12 Reasons This Stock Duo Could Rally After Earnings

TSLA and BIDU could rally after earnings next week

Joe Bell, CMT
Feb 17, 2017 at 2:20 PM
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Although next week is a short one for U.S. markets, there's still no shortage of earnings reports on the horizon. Two stocks that could move higher after earnings next week are electric auto concern Tesla Inc (NASDAQ:TSLA) and Chinese Internet issue Baidu Inc (ADR) (NASDAQ:BIDU). Here's why TSLA and BIDU shares are on our radar right now.

5 Reasons We're Watching TSLA

  1. TSLA shares have started the year strong, and are up near previous highs.
  2. There is potential resistance overhead, but TSLA has been surrounded by increased pessimism in recent months, as the theme continues to be that CEO Elon Musk overpromises and underperforms when it comes to guidance and predictions.
  3. For instance, 14 out of 17 analysts still rate TSLA a "hold" or worse -- plenty of room for potential upgrades to lure more buyers.
  4. TSLA is highly shorted, with 29% of its float sold short. It would take these bears more than seven sessions to repurchase their shorted shares, at TSLA's average pace of trading -- plenty of fuel for a short squeeze.
  5. Some fear comes from recent news of United Auto Workers trying to unionize Tesla Inc workers, which created a slight pullback -- and possibly opportune entry point -- ahead of earnings.

TSLA stock chart before earnings

7 Reasons We're Watching BIDU

  1. Emerging markets have underperformed in the past five years, but enjoyed a positive 2016 in the same year the U.S. dollar made new highs. This could be a sign of the tide turning.
  2. BIDU shows signs of potentially breaking out of a long-term symmetrical triangle pattern.
  3. The triangle is coiling near previous all-time highs from 2011, which was a major peak for BIDU shares.
  4. Despite bullish technical pattern, almost half of analysts rate it a "hold." Plus, only 10 U.S. analysts cover BIDU right now -- new positive coverage could be a catalyst higher for the stock.
  5. BIDU's price-to-earnings ratio (P/E) is 13.60, and its forward P/E is 26.1. The industry average is 45.
  6. The stock's average one-day post-earnings move is 7.1%, going back eight quarters. However, at-the-money options are pricing in only a 5.15% move, suggesting they could be underpriced.
  7. Baidu Inc has been in investment mode in recent years, but still has a big cash position and a dominant market position in China. Baidu.com is China's most popular website and among the top 10 websites in the world.

BIDU stock chart before earnings

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