Elf Beauty (ELF), Avantor (AVTR), Bill.com (BILL) and Pinterest (PINS) Report
As earnings season gets into gear we have a few updates on positions that have reported this week. Stepping back and looking holistically at our portfolio, which currently has 34 positions, we’re going to view earnings season as an opportunity to prune our portfolio a little. Essentially, we want to use the current market’s strength to our advantage to lock in some profits, exit stories that aren’t super-inspiring at the moment, and focus on the highest potential names.
On that note …
Elf Beauty (ELF) reported Wednesday. Revenue was up 10% to $88.6 million and beat by $1.8 million while adjusted EPS of $0.22 missed by $0.02. Management has been spending more to build its digital presence, meet rising e-commerce volumes and marketing. This is all good long term but means an uninspiring profit outlook for 2021. I think this stock can work in 2021 but there’s not a lot to get super excited about right now. Certainly, that can change. But with a lot of positions and just a modest profit after roughly three months let’s move on. Trading volume was on the rise as the stock approached earnings and was volatile the day after, but the stock’s action has been muted. SELL
Avantor (AVTR) reported Wednesday with results that were very much in line with the pre-announced results from January 11. Revenue was up 18.5% to $1.8 billion while adjusted EPS of $0.29 beat by $0.03. As a reminder, this is a diversified business and there are a lot of moving parts. The idea is weakness in one area should be offset by strength in another, and that was the case in Q4. Biopharma and healthcare grew 20%, government grew 50% (thanks to Covid-19 testing) and education, advanced technology/applied materials were up a few percentage points. The hook for me has been the bioprocessing and biopharma part of the business, and that should be mostly good in 2021, though management was quite conservative on the conference call regarding testing. In some respects, Avantor’s exposure to vaccine manufacturing could become offset by exposure to testing (as one goes up the other goes down, maybe), though there is likely a couple of quarters where both should be very strong. My thought getting into this stock was we could play it for an economic recovery and get the upside bonus from biopharma and bioprocessing. It has worked out OK so far as we’re up almost 10% in 2.5 months. But there’s not a big “wow” factor here. I want more wow, so am moving AVTR to sell. That said, if you want a solid, diversified and conservative growth stock for your long-term holdings you will likely do just fine with AVTR. SELL
Bill.com (BILL) reported last night and talk about wow factor. The stock is up more than 30% at time of writing. Revenue was up 38% to $54 million, beating by almost $7 million, while adjusted EPS of -$0.03 beat by $0.04. As we’ve expected, strength has been driven by small and mid-size businesses trying to automate more aspects of their businesses. Bill.com fits into the mix by offering back-office financial tools and can handle accounts payable, receivables and payments. With the stock blasting off to roughly 187 today we’re sitting on a paper profit of over 135%. Continue to hold. HOLD
Pinterest (PINS) reported yesterday that revenue was up 77% to $706 million, beating by $59 million, while adjusted EPS of $0.43 beat by $0.10. Monthly average users (MAU) grew another 37% (same as last quarter) and are now at 459 million while average revenue per user (ARPU) grew 29% to $1.57, versus up 15% in Q3. In plain English that means the company is generating more revenue per each user, which is great. Management is talking about the things we want to hear about: improving the shopping environment for users, investing in video and developing a creator ecosystem around Story Pins. All have the potential to keep driving MAU and ARPU and turn Pinterest into a more significant shopping site. In short, I think the growth story has legs. The stock popped on the result but has pulled back a little during the day. Best guess is we may see a few days of bouncing around but that PINS can begin to walk higher still. Keeping at buy. BUY