This week has been all about earnings, even though we’ve only heard from one company in our portfolio. That company is Repligen (RGEN), which reported this morning (the stock is reacting well). Notes on that report are below.
Bigger picture, what has jumped out to me this week is the continued impressive growth from Microsoft (MSFT) and Alphabet (GOOG) in the tech world, and Thermo-Fisher (TMO) in MedTech. There’s a lot more that’s happened out there of course, but just flagging three things of interest to me and stocks I wouldn’t hesitate to buy now (and on dips), these guys floated to the surface.
I’m also continuing to watch the relative performance of large-cap sectors as compared to their small-cap counterparts as, generally speaking, large caps are performing better. One would think there is a lurking catch-up period where small caps should start to shine given what we see going on in the economy. But so far, that isn’t the reality.
The S&P 500 has recently recovered from a modest dip and is back to all-time highs while the S&P 600 Index hasn’t made a new high since March. Let’s go!
Back to our portfolio, next week is going to be crazy as earnings reports will pour in. I’ll have updates as we go. Below are a few notes on what I’m seeing and what analysts are expecting from our portfolio holdings.
Recent Changes
None
Updates
Accolade (ACCD) was flat over the last week on no new news. We’re continuing to evaluate our position in this stock. HOLD
Earnings: Done
Arena Pharmaceuticals (ARNA) is off 9% over the past week, underperforming the iShares Biotech ETF (IBB). We’re sitting on this position and waiting for topline data from the pivotal Phase 3 ELEVATE UC52 and 12 studies, due out in Q1 2022. Earnings (more like a business update) come out next Thursday. BUY
Announced Earnings Date: November 4
Avalara (AVLR) is flat this week but has an earnings date of next Thursday, so expectations are rising. The stock is trading below its historical premium valuation, and with 30% quarterly growth still on the table, with upside coming out of the pandemic, there’s potential for a sustained uptick in business activity. Keeping at buy, and admittedly will be very disappointed if AVLR doesn’t pull through for us. BUY
Announced Earnings Date: November 4
Cerence (CRNC) continues to look better and is up 6% over the past week. Still, shares are well off the highs (roughly 30% below) and the stock’s reaction after the last three earnings reports has been variable enough to keep us at hold until we have more to work with. We were up 99% as of yesterday’s close, slightly above 100% as of 11 am ET today. HOLD
CS DISCO (LAW) will report earnings the week after next, on November 9. It’s been another quiet week, which is not unusual given earnings coming up. In many ways, CS DISCO is to the legal market what Bill.com (BILL) is to back-office operations automation and Avalara (AVLR) is to sales tax automation. I think it’s a long-term winner. BUY
Announced Earnings Date: November 9
Everbridge (EVBG) will report the week after next as well, on November 9. The stock was flat this week on no new news. In the upcoming Q3 report we’re looking for revenue of $94 million (up 32%) and adjusted EPS of -$0.14. For full-year 2021, analysts are looking for revenue of $360 million (up 33%) and adjusted EPS of $0.01 (up from -$0.04 in 2020). Management recently announced Everbridge will power nationwide public alert systems for Spain and the Netherlands. BUY
Announced Earnings Date: November 9
Fiverr (FVRR) will report Q3 results on Wednesday, November 10. We are looking for revenue in the quarter up 36% to $71 million and adjusted EPS of $0.02. For the full year we’re looking for guidance to suggest consensus of $290 million (up 53%) is too conservative and adjusted EPS of $0.02 is low. Our ongoing thesis here (we’re not alone) is that management was a little too conservative on the Q2 call. This was supported by comments from management weeks after the call.
It’s worth noting that competitor Upwork (UPWK) just reported yesterday, and the results were above expectations and management raised Q4 guidance. Like Fiverr, Upwork is also benefiting from the shift to remote and freelance work, a transition that accelerated due to the pandemic. Upwork said gross services volume (GSV) per active client was up 12% to $4,375 in the quarter and that the large number of clients acquired during the pandemic are maturing into higher-spending clients. There is some noise in there as take rates can vary depending on freelancer mix, and that, combined with Upwork’s lower EBITDA guidance (because it is spending 2X more in Q4 than Q3 on marketing) may explain why shares of that company are trading lower today. Big picture, I think both UPWK and FVRR can work despite some variability in results as pandemic clients mature, so keeping FVRR at buy. BUY
Announced Earnings Date: November 10
Inspire Medical Systems (INSP) is up 4% this week and 10% over the past two weeks. Management reports next Tuesday, on November 2. We are looking for revenue up 55% to $55.7 million and adjusted EPS of -$0.62. For the full-year 2021, consensus is calling for revenue to jump 82% to $210 million and for adjusted EPS of -2.25 (management is investing in growth, not for profits). My honest assessment here is that management will continue its cadence of beat-and-raise performance, sending INSP to new highs after the report. In four of the last five instances shares have traded higher after a quarterly report. Aggressive investors and/or those that have yet to take a position can add a few shares ahead of earnings, but those that are already up meaningfully may choose to just sit pat. We’re up 345% since we jumped in, so my official rating is hold. HOLD
Announced Earnings Date: November 2
JOANN (JOAN) has been a thorn in my side for most of our short relationship and the stock’s 8% decline this week hasn’t done anything to reduce the irritation. That said, there’s still potential here as JOANN is a category leader, the stock is cheap and at the current price there is a lot of bad news priced in. It shouldn’t take much to reignite interest in a small-cap value name that, on a very basic and practical level, should have much, much brighter days ahead. Mid-October retail numbers show hobby and consumer electronics spending was up 22.2% as compared to the same week in 2019. Might be some Halloween spending as well as early holiday spending in there. The stock yields 3.75%. BUY
