Cabot Stock of the Week Issue: May 12, 2025

Tariffs giveth and taketh away, perhaps not in that order. And after scaring the pants off the market when first enacted on “Liberation Day” in early April, the walking back of – or at least 90-day pause on – most of the so-called reciprocal tariffs has helped restore confidence in the market. But today’s news that China was joining the 90-day pause was the big one. The S&P 500 is up nearly 3% on the day and the Nasdaq nearly 4%, as both indexes are now poking their heads above their 200-day moving averages for the first time in more than two months. Meanwhile, the VIX is below 20 for the first time since late March, the Fed meeting came and went last week without doing any harm, despite the lack of a rate cut, and first-quarter earnings results have been mostly excellent.

It seems the market rally is back on!

Still, outside of a new deal with the U.K., tariffs are on pause, not dead. And GDP did just decline slightly in the first quarter. So there are potentially choppy waters ahead. What better stock to navigate them than a way-undervalued cruise company, recommended by yours truly in my Cabot Value Investor advisory earlier this month. It’s a name you know, and one that has led the remarkable post-Covid resurgence in cruise demand.

Here it is, with my commentary.

New Recommendation

Carnival Corp. (CCL)

Cruises became a four-letter word during Covid, as mass outbreaks (and casualties) on multiple cruise ships caused the entire industry to essentially shut down. There were 800 confirmed cases on three cruise ships alone, including passengers and crew. Various times in 2020, 2021, even 2022, I remember hearing people utter the phrase, “I’m never taking a cruise again.” Indeed, few people were. The number of cruise passengers worldwide dropped from 27.5 million in 2019 to just over 7 million in 2020 – and most of those came in the first few months of the year, before the entire cruise industry essentially halted operations starting in April 2020.

Cruises didn’t resume until June 2021, but enthusiasm had significantly dampened. Most cruises were only half full for most of the year, and passenger traffic came in at 13.9 million – roughly half pre-Covid levels. 2022 was better, with occupancy rates picking up to 78% and 20.4 million people going on cruises that year, though Covid was still lingering and disrupting daily life, at least in the early part of the year (my parents had a Viking cruise cancelled around that time). But by 2023, cruises were officially back, reporting a record 31.7 million passengers. Last year, the number ballooned to 35.7 million worldwide. More than half of them – 18.2 million – were Americans, a number that’s expected to top 19 million this year.

After grinding to a halt for two years during Covid, the global travel industry is alive and well as people want to get out and see the world again, making up for lost time after being cooped up for so long. You see it among airlines, which reported record travel numbers last year. But that was the first year airline passenger numbers had topped pre-Covid totals; cruises reached a record in 2023, and last year were 30% higher than their 2019 totals. Airline passenger traffic was just 3.8% above pre-Covid levels last year, according to the International Air Transport Association (IATA).

So, just three years after being essentially non-existent, cruises have suddenly become the most popular form of travel. Yet, despite cruise traffic being 30% higher than it was at its pre-Covid peak, share prices for most publicly traded cruise line companies are much lower.

Carnival is one of the two largest cruise companies in the world, along with Royal Caribbean (RCL), as the two combine to own 63% of the market. The difference between them? While RCL shares reached new all-time highs earlier this year (though they’re down more than 27% since), CCL shares have never come close to getting back near pre-Covid levels, when the stock peaked in the low 70s in 2018. CCL currently trades at 17.75 a share and hasn’t gotten any higher than 28 (this January). So the stock trades at a quarter of its all-time highs at a time when sales are higher than ever and profits are back in the black after four straight years of losses. Revenues were up 15.9% in 2024 to $25 billion and are estimated to top $26 billion (+4.25%) this year, with EPS expanding by 30% to $1.84. And those estimates might be conservative: In the first quarter, Carnival blew EPS expectations out of the water, with 13 cents far outpacing the 2-cent estimate. Revenue of $5.81 billion also easily beat estimates, by $70 million, and marked a $400 million improvement from the same quarter a year ago. Occupancy was 103%, with 3.2 million passengers, and the Miami-based company raised its full-year guidance, bumping up its adjusted net income expectations by $185 million to $2.49 billion.

