If You Miss These 5 Stocks, You’ll Regret it All Year

This week, Wall Street handed investors two of the biggest opportunities of the year. One group was crushed after earnings with stocks crashing 20% plus even as AI is amplifying returns. The other group surging 15 and 20% as the industry shifts into growth mode. Hey bow tie nation, Joseph Hogar and I'm going to take you through both groups, software stocks and space stocks. show you why one crashed while the other bounded along with a complete comparison of the biggest names from Palunteer, Service Now, Snowflake, and Data Dog to SpaceX, AS Mobile, and Rocket Lab. For each, we're going to dig into the latest news, the fundamentals, show you the five stocks I'm buying now. We'll first look at the software stocks here. And here I've got Service Now, ticker N, Snowflake, SN, Palunteer Technologies, PLTR, Data Dog, DDOG, Apploving Incorporation, A, and Cloudflare Inc. ticker NE. A lot of these reporting earnings this week. We're going to look into those earnings, why it crashed some of those stocks while while Palanteer actually had its best day of its history, up something like 29 30% on its earnings, why there was so much difference in those stocks. We can look here at the 5-day chart. We can see here that Palunteer jumping after its earnings there on Tuesday. We can see for the week for the 5day uh period, Palunteer up 24%. Snowflake and Cloudflare managing to hold on to positive gains of 1.9% and.3%. But then down there, Apploven down 17%, Data Dog down 16%. Both of those crashing on their earnings. We're going to talk about those and why it's actually an opportunity in these stocks. Now, we do see here uh Cloudflare, ticker NE, actually up about 17% on its earnings released last night before the uh or after the bell. So, that that one is going to be uh quite a bit higher and is really builds into something I've been talking about why I've been recommending Cloudflare over the last few months as a gateway into Agentic AI. And if we zoom out to the year-to- date on these charts, we can see the big difference, the variance in the returns on these stocks. Data Dog up 68% even with that drop just this week. Snowflake up 45%. Cloudflare 44% for the year so far. Palunteer down 12% even after that giant move on its earnings this week. Service Now down 23%. Apploven down 50% knocking half of the value off of that stock. And this is all to do with that uncertainty and the volatility around AI. Okay, which of these companies is AI going to help and which one could it destroy? We can see in its report, Palunteer stock up 29% after its reporting almost the best day over the second best day on the stock with Alex Karp saying it was otherworldly results really sovereign AI pushing this. The idea that uh countries around the world are rushing to implement AI within their economies and and really build out some kind of a sovereignty in that AI. We can see here the uh enterprise software giant reported 93% growth in overall revenue. That is amazing for a company that size 1.94 billion. That's up from 1 billion a year ago. So almost doubling revenue, beating the estimates for $1.8 billion. Commercial revenue jumped 149%. So this is really where the growth engine has been. The um government revenue doing very well at 90% growth for Palenter as well. But it's really that commercial revenue that is the future growth engine. Okay, government revenue obviously going to cap out at some point because there's limited numbers of government, limited spending there. But commercial revenue really the growth engine here and a lot of this goes to that idea of which of these software stocks is AI going to help and which will it kill? Which uh which of these software stocks is AI going to replace and which ones is it going to amplify returns? We see here in Palunteer's case, it is amplifying those returns. uh city city analyst saying that in our view the results reinforce Palante's position as one of the clearest beneficiaries of AI enterprise AI adoption accelerating commercial demand demonstrating the company's benefiting from that similar demand as the fastest AI natives in the market on the other side of that we saw that big dip in shares of app loving growth still very strong here but proved that the market is no longer rewarding good enough okay you have to continuously be beating estimates beating forecasts and raising your guidance here. Shares down about 19% on Thursday when they reported even as they reported earnings per share that met expectations $3.76 per share. Revenue came in a little light at 1.92 billion versus 1.94 billion expected. So this was just just shows you how high the bar is set for some of these software stocks, these AI related stocks. And if you do not beat those estimates and raise future forecasts, you get crushed in the market here. Revenue still rose 53% year-over-year. So very strong. What I want to highlight here though is something the CEO said blaming the miss on the timing of improvements to its advertising models as the company expands into artificial intelligence uh intelligence powered ad tech says we always manage this business with a goal of outperforming our own expectations fell short