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Facebook stock could be set to surge on earnings

As earnings season heats up, strategists say two tech stocks set to report could be head and shoulders above the rest.

Facebook, set to unveil earnings on Wednesday, July 26th, is a top pick for S&P Global portfolio manager Erin Gibbs. The company has a strong history of surpassing analysts' earnings estimates, she said, and is now trading at a relatively reasonable valuation.

This comes during a period in which analysts are not currently forecasting a substantial amount of growth over the next few months.

"This period of temporary lowered outlook and lowered valuations seems like a decent place to get in before [Facebook] starts showing Wall Street they have underestimated one of the better-managed companies in tech," she wrote Tuesday in an email to CNBC.

Furthermore, "Valuation has come down to reasonable levels, at 32 [times] forward earnings, given the lowered growth estimate for the next 12 months." The estimate for earnings per share over the next 12 months "is only 3% growth, which sets the bar fairly low."

According to S&P Global, Facebook has beaten earnings expectations handily over the last year and a half; earnings before taxes have surprised by 17 percent, 11 percent, 9 percent and nearly 5 percent over the last four fiscal quarters. Interestingly enough, Gibbs pointed out, the steady decline in the amount by which earnings beat is a "normal progression" for a company with continued larger earnings.

The real growth for the company is likely to come in 2018, Gibbs said, when "double-digit growth" is expected, adding that "if they beat it this quarter, they're still on track — well on track — to really achieving what we want for the following year. And this is a good place to get in."

For Craig Johnson, chief market technician at Piper Jaffray, Advanced Micro Devices looks poised to see a strong upward movement after its earnings announcement next Tuesday.

"The stock has been consolidating and tightening up really since the last quarterly earnings release," he pointed out.

He believes that AMD will break out of this pattern to the upside.

"These patterns typically resolve themselves in the direction of the preceding trend, and that direction is up," Johnson said Tuesday on CNBC's "Trading Nation."

"This stock is very well poised to see a nice, strong move upward after this earnings announcement."

AMD shares have already risen 19 percent year-to-date. Analysts are expecting earnings of 0.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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