U.S. markets were doused with a bucket of cold water this morning after a Chinese company called DeepSeek found ways to replicate the most advanced artificial intelligence features at a fraction of the price.
So the S&P and Nasdaq are down in the 2-3% range today, while some of the most high-profile U.S.-based AI companies – Nvidia (NVDA), Super Micro Computer (SMCI), our own Broadcom (AVGO) – are enduring much deeper selloffs. Of course, it’s only one day, and it’s possible the market needs more time to digest the Chinese AI news before rendering a more level-headed reaction (Wall Street is never level-headed in the moment). But it does throw the brakes on a market rally that had spread to nearly every sector in the last couple weeks. And with earnings season in full swing and the Fed set to speak later this week, it could make for quite the tumultuous week for U.S. investors.
So today, we look outside U.S. borders to a Dutch company with a global reach. Its name hasn’t been in the news nearly as much as its chief U.S. rival – and that’s a good thing. In fact, it’s perhaps the biggest reason to buy it now. Our Carl Delfeld added the company to his Cabot Explorer portfolio a couple months back.
Here are his latest thoughts.
Airbus (EADSF)
It’s been a rough year for Boeing (BA). Actually, it’s been a rough few years.
Boeing has lost money every year since 2018, when a series of crashes and near-crashes tarnished its brand for quality and reliability. Boeing stock surged more than 600% from 2010 to 2019. But since then, performance has deteriorated. The company has suffered nearly $40 billion in losses since 2019. Ratings agencies recently cut Boeing’s credit to just above “junk” status. Boeing needs to rebuild its reputation which has been battered by two fatal accidents in 2018 and 2019 and severe problems with a fuselage panel this past January. FAA approval for two new versions of the 737 Max is on hold.
Boeing’s defense unit has also taken big write-downs on several Pentagon contracts, including one to convert two 747 jumbo jets into new Air Force One jets. The unit is also part of a joint venture that built the Air Force’s V-22 Osprey, which suffered a crash, killing eight.
Boeing’s troubles are Airbus’s opportunity. Airbus, incorporated in the Netherlands but based in Toulouse, France, is making planes as fast as it can and has a backlog of more than 8,600 orders to fill. In 2023, Airbus beat Boeing for the fifth straight year in the orders and deliveries race, with 2,094 net orders and 735 delivered planes. I visited its facilities recently and while it shares some of Boeing’s supply chain challenges, Airbus has a clear edge right now.
Airbus just reported a 28% quarterly increase in net profit as it gained market share by beating Boeing to develop a line of fuel-efficient, mid-sized aircraft that are cheaper for airlines to fly. Airbus is benefiting from its decision to deliver the fuel-efficient, ready-to-launch A321neo, a single-aisle aircraft with 180 to 230 seats. Fuel is one of the airlines’ biggest costs. Airbus’s new A321XLR model will also enable airlines to use cheaper narrow-body jets on long-haul flights.
Along with Boeing, Airbus is one of only two manufacturers that make the full-size commercial jets needed by the world’s airline industry. China’s COMAC is making gains but is probably a decade away from being a competitive rival.
While Boeing’s stock is imploding, down more than 16% in the last year, Airbus’s (which trades over the counter as an American Depositary Receipt under the ticker symbol EADSF) is surging, up more than 23% in the last six months.