of that. He added that the pace of meaningful model improvements was lighter than normal during the period and the next step in with the next step of model performance landed just after quarter ended. Okay. So, what he's saying here is they had a new model that they were releasing that was going to be a big driver of of revenue, of earnings, but they couldn't quite get it out during the quarter. It released just after the quarter. Now, that tells me two things. one that I'll talk about next, this kind of whole game about managing expectations and this game that that management plays, but also that this stock could get a big boost on next quarter's reports when they actually do reports those uh that revenue and that earnings growth that's going to benefit from this ad model. And that's why these kinds of gut-wrenching 20% drops on earnings could be some of your best opportunities, not because the stock fell, but when your research finds that management just manipulated the crash. And now I know the words management manipulation aren't something you usually associate with a buying opportunity. So let me explain here. Nation, I saw this trick a million and two times while working as an analyst. Management takes a poor or even a mediocre report that they know investors aren't going to love and they use it as an opportunity to lower expectations. You see what happens is a company like Apploven does so well booking 50% plus revenue growth, 60% earnings growth and constantly beating those forecasts by a wide margin that analyst and investor expectations just get so high management has to perform miracles every quarter. It's hard to impress Wall Street and justify your multi-million dollar salary when investors are expecting the moon. So you get these reset quarters. Management intentionally delays a product roll out or just doesn't go balls to the wall speed like they usually do. Wall Street is disappointed and the stock crashes. Now expectations are lowered. Management can easily beat that next quarterly forecast and look like turnaround kings. This is why it's so important to read between the lines in those earnings reports and know which stocks are going to be on the way back up. Data dog here. I think another big opportunity and proves that it's not the software companies, but just really a valuation problem. This stock up 108% up to its earnings report this week. Crashing on that report when it just wasn't good enough. expectations were just too high. But this is a great software stock that is going to benefit from the coming AI revolution. Okay, we can see here data dog stock syncs uh reported 65 cents a share on revenue of a $1.12 billion. Um we can see here stock had advanced 108% this year to Wednesday's closing bell make it a rare bright spot in the software industry. So you can see that you know Wall Street isn't saying AI is going to kill this stock. They're just saying that the investors just bid it up too fast, too far, too fast uh for these kinds of results. Okay, this exposure to artificial intelligence trade offering monitoring solutions for AI chips and coding agents. This is the big story, the big shift in AI that I've been talking about over the last couple of months. That shift from token maxing and using AI at all costs to using AI effectively and efficiently within businesses. Okay, businesses are blowing out their entire AI budgets in a single month on some of these agents that they're running. They're pulling back now. They're value maxing those tokens and uh and finding ways to use their agents but use it more effectively. And that's where we're seeing these monitoring solutions, these analytics firms like Data Dog come in, be able to act as a gateway between the company's agents and those software or those those models like OpenAI, like Claude, show those enterprise customers how to use their agents more effectively. We can see here that the company did report strong growth here in the quarter and 4700 customers from 3850 customers last year. That is very strong growth. those customers of recurring revenue more than $100,000 uh dollars a year. So that is very large customers. They're growing by more than a thousand almost a thousand over the last year. CEO Pal said that our customers are building and deploying with AI and they're using data dog platform to observe secure and act on their AI enabled solutions. That is what I'm talking about folks here. This is that monitoring of AI solutions, the AI agents he's talking about there, using data dog um using data dog analytics, that data to find which agents are really saving the company most money and which which ones they want to use, which ones they want to scrapped for cost efficiency. Case in point here before we look at all these stocks, the valuations, the growth on each and which ones I'm buying. Cloudflare ticker NE stock I've been recommending over the last couple of months jumping more than 15% in after hours last night after its earnings really at the center of this idea of this change in um you know in this AI and AI agents reported second quarter adjusted growth 29 cents per share on revenue of $696.1 million was about 36% I believe about 36% growth in revenue for this expects