Earnings can make or break a stock in the short term. Impressive earnings can vault shares to new highs. Disappointing earnings — or more often, guidance — can crush a stock price. Sometimes though, the pullbacks are opportunities. Put another way, these are stocks to buy after earnings dips sent them lower.
At times, investors overreact to a company’s quarterly results. After all, there is a lot to sift through. There are the headline results, the press release and then the conference call. Afterwards, analysts provide their opinion on the quarter.
It doesn’t help that there are now algos and high-frequency trading programs that can exacerbate some of these earnings moves.
Look at Snowflake (NYSE:SNOW) for instance. This is a growth name we have liked in the past, but Wall Street did not initially like its results. Shares fell more than 16% in a single session, but are now up almost 30% and the stock is above where it was trading when it reported earnings.
So what are some of the other stocks to buy after an earnings dip?
Stocks With Q1 Earnings Pullback: Ulta Beauty (ULTA)
Coming into earnings, Ulta Beauty (NASDAQ:ULTA) was down almost 13% from the all-time high. Keep in mind that the stock had rallied about 20% year to date to get to that high and more than 40% over the prior 12 months.
After stumbling into earnings, Ulta fell another 13% in the first session after earnings and declined in four straight sessions. Ultimately, shares fell 17% after earnings and were down almost 28% from the high.
All that comes after Ulta beat on earnings and grew sales 11% year-over-year to $2.6 billion, but missed expectations by $20 million.
Management increased its full-year revenue guidance from a range of $10.95 billion to $11.05 billion (a midpoint of $11 billion) up to a new range of $11 billion to $11.1 billion (or a midpoint of $11.05 billion).
Still, that was short of consensus expectations at $11.09 billion, while management also gave a slight trim to its operating margin outlook (down from a range of 14.7% to 15% to a new range of 14.5% to 14.8%). Its earnings and comp-store sales outlook was unchanged.
In all, it wasn’t a perfect quarter, but down almost 30% should have investors thinking about an opportunity for a great retailer.
Stocks to Buy After Earnings Dip: On Holding (ONON)
The selloff in On Holding (NYSE:ONON) was interesting, given that the quarter was pretty solid. The Swiss shoemaker has stormed onto the scene for consumers and despite a pretty strong result, investors buried this name.
When it reported earnings on May 16, ONON shares were down slightly from the 52-week high it hit on May 5. However, after the report shares fell in six of the next seven sessions and lost more than 23% of its value in that span.
The company delivered record revenue in its most recent quarter as sales surged 78% year over year. Direct-to-consumer sales jumped 60% while margins widened. Management spoke of strong demand and even raised its full-year sales outlook up to 1.74 billion Swiss franc (ahead of consensus expectations of 1.73 billion Swiss franc).
It was a classic case of the stock having a massive run — up about 95% in 2023 ahead of earnings — and not delivering enough to satisfy investors. If management is right though, this dip should be bought.
Best Stocks With Recent Earnings Dip: Starbucks (SBUX)
Starbucks (NASDAQ:SBUX) had put together a pretty tasty run with its stock price, as shares bottomed early in the bear market in May 2022. From there, it ran about more than 67% into its earnings report on May 2.
The company delivered a top- and bottom-line beat with sales growing more than 14% year-over-year. Further, comp-store sales crushed expectations.
Strength from China helped drive a strong beat on the company’s international results, but since management had already seen some of that momentum “start to moderate,” they only reaffirmed their full-year outlook.
After falling four weeks in a row and working on its fifth weekly decline in the last six weeks, Starbucks stock is down almost 15% since the report.
Perhaps more losses are on the way — like if we see a larger correction in the S&P 500. However, the quarter was good and nothing was wrong with guidance. At some point, Starbucks should shake off the results.
On the date of publication, Bret Kenwell held a long position in ONON. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.