First-quarter earnings season is just getting started, but investors may want to keep a close eye on a group of stocks at risk of a profit “blowup,” according to Wolfe Research. The start of the reporting period unofficially kicked off last week with results from most of the biggest banks. That continued this week, with reports from Morgan Stanley, Bank of America and major health insurers such as UnitedHealth. As the reporting period gains steam, Wolfe Research is laying out some potential short ideas for investors, or those most susceptible to “blowups,” in what it call its “short hits list.” The basket includes stocks that show up most often in the firm’s short screens and filters companies based on earnings quality with 0 the worst and 100 the best. Here are some of the stocks that made Wolfe’s lists: Tesla was one. The electric vehicle maker has been under pressure, plunging 37% year to date through Tuesday’s close as it grapples with heightened competition in China and slower demand at home. This week, the Elon Musk-run company also set plans to lay off 10% of its workforce. Tesla scores a 2 on Wolfe Research’s earnings quality scale, showing up six times on the firm’s short screens. Other electric vehicle stocks also made Wolfe Research’s short ideas, including Rivian Automotive . The Irvine, California, EV maker scored a 3 for earnings quality in the fourth quarter of 2023 and appeared on four of Wolfe’s short screens. Rivian has tumbled 63% so far in 2024. Wolfe Research named Pinterest as another short idea, saying it was on four of the firm’s short screens. The image sharing social media company scored a 9 on earnings quality for the fourth quarter and has slumped about 12% since the start of the year. Outside of the technology and consumer discretionary industries, Wolfe Research also named Walgreens Boots Alliance , down 32% this year, and J.M Smucker , off by 13%, among other short ideas. Both stocks appear on four of the firm’s short screens and have earnings quality scores in the 20s. Other potential short ideas included Lyft , Juniper Networks and L3Harris Technologies .
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