5 Stocks Set to Soar on Bullish Earnings
This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short timeframe that your profits add up quickly.
That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.
Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move. That's why it can be worth betting prior to the report - buy only if you have a very strong conviction that the stock is going to rip higher, and its acting technically very bullish.
With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.
My first earnings short-squeeze trade idea is Intuitive Surgical (ISRG) , which is set to release its numbers on Tuesday after the market close. This company designs, manufactures and markets da Vinci Surgical Systems and related instruments and accessories. Wall Street analysts, on average, expect Intuitive Surgical to report revenues of $464.70 million on earnings of $3.14 per share.
This company reported a blowout number last quarter by topping Wall Street estimates by 41 cents per share, after reporting net income of $3.75 per share vs. an estimate of $3.34 per share. Intuitive Surgical has beaten Wall Street estimates for the last four quarters in a row. This company has averaged year-over-year revenue growth of 24.2% over the last four quarters.
The current short interest as a percentage of the float for Intuitive Surgical sits at 2.5%. That means that out of the 38.89 million shares in the tradable float, 965,964 shares are sold short by the bears. This is not a stock with a huge short interest, but since the float is so small, it's more than enough to spark a decent short-squeeze post-earnings.