adjusted earnings for this quarter 34 4 cents per share on about 736 million in revenue. And we can see here the um the CEO CEO Prince uh comments as the web shifts to AI answer engines and agent-driven commerce. Okay, so AI answer engines replacing something like a Google for search for answers for quick answers those agent agentdriven commerce. Okay, so they're using those AI agents by enterprises. We're seeing a fundamental rewrite of the internet for machineto-achine traffic. Okay, Cloudflare sits at the center of the this paradigm shift building the infrastructure, controls, the tools, and the payment rails for the agentic internet. This is what I've been talking about. What Cloudflare does part of its business is acting as a gateway between those agents and between those models like Claude, like OpenAI's GPT, acting as a gateway to be able to route those that agent traffic better and more efficiently for these companies. really saving a lot of cost but acting as a toll booth for this whole uh infrastructure system. Comparing these six stocks against each other, we want to first go down here to growth here and we want to find growth in revenue as well as growth in earnings. Growth in earnings going to be very important when we look at valuations here. But we can see here service now 20% growth expected this year. Snowflake 28%, Palunteer growth of 61%. almost doubled uh its revenue there in the last quarter. Expected to keep that up mostly 61% for the entire year. Data dog 26% app loaning 30% and Cloudflare 29%. So you can see here some of the big sell-offs here. Data dog 26% growth app loaning 30% growth. It's not that these companies are falling apart against that AI revolution. It's just that the stocks went up so far so fast that investors got scared. They took some profits in those but these stocks are still these companies are still expected to grow revenue 26 30% a year. Winners here really Palunteer 61% Cloudflare 29 applovening 30% growth. Now let's look at earnings growth. Ebida growth forward growth here it's going to be very important when we do look at valuation. So we want to look at that. Seeing 26% uh or 24% expected growth there at Service Now 50% for Snowflake. So very interesting. It's able to leverage management doing such a great job here. Able to leverage that 28% revenue growth into 50% earnings growth. Okay. So using that operational leverage there. Palunteer also from 61% revenue growth leveraging that up to 87% earnings growth. Data dog not doing so well. Probably spending a lot of money on that growth. 26% revenue growth. Only 25% EBIT do growth. So it has a lot of those operational expenses there eating into that uh earnings profitability. Applovin from 30% revenue growth up to 48% earnings growth and Cloudflare 29% revenue growth leveraging that up to 36% earnings growth. And of course part of that story from the revenue to the earnings is the profitability. So we do want to look at that. We want to look at this EBIT margin that that is the core operating profitability of a company. So the earnings before interest, taxes, depreciation and amortization. Basically this is how much of that revenue is converted into core earnings before taxes depreciation some of those non-cash cash items. Service Now 20% EBITD margin 20% operating margin there. Snowflake here on a gap basis operating 20 negative 22%. Palunteer 43% margin. Data dog almost zero 1%. That's why it wasn't able to really convert that that uh revenue growth into much earnings growth into more earnings growth. Apploving really strong here 78% in profitability. Really like that with AppLoving. The opportunity I see here in the next quarter for Apploven and Cloudflare negative 1.5%. We see that in a lot of the other cyber security stocks here. Cloudflare still a lot of cyber security business really spending on that growth and giving it negative profitability. So the winners here really Palunteer and applovening in that profitability. But then even a great company can be a bad investment at too high a price. So we want to go back to valuation here. Want to put all this together and see which stocks are the best buys right now on this valuation. We're going to look at the price toearnings to growth uh adjusted adjusted valuation. Okay. So here PEG non-GAAP is what we're going to use. That is the price to earnings of the stock. So the price of the shares divided by the earnings generated by that company. So that's your main valuation tool, but then it's adjusted for growth. Okay? If you've got a a stock, a company growing at 50% revenue or earnings each year and another growing at only maybe 10% growth in earnings, I would still pay much more for the faster growing stock because those earnings, that's what I own. As an investor, I want to see those earnings grow much faster. I'm willing to pay a little bit more for that. So you always want to adjust your price to earnings ratios by that growth. Okay, this PEG ratio gives you that all-in-one. Here we can see Service Now trading at just 1.1 times on that PEG ratio. Okay, Snowflake 5.25. Very much more expensive even adjusted for that growth here. 1.8 times for Palunteer, 3.3 for Data Dog, 0.57 for Apploven. So very