The market continues to remain strong in the face of economic data that’s anything but. As we’ve already discussed at great length, this is because the market is forward looking and there’s been enough potential positive news around treatments and the timeline to a vaccine that the path of least resistance has been higher.
There’s also been a huge amount of stimulus spending already, with explicit and implicit guarantees that more will follow as needed.
The best move lately has been not to overthink it and go with the flow. This week, the most beaten down stocks jumped into the action and surged higher.
Still, one gets the feeling (a dangerous sentiment to act boldly upon!) that we’re near a point where the breadth of strength will start to mellow out and company-specific fundamentals will start to rule again. A lot of that will depend on earnings reports.
In our portfolio, next week is huge. We have nine positions reporting. One company, Goosehead Insurance (GSHD), reports today after the bell.
There is going to be a ton of news to digest from these reports and to try and put into the context of what we’re hearing from other companies. We’ll take it all in as it comes.
In the meantime, we’re moving incrementally more conservative given the big rally this past week. Three stocks move to hold today, including one that we’ve had for a while and which jumped nearly 20% last week.
Be on the lookout for Special Bulletins as companies report. And buckle up! Things are sure to be interesting.
Changes This Week
Fiverr (FVRR) moves to Hold
Ping Identity (PING) moves to Hold
Q2 Holdings (QTWO) moves to Hold
Updates
AppFolio (APPF) is up 6% over the past week and 8% over the past two. It remains 26% off its previous high and hasn’t had a huge recovery because there is so much uncertainty in the rental market. Keeping at hold through next week’s earnings announcement. The latest consensus estimates call for revenue growth of 27% ($72.4 million) and adjusted EPS of $0.05 (down 55%). For 2020 analysts now see revenue growth of 25% ($320 million) and adjusted EPS of $0.44 (down 57%). HOLD
Earnings Date: Monday, May 4
Arena Pharmaceuticals (ARNA) was up 3% this week and is up 7% over the past two weeks. The last significant update we received was in early April when management said the controlled release version of etrasimod was working well, with fewer side effects. Keeping at buy. BUY.
Avalara (AVLR) reports next Thursday. Analysts see the provider of tax automation software reporting revenue growth of 28% ($108.5 million) and adjusted EPS of -$0.11 (down from -$0.03 a year ago). For 2020, estimates suggest 20% revenue growth and adjusted EPS of -$0.21. For now, growth is seen accelerating to 24% in 2021, when adjusted EPS goes positive. Shares have rallied 14% over the last two weeks and are up 8% this week. Despite the stock’s strength, and my conviction in the long term, we’re been playing it conservatively here. HOLD
Earnings Date: Thursday, May 7
Cardlytics (CDLX) was moved to buy last week and the stock responded by surging 17%. The stock is still badly wounded and trading 56% off its high, which is part of the reason we decided to jump back in. I have little doubt the quarter will be a disaster and the outlook will be challenged by huge uncertainty in the travel, restaurant and entertainment industries. But in this case, we’re looking beyond the near-term future and placing a bet on the value of the advertising platform (marketing offers within native banking channels). Growth estimates have plummeted for 2020, with analysts now calling for 9% revenue growth ($230 million) and adjusted EPS loss of -$0.86, down from -$0.08 a year ago. Hopefully 2020 marks a low point in between 40% revenue growth in 2019 and current projections for a bounce back to 35% revenue growth in 2021. We’ll hear what management has to say a week from Monday. Still a buy for risk-tolerant investors. BUY
Earnings Date: Monday, May 11
Domo (DOMO) remains our most troubled stock but the picture is much improved after a 32% rally in the past week. Management has come out with a plan to keep the company on track for cash flow break-even without financing. It has also jumped on the COVID-19 response wagon by launching a COVID-19 Crisis Command Center that’s being used by a number of states (previously disclosed are Nebraska, Iowa and Utah) to help coordinate public and private organizations in the fight to slow the spread of the virus. It’s still a troubled stock and growth estimates of roughly 10% this year and next are half of what was booked last year, but the stock’s trend is improving at least. HOLD HALF
