.6% Y-o-Y
- Earnings Date: Wednesday, Feb. 14
- EPS Growth Estimate: +457.1% Y-o-Y
- Revenue Growth Estimate: +32.1% Y-o-Y
- Earnings Date: Thursday, Feb. 29
- EPS Growth Estimate: +21.4% Y-o-Y
- Revenue Growth Estimate: +28.8% Y-o-Y
- Earnings Date: Thursday, Feb. 29
- EPS Growth Estimate: +70% Y-o-Y
- Revenue Growth Estimate: +15.1% Y-o-Y
- Earnings Date: Wednesday, March 13
- EPS Growth Estimate: +70% Y-o-Y
- Revenue Growth Estimate: +15.1% Y-o-Y
The fourth quarter earnings season gathers momentum next week with some of the biggest names in the world set to report their latest financial results.
The list of big companies include Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL).
While most of the focus will be on the mega-cap group of technology stocks, there are several fast-growing names set to enjoy robust earnings and sales growth thanks to surging demand for their innovative products and services.
Here are five stocks worth owning ahead of their quarterly reports in the weeks ahead as growth prospects in artificial intelligence and machine learning remain strong.
1. Palantir
Palantir's (NYSE:PLTR) AI-driven solutions are expected to be a driving force behind its future sales growth, particularly as businesses and governments around the world increasingly rely on sophisticated data-driven decision-making.
The Denver, Colorado-based company is scheduled to deliver its fourth-quarter earnings and revenue update on Monday, February 5 and results are expected to get a boost from soaring demand for its new generative AI platform - which it calls AIP.
Analysts have become increasingly bullish on the data-mining specialist ahead of the print.
According to an InvestingPro survey: all 12 of the analysts surveyed in the last 90 days upwardly revised their earnings forecast to reflect a gain of 72% from their initial estimates.
Source: InvestingPro
Consensus calls for Palantir to report Q4 earnings per share of $0.07, surging 75% from EPS of $0.04 in the same quarter a year earlier.
Revenue is forecast to increase 18.6% from the year-ago period to $603.5 million, as Palantir benefits from robust demand for its data analytics tools and services from both government and commercial clients amid the current climate.
As ProTips points out, Palantir is in solid financial health condition, thanks to its impressive gross profit margins, rising net income, and robust earnings prospects.
On the downside, ProTips highlights that Palantir trades at high earnings and revenue multiples, underlining risks associated with overvaluation.
Source: InvestingPro
With that being noted, PLTR stock appears to be trading at a premium according to several valuation models on InvestingPro.
The average ‘Fair Value’ for Palantir stands at $13.89, implying a potential downside of -15.6% from current levels.
2. AppLovin
Applovin (NASDAQ:APP), a mobile app technology and marketing platform that helps developers monetize their apps, integrates AI to optimize user engagement and ad targeting.
This personalized approach enhances user satisfaction and boosts ad effectiveness, positioning AppLovin for substantial sales growth as it continues to leverage AI in the highly competitive mobile app ecosystem.
The Palo Alto, California-based tech firm is expected to deliver triple-digit profit growth when it releases its fourth-quarter update on Wednesday, February 14.
Not surprisingly, an InvestingPro survey of analyst earnings revisions points to mounting optimism ahead of the print, with Wall Street growing increasingly optimistic on the mobile app technology company.
The last three EPS revisions from analysts have all been to the upward side and 13 analysts have a Buy-equivalent rating on the stock vs. six Hold-equivalent ratings and one Sell-equivalent ratings.
Source: InvestingPro
Wall Street sees AppLovin earning a profit of $0.75 per share, improving 457% from a loss of -$0.21 in the challenging year-ago period. If that is reality, it would mark the most profitable quarter in the company’s 12-year history.
Meanwhile, the software maker’s revenue is expected to increase 32.1% year-over-year to $927.7 million, driven primarily by the successful roll-out of its latest AI-based advertising engine.
Demonstrating the strength and resilience of its business, ProTips points out that AppLovin is in great financial health condition thanks to strong earnings and revenue growth prospects, combined with its attractive valuation.
In addition, it notes that management has been aggressively buying back shares.
Source: InvestingPro
Indeed, the present valuation of APP stock suggests it is a bargain, as indicated by the InvestingPro model. There's a possibility of a +30.1% increase from last night’s closing price, moving it closer to its 'Fair Value' set at $57.32 per share.