very cheap there for Apploven. Very inexpensive I should say. Cloudflare trading at five times price to earnings adjusted for growth. You see that in all of those cyber security stocks. Cloudflare still part of that segment, part of that industry as well and trading very expensively. I do like Cloudflare here, ticker NE. I've owned it for quite a while just on that not only that cyber security but also the Agentic Gateway uh idea seeing that rewarded today in the uh in the market with a 15% pop, but it is getting very expensive here. But among these, I would say I do like Data Dog, ticker DOG. Palunteer is still a little expensive for my taste but paying off for for investors. So I'd like to see that a little bit lower but I think you can buy shares of that now but really snow or service now ticker n probably one of my favorite picks here. It also operates in that AI agentic monitoring space as it's with its orchestrators there going to do very well in this AI agentic revolution. So I would pick up shares of service now trading in just 1.1 times on that PEG ratio. service service now that's data dog applovening I like it just ex at least for this next quarter not necessarily for a long-term play but at least for this next quarter and then cloudflare ticker NE as that longer term longer term agent AI and cyber security play I also want to look at space stocks here not just because SpaceX had its first earnings over this last week but because something very interesting happened with these stocks that I want to point out I think it's a very interesting clue into the health of some of these companies and the trend going forward. Here we've got SpaceX, ticker SPCX, Rocket Lab, RKLB, AS, Space Mobile, AS Lunar, which is uh Intuitive Machines, ticker LU NR, and Planet Labs, ticker PL. We can see here the 5-day chart. What I want to do, I want to start with the with the one month, and go back to closer to the SpaceX IPO. And you can see here with after the SpaceX IPO, these stocks all followed very similar path, all very close with SpaceX. Basically, these had been bid up, you know, pardon the pun, bid up to the moon on that SpaceX IPO and then crashed down along with it. But look at what happens just since uh just since the start of August here, these stocks all fell along with SpaceX. SpaceX has continued to pretty much trade sideways and slightly lower, but these stocks have taken off. And if we look here just over the past week, some of these stocks, Lunar up 21%, Rocket Lab 17%, AS Space Mobile up 13%, Planet Labs up 11%. SpaceX is managing to stay up about 7% for the week. But look at what happened to these other stocks disconnecting from SpaceX and really trading back on their fundamentals and on the future growth of this industry. Obviously, SpaceX earnings were the big news for the week, but investors not impressed with the stock down about 13% after that. Now, we did see revenue almost doubling over the quarter. We saw record launches. That wasn't the problem really. The problem wasn't the the space side of the story. The problem was the AI side and that SpaceX is actually trying to be two companies at once. So, here. Okay. So, he said uh Elon Musk said capital expenditures jumped sixfold to $18.4 billion. So, this company is spending $18.5 billion there in that one quarter mostly on its AI ambitions. Okay. Building out those data centers. uh for that and going forward into the AI theme. Investors looked at that with a little skepticism and a little bit of worry about when that when that spent money is going to pay off in uh in AI revenues. Okay. So, I think SpaceX actually disconnecting a little from the space stock theme here being more of an AI stock than a space stocks. That's why we saw those other space stocks jump while while SpaceX continued to fall. Now, another problem for SpaceX investors, it's something I'm going to talk more in detail here on Sunday in our market update, but it's just the supply of shares. Okay, Thursday saw the first lock up expiration. What happens is when a company issue shares for the first time when they go IPO, they hold some stock, some shares back. Okay, they all the insiders are the all the early investors, all the employees. they got those shares whether they're through working, whether through investing from in a venture capital fund or just investing early. They are not allowed to sell their shares until usually about 180 days, usually about 6 months after the lockup. Of course, the company doesn't want uh all these early investors, all these employees to just dump their shares on the market right into the IPO and really hit the hit the shares. So, they have these lock up periods. What SpaceX did was something a little different. it it set tunches for these lockups to expire. Okay, Thursday we saw that first tunch expire. It was 20% of the of the total locked shares come onto the or available to come onto the market. Okay, they had a 10% kicker that was conditional on the stock trading so far above the uh above the IPO price for a certain number of days. That didn't happen. So, it was only the 20% shares locked shares that were available now on the market. That's about 912 million shares potentially hitting