The stock is down more than 11% year to date, thanks in large part to tariffs. It’s possible tariffs and escalating fears of an economic slowdown will convince people to think twice about booking their next cruise vacation. But again: CCL stock is already trading at a quarter of its 2018 highs, at a time when revenues are 20% higher than their pre-Covid highs. The stock trades at a mere 10.9x forward earnings estimates and 1.12x sales. This is a great buy-low candidate even if sales begin to slow a bit in the coming quarters. BUY

Current Recommendations

Changes Since Last Week:
AbbVie (ABBV) Moves from Buy to Hold
Freshworks (FRSH) Moves from Hold to Buy
Waste Management (WM) Moves from Buy to Sell

One more sell this week, as we keep our portfolio size at 21 with the addition of CCL (Waste Management (WM) hasn’t performed well enough to warrant another week in a crowded portfolio). Most of our stocks have performed well of late, led by, believe it or not, Tesla (TSLA), which is getting a huge boost today on the China tariff pause news. Most of our companies have reported earnings, though a couple more are set to report this week. So hopefully it will be smoother sailing in the coming weeks, especially if the market has indeed found its footing.

Here’s what’s happening with all our stocks.

Updates

AbbVie (ABBV), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, gave back all of its post-earnings bump this week as President Trump is now threatening big pharma with tariffs. Here’s what Tom had to say about it: “The biopharmaceutical company stock looks OK. ABBV did have a sharp drop last month amid the market tumult. It typically does pull back after a surge to new highs, and the tough market expedited that retreat. It’s over with. Meanwhile, the company is moving beyond the Humira patent expiration, which had been holding the stock back. Earnings beat expectations and guidance was raised for 2025.

“However, there is still uncertainty regarding tariffs and the administration’s pledge to enforce international reference pricing, which lowers U.S. drug prices to those charged internationally. Immunology drugs Skyrizi and Rinvoq grew sales by 65% in the quarter with revenue of $5.1 billion, which already replaces peak Humira revenues. The trajectory is great, but there could be some externally caused issues ahead. ABBV will be lowered to a ‘HOLD’ until the threats either materialize or subside.” I think that makes sense. Given the pullback and the existential threat of tariffs, let’s downgrade to Hold. MOVE FROM BUY TO HOLD

Agnico Eagle Mines (AEM), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was flat this week as gold pulled back more than 3% today as the U.S.-China tariff war cools, at least temporarily. Like most of the other tariffs, the China tariffs are merely on a 90-day pause, with no long-term deal struck, so it’s possible gold will be back. Plus, this gold mining stock is already up 50% year to date, so an extended pause makes sense. I still think gold – and gold miners – has plenty of upside in this uncertain market. BUY

Airbus (EADSF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, took a breather this week after popping 13% after earnings the previous week. The earnings were good: The European-based aircraft maker and Boeing rival reported a 6% sales improvement in the first quarter, while EPS and EBITDA also topped estimates. Aircraft deliveries (136) came in a bit shy of estimates (142), but the company reaffirmed full-year guidance of 820 deliveries. The stock is now up 10% year to date, and we have a nice gain on it. Given the myriad issues with Boeing of late, I still like Airbus’ upside as a Boeing alternative. BUY

AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, was up from 25 to 27 this week ahead of today’s after-market earnings report. Expectations are modest for this mostly pre-revenue company ($3.85 million in sales, up from a mere $500,000 a year ago; EPS loss of 15 cents). More important will be what management says on the call about the company’s progress toward its goal of creating a straight-to-smartphone internet service from space-based satellites. Its revolutionary ambitions are why ASTS shares are up more than 1,000% in the last year. We’ll see if today’s report helps advance this intriguing story. BUY

