February 23, 2023

We’re in the thick of our portfolio’s earnings season so today’s update will be short and sweet. My focus this week is on providing updates on positions as they report and laying out expectations for companies that have not yet reported.

While our reports have been mostly good so far the market is still swinging with the interest rate breezes. I had thought that influence might diminish but with Fed members making hawkish public comments and expectations for more hikes after March both the 10-year and 2-year yield have become troublesome.

Tomorrow we’ll get PCED inflation. This measure carries a lower weight for some categories, such as shelter and consumer durables, than the CPI. If PCED comes in lower than expected that could pacify the inflation hawks a little as we head into the weekend.

The good news is that the economy is continuing to be stronger than expected.

Maybe the lesson here is that after a couple years being locked up at home people don’t really care if things cost a bit more than they used to. It’s still better to buy what you want/need and get out in the world and experience life than to hoard cash.

Granted, that’s a lot harder to do if you don’t have a job to provide income. But despite the Fed’s best efforts to put more people out of work, unemployment remains near record lows.

Recent Changes
None

Updates

Enovix (ENVX) reported after the bell yesterday and I sent out a Special Bulletin detailing the results this morning. The stock had a nice pop early and is still up around 10% now. Keeping at hold. HOLD
Earnings: Done

Expensify (EXFY) is on deck this afternoon and with the stock down over the last few weeks I think expectations are low. I’m looking for management to strike a bullish tone on their strategy (freemium business model) and long-term growth, even if the small business market is a little dicey right now. Analysts are expecting Q4 revenue growth of 10% to $44.4 million and EPS of $0.07, up from a loss of -$0.10 in the year-ago quarter. In 2023, analysts expect Expensify to grow revenue by 12% to $190 million and for EPS to be up about 14% to $0.32. I like the profit profile here. BUY
Earnings Date: Thursday, February 23

Flywire (FLYW) reports next Tuesday. Analysts are looking for revenue growth of 27% to $65.5 million and for EPS of around -$0.12. Guidance for 2023 should imply at least 30% revenue growth ($350 million) and EPS of -$0.19 or better. The company landed a partnership with FranConnect this week to help streamline payments for franchisors. BUY
Earnings Date: Tuesday, February 28

Huron Consulting (HURN) reports next Tuesday. Analysts are looking for revenue to grow 8% to $282.4 million and for EPS to grow 24% to $0.99. Guidance for 2023 should be for at least 10% revenue growth ($1.21 billion) and EPS of $3.98 (+20%). As part of its accelerated growth and profitability strategy Huron management expects to deliver, through 2025, low double-digit annual revenue growth, high-teen annual EPS growth, and to deploy 25% to 50% of cash flow to shareholders. This should be good for the stock. Over the first nine months of 2022 Huron repurchased 7.8% of its common stock. BUY
Earnings Date: Tuesday, February 28

Inspire Medical Systems (INSP) reported a great quarter last week and the stock continues to look OK, though I’d like to see it move above resistance near 272. HOLD TWO THIRDS
Earnings: Done

Intapp (INTA) reported a big beat last week and the stock continues to look great. No new news. HOLD
Earnings: Done

Rani Therapeutics (RANI) continues to be weak and we don’t have an earnings date yet. HOLD

Repligen (RGEN) reported yesterday morning and I sent out a Special Bulletin detailing the results later in the day. Shares were mediocre yesterday, better today. Analysts that follow the stock have had about the same view that I do, which is that it’s not a stock to give up on given the long-term potential. HOLD
Earnings: Done

Sprout Social (SPT) reported after the bell Tuesday and I sent out a Special Bulletin detailing the results yesterday. The stock’s reaction was good, not great. And today it’s about flat. We need interest rates to back off for SPT to really work (same for a lot of growth stocks). HOLD HALF
Earnings: Done

TransMedics Group (TMDX) reported another terrific quarter after the bell yesterday and I sent out a Special Bulletin detail the results this morning. The stock is having a good day. Keeping at hold, but as I mentioned this morning I think below 72 (roughly) it’s a buy. HOLD THREE QUARTERS
Earnings: DONE

Xometry (XMTR) reports on March 1. Analysts are looking for revenue of $104.3 million (+55%) and EPS of -$0.28. For 2023, guidance should be for revenue of at least $520 million (+33%) and EPS of at least -$0.45. We want to hear that the algorithm has been tweaked to get better pricing for Xometry. HOLD
Earnings Date: Wednesday, March 1

Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.