As toxic as the Russia-Ukraine situation is, there are some market opportunities out there. The Street’s market mavens are shining a light on these potential “buy the dip” opportunities this week.
Datadog $158.00. 5-day performance (-)5.01%.
Datadog (DDOG), “which monitors cloud applications for companies through analyzing data, monitoring servers, tools, databases, and various services to help companies maximize performance and improve user experience" according to the company’s website, was down 5% for the past week.
“The company reported an earnings beat and strong guidance Thursday and has rallied,” Bruce Kamich wrote on Real Money. “In our daily bar chart of DDOG, we can see that prices gapped above the declining 50-day moving average line. The rising 200-day moving average line was tested in January.”
Additionally, trading volume has increased since early December and the On-Balance-Volume (OBV) line shows a rise for much of the last year and a soft patch from December into January. “Now the OBV line looks like it is resuming its bullish rise,” Kamich noted.
Kamich feels that DDOG is a dog that’s going to hunt.
“In our December 9 review we wrote that "I will assume that some traders have booked some nice profits with DDOG. Keeping that in mind, I feel like we are playing with the house's money. I would look for DDOG to dip into the $170-$160 area in the near-term for a potential repurchase. Risk to $149 and look for a possible rebound to the $205 area. Be flexible. A new high of $205 could extend the rally further."
With hindsight, Kamich sees that prices dipped for a repurchase, but the rebound to $205 didn’t happen in December.
“DDOG is on the upswing now but further weakness in the broad market could derail the rally,” he noted. “Nimble traders could go long DDOG risking only to $160. Take partial profits at $201 if reached.”
Alphabet $2,601. 5-day performance (-)2.86%.
Alphabet (GOOGL) traded down almost 3% for the last week, and is down 9.98% on a year-to-date basis.
Yet the FAANG powerhouse is primed for a rebound, said TheStreet’s Bret Kenwell.
“After great earnings and a 12% dip, the chart says Alphabet stock is a FAANG holding to buy,” he noted.
Kenwell’s call comes at a time when the FAANG group has been hit and miss so far this year.
“Three of the components are outperforming the Nasdaq’s 11.1% year-to-date loss, while two are badly underperforming,” said. “The latter two — Meta and Netflix NFLX are down more than 30% so far this year.”
Interestingly, none of the FAANG components are higher on the year. The best relative performer so far in 2022 is Apple, down 4.75%, followed by Amazon AMZN.
Yet Alphabet is the best-performing FAANG stock over the past 12 months and that’s after it traded sideways for the last four months of 2021.
“Further, it’s fresh off a better-than-expected and, quite frankly, a robust quarterly report,” Kenwell stated. “In that report, the company also declared a 20-for-1 stock split.”
The news was enough to send Alphabet stock to new all-time highs.
“After eclipsing the prior high at around $3,019, the stock topped out at about $3,031 and moved lower over the past few weeks,” he added. “I think it’s a dip worth buying.”
Kenwell said that smart money already knows that when — not if — buyers come back to the market, they will go to the high-quality companies doing well, and Alphabet is one of those companies. “We just don't know where the bottom is,” Kenwell said.
At recent lows, Alphabet stock was down about 12% from the post-earnings high. Additionally, it’s struggling to hold the 200-day moving average and is below a number of key short-term moving averages.
“But it’s trying to find its footing,” Kenwell said. “Should the selling in the overall market accelerate, Alphabet stock could be looking at a test of the 50-week moving average and the fourth-quarter low.”
Kenwell said he “doesn’t know” that Alphabet will make new lows. “If it does, I wouldn’t be surprised in this climate,” he said. “But bulls should be on the lookout for high-quality companies that have strong earnings and solid underlying businesses.”
Alphabet has all those attributes and now the bulls can buy it after a great quarter at a price lower than it was before the print.
“And they can do so at a 12% discount from the highs,” Kenwell added.
Palantir $10.93. 5-day performance (-)16.07%.
Palantir (PLTR) Technologies has had a rough go over the past year.
The stock is down 16% for the week; 18.55% for the month, and 39.48% on a year-to-date basis. Year-to-year, PLTR is down 62%.
Those are alarming numbers, but the long-term picture paints a more positive picture for the stock, said TheStreet’s Bernard Zambonin.
“Palantir is one of the most traded stocks by individual investors — reported fourth-quarter results before the market opened on February 17,” Zambonin stated. “Investors had been hoping this would mark a turning point for the company, whose shares have been down more than 60% from their historic high.”
However, the opposite happened. Palantir stock plunged more than 14% during the February 17th trading session.
“Although Palantir's fourth-quarter earnings didn't please PLTR investors, they were far from terrible,” Zambonin added. “The software company reported earnings per share (EPS) of 2 cents — a 2-cent miss from the 4 cents Wall Street had expected.”
Even so, Palantir's EPS would have been better if it weren't for the unrealized losses on marketable securities.
“These losses may continue to distort EPS going forward,” Zambonin added. “Palantir also reported that it expects to see continued volatility in its EPS due to these holdings.”
In terms of revenue, the company beat expectations once again. Palantir reported $433 million, versus Wall Street's estimate of $418 million. “That implies 26% year-over-year growth. Commercial revenues were $194 million, representing a 47% year-over-year increase,” he noted. “And government revenues were $239 million, a 26% increase.”
The low point was the net loss of $159.1 million reported by Palantir. This was deeper than the $148.3 million loss seen in the fourth quarter of 2020. However, the loss was due to high investment in sales and marketing. Q4 marketing expenses grew 65% quarter-over-quarter.
“Finally, the soft guidance given by Palantir for Q1 also left something to be desired,” Zambonin said. “The company expects revenues to be in line with Q4's — $443 million with an adjusted operating margin of 23%. However, Palantir continues to expect annual revenue growth of 30% or more by 2025.”
Overall, Palantir earnings showed the company continues to be a strong revenue generator and is making key investments to make its business profitable.
Now, looking long term, with Palantir focusing on expanding its commercial business and its Foundry platform, the company has good prospects of maintaining its accelerated growth.
“However, in the short term, the stock should continue to see high volatility due to the current macroeconomic moment that has been punishing companies with high multiples and low or no profitability,” Zambonin said.
