Growth Stocks Crumble: Is This a Short Seller’s Paradise or a Buying Opportunity?

The Q2 2025 earnings season has unleashed a torrent of volatility on growth stocks, with most names—except standouts like Duolingo, Expedia, and Nebius—crashing hard after disappointing results. Pinterest, The Trade Desk, Snap, and Lyft have taken heavy hits, with some plunging 10-20% post-earnings, rewarding short sellers but leaving long-term investors rattled. The S&P 500 at 6,297.36 and Nasdaq at 20,884.27 are at record highs, but a VIX at 15.94, new tariffs (30% on EU/Mexico, 35% on Canada), and geopolitical tensions (Israel-Iran conflict, oil at $75/barrel) signal a potential 7-10% pullback. Did you dodge the drop or profit from shorting? Are you holding growth stocks, and which ones look oversold? Is buying the dip now just catching a falling knife? This deep dive explores the carnage, identifies oversold opportunities, and outlines strategies to navigate this high-stakes market.

The Growth Stock Wipeout: Winners and Losers

The Q2 2025 earnings season has exposed cracks in the growth stock rally, with many companies failing to meet lofty expectations:

• Pinterest ( $Pinterest, Inc.(PINS)$ ): Reported Q2 revenue of $700 million, missing the $705 million consensus, with EPS of $0.29 in line but weak Q3 guidance (8% growth vs. 10% expected). Shares plunged 15% to $25, near a 52-week low of $24, per Yahoo Finance.

• The Trade Desk ( $Trade Desk Inc.(TTD)$ ): Delivered Q2 revenue of $584 million, beating estimates of $580 million, but Q3 guidance of $600 million (10% below consensus) triggered a 10% drop to $70, down from a high of $90, per Investing.com.

• Snap ( $Snap Inc(SNAP)$ ): Missed Q2 revenue ($1.2 billion vs. $1.25 billion) and EPS ($0.02 vs. $0.03), with ad revenue growth slowing to 2% YoY. Shares cratered 20% to $10, a fraction of its 2021 high of $80, per Reuters.

• Lyft ( $Lyft, Inc.(LYFT)$ ): Reported Q2 revenue of $1.4 billion (up 14%) and EPS of $0.02, beating estimates, but shares stabilized at $12 after a typo-driven 20% surge, down 5% YTD, per Yahoo Finance.

• DocuSign ( $Docusign(DOCU)$ ): Missed Q3 revenue ($700 million vs. $710 million) and issued weak guidance, dropping 12% to $50, per TipRanks.

In contrast, some growth stocks shone:

• Duolingo (DUOL): Soared 26% to $518 after Q2 revenue of $240.8 million (up 35%) and EPS of $1.29, beating estimates of $227.4 million and $0.72, per Nasdaq. Paid subscribers grew 40% to 10.3 million.

• Expedia (EXPE): Up 5% to $135 after Q2 revenue of $3.4 billion (vs. $3.3 billion expected) and raised full-year guidance, per Yahoo Finance.

• Nebius Group (NBIS): Jumped 36.9% in the past month to $54.73, driven by AI infrastructure demand and Nvidia partnerships, per group.nebius.com.

The chart above illustrates the stark divide: DUOL, EXPE, and NBIS surged, while PINS, TTD, SNAP, and LYFT tanked, reflecting a market punishing weak growth and rewarding execution.

Did You Short or Dodge the Drop?

Short sellers likely reaped significant gains:

• PINS: A 15% drop post-earnings yielded a quick 15% profit for those shorting at $29, with potential for more if ad spending remains weak.

• TTD: A 10% decline from $78 offered a 10% gain for bears anticipating the guidance cut.

• SNAP: The 20% plunge from $12.50 rewarded short sellers with a 20% return, especially those betting on ad revenue slowdown.

For long-term investors:

• Dodging the Drop: If you avoided PINS, TTD, SNAP, or DOCU, you sidestepped significant losses. Holding DUOL, EXPE, or NBIS proved rewarding, with gains of 5-36.9%.

• Holding Growth Stocks: If you’re still holding growth stocks, reassess exposure. PINS and SNAP face structural challenges, while NBIS and DUOL offer growth potential.

Which Growth Stocks Are Oversold?

Using technical indicators like RSI (below 30 indicates oversold) and fundamental analysis, here’s a look at potential oversold candidates:

• Pinterest (PINS): RSI ~28, trading near its 52-week low of $24. Weak ad revenue growth (8% vs. 10% expected) and a forward P/E of 25x (below industry average of 30x) suggest oversold conditions, but structural issues in social media ads make it risky. A bounce to $28-$30 is possible if ad spending stabilizes.

