Quick Earnings Notes: BAND, UPWK, NET, SEDG, PTON, CYRX, NVRO, ALTR
The U.S. and the world has cleared two of the biggest hurdles of uncertainty out there. I am, of course, talking about the U.S. presidential election and the Pfizer and BioNTech vaccine news.
Yes, there are questions that remain around the transition of power from Trump to Biden, as well as the lingering uncertainty about certain state recounts. But the odds favor Biden taking office in January and lacking new and convincing information, that’s the assumption we’re working with.
On the vaccine front, there remain questions about the eventual approval and then the timing and distribution of this particular vaccine, as well as the appetite for people to actually go get it (or any other Covid-19 vaccine) when it is available.
What happens between now and then? The pandemic is raging, hospitals are filling up and more kids are moving toward homeschooling, curbing parents’ ability to work. The interim analysis from a phase 3 trial, regardless of how good it is, doesn’t change any of that right now.
And then there are the other vaccines in the works. When will we hear about those? What’s the vaccine mix look like? When will all these shots be widely available? Will they help this winter?
We were hopeful that vaccines would come that would help put the pandemic behind us. That path looks a little clearer, and that’s a good thing.
It also means we need to be considering how vaccines could affect stocks in our portfolio. Most notably, I’m talking about higher multiple stocks that have surged from the March lows since they’ve partially benefited from the pandemic.
To be clear, I’m not saying we need to get out of all these stocks. I’m just putting it out there that we need to be mindful of what’s going on and that some of these stocks may not work so well in the near-term if/as there is a rotation out of them and into other areas of the market.
We’re not going to take a 180 degree turn today. But over the coming weeks we may easily take a 30 degree turn. We start by letting one software stock go today. That company is Bandwidth (BAND).
Here’s an update on that stock, as well as many others that recently reported.
Bandwidth (BAND) had a good Q3 and on October 30 I wrote that we’d keep the stock at buy. However, since then the stock has been weak, and shares are down around 9% today on the vaccine news. We still have a gain of nearly 20% and with shares on the cusp of breaking below last week’s low I’m going to move to sell. Bandwidth will go back on the watch list. SELL
Upwork (UPWK) had a big Q3 in which revenue was up 24% to $67 million (beating by $6.3 million) and adjusted EPS of $0.04 beat by $0.07. Full year guidance was well above consensus and analysts are bullish on internal initiatives. We just entered the stock on October 21 and are up around 40% since, with most of that move coming on the day of the earnings report. I think the story is starting to get out there but after such a big earnings-related move and then today’s vaccine news let’s hit the pause button. Moving to hold. HOLD
Cloudflare (NET) made a nice move higher after beating expectations and raising its outlook. Revenue in Q3 was up 55% to $114 million and adjusted EPS of -$0.02 beat by $0.03. New customer additions grew by 43% with those spending over $100K growing over 60%. One Fortune 500 customer is now spending $10 million a year with Cloudflare. There’s little doubt management has its foot on the gas to grow the company (headcount up 42% over the last 12 months). The stock blasted off to new highs following last week’s earnings report but has lost a little ground today. Let’s let the recent news marinate before changing our rating. Continue to hold. HOLD
SolarEdge (SEDG) reported early last week and shares took a big step down as revenue in the commercial segment pulled down results, causing SolarEdge to miss expectations and give forward guidance that was weak. The pandemic is the culprit. Among other issues the virus has caused a delay in SolarEdge’s next-generation storage solution. However, residential remains strong and a collaboration with Schneider Electric could help boost results there. Interestingly, other solar companies have seen their stocks do well after reporting while SEDG went the other way. I think the constraints here are transitory and will pass and shares will recover relatively quickly. A Biden presidency is a likely plus. If any of those factors change, we may reassess but for now moving to buy on this weakness. BUY
Peloton (PTON) pulled back after reporting huge Q1 fiscal 2021 results last week. Revenue was up 232% to $758 million and could be near $4 billion this fiscal year. The storyline here is that demand has been so high the company can’t keep up. Myriad challenges include warehouse closured due to Covid-19, forest fires out west and hurricanes in the south and east. Today’s news on the vaccine front hit PTON hard as the “workout from home” thematic trade could begin to unwind. The debate here will now begin to center on just how durable this growth story could be in a non-pandemic world. I think Peloton the company will be just fine but also the debate over the “right” price for PTON right now could drive some volatility. Moving to hold. HOLD
Altair (ALTR) reported Q3 results that surpassed expectations with revenue up 6% to $107 million and adjusted EPS of $0.00 beating by $0.08. Guidance for Q4 wasn’t great as management went very conservative in light of the resurgence in Covid-19 cases. As somewhat of an industrial technology stock with exposure to aerospace and automotive markets it’s not surprising Altair didn’t want to present a best-case scenario. The upside is their conservative outlook could prove to be just that and that actual results could be far better. We’ll just have to wait and see. It’s still something of a recovery play and I think it can still work, especially as investors begin to look for stocks that can do well in a post-Covid world. BUY
Cryoport (CYRX) was one of last month’s new additions and shares are having a terrific day today on news of the Pfizer vaccine progress. This is a vaccine and drug distribution story and temperature-controlled supply chain solutions will likely be in demand for any Covid-19 vaccine. That said, management has yet to disclose anything specific, other than that it is supporting 26 separate clinical trials for Covid-19. In Q3 revenue was up 17% to $11.2 million. Keeping at buy. BUY
Nevro (NVRO) reported Q3 results well-ahead of expectations. Revenue was up 8% to 108.5 million and EPS of -$0.29 beat by $0.30. Shares have advanced to a new high since. BUY