This Week’s Hyper Stocks Watchlist

Spotify posted one of our favorite type of moves last week, one we could apply a strategy known as the “Power Earnings Gap” on. It’s a pretty straightforward strategy…find a stock that breaks out on earnings, preferably a 5%+ move, analyze the company’s earnings and see if the numbers reinforce the move. If so, these types of moves can results in multi-week, even multi-month, rallies.

How Spotify Makes Money & Opportunities for Growth

• Subscriptions: this is the obvious one. The company charges premium pricing for having access to a full music library without ads.
• Audiobooks & Podcasts: Spotify has pushed aggressively into books and podcasts, pushing them past traditional music subscriptions.
• Advertising: With over 700 million active monthly users, and more than half of them free, Spotify generates advertising revenue from its non-paying members.

Is Spotify Stock a Good Buy?

When we stumbled upon this one, we weren’t looking for Power Earnings Gaps, we were searching for interest rate resistance companies. Spotify fits that description well, it just so happened that it also rallied on strong earnings. After spending nearly 12 months in consolidation, the company just reached highs not seen since January, and it might just be the start.

Spotify exceeded its own guidance with 9% YoY subscriber growth, bringing it to 306 million premium subs. Moreover, monthly active users hit 788 million, making 11% YoY growth. The company’s revenue hit €4.97B for the quarter, and gross margin was 33%.

We must note that the report wasn’t “perfect.” Operating expenses rose 26% YoY, partially because Spotify has been spending more aggressively on marketing, cloud infrastructure, and artificial intelligence. This spending can be justified as the company exceeds other key metrics.

What’s Next for Spotify Stock

Spotify’s management raised outlook for Q4, expecting operating income of approximately €820 million, representing an increase of roughly 22% from Q3. The company is also forecasting another 10 million premium subscribers, bringing its total to approximately 316 million by year-end. More importantly, management expects operating expense growth to moderate starting in Q4 and continuing into 2027.

That means Spotify could see be expanding its members while lowering its operational costs…that’s a perfect mix for a bullish outlook.

Interest Rates & Spotify

Spotify is a relatively asset light business that doesn’t require a ton of spending on equipment, manufacturing, factories…etc. That means it generally has to borrow less, making it a strong pick for a higher interest rate environment. Its large subscriber base gives it a predictable revenue outlook, and it historically sustains a nice cash cushion.

The trade on Spotify combines both technicals and fundamentals, but that doesn’t eliminate all risk. On the fundamental side, Spotify still needs to prove its Q4 outlook will actually fruition, so the numbers they stated are only as good as their next report. For now, the market is excited enough to push the stock 9% higher on the day of earnings, but it needs to hold that gap up for the strategy to remain intact.

It was only in June that we covered Dick’s Sporting Goods, highlighting the company’s launch of Dick’s House of Sports, a concept that turns their traditional stores into a destination. Instead of just racks of gear, locations include things like batting cages, golf simulators, climbing walls, turf fields, service areas, and premium brand shops. That gives Nike, Adidas, On, Hoka…etc. a better platform to showcase products. It also helps Dick’s compete against Amazon because the experience is harder to replicate online.

What Does Dick’s Sporting Goods Do?

As the name says, it is a giant sporting goods store, which also expanded its operations by acquiring Foot Locker in recent years…and there aren’t many challengers in the space. That company’s dominance has allowed it to grow at growth stocks levels, reaching 62.68% YoY revenue growth in Q1 2026, and 53.21% in Q2 2026.

Despite their outstanding performance as a company, Dick’s valuation was cut in half since we last covered it as the stock suffered a massive earnings sell off. What happened? Dick’s missed both revenue and EPS estimates, leaving investors to question whether or not the company’s acquisition of Foot Locker was a good choice or not. See, Dick’s core business remains relatively healthy, with 4.9% comparable sales growth. The bigger issue is Foot Locker's weakness, deteriorating margins, and management's reduced earnings outlook.

Insider Activity

While scanning for new stocks to place in our watchlist database, Dick’s came up as one with high insider activity. We had already initiated coverage in June (as mentioned above), and the stock sell-off did come as a massive surprise, but that’s the market for ya…even a great name can sell-off if something goes wrong and fear is already in the streets. However, insiders at $DKS have been actively buying the dip, reinforcing a potential recovery over the medium to long term.

Shortly after its sell off, insiders went on a shopping spree. Multiple company Directors, CFO, and President purchased millions worth of combined shares. This is a very promising signal as it shows management believes in the company.

Dick’s valuation now sits at $12.87 billion at the time of this writing, leaving them at a price to sales ratio of .63x. The company also has a strong track record of posting positive net income, and the latest numbers left them at 16x P/E. Both those multiples are highly attractive considering the S&P 500 is trading at a P/E average of 25x and a P/S of 3.6x.

Risks

Unlike many businesses that we cover, which are usually B2B, Dick’s is B2C, meaning their main revenue relies on a healthy consumer. Holiday spending is projected to remain strong this year, which helps the case of recovery, but if consumer confidence and spending deteriorate any further, it may continue weighing on the company’s financials, which can prolong to recovery. We’ll be managing this trade actively.