3. Snowflake
Snowflake (NYSE:SNOW), a cloud data platform, leverages AI and machine learning to automate data processing, uncover valuable insights, and enhance decision-making.
As organizations increasingly adopt cloud-based solutions, Snowflake's AI-driven capabilities are expected to drive its sales growth, catering to the surging demand for scalable and efficient data management solutions.
The Bozeman, Montana-based data cloud company is anticipated to deliver explosive earnings and revenue growth when it reports fourth-quarter financial results on Thursday, February 29.
Earnings estimates have been revised upward 24 times in the past three months, according to an InvestingPro survey, compared to just five downward revisions, as Wall Street grows increasingly bullish on the data warehousing specialist.
Source: InvestingPro
As per Investing.com consensus estimates, Snowflake’s earnings per share are expected to be $0.17 for the final three months of 2023, an improvement of 21.4% from EPS of $0.14 a year ago.
Revenue is forecast to climb 28.8% year-over-year to $758.5 million, thanks to an expected increase in consumption from large enterprises for its cloud-based data warehouse software.
If confirmed, that would mark Snowflake’s highest quarterly sales total in its history.
InvestingPro's ProTips paints a mostly positive picture of Snowflake, citing its pristine balance sheet and strong sales growth outlook.
Nonetheless, there are concerns about valuation as ProTips points out and worries about the stock being overvalued warrant investors' attention.
Source: InvestingPro
Indeed, SNOW stock could see a decline of -9.9% from its current market value, according to InvestingPro, bringing shares closer to their ‘Fair Value’ of $185.59.
4. Okta
Okta (NASDAQ:OKTA), a leader in identity and access management, is leveraging AI to enhance security protocols and streamline user authentication.
This AI-driven approach not only fortifies Okta's services but also positions the company to cater to the increasing demand for advanced identity management solutions.
The San Francisco, California-based identity-and-access management specialist is forecast to report strong double-digit profit and sales growth when it delivers fourth quarter results on Thursday, February 29.
Wall Street is extremely optimistic ahead of the Q4 update, as per an InvestingPro survey, with analysts increasing their EPS estimates 36 times in the past three months to reflect a gain of almost 250% from their initial expectations.
Source: InvestingPro
Okta is forecast to earn $0.51 per share, increasing 70% from a profit of $0.30 a share in the year-ago period. If that is confirmed, it would mark the most profitable quarter in Okta’s history since going public in April 2017.
Meanwhile, revenue is seen rising 15.1% year-over-year to $587.2 million as the company benefits from strong demand from large enterprises for its cloud-based identity and access management software.
As per InvestingPro's ProTips, Okta’s share profile is fairly positive, with several bullish tailwinds working in its favor, including a healthy balance sheet, strong free cash flows, and a robust profitability outlook.
Source: InvestingPro
Additionally, it is worth noting that the quantitative models in InvestingPro point to a gain of +20.1% in OKTA stock over the next 12 months, bringing shares closer to their ‘Fair Value’ price target of $101.46.
5. SentinelOne
As a cybersecurity innovator, SentinelOne (NYSE:S) integrates AI into its platform to deliver advanced threat detection and response capabilities.
With the cybersecurity landscape evolving rapidly, SentinelOne's AI-centric approach enhances its ability to provide cutting-edge solutions, fueling its anticipated sales growth.
The Mountain View, California-based cybersecurity firm is forecast to release its fourth quarter financial results on Wednesday, March 13 and sell-side confidence is brimming.
In a sign of increasing optimism, EPS estimates have seen 22 upward revisions in the past 90 days, according to InvestingPro, as it benefits from increased cybersecurity spending amid the rampant surge in cyberattacks.
Source: InvestingPro
Consensus estimates call for a loss of -$0.04 per share for the fourth quarter, narrowing significantly from a loss per share of -$0.13 in the year-ago period, as the security software provider continues to make progress towards profitability.
Revenue is expected to jump 34.3% year-over-year to $169.4 million, amid strong security spending due to the complex geopolitical environment.
InvestingPro’s ProTips highlights several positive trends SentinelOne has working in its favor, including a healthy growth outlook and improved profitability trends.
Nevertheless, concerns loom as ProTips points out the cybersecurity company’s elevated sales valuation multiple.
Source: InvestingPro
It is worth mentioning that SentinelOne’s shares appear to be fairly valued at the moment, as per the quantitative models in InvestingPro, which point to a potential upside of just +3.7% from their current market value.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. As with any investment, it's crucial to research extensively before making any decisions.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.