Even though stocks have been wobbly today the last week has been very constructive for our portfolio. As of mid-day today, our portfolio is up an average of 4% from last Thursday’s close, and only two positions are down (neither by more than 2%).
Several positions are up double digits, including Cardlytics (CDLX), Sprout Social (SPT) and Goosehead Insurance (GSHD), which reports after the close today.
That doesn’t mean it’s not still a bit of a meatgrinder market. Looking at the S&P 500 Index the string of new highs would suggest our portfolio should be raging. The S&P 600 Small Cap Index, which pulled back in the second half of March but has rebounded to within 3% of its all-time high, also looks very sound and suggests things under the surface are much calmer than they really are.
Of course, we have a lot of exposure to software and MedTech stocks, and there has been some wonky performance among these names as new money has flowed into stocks with more exposure to the reopening theme in recent weeks.
That’s fine. I don’t believe that the big-picture trends that our stocks participate in have changed. It’s mostly that many of these stocks needed to take a breather after what was a truly crazy string of performance in 2020 and early 2021.
We have several companies that are flying under the radar as having leverage to reopening, but are being lumped in with the broader software group. I’d toss Avalara (AVLR), Everbridge (EVBG) and Q2 Holdings (QTWO) in this bucket, just to name three.
The rubber will begin to hit the road next week when we’re going to have a steady stream of earnings reports. I’ll be sending out quick updates on stocks as reports come in, probably in note form as with the next Issue on deck for Thursday – right into the middle of our busiest earnings period – it’s going to be critical to move quickly.
Recent Changes
None
Updates
Accolade (ACCD) reports next Wednesday and there should be a lot to unpack given recent acquisitions. Last week we heard the company will acquire PlushCare, a provider of virtual primary care and mental health treatment. It sounds like PlushCare is growing faster than Accolade and generated around $35 million in 2020. The purchase price of $450 million brings another high-touch service offering into the Accolade platform and further illustrates the race for health care platforms to grow in the virtual care space. BUY
First-Quarter Earnings Date: Wednesday, May 5
Arena Pharmaceuticals (ARNA) continues to move sideways. Management will give a business update next Wednesday, which will likely include a refined timeline of trial milestones. HOLD
First-Quarter Earnings Date: Wednesday, May 5
Avalara (AVLR) reports next Thursday. Analysts are looking for revenue to grow 28% to $143 million and for adjusted EPS to dip to $0.11, from $-0.05 in the year ago quarter. Full-year guidance will be critical. Expectations are for 26% revenue growth, to $630 million, and adjusted EPS loss of -$0.20. BUY
First-Quarter Earnings Date: Thursday, May 6
BioLife Solutions (BLFS) has turned back up this week after trading down to its 50-day line last week. There’s no news on earnings yet, but I expect we’ll get an earnings date for mid-May relatively soon. BUY
Cardlytics (CDLX) has raced higher over the past two weeks and trades just 13% off an all-time high today. I talked about the Dosh acquisition recently, and we also received an upgrade to Overweight, with a 50 price target, from Wells Fargo. We’ll hold the stock into earnings and see where the chips fall, but high level it seems the prospects for this business are improving along with the economic reopening. In Q2 analysts see revenue up 12% to $51 million, but adjusted EPS down to -$0.56 from -$0.26 a year ago. In 2020 revenue is seen up 44% to $270 million, with growth really starting to accelerate in the middle of the year. HOLD.
