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🎙️ PyUncut Market Breakdown: 4 Stocks to Buy Before They Report Earnings

Published on PyUncut.com – October 2025

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🎧 The Calm Before Earnings Season

Welcome back to PyUncut Market Breakdown, your weekly pulse on what’s moving markets, shaping investor sentiment, and creating the next wave of opportunity.

As we kick off another earnings season, markets are recovering from a volatile week — shaken by renewed U.S.-China trade tensions and an ongoing government shutdown. Stocks dropped nearly 3% last Friday after news that President Trump plans to impose 100% tariffs on Chinese goods in response to Beijing’s rare-earth restrictions.

But here’s the twist — futures rebounded Monday morning, signaling investor optimism that cooler heads may prevail.

At PyUncut, we see this week as a tug-of-war between political headlines and earnings fundamentals. The trade war is noise; earnings are signal. And in that signal lies opportunity — especially in companies poised to surprise the market.

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🧭 Macro Backdrop: The AI Boom Meets Real Economy Weakness

The U.S. economy continues to move through two parallel realities:

1. The AI-driven acceleration — Big Tech’s ongoing arms race to dominate artificial intelligence infrastructure and cloud computing.
2. The slowing “real economy” — Manufacturing, transport, and traditional sectors are still feeling the pressure of higher rates and tighter credit.

Despite the macro drag, the AI build-out boom remains powerful enough to offset broader weakness. New partnerships and capital flows are still flooding the space:

• xAI is raising $20 billion, backed partly by Nvidia itself, to create a special-purpose vehicle that rents out Nvidia chips.
• OpenAI has struck dual partnerships — one with Nvidia, which may invest up to $100 billion, and another with AMD, which will supply 6 gigawatts worth of AI chips.
• Oracle expects its cloud business to balloon from $10 billion in 2024 to $144 billion by 2030.
• Nvidia even invested $5 billion in Intel equity — a move that once seemed huge, but now feels like small change compared to AI’s trillion-dollar appetite.

We’re still in what PyUncut calls the “acceleration phase” of the AI supercycle. But here’s the risk: the market has grown addicted to new deal headlines. If upcoming earnings fail to deliver fresh partnerships or capex expansions, we could see the AI trade lose some oxygen — at least temporarily.

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📈 Key Watch: Taiwan Semiconductor Earnings

When Taiwan Semiconductor Manufacturing Co. (TSMC) reports this week, it will set the tone for the entire AI hardware ecosystem.

The market expects strong results — possibly beating guidance — but the real focus will be on how much they beat and whether management raises their forward outlook.

TSMC’s results often serve as the first real pulse check for the global AI build-out. Any mention of 2026 expectations or hints about U.S.–China trade friction could ripple across every chip stock on Wall Street.

For long-term investors, TSM remains a benchmark name:

• Shares are up 40% year-to-date, now near $300.
• Morningstar’s valuation puts it just a few percent below fair value.
• The stock is rated three stars, meaning it’s fairly priced but not cheap.

If you’re under-exposed to AI, TSMC is still a rational entry point — not deeply discounted, but stable in an overheated sector.

However, diversified investors should first check their ETF or mutual fund allocations. Most major indices already carry heavy AI exposure — roughly one-third of total U.S. market cap is now tied to AI-related companies.

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💰 Banking on Recovery: Why Financials Still Matter

While tech headlines dominate, the banking sector quietly enters earnings with solid fundamentals.

Here’s the setup:

• The Fed’s shift toward easing monetary policy means banks will pay less on short-term borrowing.
• The yield curve is expected to steepen, widening net interest margins.
• No recession is forecast — just slower growth.

That’s a recipe for short-term profitability, even as defaults tick higher. Still, red flags remain in private credit — many leveraged companies now need fresh capital from sponsors to stay solvent.

Recent bankruptcies like U.S. Auto Holdings (a subprime lender) and First Brands Group (an auto-parts supplier) show cracks in the lower-income consumer base. If this trend spreads, banks may pull back credit to riskier borrowers.

