Stock Analysis & Ideas

Three Stocks that Jumped Despite Mediocre Q2 Performance

Story Highlights

BAC, NFLX, and TSLA went on a surprise uptrend even after they failed to report impressive second-quarter results.

Here are three stocks that have surprised the market by gaining strength even after reporting not-so-impressive numbers for the second quarter of 2022: Bank of America Corp. (NYSE: BAC), Netflix, Inc. (NASDAQ: NFLX), and Tesla, Inc. (NASDAQ: TSLA).

Now, let’s understand what pushed these stocks up despite their Mediocre second-quarter performance.

Bank of America (BAC)

North Carolina-based financial services provider Bank of America released its second-quarter results on July 18. Earnings came in at $.73 per share, lower than the Street’s estimate of $0.75 per share and the year-ago figure of $1.03 per share. However, on July 19, the stock jumped 3.4%. This could be driven by a 22% year-over-year rise in net interest income, which totaled $12.4 billion.

The CEO of Bank of America, Brian Moynihan, said, “Solid client activity across our businesses, coupled with higher interest rates, drove strong net interest income growth and allowed us to perform well in a weakened capital markets environment. We grew revenue 6% and delivered our fourth straight quarter of operating leverage.”

On TipRanks, the stock has a Moderate Buy consensus rating based on 11 Buys and four Holds. BAC’s average price target of $42.86 reflects upside potential of 26% from current levels.

Additionally, TipRanks’ Stock Investors tool shows that investors currently have a Positive stance on Bank of America, as 1.3% of investors on TipRanks increasing their exposure to the stock over the past 30 days.

Netflix (NFLX)

Streaming giant Netflix announced its results for the second quarter of 2022 on July 19. Even though the company said that it lost almost a million subscribers during the quarter, the stock gained 7.3% on July 20. This upsurge could be on the back of upbeat earnings, which increased 7.7% year-over-year to $3.20 per share. The Street expected Netflix to post EPS of $2.95 in the quarter.

Further, 9% revenue growth to around $8 billion and a higher-than-anticipated rise in the number of memberships helped push the stock up.

The California-headquartered company expects revenue to rise by nearly 5% in the third quarter and EPS to come in at $2.14 per share. It also anticipates operating margin to be 20% and net paid additions of one million.

Last week, BMO Capital analyst Daniel Salmon reiterated a Buy rating on NFLX with a $365 price target. The analyst said, “Netflix’s subscriber growth is stabilizing and its free cash flow is increasing, making it an attractive growth at a reasonable price (GARP) stock pick.”

On TipRanks, the stock commands a Hold consensus rating based on seven Buys, 19 Holds, and six Sells. NFLX’s average price forecast of $229.30 implies 5% upside potential.

Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in NFLX is currently Very Positive, as the cumulative change in holdings across all 39 hedge funds that were active in the last quarter was an increase of 2.2 million shares.

Tesla (TSLA)

Tesla released its second-quarter results on July 20. Despite recording a sequential decline in earnings and revenue, the stock gained almost 10% on July 21. Second-quarter revenues totaled $16.9 billion versus $18.8 billion in the first quarter. Further, EPS of $2.27 per share was lower than the first quarter figure of $3.22.

However, the stock still soared as the company’s earnings beat expectations of $1.81 per share and the year-ago figure of $1.45.

Four days ago, Bill Selesky of Argus Research reiterated a Buy rating on TSLA but lowered the price target to $1,123 from $1,313 (39.5% upside potential).

The analyst said, “The company posted stronger-than-expected 2Q results as strong deliveries more than offset the impact of the semiconductor shortage and other supply-chain disruptions – including the shutdown of the company’s Shanghai factory in April. We expect Tesla to report strong revenue and higher automotive gross margins over the remainder of the year, setting the stage for further earnings growth.”

“We also like the company’s plan to open its Supercharger Network to non-Tesla vehicles, which should be an important new source of revenue. We note that the Supercharger Network is the largest fast-charging network in the world, with 3,971 Superchargers in operation at the end of 2Q, up 34% from the prior year,” Selesky added.

Overall, the stock has a Moderate Buy consensus rating on TipRanks based on 18 Buys, six Holds, and seven Sells. TSLA’s average price target of $872.28 reflects upside potential of 8.3%.

TipRanks data shows that financial bloggers are 68% Bullish on TSLA, compared to the sector average of 63%.

Concluding Thoughts

Although marred by record-high inflation, increasing unemployment, and unending supply chain woes, Bank of America, Netflix, and Tesla derive strength from their strong fundamentals and a large market share. It could take more than just one disappointing quarter to have any visible impact on their stock prices. Investors understand this and are taking the opportunity of the market downturn to put their money in these stocks.

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