The stock market continues to prove its resilience despite concerns over persistent inflation. A lot of that resilience is attributable to strong earnings reports overall. Most of the S&P 500 has reported earnings. Fortunately, the benchmark index is growing even faster than expected, pointing to continued strengths on the earnings front.
Strategists from leading investment firms continue to be optimistic about the strength of the stock market despite the Fed’s response to underlying economic conditions.
That optimism serves as a catalyst for investors seeking to capitalize on the strong earnings data in the first quarter.
Inflation declined slightly in April, offering renewed hope for future cuts. The Fed will not cut rates on that data but offers some hope following months of negative data. That data suggests investors should consider these stocks to buy after earnings.
Tencent (TCEHY)
Tencent (OTCMKTS:TCEHY) stock continues to surge higher following strong news related to its video segment. That strong news resulted in a big earnings beat.
The company continues to make extraordinary progress against its main competitor ByteDance, the owner of TikTok. Tencent operates WeChat, which has seen its video accounts soar of late. The company has been investing a lot of resources in order to claw back market share from ByteDance and TikTok. Those efforts are bearing fruit: Users spent 80% more time on Tencent’s video accounts, leading to a 26% increase in ad sales.
The strong performance resulted in a 62% increase in net income at Tencent. In turn, analysts expect positive earnings revisions for Tencent moving forward. That’s an excellent reason to believe share prices could move higher again in the immediate term.
Overall, the news is very strong for Chinese stocks and suggests the country’s gaming and internet sectors remain particularly strong.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) reported earnings on April 25, showing a more than 17% increase in revenues. Earnings were even stronger, with net income increasing by 20%. There are dozens of reasons to be positive about Microsoft stock, the earnings are but one.
Anyway, March EPS figures were 3.4% higher than anticipated. Investors have grown to expect double-digit growth from Microsoft in the last few years. Thus, those same investors have to refer to the guidance in order to ascertain whether that double-digit growth is, in fact, strong. The 3.4% beat indicates it is.
Microsoft isn’t without concerns at the moment. Investors continue to wonder how successful the company will be at monetizing AI in relation to its office products. Time will tell, but investors should also realize Microsoft is incredibly strong elsewhere. Intelligent Cloud Revenue increased by 21%, soaring to $26.7 billion. The company was also successful in growing less important segments, including LinkedIn where revenues increased by 10%.
Impinj (PI)
Investors who followed Impinj (NASDAQ:PI) over the last few quarters have grown accustomed to strong earnings. The first quarter of 2024 has started no differently for the firm, which operates a cloud connectivity platform.
The platform includes integrated circuits that wirelessly connect physical items and data to the platform. The performance and growth of the firm have made it one of the Internet of Things companies to pay attention to.
The company reported 21 cents of earnings during the first quarter on 76.8 million in sales. Those figures were far better than the anticipated numbers of 10 cents on $73.6 million. As impressive as those numbers were, it’s the forward guidance that should truly interest investors.
Analysts had been expecting $79 million in sales in Q2 and earnings of 19 cents prior to the strong earnings. Impinj guided for $97.5 million in sales and 75 cents of earnings, blowing away Wall Street.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) stock remains something of a mystery following its earnings report a few weeks ago. On the one hand, earnings during the quarter were better than expected, providing reason for investors to remain positive. However, the company also gave second-quarter guidance for sales slightly below the $150 billion Wall Street had been anticipating.
There’s reason to believe that Amazon will do better than it is currently predicting. For one, AWS is now at a $100 billion annual revenue run rate. Cloud is integral to so many of the current trends making Amazon immediately relevant. That brings me to my next point — artificial intelligence. I think investors will see Amazon really ramp up its artificial intelligence investment in the coming weeks. I believe that because Jeff Bezos is apparently worried the company is falling behind on that front. Thus, the company will likely react by projecting strength over the coming weeks. That could include announcements of further investments.
Emergent BioSolutions (EBS)
Emergent BioSolutions (NYSE:EBS) is a life sciences company and stock that provides products ranging from Narcan nasal spray to anthrax injections. It’s also a company that recently reported exceptionally strong earnings, prompting potential investment.
On May 1st the company reported 59 cents of earnings on $300.4 million in sales. The market had been expecting $224.5 million in sales, leading to -84 earnings. Share prices have essentially tripled since the news was announced two weeks ago. Share prices continue to move higher by double digits, suggesting further opportunity ahead.
Narcan contributed $118.5 million of the $300.4 million in sales during the first quarter. The surprise profitability during the quarter looks to have prompted a shift toward efficiency. The company concurrently announced a strategic realignment, resulting in the loss of 300 jobs as the company further focuses on its Narcan opportunity. Investing in the stock is one of the clearest ways to capitalize on America’s ongoing opioid crisis.
AMD (AMD)
Investors curious to understand whether AMD (NASDAQ:AMD) will continue to grow should consider this recent article from Yahoo! Finance.
The title gets straight to the point. Although AMD beat the first quarter guidance, a weak Q2 forecast cast doubt on its shares as an investment at the moment. The story is pretty straightforward otherwise: AMD is doing extraordinarily well as it relates to hyperscalers and the data center opportunity, but gaming revenues continue to be weak.
Many leading companies have announced deployments of AMD’s M1 300X chips. However, the company’s guidance is not what Wall Street was looking for. The data center opportunity continues to be strong and is expected to grow at double-digit rates, while gaming revenues are expected to continue declining.
Investors should be optimistic, as April inflation data shows the economy is cooling. That renews hope for rate cuts in the coming months, likely September, that will prompt significant increases in AI spending at the enterprise level.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock is again being propelled primarily by the strength of its search business. Ad revenues from Google Search are again strong, the primary reason investors should consider buying Google. The company has again returned to the strengths that have made it what it has become over the past decade or so.
Meanwhile, the company continues to invest in generative AI in order to further those strengths. Revenue from Google services accounted for nearly 88% of overall revenues. Those revenues increased by 13.6% rising to $70.4 billion, ahead of expectations.
YouTube was another bright spot for the company. Ad revenues from YouTube increased nearly 21%, growing to $8.1 billion. Furthermore, Google Cloud’s revenues grew by more than 28% during the period.
Overall, Google’s stock is again strong on the strengths of its search business. Meanwhile, the company is well-positioned to apply artificial intelligence to that segment and others. Those investments could strengthen future results substantially, which is why investors should buy now.
On the date of publication, Alex Sirois did not hold (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.
