Stocks are often volatile around earnings, and even the slightest misstep can sometimes lead to big sell-offs. For long-term investors, though, these dips can be great buying opportunities, as the reasons behind them often have very little impact on a company's future prospects.
Sandisk (SNDK +0.01%), AppLovin (APP -1.52%), and Dutch Bros (BROS +0.73%) all crashed after earnings and now look like good long-term buys. Let's look at the case for each.
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Sandisk
If you were to look at Sandisk's recent fiscal fourth-quarter earnings in a vacuum, they were incredible. Its revenue surged 372% year over year to $9 billion, while its adjusted earnings per share (EPS) skyrocketed from $0.29 a year earlier to $39.25. The results were driven by soaring NAND (flash) memory prices, which drove revenue growth and helped its gross margin expand from 26.2% last year to 84.6%.
However, investors sent its shares sinking nearly 12% the following session as its fiscal Q1 guidance, which calls for revenue between $10.3 billion and $10.8 billion ($10.55 billion at the midpoint), came up just shy of the $10.62 billion consensus, and it projected its gross margin would slip slightly sequentially.
NASDAQ: SNDK
Key Data Points
However, the big reason behind the "light" forecast was that Sandisk decided to forgo some near-term revenue and gross margin gains in favor of locking in longer-term five-year deals for more sustained growth. It now has eight contracts with revenue floor pricing of $93.9 billion and $16.5 billion in financial guarantees. This is actually the type of visibility investors should want to see from a company that has historically been in a very cyclical industry.
Trading at a forward price-to-earnings (P/E) ratio of 5.7, based on fiscal 2027 analyst estimates, the stock looks like a buy on the dip.
AppLovin
AppLovin is another company that saw robust revenue growth, but whose stock fell on high expectations. The company's revenue soared 53% to $1.92 billion, but that was just short of the $1.94 billion analyst consensus, sending its shares crashing 20% the next session.
The company said the revenue miss stemmed from its adtech AI model not improving at its usual speed, with the next big performance boost not coming until after the quarter ended. This led to a less robust pace of increased ad spending on its platform than expected, but it said the demand had already started to reaccelerate.
NASDAQ: APP
Key Data Points
The plunge in the stock brought its forward P/E ratio to 16, based on 2027 analyst estimates, which is very cheap for a company projecting revenue growth of between 46% and 48% next quarter. This is a growth stock worth buying on the sell-off.
Dutch Bros
Dutch Bros shares sank nearly 17% after the coffee shop operator turned in another strong earnings report, as it forecast that its same-store sales growth would start to decelerate in the second half. However, its overall same-store sales growth remains strong and its expansion story remains unchanged.
In Q2, the company saw its revenue jump by 32.5% to $550.9 million, while EPS climbed 40% to $0.28. Its same-store sales rose by 5.8%, on a 1.7% bump in transactions, while company-owned comparable-store sales climbed 8.3% on a 3.4% increase in transactions. However, investors didn't like that Dutch Bros only raised the low end of its prior full-year same-store guidance, taking it from 4% to 6% to a new range of 5% to 6%.
NYSE: BROS
Key Data Points
Nonetheless, that is still solid same-store growth, and the company has a long growth runway of opening new stores. At the end of Q2, it had 1,225 stores, with plans to have over 2,000 by 2029 and a long-term target of 7,000 in the U.S. With impressive average unit volumes ($2.1 million), this is a company with tremendous growth ahead, making the stock a buy on the dip.
