Buying the dip has one thing going for it: you're getting an asset for a lower price than it was recently trading for. It also has a downside that's not discussed very much – on these earnings moves, the market is reacting to actual financial data on these companies. By buying the dip, you're not only betting that the market is wrong, but that it'll admit it's wrong on your timeframe.
With that, I want to point out some famous recent dips, and how buying them may have worked out for you. There's definitely a possibility for confirmation bias here, but if you have good counterexamples, I'll be happy to add them to this list. The first column is how much the price gapped down between the close before earnings and the next open. The second column is the drop since that open.
| Initial Drop | Drop Since | |
|---|---|---|
| FB | -24.3% | -15.1% |
| PYPL | -20.4% | -25.2% |
| NFLX | -21.2% | -2.2% |
| RBLX | -23.5% | -12.5% |
| SHOP | -10.1% | -15.7% |
Meta had the largest magnitude drop in corporate history, and then shed another 15% since then. PayPal's subsequent drop is even worse than their initial one. Shopify is currently on that same trajectory, even though that one is very recent. Less recent is Netflix, which is trading lower than their 20% drop several weeks later.
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