Cabot Stock of the Week Issue: April 21, 2025

Stocks are imploding again today after President Trump yet again bashed Fed Chair Jerome Powell. The prospect of Powell being removed from his post only adds to the unrelenting investor anxiety about tariffs causing a recession, a return of high inflation – or both. We may be headed toward a re-test of those post-Liberation Day lows from the beginning of the month, which is not a major surprise but is frustrating given how rough the last few months have been for investors.

Fortunately, most of our stocks are holding up well, with no big losses in the last week despite a 4.3% decline in the S&P 500. In fact, some of our stocks are thriving (see Agnico Eagle Mines (AEM) and Eli Lilly (LLY)). Today, we add another stock that’s going against the grain of the market. It’s a new recommendation from Tyler Laundon to his Cabot Early Opportunities audience. It’s the kind of all-weather holding that can keep its head above water in this volatile market – and perhaps thrive if/when the tariff dam finally breaks.

Here it is, with Tyler’s latest thoughts.

Sprouts Farmers Market (SFM)

Sprouts Farmers Market (SFM) is not the most glamorous stock story out there. At the end of the day, it’s a grocery store chain that’s growing through expansion across the U.S.

Glamour hasn’t worked lately. And a steady-growth, domestic, health-oriented grocery store with extremely low import risk is just what I want right now.

The story hasn’t changed much in the last five months. Sprouts’ stores continue to gain traction because people are trying to eat healthier. Organic, plant-based, gluten-free, paleo, keto and dairy-free foods are becoming increasingly popular.

Sprouts plays right into these trends. Over 70% of products sold are attributed to these types of better-for-you and specialty products.

The company’s stores feature an open layout and focus on fresh produce. There’s a good-sized deli, bakery and meat and seafood area, bulk goods, and, where state law allows, beer and wine.

The chain offers a very inviting store that resembles the farmer’s market experience. Consumers, many of whom are Gen Z, Millennials, educated, in families, and have above-average incomes, continue to come back.

Sprouts also has its own brand, which is growing in popularity (23% of total sales in Q4 2024). E-commerce sales are on the rise, with 14.2% of sales so far in 2024.

Management hosted a headquarters visit in late March in Phoenix, AZ. A few big-picture in-store trends management talked about are strong sales and larger packs of proteins, different types of proteins (bison, venison and goat), and strong made-to-order sandwich business and one-pan meal offerings.

In terms of store growth, Sprouts has 440 stores today and sees potential to get to around 1,200. Around half of new store growth should be in newer markets, with the Northeast and Midwest representing entirely new market opportunities.

E-commerce, of which about 80% is delivery, continues to do well.

The company posted 12.9% revenue growth in 2024 and is expected to grow at about the same clip this year. Adjusted EPS, which grew by 32% to $3.75, should grow 25% to $4.68.

Earnings are due at the end of the month.

As for the stock, SFM came public in 2013 at 18 and soon rallied to 49.5. It then fell well below its IPO price before getting a little boost during the pandemic. The real change began last September when SFM moved through 40, then kept rising until it hit 155 in November. Then SPT was nailed after the Q4 earnings report. The stock was trading in the 130 – 140 range when management spoke at the BofA Consumer & Retail Conference on March 12 and hosted its headquarters visit later in the month. Despite a little wobble around Liberation Day, the stock has moved back above 160 and has acted very well over the last five weeks. BUY

Current Recommendations

Changes Since Last Week: Freshworks (FRSH) Moves from Buy to Hold

No sells again this week, and just one rating change, as Freshworks (FRSH) isn’t off to the greatest start for us, but has a potential lifeline with earnings coming next week, so we split the difference and downgrade it to Hold. Everything else stays the same, with some key earnings reports coming in the next week to 10 days, none more so than Tesla’s (TSLA) Q1 report tomorrow. Meanwhile, four of our names have really taken off in the last couple weeks: Agnico Eagle Mines (AEM), Banco Santander (SAN), Eli Lilly (LLY) and Netflix (NFLX) are all surging for various reasons. There are strong returns to be had out there, despite the sluggish market. And with most (but not all) of the rest of our names keeping their heads above water in recent weeks, the payoff could be immense once the market gets its act together.

