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Investors Business Daily
Business
JUAN CARLOS ARANCIBIA

AI Data Center Plays, DoorDash Lead Five Stocks Near Buy Points

Veeva Systems, DoorDash, Ubiquiti, Argan and Constellation Energy are stocks to watch this week, trading in or near buy points as a generally good earnings season helps the stock market make new highs.

Two of the stocks — Argan and Constellation Energy — are plays on the data center boom.

The S&P 500 and Nasdaq continued to make record highs Friday, with weeks gains of 1.5% and 1%, respectively. With about one-third of S&P 500 companies already reporting Q2 results, 80% have topped EPS and sales expectations, according to FactSet. That's above average, although the magnitude of earnings surprises is running below historical averages.

With the stock market in a power trend, investors can buy stocks with a 21-day average true range of up to 8%, though they should be wary of being too concentrated in high-octane names.

The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.

DoorDash stock is on IBD Leaderboard, with Argan on the Leaderboard watchlist. Veeva stock is on SwingTrader. Argan stock and DoorDash are on the IBD 50.

Ubiquiti Among Stocks To Watch

Ubiquiti stock is forming a cup-with-handle base starting in May with a 464.68 buy point. The pattern may also be interpreted as the handle of a larger cup-with-handle going back to early February. That buy point would be 465. The relative strength line is near highs, and shares found support at the 10-week moving average over the past five weeks.

The company has expanded from its roots as a provider of internet service in hard-to-access rural areas. In 2011, it started selling networking equipment, such as routers, for internet connectivity in the enterprise market. A few years ago, Ubiquiti disrupted the wireless networking gear market with large price discounts.

EPS growth accelerated from 1% in the June 2024 quarter to gains of 46%, 65% and 134% the next three quarters. Sales also accelerated, from 3% to 19%, 29% and 35%.

CEO and founder Robert Pera owns more than 90% of the stock, leaving only about 3.6 million shares for the public to trade. Still, more than 300 mutual funds are among the shareholders, according to IBD MarketSurge.

New York-based Ubiquiti has a Composite Rating of 94 and an ATR of 3.24%.

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Veeva Stock Trying To Break Out

Veeva Systems is trying to break out a flat base, but hasn't closed above the 391.69 buy point yet. The stock also found support in a pullback to its 10-week moving average the past couple of weeks.

The cloud-software firm specializes in applications for life sciences.

Veeva was spun off from Salesforce in 2013, and eventually went from using Salesforce software to its own Vault CRM application. On July 21, Veeva announced that Merck committed to Veeva Vault software to support the drugmaker as it enters a period of significant product launches.

Veeva has become the leader in IBD's medical software industry group, owning the highest Composite Rating (99) in the group. The stock is up nearly 40% year to date, giving it a 90 Relative Strength Rating. Its earnings per share rose 26% to 34% the past four quarters, while sales climbed 13% to 17%.

Analysts expect current-quarter earnings of $1.90 a share, for a year-over-year increase of 17.2%. Sales are expected to rise 13.6% to $768.2 million, according to FactSet.

Veeva has a 21-day ATR of 2.29%.

DoorDash Stock Delivers New Entry

DoorDash stock cleared a four-weeks-tight buy point of 248.74 on Friday, continuing to rebound from the 21-day exponential moving average after finding support there. The relative strength line is almost at new highs, another positive sign.

The food-delivery service's stock has surged nearly 300% since an initial breakout in May 2023. But the stock reset its base count with a 28% decline in February-April of this year, eliminating the risk of a late-stage pattern. The most recent base was a first-stage formation.

In an industry with seasoned companies such as Amazon.com and Alibaba Group, DoorDash has emerged as the leader, according to IBD Stock Checkup. Its 99 Composite Rating is one of the highest in the internet retail group.

The company's three-year sales growth rate of 29% shows consumers are hooked on delivery despite economic uncertainties. DoorDash now owns nearly two-thirds of the U.S. delivery marketplace for restaurants.