Everbridge (EVBG) has tended to trade higher when news around the pandemic sounds worse and trade lower when it sounds better. Over the last week shares are down 6%, making Everbridge the only stock in our portfolio to lose value. Despite the countertrend I don’t think the long-term story here is about COVID-19, even though that’s the short-term focus. Everbridge is a platform for managing all variety of critical situations. Management will update us on the trends next Tuesday. Analysts see revenue up 35% to $57.7 million and adjusted EPS of -$0.37. In 2020 revenue is expected to rise 29% to $260 million while adjusted EPS falls to -$0.76 (from -$0.21 in 2019). HOLD
Earnings Date: Tuesday, May 5
EverQuote (EVER) reports Monday and as I detailed last week, I’m torn on what to expect. Theoretically, with everyone at home it’s reasonable to expect an uptick in web traffic to EverQuote’s insurance comparison websites. The company derives most of its revenue from quotes. On the flip side, it’s also reasonable to expect a big dip in car and homebuying. We will find out what the trends look like on Monday. Growth estimates are more conservative after EverQuote delivered revenue growth of 52% in 2019. Current consensus points to revenue growth of 48% in the most recent quarter and 29% in 2020, when adjusted EPS is seen near -$0.20. The stock is flat over the last week. HOLD HALF
Earnings Date: Monday, May 4
Fiverr (FVRR) is up 30% since we jumped on the stock in early March, despite horrible timing, and is up 16% over the last week. It’s one of the new “work from home” darlings, in part because management gave an early look into the quarter back at the beginning of the month. It said revenue should be slightly above guidance of $32 million to $33 million. That implies roughly 40% revenue growth in the quarter, and potentially 30%+ growth for 2020. I’m looking forward to details in a week. That said, after this run and given where the stock is now, I’m moving to hold. HOLD
Earnings Date: Thursday, May 7
Goosehead Insurance (GSHD) jumped 19% over the past week and will report today after the close. I’ll send an update on the report tomorrow. Analysts currently see 30% revenue growth ($23.5 million) and adjusted EPS of $0.03. For 2020, analysts see 29% revenue growth and adjusted EPS of $0.45. HOLD THREE QUARTERS
Earnings Date: Thursday, April 30
Health Catalyst (HCAT) has given us an earnings date of May 12. There is no new news. HOLD HALF
Earnings Date: Tuesday, May 12
Inspire (INSP) was moved back to buy two weeks ago and has continued to trend higher since, helped in part by news that Inspire therapy was approved for patients 18 to 21 years old (the previous minimum age was 22). Current estimates suggest the quarter ending in March being somewhat affected (just 33% revenue growth expected after 63% in the December-ending quarter) but the June-ending quarter looking absolutely horrible, with revenue declining by 42%. All in, 2020 is expected to be a year of flat growth. That’s in the context of revenue rising 62% last year and, potentially, 75% in 2021. Clearly, the expectation is that procedures will bounce back from pent-up demand during the shut-in. It’s still a buy but don’t go crazy. BUY
Earnings Date: Tuesday, May 5
Ping Identity (PING) is seen delivering 20% revenue growth when it reports next week. EPS is seen improving to $0.03 from a loss of -$0.06 a year ago. For 2020 revenue is expected to rise 7% to $260 million. Shares are up 5% over the past week but 38% since we jumped in on April 2. Given the surge I’m moving to hold until we hear from management next Wednesday. HOLD HALF
Earnings Date: Wednesday, May 6
Q2 Holdings (QTWO) was moved back to buy last week and the stock responded by rallying 19%. Earnings are out next Wednesday and while I’m not expecting everything to sound fantastic I am expecting that management is maintaining confidence in the company’s role to accelerate digital transformation in financial institutions. Analysts see revenue up 31% in the quarter, though adjusted EPS is seen falling to -$0.12 from -$0.05 a year ago. In 2020 revenue is seen up 30% to $410 million and adjusted EPS is seen at $0.01, a big decline from $0.41 in 2019. We caught a nice updraft here this past week and now I’m moving back to hold. HOLD
Earnings Date: Wednesday, May 6
Repligen (RGEN) remains near all-time highs. There hasn’t been a lot of buzz around the stock but as one of the smaller bioprocessors out there it could be in a sweet spot to leverage demand for drug development and manufacturing. The unknown is what the disruption to existing business has been. Bigger picture, other players (who are more diversified) Danaher (DHR) and Thermo Fisher Scientific (TMO) are looking solid near recent highs as well. Earnings are due out on Wednesday with revenue growth of 18%, to $71.4 million, expected. Adjusted EPS is seen near $0.22. HOLD
Earnings Date: Wednesday, May 6
