Four struggling stocks that should rally with Q2 earnings, per Evercore ISI
There are four big-name stocks that could start to turn around this earnings season, after struggling so far this year. Nvidia Alphabet Netflix Booking Holdings The quartet are part of a group that Evercore ISI identified as “beaten-down beat and raisers” — underperforming stocks with elevated short interest and strong fundamentals that could start to do well after this earnings season. “Upside earnings surprises should catalyze share prices higher as positioning is cautious,” Julian Emanuel, head of Evercore’s equity, derivatives and quantitative strategy, wrote Sunday. The four have been floundering. Nvidia is up more than 11% this year, but has underperformed other chip stocks — especially memory names — that have benefited from supply shortages that have driven up prices. Google-parent Alphabet, like the other hyperscalers, has come under pressure as rampant AI spending and debt issuance began to unnerve investors. Netflix, dealing with M & A activity in its failed bid for Warner Bros Discovery, is off by more than 40% from its recent peak. Booking, hurt from geopolitical headwinds that knocked travel, is down by 23%. Rosier outlook But the outlook for the second quarter earnings season is more promising, and could be the catalyst the stock market needs to resume its rally, which has stalled since early June, according to Emanuel. The strategist expects the S & P 500 will end the year at 7,750, climbing a wall of worry that includes AI disruption fears, rising oil and fears around further interest rate hikes. Evercore ISI also raised its S & P 500 2026 EPS estimate by more than 6%, to $330 from $310, citing continued AI spending and, until recently, falling oil prices. Emanuel’s 2027 earnings forecast for the S & P 500 rose by more than 8%, to $360 from $333. To be sure, investors worry that fewer companies will report positive earnings surprises in the second quarter as did in the first, when profits were 15% above expectations, helping to unleash a surge of confidence on Wall Street. But Evercore ISI’s Stan Shipley still expects companies will beat earnings expectations by 7% in the second-quarter earnings season — double the rate before the pandemic, according to the note. The S & P 500 is expected to post a second straight quarter of earnings growth above 20%, according to FactSet.