• The Trade Desk (TTD): RSI ~30, down from $90 to $70. Its AI-driven ad tech and 26% YoY revenue growth support a potential rebound to $80-$85, but only if Q3 ad demand improves. Forward P/E of 50x is high but justified by growth.

• Snap (SNAP): RSI ~25, at $10, a multi-year low. Lack of profitability and 2% ad revenue growth make it a speculative play. A bounce to $12 is possible, but structural risks outweigh oversold appeal.

• Lyft (LYFT): RSI ~30, at $12. Its 11.34x forward P/E is attractive, but Uber’s dominance limits upside. A rebound to $14-$15 is possible if ride-sharing demand holds.

• DocuSign (DOCU): RSI ~29, at $50. Weak enterprise spending and a 30x forward P/E suggest limited near-term upside, with a potential bounce to $55-$60 if guidance improves.

Winners like DUOL (RSI 70) and NBIS (RSI 75) are overbought, suggesting a breather before further gains. EXPE (RSI 55) is neutral, offering value on dips.

Is Buying the Dip a Falling Knife?

With the S&P 500’s RSI at 65 and VIX at 15.94, a 7-10% pullback is plausible, per Morgan Stanley, driven by:

• Tariff Risks: New tariffs (30% on EU/Mexico, 35% on Canada) could raise costs and dent consumer spending, per Reuters.

• Geopolitical Tensions: The Israel-Iran conflict keeps oil at $75/barrel, adding uncertainty, per Euronews.

• Earnings Volatility: The market’s “negative asymmetry” (Goldman Sachs) punishes misses, making dips in PINS and SNAP riskier.

Buying dips in NBIS and DUOL is safer due to their strong fundamentals:

• NBIS: A dip to $50-$52 (support at 50-day moving average) offers a safe entry, with upside to $60-$65 if AI infrastructure demand holds.

• DUOL: A pullback to $450-$460 (50-day moving average) is a buy, targeting $550-$600 by 2026, supported by 40% subscriber growth.

PINS, TTD, SNAP, and DOCU are riskier—structural issues and weak guidance suggest waiting for clearer catalysts. A broader market pullback could exacerbate declines, making these dips potential falling knives.

Trading and Investment Strategies

Short-Term Plays

• Buy NBIS on Dip: Enter at $50-$52, target $60-$65, stop at $48. A 15-25% gain if AI momentum continues.

• NBIS Options Straddle: Buy $54 calls/puts (September expiry) for volatility, targeting 200-300% gains on a 10%+ move.

• Buy DUOL on Dip: Enter at $450-$460, target $550-$600, stop at $440. A 19-30% gain if edtech growth persists.

• Short PINS: Short at $25-$26, target $22-$23, stop at $28. A 10-12% gain if ad weakness continues, but high risk due to oversold RSI.

• Scalp TTD: Buy at $65-$70, sell at $80-$85, stop at $60. A 14-21% gain if ad demand stabilizes.

Long-Term Investments

• Hold NBIS: Buy at $50-$52, target $70-$80 by 2026, for 35-54% upside with AI infrastructure growth.

• Hold DUOL: Buy at $450-$460, target $550-$600 by 2026, for 19-30% upside with edtech expansion.

• Hold EXPE: Buy at $130-$135, target $150-$160 by 2026, for 11-19% upside with travel demand.

• Diversify with XLK ETF: Buy at $200, target $220, stop at $190, for tech exposure.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge tariff or earnings volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously optimistic, focusing on NBIS for its AI-driven upside, buying at $50-$52, targeting $60-$65, with a $48 stop, and using a $54 call/put straddle for volatility. I’ll add DUOL at $450-$460, targeting $550-$600, with a $440 stop, for edtech growth. I’ll avoid PINS, TTD, SNAP, and DOCU due to structural risks, diversifying with XLK at $200, targeting $220, with a $190 stop. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash for dips if tariffs, geopolitical tensions, or weak economic data (e.g., PMI) escalate. I’ll monitor NBIS’s AI partnerships, DUOL’s subscriber growth, and tariff developments for cues.

Key Metrics

The Bigger Picture

The Q2 2025 earnings season has been a bloodbath for growth stocks, with Pinterest, The Trade Desk, Snap, and Lyft crashing under the weight of weak guidance and slowing growth. Short sellers have capitalized on these drops, but oversold conditions in NBIS and DUOL suggest potential rebounds for patient investors. The broader market’s record highs and looming pullback risks (7-10%) demand caution—buying dips in PINS and SNAP could be catching a falling knife without clearer catalysts. NBIS and DUOL offer the best risk-reward, driven by AI and edtech growth. Investors should buy selectively, hedge with VIXY or GLD, and keep cash for opportunities. The growth stock rally is bruised but not broken—play it smart to win big.

Did you short the growth stock wipeout, or are you buying NBIS and DUOL? Share your strategy below! 🎁

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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