Sector valuations also look rich. Even U.S. Bancorp (USB) — a PyUncut favorite — trades near fair value. Most regional banks have run their course since the 2023 post-Silicon Valley Bank selloff.

So for now, banks are a hold, not a buy.

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🔍 In Focus: The AMD–OpenAI Alliance

One of the week’s biggest developments came from AMD (Advanced Micro Devices), which inked a groundbreaking partnership with OpenAI.

Under the deal:

• AMD will supply chips powering up to 6 gigawatts of AI compute for OpenAI.
• The rollout begins in 2026, with expected tens of billions in new annual revenue.
• AMD doubled its long-term AI GPU revenue projections — from $20.7 billion to $42.2 billion by 2029.
• Morningstar raised AMD’s fair value to $210 per share, up from $155.

But there’s a twist — OpenAI receives up to 10% equity in AMD via warrants. This circular financing loop means both parties benefit if the AI boom continues — and both suffer if it stalls.

These “AI money loops” — between Nvidia, AMD, OpenAI, and others — show how deeply capital is recycling within the same ecosystem. For now, it’s symbiotic. But if AI revenue fails to meet these massive expectations, the domino effect could be painful.

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🥤 Consumer Sector Check: Pepsi and Constellation Brands

PepsiCo (PEP): The Flight to Safety Stock

When markets fall, investors flee to safety — and Pepsi is a prime refuge.
After beating on both top and bottom lines, the stock jumped 6%, even on a red market day.

• Organic revenue: +1% (mostly from pricing, not volume).
• Margins: Contracted slightly to 14.9%, but still strong.
• Dividend yield: 3.9%.
• Fair value: $164, about 8% below current price.

Pepsi sits in the “large value” camp with a wide economic moat. For patient investors seeking stability over speculation, PEP remains a steady core holding.

Constellation Brands (STZ): The Value Play in Distress

On the other hand, Constellation Brands has been a frustration. Falling alcohol consumption hit everyone — from beer to spirits.

But here’s where it gets interesting:

• The stock trades at a 35% discount to fair value.
• Dividend yield: 2.9%.
• 2026 forecast: Sales down 6%, EPS around $11.57.

At 13× 2026 earnings, this five-star stock could be a turnaround story — if consumption stabilizes. Management’s product pivots (low-calorie beers, citrus-flavored variants, non-alcoholic lines) may just find traction.

Still, if the consumption downtrend persists, expect only fair value returns. PyUncut’s take: this is a contrarian’s bet, not a comfort trade.

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✈️ Airline and Aerospace: Turbulence and Opportunity

Delta Airlines (DAL): Flying High — For Now

Delta delivered blowout earnings, fueled by travel demand and low fuel costs. Premium ticket sales soared, margins widened, and investors cheered.

But airlines, by nature, have no durable moat. When capacity expands and the economy slows, profits vanish quickly.

At current valuations, Delta looks overvalued — a short-term winner in a long-term grind.

Boeing (BA): Engineering Delays Continue

Boeing’s repeated production setbacks led to another $3 trim in fair value after 777X delivery delays. Despite defense-sector tailwinds, PyUncut sees limited upside until management proves it can execute reliably.

BA remains a three-star stock — fairly valued, but not compelling without a deeper margin of safety.

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💡 Bold Contrarian Picks for 2025

Remember Warren Buffett’s timeless advice:

“Be fearful when others are greedy, and greedy when others are fearful.”

So where’s the fear today? Not in AI — that’s where greed lives. Fear lies in sectors investors have abandoned.

Here are PyUncut’s three bold contrarian plays — names that have been crushed but may be bottoming out:

1. Lululemon (LULU)

• Down 67% since Dec 2023, now a five-star stock at a 40% discount.
• Challenges: declining same-store sales, rising competition in athleisure.
• 2026 outlook: revenue stabilization in the Americas, +17% growth in China, and margin recovery as discounts fade.

If the brand regains momentum, this could be one of the stealth turnarounds of 2026.

