After last week’s selloff in tech, this week has been relatively calm, though the action at mid-day today suggests we could see more selling before the closing bell.
The culprit there could be a modestly disappointing report from Microsoft (MSFT), which beat expectations but didn’t have the wow factor around Azure growth or Office365 and also guided next quarter revenue slightly below consensus.
The result is likely dimming enthusiasm for many other tech stocks as a beat and raise quarter would have played better into bullish arguments that have helped propel the Nasdaq higher.
Still, long-term investors will likely see any weakness in MSFT as a buying opportunity and not as an indication that demand for cloud services is slowing (MSFT growth is ahead of overall IT spending). And, as a practical matter, there is a lot more out there in the tech world besides Microsoft (and Apple, which is also leading the Nasdaq lower today).
To really get conservative on technology stocks we’ll need to hear many more management teams issue forward guidance that falls short of expectations, including companies in our portfolio. That could happen, but it hasn’t just yet.
Next week we’ll get reports from two of the other big boys of tech, Amazon and Apple. We’ll also start to get reports from many smaller players, and more companies from the MedTech space.
Of note there, the iShares Medical Device ETF (IHI) has recently broken out. Strength in players such as Danaher (DHR), which just reported terrific results and a solid outlook, has that area of the market acting well.
For us, this is a time of “taking it all in” and not trying to pre-judge any of our companies. It’s better to simply let management tell us what’s going on and go from there.
First up on our earnings docket is Repligen (RGEN), which will report late next week. The following week, action really heats up as we’ll hear from at least seven more portfolio companies.
Take a deep breath and be prepared for more volatility as these earnings reports come in.
Changes This Week
None
Updates
AppFolio (APPF) peaked back in early-June at 180 and has since pulled back roughly 20%. As with many other software stocks investors just need more information to go on. The wait will be over soon. Management hasn’t given us an earnings release date but it could come as early as next week. Analysts see revenue up 22% in the quarter and tracking toward 25% growth in 2020. Adjusted EPS is seen around $0.12 in Q2 and $0.44 in 2020. HOLD
Arena Pharmaceuticals (ARNA) is consolidating in the 61 to 70 range. No new news. Earnings should be out in the first 10 days of August. BUY
Avalara (AVLR) is flat over the last week and now trading 14% off the high from two weeks ago. The only new news is that earnings are due out the week after next, on August 4. HOLD
Earnings: Wednesday, August 4
Cardlytics (CDLX) has given us an earnings date of August 4. Despite the announcement that it will launch My Wells Fargo Deals with that bank (fourth largest in the U.S.) I don’t expect the stock to do a lot until after we get an earnings report. There is just too much turbulence going on in consumer spending for investors to bid up shares without more knowledge. HOLD
Earnings: Wednesday, August 4
Everbridge (EVBG) is up 8% over the last week, in part due to the announcement that two national alerting system customers will use its countrywide Public Warning solutions. The countries are located in the Middle East and Africa. Full deployment is slated before the end of this year, at which point we will probably find out who the customers are. This brings the total count of population-wide alerting systems up to 11 countries. Keeping at buy. BUY
Earnings: Wednesday, August 6
Everquote (EVER) has pulled back 20% from the high shares hit a few weeks ago. Earnings are due out on August 4. History suggests this pullback is a good time to buy as management has destroyed expectations in all the recent earnings reports (after the last one the stock jumped from 40 to 54 before settling down). Aggressive investors can buy a few shares here, but officially I’m keeping at hold. HOLD
Earnings: Wednesday, August 4
Fiverr (FVRR) reports on August 5. The stock has benefited from work-from-home and freelancing trends and international expansion is giving an added boost. Management just announced that websites in native languages have launched in Italy (third largest economy in Europe) and the Netherlands. Expectations are high, but I think for valid reasons. The pandemic has likely given a long-term boost to this company. Still, analysts have become somewhat conservative after such a big run. We’ll find out what’s up in a couple of weeks. Keep holding. HOLD
Earnings: Wednesday, August 5
Goosehead Insurance (GSHD) is flat over the last week and given that shares are now up roughly 30% from their pre-pandemic high it is probably time for a pause. No earnings date yet but management should let us know soon. I’m expecting a report in the first 10 days of August. HOLD
Inspire (INSP) recently received favorable news coverage after Goldman moved the stock to buy with a 148 target. That’s roughly 40% above where the stock is trading now. I’ve had at buy for a while and have since been a little cautious on INSP since we don’t know what the cadence of procedures is. My thinking is that if you’ve wanted to own this stock you’ve already bought in, so a little conservatism now isn’t the worst thing. The stock’s trendline is looking good today after INSP broke out to fresh highs and has now made a series of higher highs and higher lows over the last two months. Keeping at hold through earnings, which are out a week from Tuesday. HOLD
Earnings: Tuesday, August 4
Karyopharm Therapeutics (KPTI) pre-released Q2 Xpovio sales last week (better than consensus) but the stock continues to be mostly unaffected by everything management is saying and all that’s going on in the world. It’s downright boring to watch! This is, however, part of why we hired the stock. Its fortunes lie in success with drug development and there is an upcoming decision from the FDA (later this year or early in 2021) on potential approval for earlier line multiple myeloma (Xpovio combined with Velcade). Buy while it’s still under the radar. BUY
Palomar (PLMR) dipped just below 80 last week but has been recovering this week and is now 7% below its previous high. I’ve kept the stock at buy as there hasn’t been any significant breakdown in the stock and the fundamentals appear solid. Earnings should be out around August 12. Industry analysts expect strong pricing power for insurers like Palomar. BUY
Q2 Holdings (QTWO) provides cloud-based software for financial institutions (mostly community banks and credit unions) and is now making the move I’ve been anticipating, having just broken out to fresh highs and seeming to be targeting a price in the 105 to 110 range in the near-term. Management reports the week after next. Keeping at buy. BUY
Earnings: Wednesday, August 5
Repay Holdings (REPAY) develops digital payment processing solutions and will give us our first inside look since we added the stock to our portfolio when it reports on August 10. Revenue is seen up 44% this year and 20% in 2021. Shares are still consolidating in the low-to-mid 20s. BUY
Earnings: Wednesday, August 10
Repligen (RGEN) announces earnings next Thursday. As I mentioned last week we’re looking for more details on the recently acquired Engineered Molding Technology (EMT) business and shifting demand trends resulting from COVID-19. Analysts see revenue up 11% to $78.4 million and adjusted EPS of $0.28. BUY
Earnings: Wednesday, July 30