See The Latest Updates To IBD Watchlists

While the stock is actionable, investors should remember that the company's earnings report is less than two weeks away. DoorDash will announce second-quarter results Aug. 6 after the market close. Analysts' consensus estimates are EPS of $1.13, up 35.9%, on sales of $3.160 billion, an increase of 20.2%.

There's been bullish momentum among analysts ahead of the quarterly report. Last Monday, Morgan Stanley, Bernstein and Raymond James raised their price targets on DoorDash. Two-thirds of the 45 analysts who cover the stock have buy ratings on it, and the rest have hold recommendations, according to FactSet.

DoorDash stock has a 21-day ATR of 4.86%.

Stocks To Watch: Argan

Argan is forming a base-on-base pattern with a 246.60 buy point. The stock Friday climbed above a trendline that afforded an earlier entry around 226, as well as a short-term high of 228.04. AGX stock surged 14.1% to 235.69 in a big, outside, upside reversal week.

Like DoorDash, Argan also reset its base count after emerging from a 47%-deep base that formed in January through May. Thus, it is also regarded as an early-stage base.

Arlington, Va.-based Argan is a heavy-construction company that specializes in power-generating plants, although it also works on telecom and industrial projects.

Surging demand for electricity from data centers, EVs and other industries provides a long runway for growth. Meanwhile, tariffs are motivating companies to move manufacturing onto U.S. soil, which is also driving demand for Argan's construction expertise.

The past week, JPMorgan Chase initiated coverage with a neutral rating and 220 price target. Shares currently trade around 235. Analysts said Argan is positioned to benefit from increasing energy demand and a multiyear gas power plant buildout. At current levels, however, JPMorgan believes the shares are fairly valued, TheFly.com reported.

Argan owns the highest EPS Rating (99) of the 24 stocks in the heavy construction industry group. EPS surged 39%, 400%, 149% and 176% the past four quarters while sales increased 61%, 57%, 41% and 23%. But after a 141% jump in earnings in the January-ended fiscal year, analysts expect EPS growth to slow to 11% in the current fiscal year, per FactSet.

Argan doesn't have earnings for several weeks, though several peers from the highly rated heavy construction group report this coming week.

The stock has an ATR of 4.89%.

Constellation Energy

Constellation Energy is another play on data centers and rising electrical use. The company is one of the largest clean-energy providers in the nation, operating more than a dozen nuclear power plants. It also runs natural gas, hydroelectric, hydrogen, wind and solar plants.

With the White House and tech companies pushing to make Pennsylvania a major hub for data centers, Constellation said it planned to spend billions of dollars on nuclear energy projects in the state.

Baltimore, Md.-based Constellation on Thursday announced it won approval from the Federal Energy Regulatory Commission for its $26.6 billion acquisition of Calpine from private investing firm Energy Capital Partners. Calpine is the country's largest generator of electricity from natural gas and geothermal plants. The Department of Justice still needs to approve the deal, first announced in January.

Aug. 7 could be a pivotal day for the company and the industry: Constellation plus rivals Vistra and Talen Energy will report quarterly earnings that day. The consensus EPS estimate is $1.83, up 8.7%, on sales of $4.933 billion, a year-over-year decline of 9.9%.

On Friday, UBS analyst William Appicelli raised his price target on Constellation to 385 from 360 and lifted his 2026 and 2027 earnings estimates following a strong auction for electricity in the PJM Interconnection power grid. He also raised price targets on Vistra, Talen and Public Service Enteprise Group. UBS has buy ratings on all four. Public Service reports Aug. 5.

Constellation stock is forming a lopsided base with a 342 buy point. Wednesday's move above the June 27 high of 328.44 provided another entry, although the stock erased most of the day's gains. Shares did rise 1.8% to 327.35, moving off the 21-day line, with Friday's finish a six-month closing high.

Its ATR is 1.76%.

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