Axsome Therapeutics, Inc. (AXSM), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, pulled back 7% this week to give back its 7% gain from the previous week, partially boosted by earnings. The earnings were good – revenue improved 62% year over year, with Auvelity sales – which comprise more than three quarters of Axsome’s total sales – increasing 80%. Also, Symbravo – a new drug intended to treat migraines – was approved for commercial launch in June. So the pullback is a bit of a headscratcher. AXSM shares are flat since we added them to the portfolio three months ago, which is slightly better than the market. I haven’t yet lost patience with this high-upside mid-cap biotech yet, but I’m getting there. Let’s see how it behaves this week, especially if the market takes off. BUY

Banco Santander (SAN), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up 3.5% this week after the Bank of England cut interest rates by another quarter point, to 4.25%. That’s good news for borrowers and lenders, and Banco Santander – based in Spain – is one of the largest banks in Europe, with a major presence in the U.K. The bank did shutter 18 locations in the U.S., most of them in Massachusetts, though it still has 128 branches in Massachusetts alone. Santander is also closing 95 U.K. branches next month as it shifts focus and resources to its digital banking wing. The company reported a 19% increase in profits in the first quarter, is projected to return 10 billion euros to shareholders over the next two years via buybacks, and is trading below book value despite a 63% run-up year to date already. There’s a lot to like here, especially as investors have flocked to European stocks in recent months. BUY

BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up more than 5% this week as the Chinese EV maker continues to extend its tentacles globally, out-selling Tesla in Germany and the U.K. in April. The company’s lack of presence in the U.S. has helped it avoid all the China-U.S. tariff angst, though it got a big bump today by proxy nevertheless. The stock is up 54% year to date but is still trading just below its March highs above 108. The upside for this stock – which is potentially overtaking Tesla as the biggest electric vehicle brand in the world – is immense. BUY

DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, gave back its 9.5% gain from the previous week after reporting earnings last Wednesday. There was no real reason for the pullback, as EPS of 44 cents easily topped estimates of 38 cents, up from a net loss the previous year, and the company announced two big acquisitions worth roughly $5 billion. The online food delivery giant is buying London-based Deliveroo for $3.9 billion, plus hospitality tech company SevenRooms, for $1.2 billion. It’s normal for shares of the acquiring company in big deals to retreat initially, and it’s very possible the earnings beat was already priced into the share price. I expect to see some bounce-back in DASH shares in the coming days and weeks. If you don’t already own shares, this dip on almost exclusively good news (in fairness, sales fell just shy of estimates, despite an 18% year-over-year bump in total orders) looks like a buying opportunity. BUY

Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up 10% this week after reporting yet another strong quarter on Wednesday. EPS of 14 cents topped the 11-cent estimate and were up from 9 cents in Q1 a year ago; sales of $355 million edged past estimates and were 29% higher year over year; and same-store sales improved by 4.7%. Meanwhile, the drive-through coffee store chain added 30 new locations in the quarter to bump its total to 1,012 stores – crossing the psychologically meaningful benchmark of 1,000, an important hurdle on the way to the company’s ambitious goal of opening 7,000 stores in the next decade. Also, Dutch Bros plans to introduce a food menu soon – something it currently lacks, as it offers a wide range of coffees, teas, lemonades and other drinks at its drive-through locations, but no food. That could be a game-changer. BUY

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was down another 10% this week on the heels of a somewhat mixed earnings report about 10 days ago. In his latest update, Tom wrote, “The superstar pharma company reported earnings last week that beat expectations with 29% EPS growth and a 45% revenue increase over last year’s quarter. The weight loss drugs Mounjaro and Zepbound continued to kill it with combined revenue of over $6 billion for the quarter. Sales of Zepbound exceeded those of the main competitor, Wegovy. Lilly did slightly reduce earnings guidance for the year because of stock losses. Earnings were generally well received with no major upside catalyst but nothing to interfere with the positive story that propelled the stock higher, especially strong trial results for an oral weight-loss drug that could be a game-changer in a huge market.