the market on this stock. Current only about 280 million shares are available. So that is a big increase in the supply of shares, right? So and we know just simple economics supply and demand. If there's more supply of something and the same amount of demand, then that price is going down. Now, of course, very important to note here that over the next 5 months, as we see the rest of these locked shares unlocking and being able to be sold on the market, not all of those shares, not all of those investors are going to be looking to sell. Okay, we have about 6 billion total shares of SpaceX there. Right now, about 280 million plus the 912 million that were unlocked there Thursday, there yesterday are available to be sold. Elon Musk though owns about four 4.8 billion of the that 6 billion shares. He is obviously not going to be selling, not going to be quick to sell. A lot of those other investors, the early investors, they're going to hold on to their shares. But you still do have you still have a lot of those employees that maybe don't want all of their wealth, all of their net worth tied up in the company that pays their makes their paycheck as well. Okay? They want to diversify their income and their financial risk just a little bit. You got some early investors and some of those VC funds that are going to want to cash out and book those returns. So this is going to be a pressure over the next five months to about December 9th, all of these shares the as each successive trunch gets unlocked and you see more and more of those total 6 billion shares become available for sale. But then the more important news that investors completely ignored because of the SpaceX earnings is that these other space stocks are still seeing that growth that that long-term growth in the space theme is continuing and is starting to disconnect just from the SpaceX. We did see that SpaceX actually launched three giant Bluebird direct to cell satellites on its Falcon 9 rocket. This was for as AS Space Mobile ticker AS. It got those three new direct to cell Bluebird sats in in this week. A big increase to 13 total satellites. So it just increased its its satellite uh satellite network from uh from 10 to 13. That's a pretty big step. The fact is folks, for years, space stocks have been the story. But now we're seeing real growth with that AS revenue up 138% this year forecast for 309% next. Okay, these revenues are growing. These companies are eventually going to going to be profitable. So I want to dig into that growth. See which one of these stocks I might want recommend. I have recommended Rocket Lab to tick tocker RKLB in the past. Let's look at the growth here. SpaceX doesn't have a growth estimate from analysts for Ford, but it did almost double its revenue here over the last quarter. I expect that to pretty well keep up. So, probably close to 70 to 80 90% revenue growth for this uh for this full year. Rocket Lab, 43% revenue growth. AS driver of this group, 438% revenue growth expected this year. That follows 1,700% last year. So revenue growth declining a little bit but still 400% revenue growth. Lunar, ticker lun, intuitive machines there, 71% revenue growth and planet labs 32% a little bit slower than the rest of the group here. Now, because all of these are operating at a loss, there isn't going to be any earnings growth. We can look at gross margins here. So, not necessarily EBITDO margins, but gross margins. SpaceX operating at 51% gross margin. Rocket Lab 36%, ESTS doing very well, 45% uh gross margin. So that is impressive given that level of revenue growth 44% gross profit margin, gross profitability there. Planet Labs 55% doing well. Also, Intuitive Machines quite a bit lower than the rest of this group at just 9.7% uh profitability. Here with valuation, a price toearnings ratio not really telling us much here because earnings are so low or negative for most of these companies. So you really can't use that. We can use the price to sales valuation. See really how these stack up on their price. So the market cap divided by the revenue uh this year or expected here on a trailing 12- months basis. So revenue over the last year and price divided by that SpaceX trading for just 20 times that revenue. So kind of impressive there that it's come down so much from the IPO. Rocket Lab fairly high 61 times as very expensive. You pay for that growth here folks. You've got that that 400 plus% revenue growth a year. You've got that very high profitability, but the stock is very expensive. 216 times on a price to sales basis. Intuitive Machines 5.6 times. Planet Labs 21 times price to sales. So, a lot all of these very expensive on that price to sales basis. Intuitive Machines not quite so much, but just doesn't have the growth here. I do still like Rocket Lab ticker RKLB. ESTs deserves another look, I think, despite this very high price to sales. If it does grow that revenue so fast, grow 438% over the uh over this coming year, that price to sales is still going to look like a deal if it's able to keep up that kind of revenue growth. I'm doing these stock reviews every week, so join the community so you don't miss a single one. 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