February 8, 2024

The past week hasn’t been the best for small-cap indices given some concerns around smaller financial institutions and modest weakness in value-oriented areas of the asset class. But big picture, the growthier areas continue to look good and in our specific higher growth arenas (software, MedTech, etc.) I haven’t seen much at all to complain about.

The real test will be how the next three weeks go as that timespan will cover the bulk of earnings reports from our portfolio.

On that note, we have one earnings report from last night to discuss. Elsewhere in the portfolio there’s definitely been some movement (mostly to the upside).

Let’s get right into it.

Recent Changes
Alphatec (ATEC) moves to HOLD
Liquidity Solutions (LQDT) moves to HOLD

Updates

Alphatec (ATEC) continues to hang out in the 16 – 17 range as we await official Q4 results on February 27 (we’ve already received preliminary results, which were better than forecast). Given that we’ve had a sneak peak at earnings and that I’ve had ATEC at buy for a while, I’m moving to hold today. We’ll evaluate the rating again once earnings are out in a couple weeks. HOLD

Earnings Date: February 27

Braze (BRZE) won’t report until late March so I’m not expecting any material news for a little while here. The stock is pushing up against its 52-week high from December so at the moment, no news is good news. Braze offers a customer engagement software platform that customers/brands use to connect with consumers in real time. HOLD

Expected Earnings Date: March 29

Docebo (DCBO) will report in just over two weeks. The company is a player in the Learning Management System (LMS) market and has an easy-to-use, cloud-based platform that’s used by both internal (employees) and external (customers, partners, suppliers) workers. We’re looking for Docebo to grow revenue by about 15% this year and 23% in 2024. EPS should be positive in both years, growing from $0.54 in 2023 to $0.76 in 2024 (i.e. by 41%). BUY

Earnings Date: February 23

Enovix (ENVX) reports a week from Tuesday. The stock hadn’t done much lately, until today (+9%). Nothing specific driving the move that I’ve uncovered. Enovix is an early-stage battery architecture company developing a 100% silicon anode battery for consumer electronics and (eventually) electric vehicle (EV) markets. BUY

Earnings Date: February 20

EverQuote (EVER) is our newest addition and has acted well since I added it last Thursday. The stock just recently broke to new highs above 13.2 EverQuote operates a marketplace where consumers can compare prices for insurance (auto, home, renters). It’s essentially a leveraged bet on the auto insurance market given that’s where about 80% of revenue comes from. With the auto insurance market set to recover this year, EVER could be a fantastic way to play the trend. So far, so good. BUY

Expected Earnings Date: February 28

Intapp (INTA) reported after the closing bell Tuesday and I reviewed the report in a Special Bulletin yesterday. Keeping at buy. Since the report I’ve seen a number of modest price target increases (high 40 range is about the average). BUY

Earnings: Done

Liquidity Solutions (LQDT) reported after the bell yesterday and shares traded sharply lower at the open but have come back somewhat throughout the day. The culprit is likely that revenue in a couple sizeable segments, Retail Supply Group (RSCG) and Capital Assets Group (CAG), was a little low (product mix and international delays, respectively) so total revenue growth was actually down 1% to $71.3 million, even though Gross Merchandise Volume (GMV) moving through the company’s properties was up 13% to $305.9 million. Management said they see growth in those two segments coming back in Q2, which is traditionally the highest quarter for RSCG. That’s good. Elsewhere, the Machinio segment (software) is doing very well (Asia expansion helping) and grew by 18% in the quarter (still under 10% of total revenue, however). Moving on to Q2 guidance, management sees GMV ranging from $320 million to $350 million and adjusted EPS of $0.17 to $0.27. In December, $1.2M was spent on share repurchases with plans to continue throughout 2024.

Stepping back, the main fly in the ointment here is that RSCG (which can be over 20% of revenue) hasn’t been super strong as consumers pull back on purchases. While management says it should get better from here investors want to see results, not hear about what should happen. I think there are a number of moving parts here and it’s tough for the casual observer to grasp what’s happening on a company-wide basis and see the true potential. That said, clearly results over the last two quarters have fallen short of market expectations, and now there’s more pressure on management to “get it done.” I’m not ready to bail as I think shares are oversold (nothing truly broken here). The current market environment should help the stock stabilize and give investors a chance to recognize that the strongest quarters are coming soon. That said, I’m also not pounding the table on the stock right now. Moving to hold and we’ll see how LQDT acts over the next week. HOLD

Earnings: Done

Remitly Global (RELY) has recovered from the breakdown on January 17 but there’s been no material news surrounding the stock. The company has a platform providing financial services for immigrants and their families and shares have struggled since management revealed marketing investments last quarter, which they said signaled Remitly was going on the offensive, not playing defense. HOLD HALF

Expected Earnings Date: February 28

TransMedics Group (TMDX) continues to grind its way higher and is still expected to report around the 21^st of February. No major news lately. The company is an organ transplant specialist, focused on the heart, lung and liver markets. Last year, TransMedics acquired an aviation business so it can control even more of the organ transplant supply chain. HOLD A QUARTER

Expected Earnings Date: February 21

Weave (WEAV) reports Q4 results the week after next. The company has a customer experience and payments software platform designed for small- and medium-sized healthcare businesses (dental, optometry, veterinary and medical practices). Looking into 2024, Weave should grow revenue by at least 15.5% to $195 million and slash the EPS loss by half, to around -$0.07. The stock recently punched out to new highs above 12.5 and is looking very good. BUY HALF

Earnings Date: February 21

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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