3 Reasons You Should Be Excited Right Now

Apr 10, 2021

I’m like a kid on the night before Christmas. Too excited to sleep… anticipation killing me. I swear, I think even the dogs know something is up.

Why?

Earnings season is about to kick off.

In just 8 days, we will be sending out the first of 10 weekly reports to Earnings Season Pass subscribers… breaking down the prospects of hundreds of companies as they get set to make their big earnings announcements.

Every quarter is exciting. But this one… it’s different. It’s next level.

There are three reasons why I think this could be the best earnings season we’ve had in a long time:

1. Earnings reports will be moving into the market spotlight

As someone who loves trading earnings, I have to say that last earnings season was a little frustrating.

Why?

Because there were too many topics for the market to pay attention to, which ultimately distracted from company earnings reports.

We had crazy retail short squeezes, a new president, vaccine rollout numbers, Federal Reserve uncertainty… the list goes on.

Last quarter, company earnings reports were essentially an afterthought.

But things are changing, and I believe this upcoming earnings season could be the “purest play” on earnings we have had in the past year.

Why is this important?

Because at LikeFolio, our advantage is seeing consumer demand levels on Main Street before the company reports those results to Wall Street.

We have a better idea of what the company will report than the rest of the market.

It’s a huge edge — but it’s even more powerful when the market is focused on those earnings reports as a primary catalyst for movement.

And finally, after a year of COVID and political turmoil, I believe we are about to see earnings results step back into the market as the primary driver of stock price changes.

The stage is set…

2. “Guidance” will rule the day

When companies broadcast earnings reports, they can usually be broken down into three important categories:

  • Revenues — This is the total amount of money the company took in during the prior three-month period. The market sees this as a barometer of the company’s overall health — do consumers want more of what this company is making?
  • Earnings — This is the company’s profit or loss for the quarter. This shows the market how much the company had to spend to achieve its revenue numbers, how efficiently the business is running, and gives shareholders an idea of how much the company could distribute to shareholders over the coming years/decades.
  • Guidance — This is where the company gives its outlook for the upcoming quarter or year. Do executives think they’ll be able to continue growing revenues quickly, or are there major hurdles upcoming that investors should be aware of?

This quarter, I expect that last one to be the most important of the three, by far.

Because Wall Street really doesn’t care how your company did during a pandemic (other than “did you survive”!).

But they care very, very much about how executives see things going in the future, as the country opens back up.

For example — we all saw how well companies like Home Depot and Wayfair did during the pandemic, as consumers used the stay-home period as an opportunity to improve their homes.

But that’s old news. Now, Wall Street will be keenly focused on the future — are consumers still taking on new home improvement projects, or are they tapped out and ready to move on?

Fortunately, LikeFolio sees consumer demand changes in real time, giving us a huge advantage in figuring out what company executives are likely to say regarding guidance.

By the time most companies report their earnings, 30% to 50% of the next quarter has already taken place. The company has seen its sales numbers (and LikeFolio has seen consumer demand levels)… and Wall Street is ready to react to whatever they say.

Game on!

3. Strong signals are developing on individual stocks… in both directions

At LikeFolio, we quantify everything regarding earnings and boil it all down to a unique and powerful “Earnings Score.”

This score can be anywhere from -100 (most bearish) to +100 (most bullish), giving our members a powerful prediction of how the company’s stock is likely to react to the upcoming earnings report.

Now, the earnings season hasn’t started yet… we’ve still got another week… but our team has been dissecting the data and sharing some preliminary results with me.

And, wow.

We’ve got some HUGE scores coming this season.

Some extremely bullish…. Some extremely bearish.

And a lot that I think will completely shock Wall Street and shatter some existing narratives.

In other words… this earnings season may end up having the most big-profit opportunities we’ve seen in a long, long time.

I can’t wait!

Andy Swan,
Founder, LikeFolio