- Wall Street’s Q1 earnings season shifts into high gear as investors brace for quarterly results from the mega-cap tech companies.
- While most of the focus will be on the ‘Magnificent 7’ group of stocks, there are several undervalued growth names poised to deliver strong profit and sales growth.
- As such, investors should consider adding these three companies to their portfolio ahead of their respective results.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
As the first quarter earnings season shifts into high gear, investor attention typically gravitates toward familiar mega-cap names like Microsoft (NASDAQ:), Meta (NASDAQ:), Apple (NASDAQ:), and Amazon (NASDAQ:). However, significant opportunities often lie in less-followed growth stocks that are quietly building momentum.
Three such companies—Cloudflare (NYSE:), DraftKings (NASDAQ:), and Affirm (NASDAQ:)—stand out for their impressive growth projections and upcoming catalysts that could drive substantial stock appreciation following their earnings reports.
Here’s why these companies are set to shine and why their stocks are likely to keep climbing in 2025.
1. Cloudflare
- Year-To-Date Performance: +13.5%
- Market Cap: $42.3 Billion
As businesses continue to prioritize online security and performance, Cloudflare is well-positioned to capture market share, making it a strong buy ahead of its Q1 earnings report on Thursday, May 8.
Source: InvestingPro
Having consistently outperformed earnings expectations, Cloudflare’s stock is well-positioned for further gains, supported by its leadership in the cybersecurity space and a promising long-term outlook, despite a premium valuation.
Analysts project a solid 24% year-over-year revenue increase to $469.4 million. This anticipated surge in sales is attributed to the company’s expanding suite of services, including its Zero Trust security platform and developer-focused tools, which have gained traction among enterprises seeking robust and scalable AI infrastructure and cybersecurity solutions.
Cloudflare has seen remarkable success in expanding its large customer base, with a significant portion of revenue now coming from high-value clients, including a growing number of Fortune 500 companies. Its focus on operational efficiency has also paid off, with strong gross margins and increasing free cash flow reflecting disciplined cost management and sales team optimization.
Source: Investing.com
With a “GOOD” financial health score of 2.57, Cloudflare maintains a solid foundation as it scales toward consistent profitability. Analysts remain bullish, with a mean price target of $139.01 (13.7% upside) and targets ranging from $68 to an optimistic $200.
2. DraftKings
- Year-To-Date Performance: –10.7%
- Market Cap: $16.6 Billion
As the U.S. online sports betting market continues to grow, DraftKings’ market leadership and ability to exceed revenue expectations make it a compelling investment with its first-quarter earnings report coming up on May 8.
Source: InvestingPro
Wall Street sees DraftKings earning an adjusted $0.12 per share, improving 300% from EPS of $0.03 in the year-ago period. Meanwhile, revenue is expected to increase nearly 21% year-over-year to $1.43 billion, with new markets like Ohio and Massachusetts driving robust growth.
The company’s investments in proprietary technology, including in-house odds-making and personalized betting features, have boosted customer engagement and retention, while its acquisition of a digital lottery platform is diversifying its revenue streams.
DraftKings is also moving toward profitability, with positive adjusted EBITDA signaling improved cost discipline and operational leverage. This dual growth story—strong top-line expansion with dramatically improving profitability—creates a convincing investment case.
Source: Investing.com
The popular sports betting and daily fantasy sports platform earned a “FAIR” financial health score of 2.27, reflecting its transition toward sustainable profitability after years of aggressive expansion. Wall Street is particularly optimistic about DKNG, with analysts assigning a “Strong Buy” consensus and a mean price target of $54.14 – representing a substantial 63% upside from current levels.
3. Affirm Holdings
- Year-To-Date Performance: -17.2%
- Market Cap: $16.1 Billion
Affirm Holdings is thriving in the buy-now-pay-later (BNPL) space, where it has established itself as a leader amid growing consumer demand for flexible payment options. The company’s upcoming earnings report on May 8 is expected to showcase strong growth as it continues to benefit from multiple tailwinds.
Source: InvestingPro
Consensus estimates call for Affirm to deliver adjusted earnings per share of $0.32, compared to a loss of $0.43 in the year-ago period. Revenue is forecast to jump 36% annually to $783 million thanks to a surge in demand for its BNPL installment payment service, which allows customers to split online purchases into several monthly installments without accruing interest.
Partnerships with major e-commerce platforms like Amazon, Walmart (NYSE:), and Shopify (NASDAQ:) have fueled significant increases in transaction volume, while the integration with Apple Pay opens access to millions of potential new customers.
With the global BNPL market expected to expand rapidly, Affirm’s first-mover advantage and sticky ecosystem position it for sustained growth. Its stock, still attractively valued compared to fintech peers, has room to run as profitability strengthens.
Source: Investing.com
The buy-now-pay-later company boasts a “GOOD” financial health score of 2.54, reflecting its improving unit economics and accelerating path to GAAP profitability. Analysts maintain a “Strong Buy” consensus on Affirm with a mean price target of $68.09, suggesting 35.1% upside potential.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Invesco Top QQQ ETF (QBIG), and Invesco S&P 500 Equal Weight ETF (RSP).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
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