Cabot Stock of the Week Issue: May 5, 2025

Stocks are in a much better position than they were a month ago, when “Liberation Day” set off a selling spree that sent both the Nasdaq and Russell 2000 into bear market territory and the S&P 500 close to it. Now, the S&P has officially recovered all of its April losses. Where does the market go from here? This week’s Fed meeting (where no rate cut is expected) could help determine its direction, as could another busy couple weeks of earnings. But really, this market is all about tariffs; any news on that front – especially as it relates to China – is likely to drive shares most, in either direction.

But, with volatility waning (it’s now below 25, a key number according to my colleague Clif Droke) and nine straight days of gains entering this week, stocks finally have some real momentum. With that in mind, today we add another growth stock, this one courtesy of Mike Cintolo’s Cabot Top Ten Trader advisory.

Here it is with Mike’s thoughts.

New Recommendation

Penumbra (PEN)

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.

As for the stock, after a big downtrend into last summer, PEN changed character on Halloween, surging on earnings and moving back above its 200-day line, leading to a run into the 310 area by February. From there, shares did get tossed around by the market—but only a bit, as the stock held well above its 200-day line, fell a maximum of 21% from its highs (way more resistant than most growth stocks) and, now that the market is perking up, PEN has surged back toward its highs post-earnings. The 300 area could provide some near-term resistance, but we’re OK with a small buy here or on modest dips. BUY

Current Recommendations

Changes Since Last Week:

Sirius XM Holdings (SIRI) Moves from Buy to Sell

We have our first sell in a while, as Sirius XM (SIRI) hasn’t been getting the job done, and last week’s earnings miss did little to change that. While Clif Droke likes SIRI as a long-term turnaround story, it’s taking too long in a crowded portfolio like this one. Other than that, most of our stocks are acting well, and a bunch of them report earnings this week. Until then, 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, was up nearly 4% this week and is now up more than 10% since reporting earnings 10 days ago. In his latest update, Tom noted that the company “beat expectations and then raised guidance for 2025. ABBV jumped over 3% on the day in a flat market. However, while tariffs haven’t affected pharmaceuticals yet, they are likely to come.

“Tariffs wouldn’t hurt AbbVie too badly because most sales are in the U.S. But there is also the threat of 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 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.” BUY

Agnico Eagle Mines (AEM), originally recommended by Carl Delfeld in his Cabot Explorer advisory, has encountered a bit of weakness of late as gold prices may have maxed out, at least in the short term. The stock has fallen from 123 to 111 despite topping earnings estimates in late April. Clif Droke, who also recommends AEM to his Cabot Turnaround Letter audience, wrote, “Revenue of $2.5 billion increased 35% from the prior year’s Q1, while earnings of $1.53 a share jumped 66% and record adjusted EBITDA of $1.6 billion increased by a whopping 72%. Free cash flow of $594 million also set a record for the quarter.

“Management further underscored the progress of some key mining projects, including the Meadowbank life extension beyond 2028, Hope Bay’s potential to generate 400,000 ounces annually by the 2030s, and plans for the Malartic mine to produce one million ounces annually by the early 2030s.

“The company returned around $250 million to shareholders in Q1 through dividends and share buybacks, while maintaining cost discipline. It also strengthened the balance sheet, reducing its net debt to nearly zero and indicated plans to continue providing shareholder returns this year.

“Going forward, as I expect gold prices to remain strong throughout 2025, this will enable Agnico’s share price to remain buoyant as its operational performance, combined with record gold prices, should allow the firm to deliver record financial results, including record operating margins and record adjusted net income on both an adjusted net income basis and a per-share basis.” BUY

Airbus (EADSF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, got a big earnings pop after reporting last Wednesday, jumping roughly 13%. 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. In addition, Carl noted in his latest update that Airbus’ “CEO announced it would not cover the cost of tariffs for imported aircraft into the U.S. by airlines such as Delta and American. Airbus is working with European authorities to return to a trade agreement dating back to 1979, which mostly exempted civil aerospace from duties. Airbus has been developing a line of fuel-efficient, mid-sized aircraft that are cheaper for airlines to fly.”

