5 Stocks Gaining On Earnings Optimism

1. Shopify Inc. (NYSE:SHOP)

Shopify provides an e-commerce platform to people who want to sell products online. The company’s platform and services have been a global hit ever since the COVID-19 period. However, the stock has disappointed many after its fall in 2022, still trading 33% below its all-time highs.

While that disappointment is unlikely to change soon, there is reason to believe that the existing bull run, which has paused since November, could continue. The company’s earnings are expected to come out on the 11th of February and RBC Capital Markets analysts are optimistic about an earnings beat.

Analysts have confirmed that third-party data suggests an earnings beat on the back of improved margins. There is one warning sign though, and it has to do with the guidance. Shopify has a history of disappointing Q1 guidance with the stock declining 17% on average after Q4 earnings. We believe this risk is already priced in as the stock is trading at exactly the same level as on the day of Q3 earnings. The sideways movement during the last 2 months suggests investors are prepared for poor guidance and have therefore priced it in.

Shopify is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held SHOP at the end of the third quarter which was 56 in the previous quarter. While we acknowledge the potential of SHOP as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.