The Next 5 Days Could Make Millionaires (7 Stocks to Watch)

Hey, Bow Tai Nation. Joseph Hog with your weekly stock market update. And what a week. Giant crashes and rallies on earnings and more double-digit moves in one week than I saw in my entire career as an analyst. I'm going to get right into it with some of the stocks that got crushed last week. Then to the stocks I'm watching this week, including big earnings news from Super Micro Computer, ticker SMCI, and Sound Hound AI, ticker SU N. Before we get to those stocks to watch this week though, we have got to talk about what is happening with this stock market. The tech heavy NASDAQ is down over 8% from its peak, almost 10% into correction territory. And other AI stocks like Micron are down 17% and more. But the big question is, is this the beginning of the AI bubble bursting or just a dip buying opportunity investors have been waiting for? Now, this sell-off started about a month ago with concerns over financing this AI buildout. Corewave already burning through billions of dollars in cash has seen yields on some of its debt approach 15%. That is an enormous financing cost for a company that needs billions more to build out its infrastructure, those data centers. Those concerns accelerated as the NEA clouds and the hyperscalers like Meta, like Amazon turned increasingly to debt, even equity markets to finance their spending. Meta alone has outlined capital investments approaching $150 billion while Amazon's spending plans have reached $220 billion for the year. Now, at first, the spending was just funded through the hundreds of billions of dollars in cash flow these companies were generating just on the normal business. But when AI spending outran even that the companies had to turn to debt and even issuing more shares and that's when investors started to get twitchy. Then over the last 2 weeks, earnings added fuel to this fire. And companies are largely meeting or even beating expectations. But after the enormous rally, good just isn't good enough anymore. Even massive capital spending plans are disappointing investors when management isn't raising them further. But nation, here is why I don't think this is the beginning of an AI crash. Nothing fundamental is broken in that AI investment cycle. Not yet anyway. Now, I have been arguing over the last few months that eventually the bears will be proven right. Just like with the.com bubble, that revenue generated by open AI, Anthropic, and these other AI models won't justify the trillions of dollars committed to infrastructure, financing agreements, and capacity guarantees. Not at first, anyway. But while I've also been saying that that realization isn't going to be coming for at least another 3 to 6 months, maybe even through next year. Now, the truth is financing is becoming more expensive. These companies are running to more supply of shares and debt than than ever before, but companies are still raising that money. Hyperscalers are still committed hundreds of billions of dollars to their data centers, the buildouts and the networking. That buildout has not stopped. That means the immediate catalyst for that bare market, a genuine collapse in the expected AI revenue or that investment commitments, that's just not where we are at right now. Now, could the NASDAQ continue to fall another 3 to 5% as those earnings disappoint investor expectations? Absolutely. That would put it firmly into correction territory. And I think we see just that over the next few weeks as more earnings come out. But then without that AI revenue catalyst, it's also going to be that buying opportunity. The financing risks are real and the eventual reckoning could be just as painful as.com. For now though, the infrastructure spending cycle remains intact and that deeper pullback could offer investors attractive entry points ahead of the next rebound. Now, I want to update you on some of the stocks that we've been watching here on the channel and a huge week in earnings last week before getting into the stocks coming up this week. First up, SoFi Technologies took our SOFI. It's one of the lone winners last week up 14% including a double-digit jump after its earnings report. Now, last Sunday before the report, I pointed out that the company's strong growth and super apt future as my reason for holding 6,000 shares in my portfolio and calling for a $20 price target. I wasn't expecting a huge upside surprise on the earnings because the interest rate environment and this pressure on its lending business, but but SoFi still managed to deliver one of its best quarters yet. Revenue was up 44% to almost $1.4 billion with it and earnings easily beating expectations. Management also raised its fullear revenue outlook to 5 billion and released its first 2027 guidance for 6.4 billion in revenue and earnings of 90 cents a share. The fintech bank reported a 37% increase in members and this is the real driver here that member growth because each new member in any of the products can then be cross-sold across the entire ecosystem. Now, as I pointed out last week, there are still risks here. Higher rates could eventually pressure the deposit costs and the loan portfolio could suffer in a recession. But telling here was the net interest margin increased while charge offs also decreased at the same time. And let me explain this because these are the two most important signals you want to be watching for in a bank or a financial stock. Net interest margin is the difference between what the bank pays in interest on its deposits versus the rate it collects on loans. Now, of course, investors always want to see this increase because it's the loan profitability for the bank and key to its earnings. Seeing this increase from 5.8% to 6.1% in the quarter means SoFi isn't having any problems with higher rates on its deposits. Just as important though are the percentage of net charge offs the loans the bank doesn't believe it's going to collect anything on after the borrower has defaulted. This is a key measure especially for these fast growing banks because the fear is always that they're extending credit to just anyone for that growth and may not be paid back or that a recession is going to increase those defaults. Here again though with SoFi we've seen charge offs fall continuously for 2 years. Clearly no sign of borrower weakness for the bank. revisiting these analyst price targets after the earnings report. I think there is little doubt that the stock can make it back