It’s been a chaotic season of earnings for certain technology companies, many of which had their share prices and expectations coming in way too hot ahead of their big reveals. Undoubtedly, the generative artificial intelligence (gen AI) run-up is alive and well, with GPU demand still as scorching as ever.
As mega-cap enterprises fill their orders, though, questions linger about when some of the software laggards in gen AI will start to pick up speed. In any case, other oversold AI software plays have come off in recent weeks and months. Some are down considerably after their earnings, and it’s these such names to carefully consider for the next innings of the gen AI ascent.
Here are three oversold growth stocks to pick up after their recent earnings disappointments.
Salesforce (CRM)
Salesforce (NYSE:CRM) reported some underwhelming quarterly numbers after Wednesday’s close, sending shares tumbling by around 17% in extended trading. It was a painful fall after one of the least-loved quarters in a long time. Still, given the longer-term potential behind Einstein Copilot, I view the fall in CRM stock as beyond overblown.
For the quarter, the AI-leveraging enterprise software giant missed revenue for the first time since 2006. That alarming headline raises questions about whether Salesforce still has growth in the tank.
The top line may have fallen short of consensus estimates, but just by a hair. And while guidance was underwhelming, Salesforce is a firm with a history of underpromising and overdelivering. Why else would it have such a lengthy track record of sales beats? No such impressive streak can go on forever, though. In light of a potential “higher for longer” rate environment, I’d argue that it’s smart to exhibit caution regarding predictions about the near future.
Indeed, Wednesday saw a historic fumble for CRM stock. However, CEO Marc Benioff and the company have what it takes to lift themselves off the canvas, as it looks like a solid comeback play in the second half.
Match Group (MTCH)
Match Group (NASDAQ:MTCH) is another technology firm that fell flat after its latest round of earnings. The once-hot grower seems to have been running on empty for quite a while now, with MTCH stock down close to 63% in the past two years and more than 82% from its short-lived peak in 2021.
The dating app heavyweight behind Tinder is experiencing a bit of a contraction in paid users. And there doesn’t appear to be much to get behind as a dip-buyer seeking value. Indeed, its dating apps need to tap into next-level innovation to win the business of young Millennials and Gen Z consumers. However, whether AI is the magic bullet to bring back the growth remains to be seen.
Either way, the risk-reward does not seem too bad, while shares go for 12.9 times trailing price-to-earnings (P/E) if you believe management can innovate to spark a connection with investors again. I am swiping left as shares flirt with multi-year depths.
Roblox (RBLX)
Roblox (NASDAQ:RBLX) is the modern-day metaverse play under pressure following its latest underwhelming quarterly reveal. RBLX stock is down 23% year to date and more than 18% off its May 2024 peak.
Though the latest quarterly earnings had a lot to be concerned about, most notably the sharp drop off in bookings growth (down 19% year over year), I do find the post-earnings reaction was so wildly overdone that longer-term investors who want “cheap” exposure to metaverse growth can get it at a discount with RBLX stock at $33 and change.
Sure, the latest quarter was a setback—there’s no sugar-coating that. However, I wouldn’t be so quick to dub the latest downtick in player spending as the beginning of a trend.
As long as Roblox can keep users engaged, players will again pick up Robux, Roblox’s in-game currency. Given the company’s reinvestment in various growth initiatives (yes, AI plays a big role, too), I’m inclined to give the firm the benefit of the doubt.
On the date of publication, Joey Frenette held shares of Salesforce. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
