The earnings season is kicking off this week, and Goldman Sachs thinks investors can capitalize on short-term opportunities arising from the reports. JPMorgan Chase, Citigroup and Wells Fargo are slated to post first-quarter results Friday before the bell. These names could set the tone for the overall reporting period. Analysts expect the S & P 500 to have a year-over-year earnings growth rate of 3.2%, FactSet data shows. If that’s the case, it would mark the third consecutive quarter of earnings growth. The reporting period could also be a good time for tactical opportunities in the stock market. “S & P 500 stocks have been less correlated over the past 6 months than any time over the past 5 years, providing an excellent backdrop for investors that focus on idiosyncratic opportunities. The ratio of Index to Single stock options prices suggests idiosyncratic opportunities will continue over the next 6 months,” wrote analyst John Marshall. The bank on Thursday identified stocks where its analysts are most optimistic in terms of earnings per share, relative to the Street consensus. The bank also expects these names to see sharp moves after posting earnings, based on what the options market shows. Here are a few of the names that were included in the list: Royal Caribbean Cruises , up 1% this year, was one name included on the list. The cruise company is set to report its earnings in early May. Goldman analyst Lizzie Dove sees 24% upside for the stock on the back of growing travel demand, strong pricing power and the potential for higher capital returns. Other catalysts include the company’s private island expansion and fleet optimization, which includes several new ships. “The company will be the first to re-launch in China, the highest yielding market for RCL back in 2019 (~$100mn of net income) and sees ~60% premium pricing for the company’s upcoming Asia voyages vs. other similar peer itineraries,” Goldman said. Per Goldman, the options market is pricing in a move of 7.7% on earnings day. Exchange operator Nasdaq was also singled out for its robust growth in the fintech space. The bank sees an upside of 16% for the stock, which has already rallied 8% this year. Nasdaq earnings have the potential to accelerate to around 12% in 2025 and 2026, the bank said. This is due to factors such as robust growth in the firm’s index business, faster-than-expected deleveraging and better integration and offerings of Nasdaq’s risk management software platform, Adenza. The options market implies a 4.1% move for Nasdaq on after the April 25 report is released. Semiconductor and software company Broadcom was also selected for the list. Broadcom stock has already climbed 22% this year, but analyst Toshiya Hari sees an additional 17% upside ahead. “Broadcom’s strategy to participate in markets that are durable and in which they either have or can construct a sustainable leadership position has worked well over the years,” Goldman wrote Thursday. The bank added that Broadcom also possesses an extensive technology portfolio, while its leadership in the custom artificial intelligence acceleration space could provide attractive growth opportunities. Goldman said the stock is poised for a 4.5% move after the April 22 report comes out.
These are Goldman’s top tactical stock picks going into earnings season
Apr 11, 2024
