April 21, 2022

It’s been another week of choppy trading action as more earnings reports pour in. We received a solid earnings report from Silvergate Capital (SI), and that stock has perked up. Next week we will hear from two more companies as Shutterstock (SSTK) is set to report Tuesday and Repligen (RGEN) is on deck for Wednesday.

Big picture, it hasn’t been a great week for the market. There are certainly examples of stocks that are doing well (energy, materials, healthcare and grocery store type names) but there have also been enough potholes to keep things feeling sketchy.

Technically speaking, the S&P 600 SmallCap Index has managed to eke out a weekly gain and is now back above its 50-day moving average line. And the S&P 500 is up by a fraction over the last five sessions as well.

But again, under the surface things feel iffy. And software stocks in particular have taken a hit, seemingly weaking further after Netflix (NFLX) delivered a disastrous report earlier in the week. I’m not sure we can draw many lines between demand for streaming TV services and demand for the solutions that many of our software companies sell (pretty sure we can’t).

Suffice to say, this will be a big earnings season for software stocks.

On the other hand, MedTech names continue to fare relatively well. I moved Procept BioRobotics (PRCT) to hold last week since it seems a little extended. As I research the group, I’ve noticed significant outperformance relative to the S&P 500 in recent days. There’s a little weakness in the group today but, stepping back, the action is encouraging enough to justify digging into more potential opportunities in the space.

With earnings reports just around the corner for most of our stocks, management teams have gone quiet. With little news to report, I’ve taken the opportunity to jot down expectations for each of our positions in the upcoming quarterly reports, as well as for the entire year. I’ll keep these same notes in upcoming Weekly Updates to make for easy reference when actual reports come out.

Recent Changes
Shutterstock (SSTK) moves to HOLD

Updates
Avalara (AVLR) has slipped with software stocks this week on no major news, other than that we now have an earnings release date. Analysts see Q1 2022 revenue up 29% to $198 million and adjusted EPS of -$0.12. For the full year the company is expected to deliver 23% revenue growth ($860 million) and EPS of -$0.26. HOLD
Earnings Date: Thursday, May 5

CS DISCO (LAW) hasn’t given us an earnings date yet. When the event comes, analysts are looking for 45% revenue growth ($30.7 million) and adjusted EPS of -$0.21. For 2022 Disco is expected to generate revenue of $150 million (+31%) and EPS of -$0.80. I want to maintain exposure because I think the longer-term potential will prove to make the wait worthwhile. BUY

Inspire Medical Systems (INSP) is about flat this week. In Q1 the company is expected to grow revenue by 59% to $64.3 million and deliver adjusted EPS of -$0.79. Full-year revenue is seen up 41% to $330 million while EPS is seen near -$2.14. HOLD
Earnings Date: Tuesday, May 3

Procept BioRobotics (PRCT) was moved to hold last week given the stock’s rapid ascent to almost 40 in the month and a half that we’ve owned it. First-quarter revenue is expected to be up 56% to $12.2 million and adjusted EPS should be around -$0.46. Full-year revenue is seen up 74% to $60 million while EPS of around -$1.85 is expected. HOLD
Earnings Date: Thursday, May 5

Nova LTD (NVMI) was sold last week given weakness in the stock as well as the broader semi space. Keeping an eye on the stock but sticking with the sell rating for now. SELL
Earnings Date: Thursday, May 12

Rani Therapeutics (RANI) is moving sideways on no new news. We received the Q4 update a few weeks ago so I’m expecting things to remain quiet for a little while. BUY

Revolve (RVLV) has chopped around for the last week. In Q1 analysts are looking for revenue growth of 42% to $255 million and adjusted EPS of $0.26. Full-year revenue should land near $1.12 billion (+26%) while EPS should be around $1.23. We just received the earnings date of May 3. HOLD
Earnings Date: Tuesday, May 3

Repligen (RGEN) has firmed up a little this week, but shares are still badly bruised. Earnings are set to come out next Wednesday before the market opens. Recall when management issued 2022 guidance back in February, they indicated total revenue would be around $800 - $830 million (+19% – 24%), with roughly one-quarter of that COVID. They also indicated a strong bioprocessing market and Repligen’s goal of hitting $1 billion in revenue by 2024, even if/as COVID-related sales decline. In Q1 analysts are looking for revenue growth of 30% to $185.5 million and adjusted EPS of $0.72. HOLD
Earnings Date: Wednesday, April 27

Shutterstock (SSTK) reports next Tuesday. The market is looking for 10% revenue growth ($202.1 million) and adjusted EPS of $0.86. Full-year revenue is seen up 10% to $850 million while EPS should be near $3.46. Moving to hold as the chart is telling us this is a make-or-break report for the stock (at least in the near term). HOLD
Earnings Date: Tuesday, April 26

Silvergate Capital (SI) reported this week and I sent out a Special Bulletin detailing the report. Shares have been strong since results came out, and I’m maintaining at buy under 50. BUY
Earnings Date: Done

Sprout Social (SPT) has been drifting lower this week with the broader software group. Revenue in Q1 is seen up 38% to $56.2 million while adjusted EPS is seen near -$0.04. Full-year revenue is expected to be up 33% to $250 million while EPS is seen near -$0.13. HOLD HALF
Earnings Date: Tuesday, May 3

Xometry (XMTR) has gained a little ground this week but remains in the 33 – 42 range where it’s traded for over a month. For Q1 analysts see revenue up 86% to $81.7 million and adjusted EPS of -$0.35. On the last earnings call, management issued full-year 2022 revenue guidance of $390 - $400 million, implying +83% at the high end. That’s where consensus estimates are pegged. BUY
Earnings Date: Wednesday, May 11

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