“But bigger news caused shares to tumble 10% on Thursday. CVS (CVS) selected Novo Nordisk’s (NOVO) weight loss drug Wegovy as its preferred option to offer customers. Investors fretted that the move could limit the sales growth for Lilly’s Zepbound. However, the move only affects a relatively small number of customers, and investors likely realized the overreaction as the stock was nearly 4% higher on Friday. More concerning is the imminent threat of pharmaceutical tariffs. Even more of a threat is the administration’s pledge to enforce international reference pricing, which would lower prices and profits. There could be some turbulence in the stock in the weeks ahead.” For those reasons, let’s keep LLY at Hold. HOLD

Freshworks (FRSH), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, is up 5% in the last week, with almost all of the gains coming today due to the big market bounce. There was no company-specific news. The company is coming off a strong first-quarter report in late April in which EPS of 18 cents topped the 13-cent estimate and Q2 revenue guidance came in ahead of estimates. With the mid-cap software stock now back above its 50- and 200-day moving averages, let’s restore our Buy rating. MOVE FROM HOLD TO BUY

Kenvue (KVUE), originally recommended by Clif Droke in his Cabot Turnaround Letter, was up 2.5% after narrowly topping earnings estimates (24 cents vs. 23 cents expected) last Thursday. Sales came in at $3.74 billion. Both numbers were down year over year, but the Johnson & Johnson spinoff did raise full-year revenue guidance to a range of 1-3%, up from a range of a 1% loss to a 1% gain. Additionally, the company announced Amit Banati as its new CFO, effective today. The maker of Band-Aids, Tylenol, Listerine and other signature consumer staples conceded that tariffs are taking a toll on estimates, with EPS expected to be flat for the year and adjusted operating income margin expected to decline. But the sales forecast improvement mostly outweighed the bad news, and investors nudged the stock up slightly. This remains an all-weather stock that should hold up well even in a recession, and the 3.4% dividend yield helps. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, also got a modest bump from earnings, up more than 2% this week despite EPS of $1.01 coming up a penny short of estimates. The $137 million in revenue was also just a hair shy of the $137.4 million estimate. That marked a 4.1% improvement year over year, however, while net asset value per share reached a record high for an 11^th straight quarter. Cash and cash equivalents also improved to $109.2 million, up from $78.3 million at the end of 2024. So, there was enough good to outweigh the very narrow top- and bottom-line misses. At 54 a share, MAIN is still well short of its February highs above 63. But it pays a monthly dividend with an 8% yield and boasts a beta of just 0.86 – making this business development company the perfect blend of low risk and high yield for an uncertain market like this one. BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, was down another 2% this week as investors try and process the potential impact President Trump’s threatened 100% tariffs on foreign films – Netflix’s bread and butter – might have on the business. Or if the threat will end up being just that – a threat. I don’t think it’s worth getting caught up in the “ifs” of how that theoretical might impact the business, and regardless, Netflix will remain top dog in the streaming game even if foreign films get tariffed. So, I’d instead view this recent mini-pullback – down a mere 4.2% from all-time highs in early May – as a buying opportunity into one of the market’s great growth stocks. BUY