We wish Boeing the best, but Airbus will likely gain market share and outperform in the interim. In fact, it’s already happening. BUY
EADSF | Revenue and Earnings | |||||
Forward P/E: 23.4 | Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | ||
Current P/E: 40.7 | (bil) | (vs yr-ago-qtr) | ($) | (vs yr-ago-qtr) | ||
Profit Margin (latest qtr) 4.84% | Latest quarter | 17.5 | 11% | 0.37 | 34% | |
Debt Ratio: 114% | One quarter ago | 17.1 | -1% | 0.21 | -56% | |
Dividend: $1.92 | Two quarters ago | 13.8 | 9% | 0.16 | -18% | |
Dividend Yield: 1.10% | Three quarters ago | 25.3 | 14% | 0.58 | 8% |
Current Recommendations
Date Bought | Price Bought | Price 1/27/25 | Profit | Rating |
AbbVie Inc. (ABBV) | 1/7/25 | 180 | -2% | Buy |
Airbus (EADSF) | NEW | -- | --% | Buy |
American Airlines (AAL) | 1/7/25 | 18 | -3% | Buy |
AST SpaceMobile (ASTS) | 7/10/24 | 12 | 61% | Buy |
Aviva plc (AVVIY) | 6/21/23 | 10 | 28% | Buy |
Blackstone Inc. (BX) | 8/1/23 | 105 | 72% | Buy |
Broadcom Inc. (AVGO) | 8/8/23 | 88 | 127% | Hold Half |
BYD Co. Ltd. (BYDDY) | 12/17/24 | 69 | 3% | Buy |
Capital One Financial (COF) | 10/1/24 | 148 | 36% | Buy |
Centuri Holdings, Inc. (CTRI) | 10/22/24 | 19 | 26% | Buy |
Constellation Energy (CEG) | 9/4/24 | 179 | 55% | Hold |
Dexcom, Inc. (DXCM) | 12/10/24 | 70 | 25% | Buy |
DoorDash, Inc. (DASH) | 8/13/24 | 126 | 44% | Buy |
Dutch Bros Inc. (BROS) | 8/20/24 | 31 | 90% | Buy |
Eli Lilly and Company (LLY) | 3/21/23 | 331 | 143% | Hold |
Flutter Entertainment (FLUT) | 9/24/24 | 229 | 15% | Buy |
GoDaddy (GDDY) | 5/7/24 | 130 | 57% | Buy |
Intuitive Surgical (ISRG) | 3/26/24 | 395 | 46% | Buy |
Klaviyo, Inc. (KVYO) | 10/15/24 | 37 | 16% | Buy |
Kyndryl Holdings, Inc. (KD) | 1/2/25 | 35 | 8% | Buy |
Main Street Capital Corp. (MAIN) | 3/19/24 | 46 | 32% | Buy |
Microsoft (MSFT) | 3/7/23 | 256 | 70% | Buy |
Netflix, Inc. (NFLX) | 2/27/24 | 599 | 62% | Buy |
On Holding (ONON) | 6/4/24 | 41 | 44% | Buy |
Primo Brands (PRMB) | 12/24/24 | 31 | 5% | Sell |
Reddit, Inc. (RDDT) | 1/22/25 | 186 | -3% | Buy |
Sea Limited (SE) | 3/5/24 | 55 | 110% | Buy |
Tesla (TSLA) | 12/29/11 | 2 | 21918% | Buy |
Changes Since Last Week:
Constellation Energy Corp. (CEG) Moves from Buy to Hold
Primo Brands (PRMB) Moves from Buy to Sell
Primo Brands (PRMB) becomes our first “victim” of 2025. The mid-cap water stock didn’t do anything wrong per se – it’s actually up about 5% in the five weeks since we added it to the portfolio. It just hasn’t budged much and the upside seems limited, and in an overcrowded portfolio, that was enough to get tossed aside.
Most of the rest of our portfolio is acting well, as even those that pulled back this week did so on the heels of big rallies the previous weeks. There are earnings results galore, with many more to come this week and next. So let’s dig into all of it.
Updates
AbbVie (ABBV), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was down slightly for a third straight week, though it’s possible this Friday’s (January 31) earnings report can help turn the tide. Analysts are looking for 3.6% revenue growth with 7% EPS growth. Estimates have been pretty accurate of late, with AbbVie coming in almost on the number on EPS estimates in each of the last four quarters. Perhaps even a slight beat will stop the recent bleeding. The 3.9% yield is a nice perk even as the stock has been going sideways. BUY
American Airlines (AAL), originally recommended by Clif Droke in his Cabot Turnaround Letter, got hit hard after reporting earnings last Thursday, falling more than 9%. Were the earnings bad? Not really. But first-quarter 2025 guidance came in a bit light. Fourth-quarter revenue for the airline was up 5% year over year, and EPS of 86 cents beat estimates by 30%. The company also managed to reduce its debt by $15 billion a year ahead of its stated schedule. “However,” as Clif notes in last Friday’s update, “it was the company’s downbeat guidance that rattled the shares on Thursday, as management said it expects to report a loss of around 30 cents per share in this year’s Q1 as present demand trends, fuel costs and measures to realign its business strategy weigh on American’s bottom line.