to that $20 average target. And long-term, I still believe SoFi is going to be a major bank. So, I'm holding on to my 6,000 shares. Next up, Fortnite to FTNT. I warned last week that while I am holding on to my shares of Fortnite and the other four cyber security stocks that I like, prices were just getting too ahead of their valuations. Fortnite was already up 118% this year and trading for 61 times its earnings, nearly double its valuation just last December. Now, against that scenario, the market took what was actually a very impressive earnings report and punished the stock with shares down 24% on the week. Revenue was up 20% on the quarter with earnings at 91 cents a share, both beating analyst forecast. The company generated $865 million in free cash flow just in the three months and management actually raised its fullear revenue guidance, but it just wasn't enough for investors that have piled into this stock. Even though product revenue grew at a 37% pace, that was down from the 52% growth in the previous quarter and the fourth quarter outlook is for 20%. So there is some slowdown from that very fast summer pace. The fact is AI is still creating a giant security threat and pricing power is still there with the company reporting a 38% operating margin. That is unheard of profitability in the cyersc. Again, it just wasn't enough for a market that always wants more. Now, the stock is still not cheap at 12 times this year's revenue and 37 times its expected earnings of $357 a share. But for this kind of growth and that longerterm AI cyber security story, I think you can start accumulating shares at this point. It's been down to as low as 32 times earnings last year, which would be about $114 per share, but generally it trades much higher than this. So, I wouldn't wait too long to start adding to it or some of these others sold off cyber security names. I specifically called out Service Now ticker NO last week as one facing a nasty earning surprise and investors got exactly that. shares crashed 34% on the week, including a 25% plunge Thursday after the company reported results that like a lot of these others were good by any normal standard, just nowhere near good enough for Wall Street. I pointed out in our update last week, the service now was likely to disappoint on earnings because of a pull forward in the second quarter. In July, management reported that it had recognized some revenue from a federal contract earlier than expected in the second quarter instead of the third. Now, that boosted revenue in Q2, but reduced it in this week's report. Now, subscription revenue still grew by more than 21% to $4 billion with remaining performance obligations. So, the company's backlog of orders up 20% to 13.6 billion. But an earnings of $1 a share did miss the analyst expectations of a dollar two. And management's forecast for fourth quarter subscriptions only met expectations instead of raising it. But also like a lot of the stocks that got crushed last week, the longerterm investment reasoning is still intact. While investors were worried that subscription revenue growth for a service now is slowing. Here we see the Q3 numbers. It's fallen from 22% growth last year to to just third 21% last quarter. That is still solid growth and the company is just now starting to move into a business segment. I think it's going to move revenue even higher. Management guided to revenue as high as $4.2 billion for the current quarter. Growth of 22 or 23%. And that backlog of orders of 13.6 billion growing at 20% a year shows demand is still there for its services. Now, I've been arguing that instead of being replaced by AI, Service Now is actually going to find a new revenue source in it through Agentic orchestration, acting as kind of a middleman between a company's AI agents and the AI models they use. We are just starting to see this business model develop, and it's going to be critical to Agentic AI use and getting the most efficiency out of those agents. Now, the crash last week brought the shares down to a price of just 26 times this year's expected earnings of $4 per share and just 6.7 times expected sales of 16.2 billion. While lingering fears over AI and software replacement mean investors aren't going to be willing to pay a price of 92 or 115 times earnings like we saw last December, even a rebound to a price toearnings valuation of like 40 times that $4 in earnings, that'd be $160 stock price or a 52% upside from here. I think the stock goes a lot further than that over the next 3 to 5 years as it builds out that agentic use case. I'll show you the stocks I'm watching for this week's earnings, including Super Micro computer and SoundHound. But first, if you've ever wondered what's in my portfolio or just want to see the stocks I'm buying right now, you can by joining me on the Blossom Social Investing app. You can connect your brokerage account or just input your portfolio to track all your stocks in one place. You're going to see insights like portfolio percentages and average dividend yield across the entire group. You'll also be able to join more than 500,000 investors in the social feed to see what everyone else is talking about. Now, I've shared my portfolio on the app. It is totally free to download and it helps support this channel. So, I appreciate that. So, look for the link in the description or just check out the QR code here. Arista Networks, ticker A&E, gets us started on another busy week for earnings when it reports Tuesday with the stock losing 20% off its high just a few weeks ago. And we are coming off a very strong previous quarter where management raised its forecast for fullear growth. For the third quarter, the market is expecting 44% sales growth, even stronger than that 37% booked in the second quarter, and for earnings to rise by a similar amount. Now, all of you out there in the nation know Arista is one of my favorites in this data center networking theme, a key supply bottleneck that that is driving prices and revenue growth for the company. Now, the company did announce a new rackcale networking architecture just recently. And while capital spending plans have been a worry, the hyperscalers like Microsoft, Meta, and Amazon are still planning nearly a trillion dollars in capex. So revenue growth should continue to look good here. Now, of course, the big question mark is going to be profitability with Arista's own component costs rising. But like a lot of these AI hardware names, I'm starting to like