While the market is rebounding in November, with the S&P 500 up more than 5%, many great stocks continue to be battered and bruised. This mostly has to do with earnings reports. Companies that post better-than-expected financial results and offer bullish guidance are seeing their share prices soar, while companies that disappoint are seeing their stocks get crushed. It’s not uncommon for growth stocks to see their share prices drop 10% or more immediately after issuing a bad print and/or weak guidance. However, rather than be put off by these downturns, investors should view them as an opportunity to buy long-term winners at a discount. Here are three battered growth stocks with more than 20% upside.
Cisco Systems (CSCO)
Shares of Cisco Systems (NASDAQ:CSCO) plunged 12% after the networking hardware company issued weaker-than-expected forward guidance. The company reported strong third-quarter results that included earnings per share (EPS) of $1.11 versus the forecasted $1.03. Revenue amounted to $14.67 billion compared to the anticipated $14.61 billion. Cisco’s revenue in the quarter rose 7.6% from a year earlier. Unfortunately, Cisco also reported that its new product orders slowed during the quarter.
The company estimates that one or two quarters of its shipped products are still waiting to be implemented, leading to the reduced orders. As a result, Cisco forecasts 82 cents to 84 cents in EPS on $12.6 billion to $12.8 billion in revenue for the current fiscal second quarter. That guidance implied a 6.6% revenue decline and was below the 99 cents in earnings and $14.19 billion in revenue that Wall Street expected.
However, despite the near-term guidance, there’s still reason to be bullish on Cisco. The company is acquiring data analytics software maker Splunk (NASDAQ:SPLK) for $28 billion. Also, company executives said they could win over $1 billion in orders for artificial intelligence (AI) infrastructure from cloud providers. Plus, CSCO stock pays a decent quarterly dividend of 39 cents per share for a yield of 3.32%. Buy the dip!
Palo Alto Networks (PANW)
Cybersecurity firm Palo Alto Networks (NASDAQ:PANW) was also hurt by its Q3 print. PANW stock fell 6% after the company announced quarterly billings that failed to meet analyst expectations. The company’s billings during Q3 totaled $2.02 billion, short of the consensus estimate of $2.05 billion to $2.08 billion. Analysts and investors viewed the weak billings as a sign of softening demand for Palo Alto’s cybersecurity technology products and reached for the sell button.
That’s too bad, as Palo Alto Networks Q3 print was otherwise very strong. The company’s EPS of $1.38 was ahead of the $1.16 forecast. Revenue in the quarter came in at $1.88 billion, up 20% from a year ago and above Wall Street forecasts of $1.84 billion. The guidance was also strong, with Palo Alto Networks forecasting revenue of $1.955 billion to $1.985 billion, which aligns with analyst views. Profit for the current fourth quarter of $1.29 a share was above the consensus estimate of $1.25.
Also, before the Q3 results, PANW had been flying high and was up more than 80% this year.
The Trade Desk (TTD)
Shares of The Trade Desk (NASDAQ:TTD) were practically eviscerated after the company’s latest results were public. TTD stock dropped 25% immediately after the advertising technology firm issued fiscal fourth-quarter revenue guidance that fell short of Wall Street estimations. As with Cisco and Palo Alto Networks, The Trade Desk issued financial results that beat analysts’ forecasts, but its stock was undone by disappointing forward guidance.
For Q3, The Trade Desk reported EPS of 33 cents versus the expected 29 cents. Revenue came in at $493 million compared to $487 million forecast. The company’s revenue was up 25% from a year ago. Sadly, though, The Trade Desk forecast revenue in the current quarter of $580 million, below the $610 million expected by analysts. Down went the share price. However, investors should keep in mind that TTD stock has been a long-term outperformer. Over five years, the shares are up 430%.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