“But for full-year 2025, analysts are forecasting a 25% EPS increase as the company executes further on its plans to bring back lost corporate customers this year, and American itself expects growth to resume after the first quarter. Accordingly, I’m maintaining a Hold rating on the shares in the portfolio.” Having added AAL to the Stock of the Week portfolio more recently than Clif, we’ve maintained a Buy rating on AAL. Let’s keep it that way, as I believe the selling was overdone after what was a mostly encouraging earnings report. BUY
AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, was off another 7% in the last week and has dipped below 20 for the first time since August. A $400 million offering of convertible senior notes due in 2032 is, at least in the short term, diluting the value of existing shares, prompting some selling. But it’s likely a necessary evil for a company that is still mostly pre-revenue and could attract buyers in the not-too-distant future. Meanwhile, space stocks had a (fleeting) moment last week after President Donald Trump said he plans to send astronauts to Mars. A “pro-space” president, combined with having SpaceX CEO Elon Musk in his cabinet, is seen as bullish for space stocks as a whole, including ASTS. And with the company making strides toward its ambitious goal of creating the first space-based, straight-to-smartphone internet connection via low-Earth-orbit satellites, the upside remains immense despite the recent wobbles in the share price. BUY
Aviva plc (AVVIY), originally recommended by Bruce Kaser in Cabot Value Investor, has finalized its agreement to buy Direct Line Insurance Group for 3.7 billion pounds ($4.65 billion), creating the largest motor insurance company in the United Kingdom. The deal is expected to be completed by mid-2025. AVVIY shares were down about 8% after the company’s Direct Line takeover bid was first reported on November 27, but they’ve come roaring back of late and are trading at three-month highs as of this writing. The Direct Line addition should give this U.K.-based insurance and investment management firm a market cap of $21.2 billion, up from its current $17 billion. That gives AVVIY shares 25% upside from their current price. The 6.9% dividend yield adds to our total return. BUY
Blackstone Inc. (BX), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was unchanged last week ahead of this Thursday’s (January 30) earnings report. Analysts anticipate 50.4% revenue growth with 31.5% EPS growth, so the bar is high. BX shares are up more than 5% already in January, so it’s possible the big quarter is baked into the share price. Regardless, Blackstone’s status as a “Bull Market Stock” (Mike’s term) means it should continue to thrive – and outperform – as long as the bull market remains intact. BUY
Broadcom Inc. (AVGO), originally recommended by Tom Hutchinson in Cabot Dividend Investor, is imploding today, down more than 16% in early Monday trading thanks to the aforementioned Chinese AI “threat.” After a huge earnings-fueled run-up in early December, we sold half our position to book profits on a stock that had nearly tripled since we added it to the portfolio in August 2023. But it has now given up a chunk of those gains and is trading right at its 50-day moving average. Let’s see how the stock behaves in the coming days, as this selloff of all U.S. AI plays to start the week may be overdone. Keeping at Hold, but any further weakness could prompt us to Sell. HOLD HALF
BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was flat this week on no news. A week ago the company announced plans to complete a new $1 billion plant in Indonesia as it expands beyond China, where it does 90% of its business currently. The Indonesian plant is a chance to gain a foothold in Southeast Asia, one of the world’s fastest-growing regions. BUY
Capital One Financial Group (COF), originally recommended by yours truly in the Growth/Income portfolio of my Cabot Value Investor advisory, got a nice boost from earnings last week, rising 5% after reporting EPS of $3.09 in the fourth quarter, outpacing estimates of $2.80 and marking a 38% improvement from the same quarter a year ago. Higher interest income and a bump in loans and deposits, resulting from the Fed finally cutting interest rates, were largely responsible for the big quarter. For the year, adjusted EPS came in at $13.96, ahead of the $13.53 estimate and 12% higher than in 2023. Revenues improved 6% in 2024, to $39.1 billion.
Of course, the bigger catalyst for COF shares – a $35.3 billion merger with Discover Financial (DFS), which would create the largest credit card issuer in the U.S. and the sixth-largest bank by assets – is still awaiting approval, which the company expects to happen sometime this year. COF shares are up 35% in the last six months, partly in anticipation of the Discover deal closing. BUY
Centuri Holdings Inc. (CTRI), originally recommended by Clif Droke in his Cabot Turnaround Letter, has been on a bit of a rollercoaster in the last week, but net-net is up about 2% to reach new six-month highs above 23. There was no news, so the stock is likely mimicking the up-and-down movement in the market this past week. Shares of the small-cap utility have been on an upward swing since new CEO Christian Brown took over in early December – a move that prompted famed investor Carl Icahn to up his stake in CTRI by 38%. BUY
