Updates on SMAR, VIE, SPCE, DKNG, KR, ENPH
Smartsheet (SMAR) Smartsheet recently reported earnings and shares tumbled yesterday despite the company beating on both the top and bottom lines. Revenue was up 52% to $86 million while adjusted EPS of -$0.11 beat by $0.08. The issue is forward-looking guidance. With the onset of the pandemic Smartsheet, which serves a lot of small businesses, and generates roughly 4% of revenue from travel, retail and hospitality industries (a modest amount, but still), extended longer payment terms and shorter software agreements to keep customers. This all hurt forward billings estimates. While management did say things have begun to improve business is still not back to pre-pandemic levels. The market had been expecting better news, and possibly even some acceleration.
The big question is how fast the people/companies that “took a break” will get back to work and re-engage with Smartsheet’s products. The software is not a huge project to get started with and it tends to spread virally. If people get right back to work it’s not difficult to envision a big quarter on the horizon for SMAR. On the other hand, if people come back but companies remain conservative on spending it could take a few quarters for SMAR to get back up to speed. On balance, the stock is neither a buy or a sell here. We typically see stabilization in stocks like this after a few days so let’s move to hold and see what happens. If SMAR starts to fall apart, we’ll let it go. HOLD
Viela Bio (VIE) Viela has begun to recover from its secondary offering-induced selloff. Recall that this offering was done to help fund pipeline development and the commercial rollout of inebilizumab, which is still seen gaining FDA approval by the June 11 PDUFA date. Inebilizumab has the potential to become the leading front-line treatment for Neuromyelitis Optica Spectrum Disorder (NMOSD), a central nervous system disease that invades the optic nerves and spinal cord, leading to vision loss and paralysis. It used to be considered a version of multiple sclerosis (MS), but whereas MS is progressive, NMOSD comes in waves of attacks, typically each one worse than the one before. Patients often recover some function between attacks, but naturally they take their toll over time. With inebilizumab on the cusp of approval confirmation should send the stock up somewhat; however, any failure to gain approval would be quite damaging. Still, at this stage, going with what we know, we can move VIE back to buy. BUY
Virgin Galactic (SPCE) The timeline to launching people into space is getting shorter and the stock has pulled back and consolidated enough. Moving back to buy and filling the second half of our position. BUY SECOND HALF
DraftKings (DKNG) DraftKings has soared over 30% since we added it on May 20. Let’s let the stock cool off a bit before buying any more. Moving to hold. HOLD
Kroger (KR) We jumped into this conservative story at a time when the world was falling apart and everyone needs food, gas and prescriptions. It’s not a bad stock and the story isn’t falling apart. But the stock didn’t take off as I had expected. Let’s step aside. SELL
Enphase (ENPH) Enphase hasn’t been a great performer since we added it just a few weeks ago. The growth story is the same now as then, but given the recent decline I’m moving the stock to hold until we can get a better sense of the next directional move. HOLD
