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Got $1,000? 4 Stocks to Buy Before Earnings

By Bram Berkowitz – Oct 10, 2021 at 7:00AM

Key Points

  • Investors may reward fintechs LendingClub and SoFi if they show more consistency and growth.
  • AcuityAds has been down and out for several months now, but its illumin product shows great promise.
  • Gannett, the largest newspaper publisher in the country, looks to be making great progress on its new strategic plan and digital subscriber growth goals.

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Quarterly reports often catalyze big stock moves.

Third-quarter earnings season will kick off soon, which makes this an opportune moment to start looking around for stocks that could jump after they deliver their reports. Earnings serve as a three-month snapshot for how a company has performed and can often provide hints regarding future performance including guidance from management, the launch of new products, as well as updates on current initiatives.

While you always want to focus on stocks that will be good holdings for the long term, earnings reports can serve as a great catalyst for a quick upward move, which is why buying in in the weeks ahead of them can be a good way to start a new position. Here are four stocks to invest $1,000 in before they deliver their next earnings reports.

1. LendingClub

I have been quite bullish on LendingClub (LC -0.68%) for much of this year. The company, which is now the largest holding in my portfolio, is mainly in the business of originating personal loans online, using technology to streamline the underwriting of those loans as well as the application and approval processes for borrowers.

I believe the market isn't giving LendingClub the credit it deserves. in part due to its past troubles, and in part because investors may not fully understand its unique digital marketplace bank model. LendingClub earlier this year completed its acquisition of Radius Bank, which allows it to use cheap deposits to originate loans and generate higher margins, and also saves it on other costs. It plans to retain about 15% to 25% of loans it originates on its balance sheet, where they will bring in monthly recurring interest payments. Over the long term, those retained loans will be much more profitable than the loans it sells to other banks or other institutional investors.

The marketplace bank model is still new, but it helped the company generate blowout earnings in Q2, which led to a more than 40% pop for the stock. I think another pop could occur if LendingClub has another strong quarter and demonstrates some consistency. I also think that consumer spending and activity have stayed fairly robust in Q3, despite the spread of the COVID-19 Delta variant. If there was strong personal loan activity in Q3, I have no doubt LendingClub was able to reel in its fair share of that business.

Man in conference room presenting to others.

Image source: Getty Images.

2. AcuityAds

Canadian adtech company AcuityAds (ATY 6.14%) serves ad agencies and Fortune 500 companies. One of its main products that has really excited investors is illumin, which works as an automated platform that enables clients to carry out an entire multichannel advertising strategy from planning to real-time execution in data collection. The platform is particularly exciting for AcuityAds' customers because it allows them to put creative work out into actual campaigns and then see in real time how audiences are engaging with it.

In February, Acuity traded for as much as $25 per share. Since then, the stock has struggled, and shares are now down to just over $6. But the company had a pretty solid second quarter, generating a profit of $3.4 million, up from a $1.6 million loss in Q2 2020. Total revenue in the quarter also grew significantly on a year-over-year basis to $15.9 million. The average 12-month price target on the stock set by analysts is $15.77, with a low of $13.17 and a high of $22, which implies more than 100% upside from current prices even on the low estimate.

3. SoFi

Shares of the much-hyped SoFi Technologies (SOFI -1.86%) have popped a few times this year only to come back down, but I think there is reason to believe in the hype. The company, which seeks to be a one-stop-shop serving the financial needs of high-income earners who are poorly served by traditional banks. It offers an array of different lending products, an online brokerage, and also acquired the fintech Galileo, which helps other fintechs with front- and back-end functions.

In the second quarter, SoFi disappointed investors when it missed earnings estimates by a wide margin and reported a loss of more than $165 million. But $144 million of that loss was attributable to non-cash and one-time expenses. The company's student lending division also took a hit due to federal policies related to the pandemic, but those are temporary. On a more positive note, SoFi did show strong growth in its SoFi Invest division, which includes its online brokerage and equity capital markets and advisory services. The company is also expected to obtain a bank charter, which will help it streamline its operations in many ways. I think a solid quarter of earnings could get the stock back on track.

4. Gannett

In 2019, Gannett (GCI -1.60%), was acquired by New Media Investment Group, the parent of Gatehouse Media, but the combined company -- now the largest newspaper publisher in the country -- kept the Gannett name. The stock got hammered during the pandemic, trading at less than $1 per share at one point, as investors worried about the amount of debt the company had taken on to complete the merger and the bleak outlook for the newspaper and digital news space.

But Gannett appears to be turning things around. It has reduced its debt, cut costs, increased digital subscribers and digital revenue, and thinks it can grow to 10 million digital subscribers over the next five years. The company is also diversifying revenue into events, non-fungible tokens, and the gambling space. An earnings beat in Q2 sent Gannet's stock up by 12%. If the company continues to pay down debt and shows progress on digital subscriber growth and revenue diversification in Q3, I think investors will once again push the stock price higher.

Bram Berkowitz owns shares of AcuityAds Holdings Inc., Gannett, and LendingClub and has the following options: long January 2023 $45 calls on LendingClub. The Motley Fool owns shares of and recommends AcuityAds Holdings Inc. and SoFi Technologies, Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

SoFi Technologies Stock Quote
SoFi Technologies
$4.74 (-1.86%) $0.09
Gannett Stock Quote
$2.46 (-1.60%) $0.04
LendingClub Stock Quote
$10.24 (-0.68%) $0.07
AcuityAds Holdings Inc. Stock Quote
AcuityAds Holdings Inc.
$1.90 (6.14%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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