We now have a gain on this stock, which should continue to gain steam as Boeing struggles. Perhaps last week’s earnings beat kick-started a more extended rally in the shares. BUY

AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, continued its recent rise, advancing from 23 to 26 before pulling back to 25 Monday morning. There was no news. Earnings are due out a week from today, May 12. Trading well off its March highs near 34, ASTS is nonetheless up more than 900% in the last year as Wall Street is high on its potential as a revolutionary company that’s attempting to build worldwide, straight-to-smartphone internet access via low-Earth orbit satellites. AST started building its BlueBird satellite network last September, and the company is still pre-revenue. It’s still somewhat theoretical, but given its ambitions, I think the stock has way more upside left. BUY

Axsome Therapeutics, Inc. (AXSM), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, reported earnings pre-market today, and the results 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. The stock was up 3% this morning in response and climbed more than 7% in the last week. Let’s see if today’s earnings act as a tailwind in the coming weeks and potentially push shares back near their February highs. BUY

Banco Santander (SAN), originally recommended by Carl Delfeld in his Cabot Explorer advisory, finally took a step back after advancing 10% the week before and 60% year to date. The stock was down about 3% even after reporting another strong quarter last Wednesday. Here’s Carl with the details: “Banco Santander (SAN) posted a first-quarter 19% increase in net profits, comfortably beating estimates. Profitability was boosted by strong results from the bank’s Spanish retail group and its U.S. digital consumer lending unit. The bank is also projected to return 10 billion euros to shareholders over the next two years via buybacks. The bank is still trading below book value, so keep buying.” I agree. This mini-dip is a buying opportunity into one of the world’s great banks. BUY

BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was mostly unchanged this week after getting a nice post-earnings bump last week. Q1 results were quite good. Profits for the Chinese EV maker exactly doubled in the first quarter, its best bottom-line performance in nearly two years, while sales improved 36.4% to 170.4 billion yuan. Market share in its home market of China – where it does roughly 90% of business, though it’s making a hard charge at expanding globally (BYD is targeting 800,000 cars exported this year) – increased to 13.6%, up from 12.1% in Q1 a year ago. Coming on the heels of introducing a new God’s Eye self-driving car technology and rolling out a charger capable of charging up to 300 miles in just five minutes, the first-quarter earnings report only adds to our bullishness on BYD. It’s probably our favorite stock in the portfolio. BUY

DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is back in business, up 26% in the last month, including a 9.5% run-up in the last week ahead of this Wednesday’s (May 7) earnings report. Big things are expected: Analysts are looking for 38 cents in EPS, up from a 6-cent loss a year ago, on 23% sales growth. Given the recent run-up, it’s very possible a strong quarter is already being factored into the share price, so the company may need to easily top those estimates to maintain momentum. We’ll see what Wednesday’s report brings. BUY

Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was flat ahead of earnings this Wednesday and after a 10% bump the previous week. Analysts are anticipating 25% sales growth and 22% EPS growth. The fast-growing drive-through coffee store chain has become a Wall Street darling in the last year (+123%) as the company has surpassed 1,000 locations and has aspirations to open 7,000 stores in the next decade. After opening 32 more stores in the fourth quarter and more than 150 last year, we’ll see how many stores the company opened in the first quarter. BUY

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, pulled back more than 4% after reporting underwhelming earnings last Thursday. EPS missed the mark, coming in at $3.34 when $3.46 was expected. Revenue was roughly in line with estimates. Demand for Lilly’s weight-loss drugs Mounjaro and Zepbound remains robust, but tariff uncertainty weighed heavily on full-year guidance, with the company slashing EPS guidance from $24 at the high end to $22.28. Part of that reduction is due to a $1.57 billion charge related to its acquisition of an oral cancer drug from Scorpion Therapeutics in the first quarter. I think the selling was overdone, and indeed the stock has bounced back already after tumbling more than 11% following the report. There’s nothing wrong with the business, so let’s keep holding. HOLD

Freshworks (FRSH), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, is up 4.5% in the last week after a convincing earnings beat (18 cents in EPS vs. the 13 cents expected). Here’s what Tyler had to say about it: “Management also guided for Q2 revenue slightly ahead of consensus expectations. Management talked about the lower cost advantage of the Freshworks platform versus other players like NOW and Zendesk, as well as a relatively fast ability to migrate new customers and get them up and running. FRSH stock has acted well over the last two weeks and is now trading slightly above its 200-day moving average line.” The earnings bump is a good sign. Another week or two of strong post-earnings action could convince us to restore a Buy rating. For now, keep holding. HOLD

