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Why Investors Need to Take Advantage of These 2 Computer and Technology Stocks Now

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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.

The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.

In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.

Should You Consider TSMC?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. TSMC (TSM - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.31 a share 14 days away from its upcoming earnings release on April 18, 2024.

By taking the percentage difference between the $1.31 Most Accurate Estimate and the $1.29 Zacks Consensus Estimate, TSMC has an Earnings ESP of +1.29%. Investors should also know that TSM is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

TSM is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Uber Technologies (UBER - Free Report) .

Uber Technologies is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on May 7, 2024. UBER's Most Accurate Estimate sits at $0.21 a share 33 days from its next earnings release.

For Uber Technologies, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.21 is +0.74%.

TSM and UBER's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Taiwan Semiconductor Manufacturing Company Ltd. (TSM) - free report >>

Uber Technologies, Inc. (UBER) - free report >>

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