IPOs are red-hot, known to produce huge paydays for early investors.
That’s true of one stock I cover today — Coinbase Global Inc. (Nasdaq: COIN).
Its CEO’s net worth soared $20 billion. NBA superstar Kevin Durant made a 54-fold gain on the IPO, enough to turn a $250,000 investment, which was the smallest he had, into $13.5 million. And there’s rapper Nasir Jones, known as Nas in the entertainment industry, who had a stake worth more than $40 million when it IPO’d.
But — as we can see from the profits that early investors can make —mainstream investors want a piece as well.
The only problem is that retail investors are left waiting until the stock goes public before grabbing shares.
The other company we’ll look at today is smart TV provider VIZIO Holding Corp. (NYSE: VZIO).
This week, those two companies will be reporting earnings for the first time since going public earlier this year.
One is up 50% since its first publicly traded price, and the other is down 30%.
If you haven’t followed them closely, you might be shocked at which one is up and which one is down.
Here’s what to expect…
Stock No. 1: VIZIO Holding Corp.
Earnings Announcement Date: Tuesday, after the close.
Expectations: Earnings at a $0.06 loss per share. Revenue at $485.2 million.
Average Analyst Rating: Outperform.
Vizio also makes soundbars and other accessories, but its hot part in the market is smart TVs. The benefits of a smart TV started only by adding an Amazon Fire Stick or Apple TV to your existing TV. But that is just another device to plug in and operate.
Now, companies like Vizio have made it their mission to provide the smart TV experience a customer wants.
Vizio’s SmartCast TVs come loaded with apps to watch content from Netflix, Prime Video, Apple TV, Disney+ and more. No extra cords or devices. It’s already on the TV.
It’s what has propelled Vizio’s growth to climb by double digits last year and helped push the stock to a 50% gain over these first few weeks after its IPO.
It’s only been public for a little over one month. But it is still enough price movement to point out a few key trends…
VZIO Is Set for a Massive Move
My trend lines show a clear wedge pattern formed shortly after the stock went public. The red resistance line was declining slightly towards a green support line that was sloping upwards.
Then, we had a breakout in late April. It briefly dipped below it a couple of days later, but ultimately, that red resistance line held as a support and will help put a bottom in for the stock over the short term.
Traders are expecting some big moves this week on earnings. The options market is pricing in an 8.5% jump, up or down, when it reports.
Here’s the problem from a technical perspective.
An 8.5% move brings you back down to that key support area, the old resistance line in red. But an 8.5% move up is a solid breakout that could continue to run.
I like the upside play the best. That floor around the $24 price range on the bottom makes me hesitant about the downside opportunity with the large move already priced in.
Stock No. 2: Coinbase Global Inc.
Earnings Announcement Date: Thursday, after the close.
Expectations: Earnings at $3.06 per share. Revenue at $1.81 billion.
Average Analyst Rating: Outperform.
Coinbase made its public debut with a ton of hype. It’s a cryptocurrency marketplace that is now listed on the public stock market giving individual investors that pick-and-shovel play on the crypto market.
That means you don’t have to pick which cryptocurrency will survive and thrive; you can own the company that acts as a gateway into the crypto world.
A lot of people look at Coinbase just as another way to buy cryptocurrencies. But, as crypto becomes more mainstream, it means traditional brokerages will offer some of the same currencies Coinbase relies on customers buying — Litecoin, Ethereum, XRP, Dogecoin and more.
The next level for Coinbase over a traditional brokerage is a crypto wallet app.
Privacy and security that traditional banks and brokerages simply can’t offer are the biggest part of the crypto movement.
Coinbase went public on April 14, less than a month ago.
A quick glance at the chart tells you how investors have reacted since the company listed on the public markets…
COIN Struggles After Hot Launch
Despite being a popular stock on the day of its public offering, shares have slumped over 30% in just over a month.
Concerns about traditional brokerages stepping up and offering more cryptocurrencies as direct competition for Coinbase could have made investors nervous.
With its first earnings report due this week, investors are still nervous.
Now, the options market is only pricing in a 5% move.
That’s nothing. This stock swings 3% to 5% on a normal day.
From high to low, this stock has lost 37% in just 16 days. That’s 4.2% per day. Earnings are a more volatile event than a normal day of buying and selling.
I’m looking for a big move on earnings from the stock, but I’m not willing to guess which way.
A better way to trade earnings is after they are announced, not gambling on the event itself.
To learn more about my approach and how I nail triple-digit gains after the earnings announcement, click here.
Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.