the valuation in this sell-off. Last week's dip brings the stock back to 17 times this year's sales and a PE ratio of 41 times earnings. That's still too expensive to be loading up here, but the growth will continue to be there, and I'd be buying if we see anything closer to $150 a share. This has been a mixed picture after previous earnings or the stock up on two reports, but then down hard on the other two over the last year. Now, the downside risk in earnings, especially in this kind of a sell-off environment, is bigger. So, I'd probably avoid it going into the earnings. Now, that said, analysts are even more bullish than they usually are on stocks. The average target for $248 per share is a 44% upside. Even the low target among 18 analysts here is for a 28% upside to $220 per share. So, I wouldn't wait too long to start adding this stock. Super Microcomput, ticker SMCI, also reports its earnings on Tuesday, though management once again pre-announced some results, so it shouldn't be as volatile as it could be on earnings. Management reported earlier this month that his fiscal first quarter would show revenue as high as 19.5 billion versus a previous guidance for 15.5 billion and that gross margins would be closer to 12 1.5% versus previous estimates for just under 11% profitability. That pre-announcement sent the shares up more than 10% on the day and takes a lot of that uncertainty out of the official release. For the quarter, Wall Street is still only expecting about $16 billion in sales. So, we could get an upside surprise yet. But even that would be 223% growth from last year's quarter. Full year sales are expected to reach $70 billion, nearly 80% higher. And for profits of 20% higher to $467 a share. Now, against this extremely strong growth that is going to continue for as long as that AI data center buildout lasts, stock has gotten caught in the recent sell-off and is down 27% over the last few weeks. Now, I have been clear since January that I've been selling call options against my shares. So, I've sold some of the positions off at $ 35 and $40 per share. This recent sell-off is interesting though because it has nothing to do with SMCI and and that usual roller coaster that we see in it. So, if we do get beyond the recent fear and the back end of that AI theme, the valuation is again looking attractive here on that $4.67 in expected earnings. The stock is trading for a price of just seven times PE and just.3 times on a price to sales basis. The shares have done very well on earnings lately, up an average 19% after the last three quarterly reports as that growth really ramps up here. The stock is one of the biggest variations among analysts though with a low target of about $15 per share and a high as high as $57 each at the average target of just over $40 a share would be a 25% upside. And if this AI stock selloff doesn't become a bare market, I think it's clear that we get even higher than that, maybe 45 or $50 over the next year. I still hold 27,000 shares, but you can see here I've covered them all with these call options. So collecting that premium and lowering my downside risk. I'm still up about 15% on the position with some upside left to $40 a share, but also about $130,000 in downside protection. And that cash from these call options. Cloudflare ticker NE is down 22% in the recent sell-off though still up 43% so far this year into its earnings report coming on Thursday like Service Now we saw the stock get caught up in the software crash earlier this year but I argued much more important is the company's position in that AI agent revolution managing company's agent workflow to help them get that best efficiency beyond that Cloudflare is quickly becoming a broader AI application platform above its legacy content delivery and cyber security more than 10 million developers now use the platform, creating a huge distribution channel for AI applications for its enterprise AI workspace. And these generate demand for Cloudflare's infrastructure and its security. Revenue is already growing at a solid 32% annual pace. And in contrast to some of these AI infrastructure or the hardware stocks like Nvidia, Micron, even SMCI, I think Cloudflare continues to see that growth for even longer as the AI theme evolves into applications after the data center buildout. Now, that said, shares are still very expensive here at $223 times this year's expected earnings of A126 per share. But a dip closer to $250 per share would put this firmly back in my buy territory. Now, analysts are a little worried about that valuation as well with an average target for $361 per share, which would still be about a 28% upside, but also a low target of $160 each. Now, this is still way too expensive for my taste here, but definitely one you want to be watching for to pick up as the market sells off further. And Soundhound AI ticker sou is getting absolutely smashed now down to below where I started buying initially in 2024 at around $4.80 a share. And this one has been selling off since before the recent market weakness and is much more about a cash flow health and being able to turn growth into profits. growth is there and could accelerate following its Live person acquisition which closed early September. With this deal, Soundhound is going to be able to sell its AI voice technology and Live Person's existing enterprise customers while offering live person's digital messaging to its own customers. That should help the combined company continue to place its technology into different verticals from auto to customer service and through voice tech expanding on those relationships with hundreds of companies. This is a next level use of AI that may be a little ahead of its time, but Soundhow dominates this field along with a valuable patent portfolio. And that's why even against these cash flow worries, I think growth continues to surprise here. And the company has no trouble getting the funding for it. Sales are expected up 40% for the full year and another 64% next year to 390 million with profitability eyed later in 2028. Now, there's only five analysts covering the stock, so you have to take this with a massive grain of salt. But even the low target for $6 a share is a 43% upside. I don't know that we'll see $20 a share again for a while, but this is one worth well over the current price. So, I'm adding more on the dips like these. YouTube thinks you're going to like this video on the right here next. to watch it and let's see if they're