Our portfolio has been largely treading water for a few weeks. That’s not surprising given that we’ve been waiting for earnings season to start (it finally has!) and that there’s this persistent sense that bad news for the economy resulting from the coronavirus equal more stimulus and accommodative fiscal policy equals support for equity markets and, in some ways, good news for certain tech and MedTech companies.
That’s a bit oversimplified, but I think you know what I mean – bad news from the pandemic doesn’t necessarily mean bad news for all stocks. What a strange time we are living through.
Today could be a pivotal one for technology stocks as investors are anxiously waiting to hear from the big tech names, including Amazon (AMZN), Apple (AAPL), Facebook (FB) and Alphabet (GOOG). Then our earnings season fires up next week. We are, essentially, in a holding pattern for each stock until after it reports and we can assess the results.
We already heard from Repligen (RGEN) this morning so I have an update there, and we will hear from Goosehead Insurance (GSHD) after the close today. From there, the following represents the cadence of reporting dates:
July 30: GSHD
August 3: APPF
August 4: AVLR, CDLX, EVER, INSP, KPTI, PLMR
August 5: ARNA, FVRR, QTWO
August 6: EVBG
August 10: RPAY
In addition to eleven of our companies reporting next week we are scheduled to release the next issue of Cabot Small Cap Confidential. It’s going to be busy!
Changes This Week
None
Updates
AppFolio (APPF) is flat over the last week and reports Monday. Look for revenue to rise 22% in the quarter and be on pace for 25% growth in 2020. Adjusted EPS is seen around $0.12 in Q2 and $0.44 in 2020. At 23% off its recent high the stakes are much lower than they were a few weeks ago. HOLD
Earnings: Monday, August 3
Arena Pharmaceuticals (ARNA) is still consolidating in the 61 to 70 range. No new news. Earnings are out next Wednesday, but really this is another check-in on pipeline progress. BUY
Earnings: Wednesday, August 5
Avalara (AVLR) was up 5% this week and reports on Tuesday. Analysts see revenue up 21% and adjusted EPS of -$0.10. For the full year look for clues revenue should surpass 20% growth and adjusted EPS should be around -$0.19. That would translate to revenue near $460 million and potential first full-year EPS profit in 2020, though the rate of investments will influence earnings. The stock looks healthy after a 10% pullback and a couple weeks consolidating. HOLD
Earnings: Tuesday, August 4
Cardlytics (CDLX) reports on Tuesday and given uncertainty in consumer spending this stock could easily move a great deal. Management has indicated that marketers are increasingly turning to the company’s purchase intelligence platform for spending insights, and my occasional check-ins on offers through my bank suggests Cardlytics has been able to pivot somewhat to more online brands. As I’ve been writing, I like the stock long-term so want to hold through this pandemic, but we’ll take it one step at a time. Consensus estimates suggest a big hit this quarter, with revenue seen falling 37% to $30.8 million and adjusted EPS of -$0.57 being well below an EPS loss of -$0.12 in the year ago quarter. For the full-year analysts see revenue down 10%, then rebounding to expand 42% in 2021. Clearly, commentary from management will matter. HOLD
Earnings: Tuesday, August 4
Everbridge (EVBG) was up for the second week in a row and looks good heading into next Thursday’s report. Shares are 15% off the high, meaning expectations are high-ish, but not insane. I continue to think that the stock is worth holding through volatility as the platform could easily still be in the early innings of adoption around the U.S. and the world. Next week look for the quarterly report to reveal that Q2 revenue rose 30% and adjusted EPS was around -$0.21. Analysts are looking for roughly 30% growth for the full year too, while adjusted EPS in 2020 should be around -$0.18, which would mean Everbridge could turn a profit next year. BUY
Earnings: Thursday, August 6
Everquote (EVER) was up modestly this week but at 20% off its high there appears to be ample upside in the stock, provided it hits its numbers. What do we need? Revenue in the quarter should have risen 42% and be on pace for at least 33% growth this year while quarterly adjusted EPS should come in at a loss of $0.04 or better and be tracking toward a full-year loss of $0.20 or better. As stated last week aggressive investors can buy a few shares here, but officially I’m keeping at hold. HOLD
