Sell IonQ (IONQ). Varonis (VRNS) Earnings Update
Momentum has faded from the quantum computing space over the last couple of weeks as investors have taken more of a risk-off approach. That has hurt our position in IonQ (IONQ), which just dipped below its 200-day moving average line yesterday (while the broad market was up). It hasn’t helped that co-founder and Chief Science Officer Chris Monroe has decided to move on, a somewhat odd development given commentary from management that the company is doing well and getting closer to true commercial scale (even if “closer” might mean a couple of years). Given the combination of an iffy macro, poor stock performance (IONQ is our worst-performing position) with a long-term trendline break, and higher bar for management to surpass to gain favor with investors in the near term, we’re going to step aside today. No doubt, IonQ remains a very compelling company and it will stay on my radar. But not in our portfolio. SELL
Watch List stock Varonis (VRNS) reported Q3 results yesterday that modestly surpassed expectations and drove a number of analyst price target increases today (Stephens from 37 to 40, Wedbush from 32 to 35, JPMorgan from 35 to 36). The short version is that the trends continue to be positive and the SaaS transition remains ahead of target (59% of new business versus expectations for 45%), now accounting for 15% of annualized revenue. Management said AI should continue to boost growth as data governance becomes increasingly important. They called GenAI a “game changer.” The stock is up nicely today (+5%), though not breaking out to new highs (yet). In a different environment I might move to buy, but we have the Fed tomorrow and it’s a “risk-off” environment right now. I think the chances that VRNS zooms out of reach in the very near future are fairly low so we won’t jump on it right now. But there’s no doubt the stock has moved near the top of our potential buy list. WATCH
Lastly, we’re dropping Array Technologies (ARRY) from our Watch List today due to poor performance from the stock, and solar stocks in general.