Constellation Energy Corporation (CEG), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, is imploding today along with everything else that’s AI-adjacent, falling nearly 20% in Monday trading. Constellation is a nuclear energy company that caught Wall Street’s attention when it inked a massive deal with Microsoft to power its AI data centers by reopening Three Mile Island in Pennsylvania. The stock was up 13% last week after announcing it was acquiring natural gas and geothermal electricity giant Calpine Corp. for $16.4 billion, making it the largest independent electricity provider in the country. But the China AI news has erased those gains in one fell swoop. Still, CEG remains a big winner for us in a short amount of time, and the China AI news doesn’t negate the two aforementioned major deals Constellation has signed of late. So the guess here is that today’s selloff is overdone. But, until the selling stops, it makes sense to downgrade CEG to Hold. MOVE FROM BUY TO HOLD
DexCom, Inc. (DXCM), originally recommended by Clif Droke in his Cabot Turnaround Letter, kept tacking on after a 7.5% advance last week, rising from 86 to 88 on no news. The stock is likely still riding the momentum of an upgrade from Baird earlier this month in which the firm raised its price target on the stock from 86 to 104. The firm said its rating hike is based on DexCom’s potential for U.S. sales growth to surge back to the low-to-mid teens by mid-2025, plus growing confidence that the company’s in-the-works G7 15-day sensor will be approved by the Food and Drug Administration (FDA) for use in hospitals soon. Also, DexCom recently released preliminary, unaudited Q4 earnings results, which were solid. Revenue improved 8% for the quarter and 11% for the year, and the company expects revenue to accelerate to 14% growth this year. Official results won’t be released until February 13. BUY
DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was up another 2% this week as Bank of America became the fifth Wall Street firm to raise its price target on the stock in the last month, bumping theirs from 172 to 205. Wells Fargo, Morgan Stanley, Keybanc and Wolfe Research have all raised their price targets on the online food delivery giant in recent weeks. That kind of institutional confidence gives DASH the look of what Mike calls a “liquid leader,” meaning it could lead the charge in the market’s next big advance. BUY
Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, held mostly steady this week after advancing 8% the previous week. The fast-growing drive-through coffee shop chain is leveraging its Dutch Rewards Loyalty program, and the company is gaining quite a following as it now has 950 locations in 18 states – with an eye toward 4,000 locations in the next 10 to 15 years. That kind of ambition has Wall Street’s attention, with four analysts raising their price target on the stock in the last month. BUY
Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, had a nice bounce-back week, advancing 9% after sinking to six-month lows last week. There was no company-specific news, though weight-loss drugs were making headlines for the first time in a while as rival Novo Nordisk’s (NVO) new drug, amycretin, showed promising results in clinical trials. As Lilly’s most direct competitor, Novo’s good news theoretically should be bad news for Lilly. But this could be a “rising tide lifts all boats” type of situation – and Lilly needed any kind of catalyst after a rough few months prompted us to downgrade it to Hold last week. The next big catalyst comes February 6, when the company reports earnings. Keeping at Hold until then. HOLD
Flutter Entertainment (FLUT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was down nearly 5% this week, giving back the amount it had gained the previous week. In his latest update, Mike wrote, “FLUT is looking like a classic case of sell the rumor, buy the news, as the stock’s very encouraging breakout in November ran into a wall in early December as reports started to come to the surface that sports outcomes were favoring the bettors (favorites were hitting at record rates)—but when Flutter actually announced that Q4 results would be sour a couple of weeks ago, the stock bottomed out, likely in part because the underlying trends (margins excluding unfavorable/favorable results) were just fine. With that said, like so many names, the stock has run right back into some resistance, and there hasn’t been much buying volume to this point, so we’ll see how it goes. All in all, we’re optimistic the worst has passed but want to see a bit more confirmation before restoring our Buy rating.” We already had a Buy rating on FLUT and will keep it right there despite this week’s pullback. BUY
GoDaddy Inc. (GDDY), originally recommended by Tyler Laundon in Cabot Early Opportunities, was flat this week, taking a breather after last week’s 5% boost. The only news was that actor Walton Goggins will star in the company’s Super Bowl commercial in two weeks. (Remember, GoDaddy made a name for itself years ago with a series of semi-racy Super Bowl ads featuring race car driver Danica Patrick.) In more relevant news, the web domain registry giant will release earnings results on February 13. BUY
Intuitive Surgical (ISRG), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, gave back some of its 11% gain from the previous week after last week’s earnings showed fairly conservative guidance for 2025. Namely, the maker of the da Vinci robot surgical systems guided for gross margins of 67-68% this year, slightly less than the 69% analysts were looking for. But considering Q4 EPS and revenues easily topped estimates and the company installed 493 new platform placements – 174 of which were the new da Vinci 5s – the mini-selloff since seems a bit nitpicky. There was way more to like than dislike from Intuitive’s latest report. So we’ll keep the stock at Buy, as the company has a tendency to be conservative in its own guidance. BUY
