The U.S. economy is growing more quickly than before the pandemic, both the S&P 500 and S&P 600 are up modestly over the past week and, so far, this earnings season has been a massive improvement over the train wreck of the first-quarter reporting season.
There are, of course, a plethora of issues. The GDP numbers represent anything but a normal economy. The Delta variant is sparking concerns over transmission and elevated tempers around mask wearing. And prices are not going down.
Still, on balance it’s hard to feel bearish right now. On the one hand if things continue to go OK the economy will keep improving, theoretically supporting stocks. And if they turn south, the Fed and Treasury are there to support us all, also theoretically supporting stocks! I’m not really joking.
In terms of our stocks, after a bumpy spring things have smoothed out and the last week has been mostly good. While the average gain across the portfolio is only a couple percentage points we have two stocks, Repligen (RGEN) and Fiverr (FVRR), up more than 10%, and a third – Avalara (AVLR) – that came close. No stock is down more than 5%.
The biggest news from our portfolio is the Repligen earnings report, which I detailed in a Special Bulletin earlier in the week. That stock looks fantastic.
Next week we have six more earnings reports, starting with Inspire Medical (INSP) and Sprout Social (SPT) on Tuesday. It’s going to be an intense week, so enjoy this weekend and get ready!
Recent Changes
Fiverr (FVRR) Moves to BUY
Updates
Accolade (ACCD) hosted a deep dive webinar earlier this week during which management walked through exactly how the company integrates data into the patient experience and then leverages those insights to address areas where patients are most vulnerable. Over time the company will likely continue with these types of education efforts since its ability to use data grows as the platform ingests more. They are a great way to illustrate the clear ROI for employers. The stock is off modestly this week. BUY
Earnings: Done
Arena Pharmaceuticals (ARNA) made a splash this week with news of a strategic collaboration with Aristea Therapeutics to advance that company’s RIST4721 compound to treat multiple indications focused on dermatology and gastroenterology. Given that Arena’s current pipeline skews toward similar indications this makes sense. More specifically, Aristea’s RIST4721 is an oral antagonist of chemokine receptor 2 being developed for the treatment of palmoplantar pustulosis (PPP) and other neutrophil-mediated diseases, including hidradenitis suppurativa (HS). Arena will pay $60 million upfront, which gives the company the option to acquire Aristea upon completion of a Phase 2b study evaluating RIST4721 in PPP. That study is funded by Aristea. Stepping back, analysts aren’t likely to attribute much value to this mid-stage asset, but if it advances to Phase 3 studies and Arena acquires it then that could move the needle. It seems like an interesting development since, among other reasons, there are no approved treatments for PPP, which affects around 470,000 people in the U.S., Europe and Japan. Abbvie’s Humuira is approved for HS and is expected to be treating around 800,000 patients by 2028, so this asset could put a dent in that market as well. BUY
Avalara (AVLR) is looking strong. Shares are up 8% since last Wednesday’s close and +14% over the last two weeks. Current Q2 consensus calls for revenue of $154.3 million (up 32%) and adjusted EPS of -$0.10. Full-year revenue is seen around $650 million (up 30%) and adjusted EPS of -$0.25. I expect it will do better. BUY
Earnings: Thursday, August 5
Cerence (CRNC) had a quiet week and we still don’t have an earnings report. Shares are roughly flat compared to a week ago. BUY
Everbridge (EVBG) is creeping back toward its early-July high near 148. Earnings are a week from Monday. Revenue is seen growing by 28% to $83.9 million while adjusted EPS is seen at around -$0.23. For full-year 2021 revenue is seen up 33% to $360 million while adjusted EPS is seen around -$0.17 (down from -$0.01 in 2020). BUY
Earnings: Monday, August 9
Funko (FNKO) was sold a week ago and is down a few percentage points since. No new fundamental news. Earnings will be reported on Thursday, August 5. SOLD
Fiverr (FVRR) broke out to multi-month highs yesterday after jumping above the 257 level last touched in late June. Shares are now “cleared” for a run into the 300 price area in my view, provided earnings come in above expectations (“beat and raise” is a must these days). Revenue is seen up 59% to $74.8 million while adjusted EPS is seen up 40% to $0.14. For 2021 revenue is expected to grow 64% to $310 million while EPS should be up 18% to $0.39. I think the value of Fiverr’s platform is back in focus as the Delta variant circulates. It’s an aggressive move that I may regret, but I’m upgrading to buy for the risk-tolerant investor. Shares are up 10% over the last week. BUY
