Market Insights

Earnings season keeps highlighting new growth stocks for technology investors. This week, solar energy came into its own.

Enphase Energy (ENPH) spiked 42 percent on its results while SolarEdge Technologies (SEDG) ripped more than 20 percent. Both companies’ products manage home-solar installations, linking panels to electrical systems and batteries.

ENPH’s revenue surged 128 percent, or 5 percentage points more than analysts had projected. Earnings beat estimates by 6 cents a share and guidance was 18 percent higher than expected. SEDG’s business grew about 74 percent and also beat estimates across the board.

Their breakouts keep solar at the top of the industry rankings in 2020, more than six times the gain of the S&P 500. They also highlight how new growth stories appearing in the technology sector, keeping buyers engaged as the stock market flies to new highs.

Nvidia’s Artificial Intelligence

Nvidia (NVDA), a much larger company with a wider base of investors, was another big mover in the last week of earnings. The semiconductor firm’s quarter impressed people on many fronts, and not simply with consensus-beating numbers:

• Data-center revenue rose 43 percent, more than 15 percentage points ahead of Wall Street’s projection. These chips are used for artificial intelligence and machine learning. NVDA’s leadership in this growth market of the future eased worries about softness in its established gaming business.
• Gross margin was higher than expected, a sign the company has pricing power with customers. Revenue guidance for the current quarter was $10-15 million ahead of forecasts.
• Analysts gushed at the results. According to MarketWatch, more than half raised their price targets. Bernstein was a notable one, finally upgrading NVDA to the equivalent of a “buy” rating.

GoDaddy and Garmin

GoDaddy (GDDY) was another relatively new technology stock that ripped higher on strong results. The web-registration company beat estimates on the top and bottom lines. It also guided revenue above estimates and made more money per user than expected.

The report sent GDDY to its highest level since last spring. It also had a “golden cross” chart pattern, with the 50-day moving average rising above the 200-day MA. That could potentially draw interest to a company that’s only been public for two years.

Garmin (GRMN) is a much older story. The 31-year old GPS pioneer had its third straight bullish earnings report, lifting it back to the highest levels of the decade. Its big story has been expansion into aviation and fitness.

Expedia (EXPE) also had a big surprise: lower ad spending lifted profitability much more than expected. That changed analysts’ views of the travel company and helped offset weak bookings. Firms including Morgan Stanley, Credit Suisse, Cowen and UBS raised price targets in response.

ViacomCBS Slides

While those technology companies rose on their results, media conglomerate ViacomCBS (VIAC) plunged 14 percent after missing estimates. Advertising, publishing and movies all shrank. It was the company’s first quarterly release since being combined.

NetApp (NTAP) had its biggest drop since last summer on a depressing mix of higher costs and weak revenue. Making matters worse, the data-storage company guided below consensus and announced the retirement of CFO Ron Pasek.

ConAgra (CAG) was the other big decliner in the S&P 500. The food company is down about 9 percent in the last week after unexpectedly cutting its guidance.

In conclusion, the last week of earnings season has had its winners and losers. The big trend continues to be strength in newer technology companies like ENPH and GDDY as investors keep finding opportunities in the strongest corner of the market.