Earnings: Tuesday, August 4
Fiverr (FVRR) reports Wednesday and with the stock at all-time highs expectation are elevated. Analysts see revenue up 40% in Q2 and tracking toward that pace of growth for the full-year, while adjusted EPS should come in around -$0.18 in the quarter and -$0.73 in 2021. The big question is to what extent the pandemic has accelerated growth for Fiverr and how management plans to keep the growth alive when the pandemic begins to subside. The company just released “promoted gigs,” which allows freelancers to pay for advertising services on the platform. Think of this as being similar to the way advertisers pay for top of page placement in Google and other web search engines. I believe this is a significant development as it opens up a new revenue stream. HOLD
Earnings: Wednesday, August 5
Goosehead Insurance (GSHD) reports today after the close. Analysts see revenue up 25% and adjusted EPS up 43% to $0.10. Critical will be management’s commentary around the cadence of renewals and how that will drive forward revenue and EPS growth. The stock has been on a big run, so we’ve been keeping at hold. HOLD
Earnings: Thursday, July 30
Inspire (INSP) recently hit a new high near 100 after Goldman moved the stock to buy with a 148 target. Tuesday’s report will reveal just how good the firm’s analysis is. In the current quarter we are hoping to see the trough, with revenue seen down 56% to $7.9 million and adjusted EPS of -$1.11. For the full-year revenue is seen down just 2%, then roaring back to expand by 75% in 2021 as doctors catch up on procedures. HOLD
Earnings: Tuesday, August 4
Karyopharm Therapeutics (KPTI) isn’t doing all that much these days, which can make the stock somewhat boring to follow. But this is biotech and so much depends on trial results and label expansions. That’s the case with Karyopharm, and the next major potential catalyst is the potential approval for earlier line multiple myeloma (Xpovio combined with Velcade). Management will update us on all the pipeline progress next Tuesday. BUY
Earnings: Tuesday, August 4
Palomar (PLMR) popped 6% this week as it marches toward next Tuesday’s earnings report. As mentioned last week industry analysts expect strong pricing power for insurers like Palomar. Plus, the company is expanding into new markets. All this said the 2020 hurricane season is approaching and is seen as being above average. Next Tuesday look for management to report that net written premiums rose 40% and that adjusted EPS was around $0.51. BUY
Earnings: Tuesday, August 4
Q2 Holdings (QTWO) will report on Wednesday and analysts see revenue up 23% to $95.3 million and adjusted EPS of -$0.02. We will be looking for commentary on the pace of implementations and overall demand for cloud-based banking solutions in an extended low rate environment. BUY
Earnings: Wednesday, August 5
Repay Holdings (REPAY) was down 3% this week and is now 20% off its June high. Management will report the week after next. We recently learned that the company has acquired cPayPlus for around $16 million (including performance payments), an accounts payable automation provider serving the automotive, property management and field services industries that has over 26,000 enrolled supplier relationships. BUY
Earnings: Monday, August 10
Repligen (RGEN) reported this morning and beat on both the top and bottom lines. Revenue rose 24% (up 19% organically) to $87.5 million, beating by $9 million. Adjusted EPS of $0.42 destroyed consensus of $0.28. Management said Covid-19 has provided a significant lift to its Protein and Filtration Products businesses and that the trend is expected to continue. There was also a lot of demand for gene therapy-related solutions. Full-year revenue guidance was raised by roughly $20 million to a range of $332 to $340 million. The newly-acquired EMT business is expected to contribute $3.5 to $4 million. Importantly, Repligen can gain business from any vaccine or drug for Covid-19 – it doesn’t matter what platform is being used – from development and trials to large-scale manufacturing. The stock is rising on the report and I foresee continued strength in the coming weeks. Keeping at buy. BUY
Earnings: Done
