These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar

The Zacks Earnings ESP tool, designed to identify potential earnings surprises by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, has demonstrated a 70% success rate in predicting positive bottom-line surprises when combined with a Zacks Rank #3 or stronger, yielding average annual returns of 28% over a 10-year backtest. This methodology currently flags Okta (OKTA) with a +2.29% ESP and Akamai Technologies (AKAM) with a +4.28% ESP as strong candidates for exceeding earnings expectations in their upcoming reports, providing investors with a data-driven approach to earnings season trading.

Analysis

The report details a quantitative methodology, the Zacks Earnings ESP, designed to identify potential earnings beats by focusing on the most recent analyst estimate revisions. The system's historical performance claims that stocks with a positive ESP and a Zacks Rank of #3 (Hold) or stronger have posted positive bottom-line surprises 70% of the time, with a 10-year backtest suggesting average annual returns of 28%. This model currently flags two technology sector stocks: Okta (OKTA) and Akamai Technologies (AKAM). Okta, with its earnings release eight days away, holds a Zacks Rank #3 (Hold) and a positive Earnings ESP of +2.29%, based on its Most Accurate Estimate of $0.86 versus a consensus of $0.84. Akamai, slated to report in 80 days, also has a #3 (Hold) rank but a more significant ESP of +4.28%, with its Most Accurate Estimate at $1.60 against a consensus of $1.53. While both stocks are rated to perform in-line with the market, this specific indicator points to a heightened probability of them exceeding their upcoming quarterly earnings forecasts.

Key Decisions for Investors

• Investors may view the positive ESP figures for both Okta and Akamai as a potential short-term, event-driven catalyst ahead of their respective earnings announcements.
• Consider the differing time horizons: Okta's imminent report in eight days presents a near-term trading consideration, while Akamai's report in 80 days allows for a longer period to monitor for corroborating or conflicting signals.
• It is prudent to balance the optimistic ESP signal against the neutral Zacks Rank #3 (Hold) for both companies, which suggests broader expectations are for in-line market performance, indicating this single metric should be part of a wider due diligence process.