Penumbra (PEN), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, was up 1.5% in its first week in the portfolio. There was no news. Here’s what Mike wrote about it last week: “Penumbra will probably never be a household name, but it looks like a big medical leader thanks to its newer, best-in-class devices for blood clot removal, which affects something like 800,000 patients per year in the U.S. alone and contributes to 100,000 premature deaths. Taking drugs to dissolve the clots was the standard of care but carries major risks, and the results were often hit and miss, while the initial wave of mechanical devices had limitations and were cumbersome. Penumbra has come up with a better way, thanks to its CAVT technology (computer-assisted vacuum thrombectomy) that has many next-level advantages both technologically (optimized suction strength depending on vessel size, etc.) and practically (quicker procedure times are good for everyone, along with better outcomes). CAVT is integrated into a few different device platforms for Penumbra that serve a variety of blood clot types (removing those found in blood vessels is the main draw, but it’s also big in pulmonary embolisms and even in the brain after certain strokes), and they’re all rapidly gaining share: In Q1, total revenues lifted 16%, but thrombectomy revenue were up 25% and, within that, venous-related revenue were up 42%, while margins here continue to boom (operating margin of 12.4% in the quarter, up 5.5 percentage points from a year ago) driving earnings up 102%. (All of the firm’s products are made in the U.S., with three-quarters of its materials and components sourced in the U.S., allowing it to sidestep most of the tariff uncertainty.) Top-line growth is likely to slow some going ahead, but Wall Street sees continued big market share gains and margin expansion, which should lead to 30%-plus earnings growth this year and next. Of course, the valuation isn’t cheap, but Penumbra has an emerging blue-chip feel to it in the medical device space.” BUY

Planet Fitness (PLNT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, pulled back more than 4% after reporting earnings last Thursday. EPS of 59 cents fell short of the 62-cent estimate. Revenue, however, improved 11.5% year over year, while same-club sales expanded by 6.1%. And the earnings were up from 53 cents a share a year ago. The fitness club chain opened 19 new locations during the quarter, upping their total to 2,741, and added 900,000 new members to bump their total to 20.6 million. That’s pretty solid growth across the board, despite the earnings shortfall. I think this has bounce-back potential, which may have even started today. I’d buy this dip. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, is flat in the last week ahead of earnings tomorrow, May 13. Analysts anticipate 91 cents in EPS, which would be a 231% year-over-year improvement for this Southeast Asian conglomerate. Shares are up 33% year to date and 119% in the last year but trade at little more than a third of their 2021 highs. Let’s see what tomorrow’s earnings bring. BUY

Sprouts Farmers Market (SFM), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, is down nearly 9% in the last week for no good reason. After a good run prior to and right after late-April earnings, the stock has coughed up all those gains. Revenue for this organic grocery store chain is on track for 12-14% growth this year, with 28% digital sales growth. There was nothing wrong with the earnings report, as the company upped both top- and bottom-line guidance. So I think the recent sell-off is unwarranted. I expect SFM shares to rebound if the market goes on a run here. BUY

Stoxx Europe Total Market Aerospace & Defense (EUAD), originally recommended by Carl Delfeld in his Cabot Explorer advisory, gave back about half its 7% gain from the previous week. This ETF, the only one in our mostly stock-centric portfolio (hence the name), is a play on the strength of European stocks and Europe’s increased focus on defense spending as its economy improves. European stocks are up more than 6.6% year to date, while U.S. stocks are down. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has taken off again, up 14% in the last week! What gives? Well, half the gains came today on the China trade deal news, which theoretically helps Elon Musk’s company at a time when it’s struggling to gain traction in China. It doesn’t change the fact that the company reported a rotten quarter last month or that it still hasn’t made much headway with the long-promised autonomous driving technology. But Tesla is a huge brand, and despite all the recent negative press mostly related to Musk’s dealings in the Trump administration, investors want to own the stock. And they spotted an opportunity when TSLA shares cratered in the first quarter. Now they’re up 26% in the last month. Keeping at Hold, as another pullback would be normal after such a big run-up. But once again, TSLA stock has come roaring back after being counted out. HOLD

Waste Management (WM), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, is down 4.5% in the last week and is now at a small loss since we added it to the portfolio as a safety play in March. It’s not really getting the job done, on the heels of a fairly underwhelming earnings report, so as our portfolio starts to get crowded again, let’s toss this trash collection giant in the garbage. MOVE FROM BUY TO SELL

The next Cabot Stock of the Week issue will be published on May 19, 2025.

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