Despite recent struggles, a fresh analysis from Evercore ISI points to four prominent stocks that could experience a significant turnaround during the upcoming earnings season. These "beaten-down beat and raisers," as identified by the firm, include technology giants Nvidia, Alphabet (Google's parent company), and Netflix, alongside travel industry leader Booking Holdings.
Julian Emanuel, Evercore's head of equity, derivatives, and quantitative strategy, noted that these companies are characterized by underperformance, elevated short interest, and robust underlying fundamentals. He anticipates that positive earnings surprises, coming amidst cautious market positioning, could act as a potent catalyst to drive their share prices higher.
Individually, these stocks have faced headwinds. Nvidia, despite an 11% year-to-date gain, has lagged behind other chip manufacturers, particularly memory stocks that have benefited from supply constraints. Alphabet has felt pressure from escalating AI expenditures and increased debt issuance, a concern shared by other hyperscale players. Netflix, still navigating the aftermath of its unsuccessful bid for Warner Bros. Discovery, has seen its stock price drop over 40% from its peak. Meanwhile, Booking Holdings has been impacted by geopolitical tensions affecting global travel, resulting in a 23% decline.
However, Evercore ISI's outlook for the second-quarter earnings season is decidedly more optimistic. Emanuel suggests this period could reignite the broader stock market rally, which has seen a pause since early June. He projects the S&P 500 will reach 7,750 by year-end, overcoming prevalent market anxieties such as AI disruption, rising oil prices, and the specter of further interest rate hikes.
The firm has also upgraded its S&P 500 EPS estimate for 2026 by more than 6%, raising it from $310 to $330, attributing this revision to sustained AI investment and, until recently, favorable oil price trends. Furthermore, Emanuel's 2027 earnings forecast for the S&P 500 has climbed over 8%, from $333 to $360.
While some investors harbor concerns that the second quarter might not replicate the first quarter's impressive 15% earnings beat, Evercore ISI analyst Stan Shipley remains confident. He forecasts companies will still surpass earnings expectations by 7% in Q2, a rate double that observed pre-pandemic. This aligns with FactSet's projection that the S&P 500 is set for its second consecutive quarter of earnings growth exceeding 20%.
