February 27, 2025

While the broad market has stabilized a little over the last couple of days, we are still very much in a risk-off environment. As we all know, the market hates uncertainty. And we’re getting plenty of it these days

On-again, off-again tariff threats are the big story this week with Trump’s latest comments reiterating March 4 as the date for Mexico and Canada tariffs and April 2 as the date for reciprocal tariffs (tariffs that match those levied by other countries on U.S. exports), and an additional 10% tariff on China as of that date.

It’s worth noting a lot of Trump’s comments around tariffs have been contradictory and confusing, further muddying the waters.

Like I said, the market doesn’t like uncertainty.

Turning to small caps, the S&P 600 continues to be under pressure and fell below its 200-day moving average line last Friday. The index is now back to where it was during a short sell-off in mid-January.

Should small caps go any lower, the index will fall below the area of support that has held since October.

The retreat in the index is partially a result of significant drawdowns in individual stocks that are getting hit harder than they should upon earnings results that are more or less fine.

That said, the downtrend in several sectors of the S&P 600, including industrials, materials energy and tech, illustrate that concerns go beyond short-term earnings releases and speak to macro concerns that growth may slow and that the last mile in the fight against inflation will be challenging.

Further evidence of those macro concerns can be seen in the 10-year yield, which has fallen back sharply over the last two weeks. Absent macro concerns, we would expect to see a decrease in the 10-year yield coincide with an increase in the prices of riskier assets, like small caps, tech, etc. But that hasn’t happened.

The bottom line for now is that it’s worth being cautious. But also acknowledge that investor sentiment has fallen back to such a level as to offer a contrarian buy signal.

Should we get more clarity around the tariff picture and good news on the inflation trend (the PCE Price Index report will come out tomorrow), buyers might quickly emerge.

It’s just too early to make that call today.

Recent Changes
None

Updates

Alkami Technology (ALKT) reports today after the close. I expect management to highlight recent deal flow, including the one announced earlier in the week with Financial Center First Credit Union. Management is also likely to provide forward guidance and talk about the company’s annual user conference in Nashville, TN, that starts on March 31. The stock’s downward drift lately has been surprising, in part because the company has a high level of visibility into future revenue since customers need to alert providers 15 – 18 months in advance if they plan to switch. Bullish themes for ALKT lately have been integrations (with FIS, Fiserv, Jack Henry, etc.) bringing in more customers, reducing hosting costs and offshoring (both of which help profit margins) and, bigger picture, the slow but accelerating move to digital banking for credit unions and regional banks. None of that has helped ALKT lately, but I’m optimistic that today’s earnings report will illustrate that the stock is mispriced. BUY

Confirmed Earnings Date: February 27

Artivion (AORT) reported after the bell on Monday, and I detailed the results in a Special Bulletin on Tuesday. The company missed expectations due to a cybersecurity event in November that meant it had to complete a lot of processes manually and which impacted supply of On-X tissue. There will be some lingering impact from that event in Q1 2025, but management believes it’ll more than make up for it in the remaining three quarters of the year. Management also talked about the schedule for the NEXUS aortic stent graft system, which it believes will gain FDA approval in the second half of 2026, as well as the expected final approval date for AMDS in the U.S. in the middle of 2026. The takeaway from the quarter should be more along the lines of one step back, two steps forward than game over. I expect AORT stock, which is currently trading below its 25-day moving average line, to recover. BUY

Earnings: Done

AvePoint (AVPT) reports after the close today. The company just announced new data security solutions for Google (GOOG) Workspace and Google Cloud, illustrating its commitment to providing data protection beyond the Microsoft (MSFT) environment. The company is expected to deliver Q4 revenue growth of 17.9% to $88 million and adjusted EPS of $0.05. Consensus estimates call for revenue to grow by 18.5% in 2025, when EPS should grow 40% to $0.23. The stock recently pulled back from an all-time high near 20 to about 17. We go into the event with AVPT at hold. HOLD

Confirmed Earnings Date: February 27

Delcath (DCTH) was added three weeks ago (half-sized position) and has pulled back about 10% since. There have been no new developments since I added the stock. Delcath’s whole-organ treatment system (focused on liver-dominant cancers) delivers a high dose of a chemotherapy agent directly to the liver. It gained FDA approval for the treatment of metastatic hepatic dominant uveal melanoma (mUM) in August 2023. This is the first and only FDA-approved whole-liver directed therapy. Management thinks HEPZATO can become the U.S. market leader for treating mUM and has the potential to treat several other cancers in the liver as well. On January 13, management pre-released Q4 2024 results that surpassed expectations. Management said Q4 revenue should be about $15.1 million, roughly 21% higher than expectations. Implied full-year 2024 revenue is $37.2 million (+1,671% over 2023). The official report is on March 6. BUY HALF

Confirmed Earnings Date: March 6

Docebo (DCBO) will report Q4 results tomorrow. Management will also speak at a number of upcoming investor conferences, including with Scotiabank and Morgan Stanley (MS) next week, followed by a Cantor tech conference on March 12. Back to tomorrow’s earnings report, consensus estimates call for Q4 revenue to grow by 14% and adjusted EPS to grow by 6.4% to $0.27. Looking out into 2025, the company is expected to grow revenue by 14% and EPS by 27%. BUY

Confirmed Earnings Date: February 28

Enovix (ENVX) reported last Wednesday, and I summarized my thoughts in a Special Bulletin. There was no single item from the conference call that should send ENVX stock surging right now. But those potential catalysts should be coming, likely in the form of a Q3 purchase order from a smartphone company and more details on potential in the defense and drone market, as well as the smart eyewear market. BUY

Earnings: Done

FTAI Infrastructure (FIP) reports after the close today. This morning the company disclosed that it purchased the remaining 49.9% of Long Ridge in exchange for a $20 million promissory note, $9 million in cash and 160,000 shares of convertible junior preferred stock. Shares have been in a downward slide but are trading higher today, probably more in anticipation of this afternoon’s earnings release than on the news of the Long Ridge acquisition. Management is sure to talk up the deal’s benefits, as well as those of other investments across the company’s four main businesses. Suffice it to say that this is a significant earnings report for us given how poorly FIP stock has acted lately. BUY

Confirmed Earnings Date: February 27

Mama’s Creations (MAMA) was sold last Friday. No updates. SOLD

Peloton (PTON) will participate in the Morgan Stanley Tech, Media & Telecom Conference next week (March 4). Management should be providing significant updates on the new growth strategy in the coming months, although there are no specific dates on the calendar. Perhaps we will learn a little more next week. BUY HALF

Earnings: Done

Perpetua Resources (PPTA) hasn’t released any news since the Financial Update a few weeks ago, which I went over at the time of publishing and again last week. Given the stock’s significant drop after the report came out, the class action lawyer sharks have come out of the woodwork, but so have some analysts reiterating their view that shares should be trading significantly higher than they are right now (i.e., closer to the 16 – 20 range. Considering filling the second half of our position, but not ready to pounce just yet. BUY HALF

Expected Earnings Date: March 14

Weave (WEAV) reported Q4 results last week that surpassed expectations on both the top and bottom line. Management talked about a tough comparison in the upcoming second quarter due to price increases that happened in 2024. Forward guidance implies roughly 15% revenue growth in 2025. It’s worth noting that in the last two years, revenue growth has been five to nine percentage points higher than what was guided for at the beginning of the year. In other words, management tends to take a conservative approach. WEAV stock is currently trading right on its 200-day line and is a buy given what seems like an overdone drawdown. BUY

Earnings Done

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.

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