Certain Tech Stocks Had a Strong Earnings Season, Despite Covid-19

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Tech Stocks Sector Had a Strong Earnings Season, Despite Covid-19

Coronavirus is completely dominating the market as earnings season winds down. But investors shouldn’t forget the stocks that rallied on good news.

In particular, newer technology companies are flourishing. Several are smaller companies, while others are mid-sized companies potentially on the road to large-cap status. Learning some of these stories now could let traders take advantage of the current selloff.

The big name this week is Square (SQ), which reported strong growth in its Cash App and business services. That let the payment processor beat earnings and revenue forecasts, plus issue better-than-expected guidance. Analysts reacted enthusiastically, seeing more opportunities as SQ expands into services like investing.

It was also the second big rally for Jack Dorsey this month. His other company, Twitter (TWTR), spiked after beating estimates on February 6.

Square (SQ) chart with 50- and 200-day moving averages. Notice recent "golden cross."
Square (SQ) chart with 50- and 200-day moving averages. Notice recent “golden cross.”

Dropbox (DBX) was a newer and smaller tech stock with strong results in the last week. The cloud-based storage company beat estimates across the board after getting more users to pay and raising prices. It’s also given back almost all of its post-earnings rally.

HP Surprises

An older technology company, computer and printer maker HP (HPQ), also surprised to the upside. The once-mighty pioneer of Silicon Valley is now in a takeover battle with another old company: Xerox (XRX). Both firms have quietly improved their businesses and may now combine to remove costs. The pair might be worth watching as bids and counter-bids fly back and forth.

Here are a few other lesser-known technology stocks that rallied earlier in this earnings season:

  • Citrix Systems (CTXS): The networking and security company flew to a new record highs after beating estimates across the board as it successfully migrates customers to subscriptions. CTXS dropped more than 20 percent from its peak and today tested its 200-day moving average.
  • GoDaddy (GDDY): The web-domain giant beat estimates and squeezed more revenue out of clients. The stock has now retraced its entire post-earnings rally.
  • Shopify (SHOP): The rising powerhouse for small-business e-commerce also crushed estimates as it expanded into new areas like logistics. It spiked over $590 and today tested all the way back below $450.
  • Solar energy: Enphase Energy (ENPH) and SolarEdge (SEDG) are the two names in this space. Last week’s earnings recap has details.

Toll Brothers Gets Housed

Toll Brothers (TOL) was a big mover on earnings outside the technology sector. However it crashed after selling fewer houses than expected and getting squeezed by higher costs. Other homebuilders have benefited from strong demand and low mortgage rates. Will buyers return to this industry once the current volatility passes?

Other housing-related stocks, Home Depot (HD) and Lowe’s (LOW), had mixed results. HD tried to rally after signaling its wave of IT investment is nearing an end. That could boost margins and help make its giant stores more accessible to e-commerce. LOW, however, crashed on increased competition from HD.

Deere (DE) chart with 50- and 200-day moving averages.
Deere (DE) chart with 50- and 200-day moving averages.

Deere (DE) was another standout name, spiking to a record high after reporting unexpected profit growth. The tractor maker predicting that U.S. farmers will increase spending as the Phase One trade deal with China goes into effect.

In conclusion, the spread of coronavirus has triggered one of the fastest and most violent selloffs in the stock market’s history. That’s dominating everyone’s attention. However, several interesting and potentially positive stories have flown under the radar. Hopefully this post helps you learn some of them.

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