First-Quarter Earnings Date: Tuesday, May 4
Cerence (CRNC) has been quiet lately and the stock has been bouncing around mostly in the 90 to 100 area. The biggest news is that Cerence’s old parent company, Nuance (NUAN), will become part of Microsoft (MSFT). Makes one wonder if there is a suitor out there for Cerence as well. HOLD
Everbridge (EVBG) will report the week after next. Management announced another county in North Carolina will use the company’s platform to help roll out vaccine distribution. Shares of EVBG have been moving sideways for almost a year. In the upcoming quarterly report we’re looking for evidence that CEM deals keep pouring in across the globe and cash flow (now positive) keeps climbing. We expect some increase in costs owing to more travel, but with EVBG trading at a discount to other high-growth SaaS peers there’s ample room for shares to trade higher, provided guidance is good. BUY
Second-Quarter Earnings Date: Monday, May 10
Fiverr (FVRR) will report next Thursday. It’s sure to be an interesting event given how much the company has benefited from the work-from-home trend. Analysts are looking for revenue to be up 91% to $65.1 million and for adjusted EPS of -$0.10. For 2020 we’re expecting revenue growth of 53%, to $290 million, and for EPS to rise 21%, to $0.40. HOLD HALF
Second-Quarter Earnings Date: Thursday, May 6
Goosehead Insurance (GSHD) has turned back up and is looking a lot better around the 114 level than it did near 96 at the beginning of the month. Earnings come out today. Revenue is seen up 40% to $28.7 million while adjusted EPS is seen near $0.06. Guidance for the year will be critical. Analysts see revenue up 28% to $150 million and adjusted EPS up 22% to $0.83. As always, the trends within the franchise channel will be of utmost importance. HOLD HALF
Second-Quarter Earnings Date: Thursday, April 29
Inspire Medical Systems (INSP) has moved back up to within spitting distance of its all-time high, helped by recent news that the company will expand into Japan later this year through a distribution agreement with Japan Lifeline. Current consensus estimated don’t likely account for much, if any, of this new business. This company is cranking. Revenue is seen up 73% in Q2, to $36.9 million. For the full year 2021 revenue is seen up 65% to $190 million. Inspire is still not profitable, but if the growth is good enough that shouldn’t be an issue. I upgraded to buy two weeks ago and am sticking with that rating. BUY
Second-Quarter Earnings Date: Tuesday, May 4
Kornit Digital (KRNT) will report a week from Tuesday. Management just announced the release of the company’s new MAX technology, which includes 3D capabilities that can simulate embroidery, vinyl, and heat transfer in a single digital process. It also announced ActiveLoad Automation, which eases the amount of labor required to load printers. Both of these announcements have been expected, but it’s still nice to see management delivering on the timeline they laid out. These innovations are available on the Kornit Atlas MAX system and will be available as an upgrade for Kornit Atlas systems early next year. BUY
First-Quarter Earnings Date: Tuesday, May 11
Porch Group (PRCH) is looking a little better after bouncing back up to its 200-day line. This week management announced new services for AARP members that include discounts and other personalized help. We have an earnings date of May 17. I’ve kept at buy, but fully acknowledge the stock doesn’t look all that attractive right now. One positive is that PRCH isn’t alone in looking this way – many SPAC IPOs have been through the ringer lately. BUY
First-Quarter Earnings Date: Monday, May 17
Q2 Holdings (QTWO) is going mostly sideways, though there is some upside bias emerging as we approach earnings next week. I think the stock has been overly punished and is a good value now. We’re looking for revenue to have grown 25% to $115.5 million in Q2 and for EPS to have jumped to $0.08 from -$0.09 in the year ago quarter. In 2021 analysts see revenue up 22% to $490 million and adjusted EPS up to $0.29 from $0.08 in 2020. We want to hear more about the pace of implementations, which should be getting far easier to do with the pandemic’s retreat. However, Q2 may have some manpower constraints. BUY
First-Quarter Earnings Date: Wednesday, May 5
Revolve (RVLV) reports next Thursday in what will be the first quarterly report since we jumped into the stock. After a sharp contraction in fiscal 2020 (revenue down 3%) we’re looking for sales to rise 19%, to $690 million, in fiscal 2021. Next week’s report will be the first of fiscal year 2021. In the previous three quarters sales have been down. In the upcoming report we should see revenue up around 8% to $157 million, and for EPS to double to $0.12. From what we’re seeing in the retail world it feels like there should be upside to those numbers. BUY
First-Quarter Earnings Date: Thursday, May 6
Repligen (RGEN) reports on Tuesday. I’m expecting a strong quarter given the strength in the bioprocessing space, the question will just be how the stock reacts. Barring any major fumbles, I would expect to be a buyer on any weakness, should it occur. Revenue in the quarter is seen up around 54% to $117 million while EPS should be up 30% to $0.42. For 2021, guidance should be for around $510 million, representing nearly 40% growth. BUY
First-Quarter Earnings Date: Tuesday, May 4
Sprout Social (SPT) has climbed nicely this week and is back to 15% off the all-time high. Earnings are out next Tuesday, with revenue seen near $40 million (up 30%) and on pace to hit $170 million in 2021 (up 28%). Sprout Social is not profitable and will likely deliver adjusted EPS of -$0.10 in Q2. BUY
Second-Quarter Earnings Date: Tuesday, May 4
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