Kenvue (KVUE), originally recommended by Clif Droke in his Cabot Turnaround Letter, was up more than 2% this week ahead of earnings this Thursday, May 8. Expectations for the quarter are modest, to say the least. Analysts foresee a 5.4% revenue decline with a 17.8% EPS dropoff. However, the company has topped EPS estimates in each of the last four quarters, so let’s see if they can do it again. The high-yielding Johnson & Johnson spinoff was added to the portfolio last month 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 off 2% this week ahead of earnings this Thursday, May 8. Analysts expect a 5% increase in revenue but with a 2.9% decline in EPS. Regardless of the results, MAIN is a high-yielding business development company that pays a monthly dividend, so it – like Kenvue – is a good life raft to have in volatile markets like this one. I don’t think Thursday’s report will change that, though it could offer some short-term share price upside if the company can top those modest estimates. BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, is up 2% in the last week despite catching some tariff shrapnel. Over the weekend, President Trump said he plans to institute 100% tariffs on foreign-made films, prompting NFLX shares to pull back more than 2% today. Part of what has given Netflix such global appeal is that it develops content, including movies, from all over the world; Roma, All Quiet on the Western Front, and the hit show Squid Game are just a few of the many prestigious overseas hits Netflix has either acquired or greenlit in recent years. So, 100% tariffs could be damaging to the bottom line. But who knows if it will happen. Tariff threats have come and gone in recent months, and it’s a fool’s errand trying to guess which ones to take seriously. In the here and now, Netflix is thriving like never before, coming off yet another record quarter and with shares trading at new all-time highs coming into the day. It’s something to monitor, but I don’t think tariff threats on foreign-made films should in any way be a deterrent to buying NFLX stock if you don’t already own it. BUY

Planet Fitness (PLNT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was up 3.5% this past week ahead of earnings on Thursday, May 8. Analysts anticipate 12.8% revenue growth with 17% EPS growth. The fitness center chain has topped EPS in each of the last four quarters. This is a play on Americans’ return to gyms post-Covid, as memberships continue to soar. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up 9.5% this week on no news. The stock has recovered all of its early-April losses and is now approaching its early-March highs in the mid-140s. Earnings are due out May 13. We’ll see if those can maintain momentum for this Singapore-based conglomerate that’s a play on Southeast Asian economic growth. BUY

Sirius XM Holdings (SIRI), originally recommended by Clif Droke in his Cabot Turnaround Letter, missed EPS estimates by a wide margin last Thursday, with the 59 cents reported falling short of the 66-cent estimate. The stock fell sharply on Thursday but has mostly recovered its losses since. Still, this turnaround stock is taking too long to turn around for a crowded portfolio like this one, so let’s say goodbye to it and open up a spot for a stock with more immediate upside. MOVE FROM BUY TO SELL

Sprouts Farmers Market (SFM), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, was up 1.5% this week after beating handily beating earnings estimates. Here’s what Tyler had to say about it: “Sprouts Farmers Market (SFM) also beat expectations (revenue $2.24B vs. consensus $2.21B) and issued improved full-year 2025 guidance (revenue growth +12-14% vs. prior guidance +10.5-12.5% and consensus +12.5%, EPS $4.94-$5.10 vs. prior guidance $4.52-$4.68 and consensus $4.69). Other bullish metrics include digital growth of 28%, to 15% of sales, and private-label penetration of 24%. Store count should grow by about 35 stores this year (current count is 443 after three new stores opened in Q1) as Sprouts goes after customers seeking specialty and health-oriented products (organic, gluten-free, keto, etc.). Stock will continue to trade at a premium valuation that should be supported as long as growth continues. We’re up about 10% since jumping in on April 16.” We got into it a week later and have a 7% gain. Not a bad start. BUY

Stoxx Europe Total Market Aerospace & Defense (EUAD), originally recommended by Carl Delfeld in his Cabot Explorer advisory, got off to a great start in its first week in our portfolio, advancing more than 7%. 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 as a group were up 3% in the last week, and this fund more than doubled that performance. So far, our timing appears to have been good here. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, had an interesting week. The Wall Street Journal reported that Tesla’s board of directors opened a search for a CEO to replace Elon Musk as the company’s profits and popularity have cratered in recent months, partly the result of Musk’s involvement with the Trump administration. Musk called the report “false,” but he has indicated that he may step away from his role with DOGE and focus more on Tesla. TSLA shares were down 3.5% for the week, though that all came this morning after a report that Tesla’s sales fell 36% in Spain in April. In the past month, the stock is up more than 15% after a disastrous first quarter. As my colleague Brad Simmerman and I discussed on our Street Check podcast last Friday, Musk is both Tesla’s greatest asset and, at least presently, its biggest anchor. His presence and reputation as an innovator likely provide a floor for the stock price, but his plummeting popularity may also be limiting the stock’s ceiling at the moment. So, we will maintain our Hold rating. I do believe TSLA shares will be higher a year from now. But there’s no denying the company is going through a rough patch. HOLD

Waste Management (WM), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was up 2.5% after reporting earnings last week. EPS of $1.67 edged past the $1.55 estimate, while revenues improved 16.7% year over year (though that fell about 1.5% short of estimates). Not spectacular results, but then again … this is a garbage collection company. And the quarter was good enough to move the needle for the share price and convince both Citigroup and UBS to raise their price targets on the stock. BUY

The next Cabot Stock of the Week issue will be published on May 12, 2025.

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