Top Stock Investing Lessons Learned from Q3 Earnings

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The third-quarter (Q3) earnings season was quite turbulent, with even some mega-cap blue-chip stocks showing dents in their armor. Undoubtedly, FAANG stocks (with the exception of Apple (NASDAQ: AAPL)) have fallen flat this earnings season, with forward-looking guidance weighing them down. Indeed, its discouraging to see big tech show such fragility after holding their own through past periods of turbulence.

With downbeat guidance enticing analysts to lower the bar on coming quarterly results, expectations are now very muted for most firms. Though recession storm clouds will be moving in, such lowered expectations may set the stage for better-than-expected quarters moving forward. Indeed, its hard to be bullish on anything these days as blue chips begin to sink.

This third quarter may have been painful for most portfolios, but there were lessons to be learned. In this piece, well go through two key takeaways from one of the most jittery and stomach-churning earnings seasons in recent memory.

Dont Bet Against Apple Stock, Even as its Peers Sink

FAANG companies really failed to deliver in the latest quarter. Even the firms that surpassed expectations were met with steep selling activity following downbeat guidance. With a recession on the way and inflation headwinds lingering, Id say its only prudent to be cautious with any such guidance. Indeed, things could get more turbulent from here as we learn just how much consumers can tighten their wallets. Despite the seemingly endless post-earnings tumbles for big tech companies, Apple, which reported after many of its big-tech peers, delivered a beat, punishing the short-sellers who thought itd also fumble.

Indeed, the best was saved for last when it came to the FAANG group!

There was chatter about muted iPhone deliveries, but at the end of the day, Apple pulled it off and was able to scrape out a strong, albeit short-lived gain, widening the gap with its +$1 trillion peers.

Going into Apples quarter, it seemed like a sure thing that Apple would flop. If all of its FAANG rivals fell flat, it would have been forgivable for Apple to clock in a stinker for once. The fact that it didnt shows how powerful a firm Apple can be in the face of profound pressures.

Indeed, CEO Tim Cook deserves a round of applause for surprising to the upside. Eventually, the post-earnings gains were lost as markets sunk on the back of broader market fears.

In any case, Apples quarterly performance shows that wonderful firms can pull off surprises even when the odds are stacked against them. As it turned out, Apple wasnt the last domino to tumble.

Earnings Results Can Drastically Overshoot

Weve seen some horrific double-digit plunges from mega-caps this year. Meta Platforms (NASDAQ: META) is a stock thats crumbled on the back of weak results that probably werent as abysmal as post-earnings moves suggested. Indeed, reaction to earnings can be extreme, leading to overswings in both directions.

In Q3, the gravitational pull has been to the downside. Expectations were already muted, making the consequences for missing that much more severe. Guidance downgrades have also added to the gloom. Such post-earnings moves show the high stakes of betting on firms going into earnings results.

Since clocking in terrible results, its been a downhill slide for Meta stock. Eventually, the sellers ran out of steam, and the stock went on to rally about 30% from its low of around $88 per share. Indeed, the odds were stacked against Meta, but there were promising takeaways from the quarter. Most notably, Metas Reels is starting to pick up traction. As economic storm clouds begin to fade, Meta could begin to flex its muscles as it looks to get back into growth mode.

The Takeaway

In the third quarter, many mighty firms have fallen. Still, the mightiest (Apple) has been able to buck the trend and shows that some firms are more capable than others in overcoming profound headwinds weighing heavily on most other companies.

Betting for or against companies has become that much riskier in todays volatile environment. However, arming yourself with premium website traffic data available on TipRanks may help investors gain an edge before earnings reports to better deal with the choppiness in the face of a recession.

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