3 Growth Stock Buys That Dipped After Earnings

As earnings season winds down and the market digests the numbers that companies have reported, now is the perfect time to take a look at some stocks that present nice buying opportunities. Many growth stocks have been absolutely soaring since the market bottomed in March, which led investors to take some profits as earnings reports were released this month. This was expected since many of these hot names were extended and have sky-high valuations.

Buying great companies that have pulled back off of their highs can be a very intelligent investing strategy. Many of these growth stocks haven’t really offered investors attractive entry points over the last month or two until now, which is why you might want to consider adding shares at this time. Below, we are going to take a look at 3 growth stock buys that dipped after earnings. Each one of these companies has significant long-term potential and could be ready for the next leg up sooner rather than later.

Fastly Inc (NASDAQ:FSLY)

The first stock we are going to feature here is an edge-computing company that has been one of the hottest names in tech this year. Fastly Inc was up over 1000% from its March lows before selling off after its Q2 earnings release and some negative headlines related to one of its biggest clients, TikTok. At this time, it looks like the price has stabilized and investors have a nice opportunity to buy a business with a chance to become a true disruptor in the cloud computing industry.

Fastly’s technology is impressive, to say the least. Its cloud-based content delivery network helps businesses run their websites and applications smoothly without having to pay tons of money for physical servers. With so many businesses interested in cloud computing services, Fastly could continue its growth for many years to come. The negative news related to one of Fastly’s biggest clients, TikTok, spooked investors since TikTok accounted for 12% of the company’s total revenue in the first half of 2020. With that said, there’s a good chance that the extremely popular application TikTok is acquired by a U.S. company soon. Fastly’s Q2 earnings were actually impressive, as Q2 revenue grew by 75% year-over-year and the company increased its 2020 guidance.

Twilio (NYSE:TWLO)

We know that cloud computing is helping businesses to save massive amounts of money and operate with more efficiency. This has been the narrative all year and led companies like Twilio to rip to all-time highs. With that said, the stock sold off heavily after its Q2 earnings numbers were released even though it was able to beat on revenue and EPS estimates. There’s a good chance that this sell-off was simply profit-taking and a reaction to Twilio announcing that it would be selling $1.25 billion new shares in a secondary offering.

This company is benefitting from several trends right now including more people working from home and companies trying to take their communications into the digital age. Twilio is a cloud communications platform as a service company that helps its customers integrate emails, text messaging, and video calls into existing software and applications. It’s essentially a software-based platform that links the internet and telecom networks. Twilio’s revenue in Q2 grew 46% year-over-year and its Active Customer Accounts grew by 24% year-over-year to 200,000. This is a rapidly growing company that has quickly become the leader in digital communications tech.

Roku (NASDAQ:ROKU)

Here we have another company that reported stellar Q2 earnings but sold off sharply in the days following the earnings release. Roku is a company that offers devices that allow people to connect their televisions to the internet in order to watch streaming content. It also generates revenue from advertising on its streaming platform. With tons of people staying home during the pandemic and an uncertain economy driving consumers towards cutting costs such as cable bills, Roku looks like a solid buy for the long-term.

The Q2 figures for Roku weren’t actually as bad as the sell-off might lead you to believe. Total Net Revenue was up 42% year-over-year in Q2 and Active Accounts grew 41% year-over-year, both promising signs for the streaming company. We knew that ad-spending would decline as many companies cut costs to deal with the economic impacts of the pandemic, but that should rebound with time. The bottom line here is that streaming is here to stay and buyers are still in control as the stock has found short-term support after the pullback.