It’s not perfect, but the market has been putting one foot in front of the other in recent weeks, with more stocks acting well, more breakouts and the indexes refusing to pull in much. As always, we’re really just taking our cues from the trend of the market (intermediate-term trend up; long-term trend still down but getting close to flipping) and the action of leading stocks (better and better, but still not a bunch of new highs). We’re nudging our Market Monitor up to a level 6, though we’d still favor going slow overall and, ideally, entering on weakness.
This week’s list is another solid batch of stocks with excellent charts, including many that have really stormed ahead on big volume. Our Top Pick looked like it was done for a couple of months ago, but has stormed back to new highs thanks in part to a great post-earnings reaction.
Cabot Top Ten Trader Issue: August 15, 2022
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Better and BetterThere’s really not much different to say this week than what we’ve said the prior few weeks—it’s not perfect, but the market has been putting one foot in front of the other in recent weeks, with more stocks acting well, more breakouts, the indexes refusing to pull in much and, on Friday, even posting a mini-blastoff: North of 90% (actually more than 92%) of the S&P 500 stocks closed above their 50-day lines, and of course this happened following a big downturn in the market; historically that leads to solid results during the next six to 12 months with relatively little drawdown. It’s another feather in the bulls’ cap, though as always we’re really just taking our cues from the trend of the market (intermediate-term trend up; long-term trend still down but getting close to flipping) and the action of leading stocks (better and better, but still not a bunch of new highs). We’re nudging our Market Monitor up to a level 6, though we’d still favor going slow overall and, ideally, entering on weakness.
This week’s list is another solid batch of stocks with excellent charts, including many that have really stormed ahead on big volume. Our Top Pick is Albermarle (ALB), which has taken off after earnings as it’s the institutional-quality way to play the lithium boom.
| Stock Name | Price | Buy Range | Loss Limit |
| Albermarle (ALB)★ TOP PICK ★ | 285 | 272-283 | 239-243 |
| Arista Networks (ANET) | 129 | 123-127 | 108-110 |
| BioMarin Pharm (BMRN) | 97 | 94-97 | 85-87 |
| CF Industries (CF) | 103 | 98.5-101.5 | 88-90 |
| Cheniere Energy (LNG) | 158 | 152-156 | 133-136 |
| Flex Ltd (FLEX) | 19 | 18.2-19.2 | 16.2-16.6 |
| Global Foundries (GFS) | 63 | 60.5-62.5 | 51-53 |
| New Fortress Energy (NFE) | 59 | 54.5-57.5 | 46-48 |
| Pure Storage (PSTG) | 30 | 29-31 | 26-27 |
| Trade Desk (TTD) | 75 | 70-74 | 58-61 |
Stock 1
Albermarle (ALB) ★ TOP PICK ★
| Price | Buy Range | Loss Limit |
| 285 | 272-283 | 239-243 |
Why the Strength
Albermarle does a good business in bromine (used in agricultural chemicals, insecticides and the like) and certain catalysts, but the big idea is that the stock has long been the institutional-quality play ($33 billion market cap; trades north of $300 million of volume per day) on lithium, a metal that’s in big demand (and will be in much bigger demand) as electric vehicle sales soar; it looked like this well-known theme had run its course, but the stock has ripped back to its old highs as earnings continue to impress and the latest green energy bill should goose demand in the years ahead. In the second quarter, sales rose a ridiculous 91% with earnings nearly quadrupling and EBITDA (the more apt measure of profits for this company) more than tripling, and most of that was due to the lithium business; for the full year, EBITDA for that division is expected to rise 500% as prices lift more than 200%. (About 85% of the lithium business is EV battery related, too.) Besides a sag in EV sales (which has always looked unlikely), the risk here has been Albermarle’s huge capital expenditures in order to expand future production to meet demand ($950 million of CapEx last year, up to $1.4 billion this year and 2023 will be a huge spending year; overall output should be up 25% this year and 20%-ish next, too), but even that is dissipating—Albermarle expects to be free cash flow positive this year and next year as well (even assuming flat prices), which obviously takes the pressure off any funding needs near-term. To be fair, the question is whether prices do level out or ease, which would cause overall growth to slow going forward—Wall Street sees earnings up just 11% next year—but, big picture, there’s little doubt the company should get a lot bigger in the years ahead.