Keep some cash on hand to deploy when that does happen. But also, stay invested. Right now, you could make a good case for each of our 20 stocks. Here’s what’s happening with all of them.

Updates

AbbVie (ABBV), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, pulled back 3% ahead of earnings this Friday, April 25. Analysts anticipate 4.9% revenue growth with EPS growth of 5.6%. The stock got knocked backward along with everything else in the first half of April and is trying to establish a bottom, it appears. Perhaps an earnings beat can help right the ship. BUY

Agnico Eagle Mines (AEM), originally recommended by Carl Delfeld in his Cabot Explorer advisory, continues to be one of the best-performing stocks on the market, up another 6% this week to reach new all-time highs above 125! AEM is, of course, benefiting from the flight to gold, as tariff uncertainty has triggered a buying spree in the yellow metal, sending prices up more than 30% year to date to new highs above $3,400 an ounce.

Clif Droke, who also owns AEM in his Cabot Turnaround Letter, wrote last Friday: “Analysts at BMO Capital Markets initiated coverage on Agnico Eagle Mines (AEM) this week, assigning the stock an Outperform rating and setting a share price target of 131. The firm based its optimism for Agnico on the company’s ability to generate ‘significant free cash flow (FCF) due to reliable and high-margin production in secure jurisdictions.’ (Agnico generated strong FCF of $2.14 billion over the past 12 months, with an excellent gross profit margin of 63%.)

“BMO further underscored Agnico’s strong production profile and project pipeline, as well as its future high internal rate of return (IRR) opportunities, including the Malartic mine, the San Nicolas project and the Hope Bay property—all of which BMO expects will improve Agnico’s growth prospects.

“’We believe an investment in Agnico gives reliable and high margin ounces in safe jurisdictions, driving significant free cash flow,’ BMO said in a research note. ‘This is a gold mining equity that we think works.’

“In another major upgrade, analysts at Citi raised Agnico’s share price target to 140 while maintaining a Buy rating, based on stable first-quarter expectations and higher gold prices. When Agnico reports Q1 results next Thursday, Citi forecasts an EBITDA of $1 billion and a per-share earnings of $1.40 (up 84% year-on-year if realized), along with significant free cash flow yield.”

We now have a 25% gain on AEM in just six weeks. BUY

Airbus (EADSF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was roughly flat this week despite some ups and downs. The aircraft maker is set to report earnings on April 30. Carl notes that the stock “stands to gain from China giving Boeing (BA) the cold shoulder and handing arch-rival Airbus a virtual monopoly over civil aircraft exports to China. The Chinese market is expected to account for 20% of global demand over the next two decades. Airbus has been gaining market share by beating Boeing to develop a line of fuel-efficient, mid-sized aircraft that are cheaper for airlines to fly.” BUY

AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, held its gains from the previous week, remaining in the 23 range after a 10% bump last week. There was no news. AST SpaceMobile has the ambitious goal of delivering broadband internet service straight to smartphones all over the world via space-based satellites. The company launched its first five satellites into low-Earth orbit last September, with many more to come this year. The upside for this potentially revolutionary company is immense, especially after the recent dip. BUY

Axsome Therapeutics, Inc. (AXSM), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, bounced back nicely this week, up 4%. There’s been no news, so it’s a good sign that this speculative mid-cap biotech advanced in another down week for the market. The stock is now up more than 23% year to date, so there’s clearly support for ASTS if the market can finally get going. BUY

Banco Santander (SAN), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up another 4% this week after rebounding 14% the previous week. The stock is still shy of its March highs but has recovered most of its early-April losses. It’s the best-performing large-cap European stock this year, up 49% year to date, as the Spain-based bank has been mostly unscathed by the tariff war and has benefitted from the flight from U.S. stocks. We’ll see if that remains the case after it reports earnings on April 30. BUY

BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, pulled back from 98 to 92 after posting a 22% gain the previous week. This Friday’s (April 25) earnings report could determine where the stock goes next. Analysts are expecting 51% sales growth for this hard-charging Chinese electric vehicle behemoth. Carl notes that “the company is gaining traction in Brazil, the world’s sixth-largest auto market. BYD sells no EVs in America but does have a footprint in Morocco and Mexico, two countries with free trade agreements with the U.S. and the EU. BYD projects total vehicle sales for 2025 of 5.5 million.” The stock is up 33% YTD but is trading well below its March highs. This is a great entry point, or you could wait until after the earnings report. BUY

DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, held its gains a week after rising 10%. Shares of the online food delivery giant are still well shy of their mid-February peak but are showing signs of a strong recovery on little news. We have a 43% gain on the stock in eight months. Let’s maintain our Hold rating until shares can push back above their 50-day moving average (189). HOLD

Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was off a tick, from 58 to 57, after a big recovery week last week. The stock is still miles below its mid-February highs above 85. There’s been no news. The fast-expanding drive-through coffee store chain recently added mobile orders to its repertoire. After adding 32 new locations in the fourth quarter of 2024, it now has 982 stores, with a goal of adding more than 150 more this year and getting to 4,000 locations within the next 10 years. This is a great growth story trading at a steep discount right now. BUY

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was up more than 11% this week after its new weight-loss pill demonstrated impressive results in late-stage clinical trials. Called orforglipron, this GLP-1 drug would be the first orally taken weight-loss drug; in Phase III trials, it reduced blood sugar levels in test patients to a range of 1.3% to 1.6% at 40 weeks, compared to just 8% for placebos. That could help pave the way for the drug to gain FDA approval later this year. LLY shares still trade well below their early-March highs but have had a good couple weeks to leave their April lows well in the rear-view mirror. I’m going to leave the stock at Hold with earnings (May 1) on the horizon. HOLD

Freshworks (FRSH), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, is down about 3.5% in the last week and is trading right at its 2025 nadir in the low 12s. A dip below 12 might mean it’s time to sell, but with earnings due out in a week (April 29), there’s some potential for a quick turnaround.

Here’s what Tyler had to say about the stock in his latest update: “Freshworks (FRSH) is well known for offering user-friendly, cost-effective alternatives to enterprise software from companies like Salesforce (CRM), Zendesk (private), and ServiceNow (NOW). If we do see the economy slow down, it’s possible companies will gravitate toward its lower-cost options. On the other hand, management’s recent view of a stable to improving small and mid-sized business market, offset by a little pressure with larger customers, was already factored into the beaten-down stock and likely required an improving economy for growth to accelerate into the back half of the year. Given an uptick in macro concerns, Freshworks feels more at risk than it did a month ago. On the other hand, cloud software stocks sold off hard and have not really bounced yet, so we could still see a nice upside move (even if temporary) upon any positive economic or tariff-related news. On balance, FRSH is a stock that I’m on the fence with so am moving to hold even though we only hold a half-size position.” Let’s do the same, given the amount of backsliding lately. MOVE FROM BUY TO HOLD

