Want Better Returns? Focus on These 2 Computer and Technology Stocks Set to Beat Earnings

Company performance compared to bottom line expectations can greatly impact stock prices.

When it comes to a company’s quarterly financial report, earnings are arguably the most important single number. But how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

The Power of Earnings Surprises

According to a study, the majority of stock price movement occurs in reaction to earnings releases. A study showed that shares of companies that exceeded earnings expectations rose 2.6% on average, while those that fell short saw their stock decline by 2.4%. This highlights the importance of identifying companies that are likely to surprise.

2 Stocks to Add to Your Watchlist

To identify potential earnings surprises, I use the Zacks Earnings ESP, or Expected Surprise Prediction. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

The Earnings ESP model compares the Most Accurate Estimate to the Zacks Consensus Estimate.

Using this model, I found two Computer and Technology stocks that meet our ESP qualifications.

Silicon Motion (SIMO)

Silicon Motion earns a Zacks Rank #3, 22 days from its next quarterly earnings release on August 1, 2024, and its Most Accurate Estimate comes in at $1 a share. This translates to an Earnings ESP of 8.99%, which suggests a good chance of beating analyst expectations.

Shopify (SHOP)

Shopify, which is readying to report earnings on August 7, 2024, sits at a Zacks Rank #3 (Hold) right now. Its Most Accurate Estimate is currently $0.23 a share, resulting in an Earnings ESP of 11.72%.

Both SIMO and SHOP’s positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.

“Investors who focus on earnings surprises can turn the tables in their favor.”

Stay ahead of the curve by identifying potential earnings surprises.