Klaviyo, Inc. (KVYO), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, popped another 12% this week after a 5% advance the previous week. The stock is likely still drawing strength from three analyst price target hikes this month. It’s clear this mid-cap software solutions stock is starting to make believers out of Wall Street. BUY
Kyndryl Holdings, Inc. (KD), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, pulled back from 39 to 38 to give back more than half its gains from the previous week. There was no news other than that the company will report earnings on February 19. Kyndryl is a mid-cap IT infrastructure and consulting provider that was spun off from IBM three years ago. Most of the Fortune 100 companies depend on Kyndryl’s technology, and most of their contracts with the company yield high-single-digit margins. BUY
Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, held its gains above 60 though is down today after reaching new highs above 61. The business development company with a monthly dividend payment continues to be one of the most reliable stocks in our portfolio. Its 6.8% yield adds to our robust total return. BUY
Microsoft (MSFT), originally recommended by Tyler Laundon in Cabot Early Opportunities, hasn’t moved an inch since our last issue, at least in the aggregate, though it was having a very good week until today’s China/AI news sent it tumbling nearly 4%. But that won’t matter if the company reports another strong quarter this Wednesday, January 29. Analysts are looking for 11% revenue growth with 6.1% EPS growth. Microsoft has topped EPS estimates in each of the last four quarters. We’ll see if this quarter’s estimates are similarly conservative. BUY
Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, had a great week, adding exactly 100 points (more than 11%) after reporting stellar earnings last Thursday. The numbers were eye-popping: 102% EPS growth and 16% subscriber growth with a record 18.9 million new subscribers added. The influx of new subscribers had mostly to do with Netflix’s first toe-dip into live sports – previously its one remaining blind spot – as the streamer aired two NFL games on Christmas Day and a Mike Tyson/Jake Paul boxing match that drew 108 million live viewers globally in November. It could be just the tip of the iceberg, as Netflix is sure to see its success with live sports as an opportunity to make it a more regular feature, similar to how Amazon has Thursday Night Football, Apple TV+ has an MLB package, and Max has NBA and March Madness thanks to its Turner Sports ties. Trading at new all-time highs, NFLX may see some temporary consolidation in the coming days. But it has become one of the more undeniable growth stocks on the market, despite its mega-cap size. BUY
On Holding (ONON), originally recommended by Mike Cintolo in Cabot Growth Investor, dipped from 60 to 59, but remains near its December highs. In his latest update, Mike wrote, “We went to Hold on ONON a couple of weeks ago, but that’s looking like a mistake at this point—shares were on the intermediate-term brink for a couple of weeks but held support and have popped back to their December highs. There’s been no official news from the firm, but the top brass’ presentation at the ICR retail conference earlier this month had good vibes, with the holiday selling season reportedly finishing up well in the U.S. and elsewhere (including a doubling of sales on the November 11 holiday in China) and with full-price sales trends looking good (i.e., not a ton of discounting); all in all the feeling is 30%-ish currency-neutral growth could be on tap for 2025. If you want to nibble, that’s fine, but we’ll wait for a clearer move to new highs before restoring our Buy rating.” We’ll maintain our Buy rating, but I agree with Mike that I’d start small until we see some real movement in the share price. BUY
Primo Brands (PRMB), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, has been perfectly “fine” since we added it to the portfolio a little over a month ago, but it pulled back slightly this week and has only actually gone up one week since we added it. It’s a mid-cap water stock with a nice story, but in an overcrowded portfolio, it’s not really knocking my socks off, so let’s sell and book a very small profit on it. MOVE FROM BUY TO SELL
Reddit (RDDT), originally recommended by Tyler Laundon in Cabot Early Opportunities, was down about 4.5% in its first week in the portfolio. That’s despite three analyst upgrades last week and five this month. Wall Street is bought into this increasingly popular venue for online forums on almost any topic, but after nearly tripling in the last six months, it’s possible an extended breather is in order before the next leg higher. View this mini-dip as a chance to get in at a better price in case you didn’t buy last week. BUY
Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, fell from 118 to 115 after an 11% run-up the previous week. There was no news. This Singapore-based conglomerate remains an outstanding catch-all play on Southeast Asian economic growth, and despite nearly tripling in the last year, shares trade at less than a third of their 2021 peak. BUY
Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, gave back all its gains from the previous week, continuing a pattern this month of rising into the 420s only to tumble back below 400. Perhaps it will finally pick a lane after this Wednesday’s (January 29) earnings report. Analysts are expecting 7.8% sales growth with 8.5% EPS growth. But the company has missed on earnings in three of the last four quarters, with only the latest quarter surprising to the upside. Let’s see if that was the start of a more encouraging trend. BUY
The next Cabot Stock of the Week issue will be published on February 3, 2025.
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