Kornit Digital (KRNT) continues its sneaky upward slide and is on the verge of breaking out to new highs. The company this week announced a new strategic advisor and eventual Board member in Stef Strack. Ms. Strack is founder and CEO of Voice in Sport (digital sports company for women athletes), was previously CEO of fashion house Rag & Bone, and held various leadership positions at Nike. She will contribute insights to help develop and execute strategies related to digital transformation, product, and direct-to-consumer. In the upcoming quarterly report, we’re looking for revenue to be up 55% to $89.2 million and for adjusted EPS of $0.24 (up 33%). BUY
Announced Earnings Date: November 10
Rani Therapeutics (RANI) continues to look strong, and a 13% jump yesterday has pushed our paper gain above 30% (RANI is up again today). Gains can be fleeting with a stock like this, however, as it is a relatively thinly traded name (also a recent IPO) and will jump around on a daily and weekly basis. Rani reported quarterly results on September 13, and we don’t have a date yet for the next update, which I expect will be later in November. As we move into the second half of 2022 we should get data on the repeat dosing of RT-101. Also, several other programs will enter the clinic later in 2022 and into 2023, meaning a catalyst-rich 2023. In the meantime, I expect investors will focus on any commentary around Rani’s progress getting an initial drug-agnostic safety investigational device exemption (IDE) for the RaniPill, which has the potential to reduce the costs and timeline for each program since, if approved, it would only need to conduct clinical studies for each drug and not the pill. BUY
Revolve (RVLV) was added this past spring (April) and we’re up a little more than 50% since. Earnings will be out next Wednesday. We’re looking for quarterly revenue of $216 million (+43%) and adjusted EPS of $0.15. Full-year consensus estimates are calling for revenue up 41% to $820 million and adjusted EPS up 32% to $1.04. HOLD
Announced Earnings Date: November 3
Repligen (RGEN) reported Q3 results this morning that surpassed expectations. Revenue was up 89% to $178.2 million (organic revenue growth was 77%) versus consensus of $170.9 million. Revenue from acquisitions made over the last 12 months contributed 6% of revenue. Revenue from COVID programs contributed 27% of revenue. Revenue from gene therapy customers was up 50%. Adjusted EPS grew from $0.40 in Q3 2020 to $0.78 in Q3 2021. Full-year guidance is increased to a range of $655 - $665 (+79% - 82%) million from $625 - $645 million (+77% - 80%).
Listening to management speak this morning it’s clear they feel good about where the business is, both with and without COVID. Big picture, management discussed how the bioprocessing market is growing rapidly enough where Repligen sees a long runway of 15% to 30% annual growth (well above the market). It also sees COVID revenue as being fairly sticky, but also said it is just responding to customer demand as Repligen itself isn’t in the driver seat for COVID products. If manufacturers need vaccine, they are there to help. One analyst asked about undeveloped market demand, and the CEO said they suspect some of that is being reflected in orders they already have that are nine months out. Add it all up and I think RGEN continues to be a great fit for us. Shares are up over 5% today. It’s hard to say if this is going to drive the stock to new highs in the near term, but with the solid report from Thermo-Fisher (TMO), with COVID tailwinds, it feels like RGEN could go higher. Long term, I’m quite confident the stock will continue to work. For those with sizeable positions I think RGEN remains a hold, whereas if you don’t yet own any, I could see taking a starter position here and looking to be an opportunistic buyer down the road. HOLD
Earnings: DONE
Sprout Social (SPT) slid 4% this week and reports next Tuesday. We’re looking for revenue of $47.4 million (up 41%) and adjusted EPS of -$0.08. Full-year consensus calls for revenue of $180 million (+35%) and adjusted EPS of -$0.21 (versus $0.40 in 2020). The past two weeks haven’t been great for social media companies, in large part due to challenges some face putting ads in front of consumers with new privacy features in iOS. However, I don’t think that changes the landscape for software that helps companies manage their social media spending, engagement and analytics. BUY
Announced Earnings Date: November 2
Thunderbird Entertainment (THBRF, TBRD.CA) reported Q4 and full-year fiscal 2021 results last week. Revenue was up 24% to $26.1 million, adjusted EBITDA was down 21% to $2.3 million and free cash flow was up 85% to $4.8 million. For the full year, revenue was up 37% to $111.5 million, adjusted EBITDA was up 26% to $19.6 million and free cash flow was up 68% to $12.3 million. As we move forward, we’re looking for more updates on the company’s consumer products division, which should see significant growth with industry veteran Richard Goldsmith’s leadership. The stock is trading 9% off its recent high. BUY
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
| Stock Name | Date Bought | Price Bought | Price on 10/28/21 | Profit | Rating |
| Accolade (ACCD) | 8/6/20 | 40 | 40 | 0% | Hold |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 58 | 49% | Buy |
| Avalara (AVLR) | 2/1/19 | 40 | 180 | 351% | Buy |
| Cerence (CRNC) | 10/1/20 | 50 | 104 | 108% | Hold |
| CS Disco (LAW) | 9/2/21 | 57 | 52 | -9% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 155 | 899% | Buy |
| Fiverr Intl (FVRR) | 3/5/20 | 32 | 175 | 442% | Buy |
| Inspire Medical (INSP) | 10/4/19 | 59 | 260 | 344% | Hold |
| JOANN (JOAN) | 8/6/21 | 15 | 11 | -32% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 165 | 62% | Buy |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 25 | 46% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 285 | 381% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 74 | 64% | Hold |
| Sprout Social (SPT) | 9/3/20 | 36 | 123 | 238% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 4.0 | 3% | Buy |