In a note to investors on Wednesday, Goldman Sachs analysts said the company recommends buying call options on certain stocks for which they expect upward revisions to consensus estimates.
“Earnings revisions outperformed last quarter despite a volatile macro environment; we expect fundamentals to boost stocks again this quarter. Individual stock positioning is the weakest in years as evidenced by the decline in individual stock option volumes, the increase in put and call skewing of options and net selling by retail investors created headwinds for broader equity returns over the next two weeks,” the analysts wrote. “We rely on new estimates and qualitative commentary from our equity analysts to identify the 25 most off-consensus opportunities in our coverage of America.”
Goldman Sachs sees upside earnings potential for 17 stocks, including KBR (NYSE: ), Meta Platforms (NASDAQ: ), Maravai LifeSciences (NASDAQ: ), Payoneer Global (NASDAQ: ), Postal holdings (NYSE: ), Raymond James Financial (NYSE: ) and Snowflake (NYSE: ) as they expect downward earnings revisions to drag down eight companies, including Franklin Resources (NYSE: ), Cinemark Holdings (NYSE: ) and Intel Corporation ( NASDAQ:).
“Retail investors continue to dominate the markets, but they have switched from buying call options on individual stocks to buying call options on indices. The rise in indices is crowded, we prefer to buy less crowded individual security options to position ourselves for selective relief rallies” , the analysts added.
However, he acknowledged that 29% of them have made advance announcements in the past two quarters, “highlighting how difficult it has been for companies to forecast earnings in a rapidly changing macroeconomic environment.”
By Sam Boughedda