Kenvue (KVUE), originally recommended by Clif Droke in his Cabot Turnaround Letter, was unchanged at 23 on no news. The high-yielding Johnson & Johnson spinoff was added to the portfolio two weeks ago as a safety play, regardless of what happens to the economy, since people always need most of the things it makes – Band-Aids, Benadryl, Tylenol, Nicorette gum, Listerine, etc. It’s an all-weather dividend stock that should sustain us through tariff turbulence. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, was down from 53 to 52 on no news. A business development company that pays a high-yielding (7.9%) monthly dividend, MAIN holds plenty of appeal in volatile markets like the current one. As Tom wrote in his latest update, “Main’s portfolio of companies not only makes high-interest loans, but it also takes equity stakes. The equity stakes are the primary reason the total returns have been better than just about every other BDC. If the economy hangs on, the BDC should continue to deliver, but if a slowing economy becomes an increasing problem, we’ll have to reevaluate.” BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, got a nice 7% boost after reporting yet another strong quarter last week. Earnings per share of $6.61 topped analyst estimates ($5.66) by almost a full dollar, while revenue improved 13% year over year. Perhaps most importantly, the global streaming giant reaffirmed its full-year revenue guidance of between $43.5 billion and $44.5 billion. Shows and movies aren’t subject to tariffs, and the company seems unbothered by the potential for a global economic slowdown. As a result, 19 different brokerage firms, including Morgan Stanley, have raised their price targets on NFLX since earnings, with a median target of 1,147. At a time when the Magnificent 7 have been struggling mightily, NFLX is perhaps the surest bet among mega-cap tech stocks in this market. BUY

Planet Fitness (PLNT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was down about 4.5% in its first week in our portfolio. There was no major news, although Guggenheim raised its price target on the stock from 105 to 110. The firm is the biggest national fitness center player, with 2,722 gyms at year-end that cater to people who want to use the gym ... but aren’t exactly fanatics about fitness and don’t want to pay for some premium offerings seen among many high-end local competitors. And after a rough few years during Covid, the company is showing signs of life, with sales up 10% last year, EBITDA up 12% and memberships up 5%. Meanwhile, PLNT shares are 15% off their late-January highs. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was flat after a nice recovery the previous week. A downgrade from JPMorgan from Buy to Neutral on the stock didn’t damage the stock much, drowned out by the wave of analyst upgrades in the last couple months. This remains a great way to play strength in the fast-growing Southeast Asian markets, with each of its three business segments (Shopee – e-commerce; SeaMoney – fintech; Garena – gaming and entertainment) generating north of 20% revenue growth. And yet, the stock trades at roughly a third of its 2021 highs. I love the upside, even after more than doubling in the last year. BUY

Sirius XM Holdings (SIRI), originally recommended by Clif Droke in his Cabot Turnaround Letter, was unchanged this week on no news. The next big catalyst could be the May 1 earnings report. Until then, expect shares of this satellite radio company to hold serve, unless the market completely deteriorates again. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is down 9% ahead of the pivotal first-quarter earnings report tomorrow (April 22). The stock is trading right near its 2025 lows. Earnings expectations have rarely been lower for the company: analysts anticipate 0.5% sales growth and a 6.6% EPS decline. The company has fallen short of earnings estimates in three of the last four quarters, which is perhaps adding to the pessimism this time around. Then again, this is the first full quarter since CEO Elon Musk took over as part of the Trump administration’s cabinet and triggered Tesla boycotts and protests across the country due to his controversial actions. So, we’ll see what happens. Another implosion after earnings tomorrow and it may be time to reassess TSLA’s place in the portfolio after more than 13 glorious years. An earnings beat, even a narrow one, could send shares soaring again. Stay tuned. HOLD

Waste Management (WM), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, pulled back slightly but has generally been a steadying force since we added it to the portfolio earlier this month. The company reports earnings a week from today, April 28. As Tom notes, “You can depend on garbage. As the market plunges and uncertainty swirls, investors are attracted to safety, and the relative performance of stocks like WM tends to thrive. Of course, this stock also has a good track record in bull markets. It’s a good holding if the market turns around too.” BUY

If you have any questions, don’t hesitate to email me at chris@cabotwealth.com.

Here, too, is the latest episode of Cabot Street Check, the weekly podcast I host with my colleague Brad Simmerman. This week we celebrated our 100^th episode, and talked tariffs, the market, interest rates and the potential impact of earnings season.

The next Cabot Stock of the Week issue will be published on April 28, 2025.

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