2. Fiserv (FI)

• Provides core banking software for small and mid-size banks.
• Stock down 40% YTD, now five-star, 36% below fair value.
• Concerns about AI disruption are overblown — fundamentals remain strong.

Management lowered guidance last quarter, but if stabilization emerges, this could re-rate sharply higher.

3. HubSpot (HUBS)

• Down 37% YTD, now a four-star stock, 37% discounted.
• Offers cloud-based marketing and CRM tools.
• The market fears AI will replace HubSpot’s model — but in reality, AI augments it.

Our tech analysts at PyUncut consider HubSpot among the top undervalued software plays post-AI selloff.

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🏦 4 Stocks to Buy Before They Report Earnings

Now, the main event — our four earnings-season plays worth owning before results hit the wires.

1. Microsoft (MSFT)

• Rating: 4 stars
• Discount: 15% below fair value
• Moat: Wide (cost advantage, network effects, switching costs)
• Dividend: 0.7%

This is the last undervalued large-cap AI stock standing.

Microsoft’s aggressive capex early in 2025 is set to bear fruit in Q3–Q4 as Azure growth accelerates. Expect a strong beat and possible guidance hike.

PyUncut’s call: AI’s safe haven — if markets sell off, money will rotate into Microsoft.

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2. Salesforce (CRM)

• Discount: 26% below fair value
• Dividend: 0.7%
• Moat: Wide (network effect, switching costs)
• Uncertainty: High

CRM stock is down 28% this year amid fears that AI could make its platform obsolete. PyUncut disagrees.

Salesforce is already embedding AI into every layer of its cloud ecosystem — from predictive analytics to customer insights.
The last two earnings beats suggest momentum beneath the fear.

If they deliver a third consecutive top-line surprise, CRM could trigger a powerful rebound.

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3. Danaher (DHR)

• Discount: 25%
• Dividend: 0.6%
• Moat: Wide (switching costs, intangible assets)
• Uncertainty: Medium

Danaher was hammered earlier this year after two weak quarters, but fundamentals are stabilizing.
Q2 margins exceeded expectations, and FY2025 EPS guidance rose to $7.70–$7.80.

One more solid quarter could restore institutional confidence. PyUncut sees DHR as a quiet compounder hiding in plain sight.

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4. Ventas (VTR) – Healthcare REIT

• Discount: 12%
• Dividend: 2.8%
• Moat: None (typical for REITs)
• Uncertainty: Medium

In a slowing economy, PyUncut prefers defensive REITs with stable tenants — and healthcare fits that bill.

Unlike risky office properties, Ventas’ senior housing and medical tenants offer steady occupancy and resilient cash flows.

With the Fed easing and long-term rates expected to decline, lower cap rates will lift REIT valuations — and VTR stands to benefit first.

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🧩 The Bigger Picture: Rotation, Risk, and Reward

As earnings season unfolds, PyUncut sees two key narratives colliding:

1. AI enthusiasm vs. valuation fatigue.
   The AI trade isn’t over — but it’s crowded. New catalysts are needed to sustain momentum.
2. Value rotation in progress.
   Investors are beginning to rotate from overvalued growth names to defensive value and income plays — think Pepsi, Ventas, and Danaher.

The smartest portfolios this quarter will strike a balance between both worlds:

• Exposure to AI leaders like Microsoft,
• Counterweights in defensive names like Pepsi and healthcare REITs,
• Optional contrarian upside in discounted stocks like Lululemon or Fiserv.

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🎬 Final Thoughts

In this week’s PyUncut Market Breakdown, the theme is clear:

Earnings season isn’t just about numbers — it’s about narratives.

When fear dominates one corner of the market, that’s where opportunity hides.

So whether you’re leaning into AI momentum or bargain-hunting in overlooked sectors, remember: the next great trade often begins in discomfort.

Stay diversified, stay patient, and stay curious.

Because, as Warren Buffett said — and PyUncut reminds you —

“You make your money not when you buy the obvious, but when you buy the overlooked.”

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Written by the PyUncut Editorial Team
For more in-depth analysis, daily visuals, and earnings recaps, visit PyUncut.com.

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