Earnings: Thursday, August 5
Inspire Medical Systems (INSP) is flat over the last week as investors digest all the news around reimbursement rates that I’ve discussed in our last two Weekly Updates. Combing through the analyst coverage of what has transpired I see Piper lowered its price target (which at 235 remains well above INSP’s current price of 178) while both Bank Of America and JPMorgan have held steady. No new developments. Still a buy. BUY
Earnings: Tuesday, August 3
Kornit Digital (KRNT) recently announced a strategic partnership with online visual communications and design platform Canva, which makes it easy for users to make social media graphics, posters, apparel and videos. Kornit’s operating system will become one of Canva’s certified integration partners so that users who chose to design and fulfill orders through Canva can route them through Kornit’s global fulfillment network. Canva currently serves over 55 million private and enterprise users around the world. We should hear more about this when Kornit reports on August 10. Shares remain on the verge of breaking out to fresh highs above 129. BUY
Earnings: Tuesday, August 10
On24 (ONTF) is still bouncing around and is likely to continue to do so until earnings come out and investors get an update on the trends. Analysts are modeling Q2 growth of 29% to $51 million and bottom-line break even. Expected 2021 revenue growth is 34% ($210 million). Adjusted EPS is seen around -$0.03 in 2021, then turning positive in 2022. As mentioned previously I expect sales teams will continue to need the flexibility of digital solutions like On24 given lingering COVID cases. BUY
Earnings: Tuesday, August 10
Porch Group (PRCH) is up a modest 3% over the past week on no news. Earnings should be out in the first two weeks of August, but no date has been set yet. BUY
Q2 Holdings (QTWO) is flat over the last week as investors continue to eye earnings on August 4. Key to the stock’s trajectory will be the pace of new bookings, which have slowed since the pandemic. A jump is needed to breathe new life into the stock. Analysts currently see revenue up 26% to $122.8 million in Q2 and up 24% to $500 million in 2021. It’s the expected 20% rate of growth in 2022 that we are looking for management to hint as being too conservative. We’ll hear what’s up next Wednesday. BUY
Earnings: Wednesday, August 4
Revolve (RVLV) will report next Wednesday and with the stock trading near all-time highs and expectations elevated we’ll keep at hold through the event. We will likely need a solid beat and raise, with indications that the surge in buying activity as the pandemic has eased has merit. Consensus estimates call for revenue of $198 million (up 39%) and adjusted EPS of $0.21 (up 5%). HOLD
Earnings: Wednesday, August 4
Repligen (RGEN) reported a blockbuster earnings report Tuesday morning and the stock has been on fire since, rising 10% Tuesday and another 4% yesterday. That brings the total gain from last Wednesday’s close to 17%. Not bad. I detailed the earnings report in a Special Bulletin Tuesday and have nothing to add today. You can still buy here, though don’t be surprised if RGEN takes a few weeks to consolidate the recent gains. BUY
Earnings: Done
Sprout Social (SPT) reports on Tuesday and we’re looking for revenue growth of 37% to $43.1 million and adjusted EPS of -$0.10, an improvement of a penny. There’s no new news and with shares just 4% off the all-time high we clearly need a solid report to keep SPT headed higher. HOLD
Earnings: Tuesday, August 3
Thunderbird Entertainment (THBRF, TBRD.CA) hasn’t revealed an earnings date yet. There’s little news on this stock given that it is so small and trades on Canadian exchanges, but don’t let that fool you into thinking there’s no potential. Shares have been digesting a big run in 2020 and the first half of 2021. I expect they’ll get strong again before long. Recall that Thunderbird is a media production and distribution company that creates content for major streamers, including Netflix, Disney+, Apple TV+ and Discovery. It is known for producing content for kids, which is of strategic importance for streamers given that families tend to stick with platforms that keep kids happy. BUY
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
