The week was ticking along pretty well until this morning’s first read of GDP (1.6% vs. expectations of 2.2%) came out and shot a small hole in the “at least the economy is doing well” argument that’s helped the market hold up despite persistent inflation data.
Embedded in the GDP report were Q1 core and headline PCE inflation, both of which were a little hotter than expected and up from Q4 of 2023. March PCE data will be out tomorrow and is expected to be the biggest macro news event of the week.
With traders now pushing out expectations for a rate cut until December, we’ve seen the 10-year yield jump to 4.72% this morning.
That’s not great. As I stated last week, I think we move from a code yellow/orange situation for the market into a code orange if the 10-year yield jumps above 4.7%. Now we’re there and stocks are selling off (though off the worst levels of the morning) as yields jump.
Speaking of stocks, the latest batch of earnings reactions was a bit of a bummer for growthier names with Meta (META) selling off hard on talk of a prolonged AI investment cycle – good for some names, like Vertiv (VRT) – and ServiceNow (NOW) only raising the low end of full-year subscription revenue guidance.
Taking it all in, it’s somewhat of a gloomy, glass-half-empty-feeling morning for the market.
That could all change tomorrow, or the day after, or next week (you get the picture). I think the market is going to continue to be choppy in the short term. The “bad news is good news” engine hasn’t fired up yet and we have a ton more earnings on tap that could move the market, including Microsoft (MSFT) this afternoon.
And of course, there’s the March PCE reading tomorrow, earnings from all of our positions and the May 1 FOMC meeting next Wednesday.
In other words, let’s continue to be cautious but take things as they come. We’ve lightened up a little already. Given how strong the market had been until just recently, it’s not surprising that there’s some turbulence out there as investors scrutinize every new development and earnings report.
Recent Changes
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Updates
Alphatec (ATEC) reports a week from Monday. As I wrote last week, investors will be trying to connect results and forward guidance to the company’s recently updated long-range plan, which calls for average revenue growth of 20% through 2027 (when sales should hit $1 billion) and continued EBITDA margin expansion (to 18%, from slightly negative now). More granular details will cover the expected cadence of surgeon additions and revenue per procedure, along with projected orders for EOS and international expansion (Australia, New Zealand, Japan). The hurdle for Q1 is revenue of $134 million (+22.8%) and EPS of -$0.16 while any discussion of full-year revenue should call for growth to top 24%. Shares have firmed up this week (until this morning) as has the broader MedTech group. HOLD
Earnings: Tuesday, May 7
Docebo (DCBO) found support at its 200-day moving average line last week and has been holding around that technical line. I suggested this area is a good place to add exposure given the stock’s pattern of rallying off the 200-day line. Earnings the week after next. Not expecting any change in the positive growth trends from Q4. BUY
Earnings: Thursday, May 9
Enovix (ENVX) continues to be a dog in our portfolio as these types of earlier-stage manufacturing-type stocks just can’t catch a sustained updraft (JOBY, RIVN are in the same boat). It’s somewhat surprising that ENVX hasn’t firmed up given the recent announcement of Factory Acceptance Testing (FAT) for the Agility Line at Fab-2 in Malaysia. That means it moves on to Site Acceptance Testing (SAT) next, and management restated their expectation to have sample cells (EX-1M) coming off Fab-2 this quarter. Those cells are destined for mobile and IoT uses. Looking forward to updates on SAT and sample cell production on next week’s earnings call. Also, recall that on May 6 CEO Dr. Raj Talluri will host an “Ask Me Anything” video call at 5:00 PM ET. BUY
Earnings: Wednesday, May 1
EverQuote (EVER) continues to look good despite a little wobble last week. I elected to sell a quarter of our position “just in case” given our 30%+ gain. B. Riley just picked up coverage with a 24 price target and we’ll have earnings out on Monday, May 6 (a week from next Monday). We’re looking for revenue of at least $80.3 million and EPS of -$0.07 or better. HOLD THREE QUARTERS
Earnings: Monday, May 6
Intapp (INTA) continues to look stable in the low 30s as we look to the Q3 report to give the stock a jump start. The date of the event has been set for May 7. HOLD
Earnings: Tuesday, May 7
Liquidity Solutions (LQDT) was sold last week. SOLD
Remitly Global (RELY) was sold last week. SOLD
RxSight (RXST) is in a bit of a quiet period after two busy weeks, which included the annual meeting of the ASCRS in Boston and the Needham Healthcare Conference. We have an earnings date of May 6. Looking for revenue of at least $27.6 million (+58%) and EPS of -$0.29 (30% improvement). The full-year revenue hurdle is $131.5 million (+48%). BUY
Earnings: Monday, May 6
Talkspace (TALK) is our small, virtual behavioral health company and our newest pick. A pullback to 3 two weeks ago has us underwater on the first half of our position and opens the door to add shares right around the 50-day line, with about two weeks until earnings. This week a specialty telemedicine company, Thirty Madison, announced a partnership with Talkspace to expand mental health offerings to over 500,000 women. Keeping at buy. BUY HALF
Earnings: Tuesday, May 7
TransMedics Group (TMDX) will be out with Q1 earnings next Monday. It should be quite an event given the pace of growth here. Revenue is seen up 101% to $83.8 million while EPS is seen near -$0.02. Given last quarter’s revenue beat was nearly 20%, it should be stated that there’s a good deal of wiggle room. Any full-year guidance should call for revenue growth of at least 52%. HOLD A QUARTER
Earnings: Tuesday, April 30
Weave (WEAV) will be out with Q1 earnings next Wednesday. Keeping at buy heading into the event. Looking for management to deliver revenue of $45.8 million (+15.7%) and EPS of -$0.02 and maintain full-year guidance of at least 15%. The company is drifting toward profitability too. While current consensus calls for EPS of -$0.04 this year, there’s an outside chance we could see a few quarters of breakeven or better. BUY HALF
Earnings: Wednesday, May 1
That’s it for this week. Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
Currently Open
| Ticker | Stock Name | Date Bought | Price Bought | 4/25/24 | Profit | Rating |
| ATEC | Alphatec | 4/10/23 | 15.7 | 12.4 | -21% | Hold |
| DCBO | Docebo | 12/7/23 | 44.6 | 43.7 | -2% | Buy |
| ENVX | Enovix | 10/6/22 | 20.4 | 5.9 | -71% | Buy |
| EVER | EverQuote | 2/1/24 | 13.7 | 18.5 | 35% | Sold 1/4, Hold 3/4 |
| INTA | Intapp | 1/4/23 | 25.7 | 30.9 | 21% | Hold |
| LQDT | Liquidity Services | 11/2/23 | -- | 17.2 | -- | SOLD |
| RELY | Remitly Global | 9/7/23 | -- | 18.1 | -- | SOLD |
| RXST | RxSight | 3/7/24 & 3/28/24 | 52.7 | 51.3 | -3% | Buy |
| TALK | Talkspace | 4/4/23 | 3.7 | 3.1 | -16% | Buy A Half |
| TMDX | TransMedics Group | 7/7/22 | 34.1 | 87 | 156% | Hold a Quarter |
| WEAV | Weave Communications | 1/4/24 | 11.3 | 10.8 | -4% | Buy A Half |
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