EarningsBeats Digest

Published: Mon, 06/14/21

EarningsBeats.com Digest for June 14, 2021

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Tuesday, June 15th at 4:30pm eastern

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Beating Estimates and Raising Guidance - A Solid Combo

One of my favorite trade setups is to watch a stock get trounced after it reports better-than-expected revenues and earnings AND raises future guidance. There was one such stock that reported Thursday after the bell - Dave & Buster's Entertainment (PLAY). The stock immediately gapped higher on Friday morning, opening at 46.82 and trading as high as 47.95 before sellers ripped it apart. PLAY closed on Friday at 42.87, more than 5 bucks off its high. Did they subsequently lower guidance during the day on Friday? Of course not. PLAY is simply range-bound for now, so market makers, which were on the sell side at the opening bell, clobbered those that chased the news:

PLAY has displayed excellent support over the past few months at 40.62. There hasn't been an open or a close beneath that level since late February. Given that its highest candlebody was 49.16 on March 29th, there's a fairly sizeable range currently from 40.62 to 49.16. As PLAY retreats, I see it as a solid reward-to-risk opportunity. Obviously, there are no guarantees, but PLAY traded as high as 47.95 after the earnings beat and raised guidance, so the closer it gets to 40.62, the better the opportunity. It becomes a much better trade, in my view. I don't currently own PLAY, but I may begin building a position in it on any weakness on Monday.

Happy trading!

Tom Bowley

Chief Market Strategist

EarningsBeats.com
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