Technical Analysis
ALB had a big, beautiful run into the market top last November and quickly began giving up ground—by the market’s late February low (when Russia first invaded), shares had slid 42%. That was the low point and the stock did show relative strength into May, but the sellers made another go at it, with ALB suffering a second sharp (31%) dip. But now the buyers are back in control, with shares not just rising with the market but powering ahead last week after earnings as it retests its 2021 peak. Like a lot of things, there’s resistance around here, so if you want in, aim for dips … though we’re not expecting a major retreat.
| Market Cap | $32.6B | EPS $ Annual (Dec) | |
| Forward P/E | 14 | FY 2020 | 4.12 |
| Current P/E | 34 | FY 2021 | 4.04 |
| Annual Revenue | $4.33B | FY 2022e | 19.45 |
| Profit Margin | 27.4% | FY 2023e | 21.64 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 1.48 | 91% | 3.45 | 288% |
| One qtr ago | 1.13 | 36% | 2.38 | 116% |
| Two qtrs ago | 0.89 | 2% | 1.01 | -14% |
| Three qtrs ago | 0.83 | 11% | 1.05 | -4% |
Stock 2
Arista Networks (ANET)
| Price | Buy Range | Loss Limit |
| 129 | 123-127 | 108-110 |
Why the Strength
Arista provides hardware and networking smarts to the so-called Cloud Titans including Microsoft and Facebook – dominant Internet businesses that require huge amounts of infrastructure, like switches, that direct reams of data through the internet and corporate data centers. Those two names will each be more than 10% of business for Arista this year, but the company also has a broad corporate customer base of more than a thousand companies who look to it for industry-leading performance, availability and scalability. The corporate cloud computing and networking segment has been slumping since the start of the pandemic, but Arista has navigated the challenges as good as anyone. Despite lingering supply chain issues, the company posted its first-ever billion-dollar quarter in Q2: Sales were up 49% (a big acceleration) to $1.05 billion and fully diluted EPS up 59% to $1.08. Navigating supply chain troubles to hit delivery targets meant its margin got crimped, but investors are now expecting that to start widening again, perhaps as soon as the current quarter. As workers return to the office, companies are picking back up on their desire to upgrade their corporate campuses – that was propelling Arista’s business pre-COVID – but clients are now adding more distributed communications into the mix, given the increase in flexible and remote schedules. Weak spots remain –business outside the U.S. has been slower to rebound and nicked by the strong dollar. Still, for the year, Arista should post $4.01 net income a share, up 40%, with a 15%-ish gain likely in 2023.
Technical Analysis
ANET’s business has been rock solid all year, but the market’s March/April slaughter finally took the stock down below its 200-day line and to multi-month lows. The recovery wasn’t anything to write home about at first, more of a bottoming effort, but ANET got a head of steam going after Q2 earnings, rallying two weeks in a row on big volume and moved up some more last week. Shares are back in an area of resistance, so if you want in, we’d aim for dips.
| Market Cap | $38.6B | EPS $ Annual (Dec) | |
| Forward P/E | 32 | FY 2020 | 2.26 |
| Current P/E | 36 | FY 2021 | 2.87 |
| Annual Revenue | $3.50B | FY 2022e | 4.01 |
| Profit Margin | 32.6% | FY 2023e | 4.55 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 1052 | 49% | 1.08 | 59% |
| One qtr ago | 877 | 31% | 0.84 | 35% |
| Two qtrs ago | 825 | 27% | 0.82 | 32% |
| Three qtrs ago | 749 | 24% | 0.74 | 21% |
Stock 3
BioMarin Pharm (BMRN)
| Price | Buy Range | Loss Limit |
| 97 | 94-97 | 85-87 |
Why the Strength
BioMarin focuses on developing treatments for rare diseases and medical conditions. BioMarin identifies drug targets through genomics, which it says allows a firm understanding of an underlying disease mechanism. BioMarin’s promising new drug is Voxzogo (vosoritide), a treatment for achondroplasia, a form of short-limbed dwarfism. The treatment generated $54 million in revenue in its first half-year on the market this year, well more than expected by investors, and there are now about 446 children in 20 markets worldwide being treated by it. In the second quarter, Australia and Japan approved Voxzogo, while the U.S. is expected to be the quickest ramp up for the drug as it has wider insurance coverage and deeper knowledge among endocrinologists. For the year, Voxzogo should bring in $145 million in sales. That’s a small slice of business right now for BioMarin, which offers another six major drugs, including its best-seller Vimizim, with $623 million 2021 revenue, that treats Morquio A syndrome, a rare disorder in which an inability to break down sugar chains to build bone and connective tissue leads to problems including scoliosis. Of drugs in development, the one investors expect the most from is Roctavian, a gene therapy to treat hemophilia A under certain conditions; it has orphan drug designation in the U.S. and E.U., with approval in Europe expected this quarter, while a resubmission to the U.S. FDA after a surprise thumbs down two years ago will come in late September. Overall, BioMarin’s revenue this year should be about $2.1 billion with EPS of 71 cents, but with good things bubbling up in the pipeline, analysts see the top line lifting nearly 30% next year while earnings soar.
Technical Analysis
BMRN spent much of the year to date working off bearishness from disappointing in 2021 results and FDA requests for more data on one of its pipeline drugs. But beginning in February, shares began to etch a double bottom base, with a shakeout in June leading to a quick pop back to 90 or so—and after some tightening, BMRN broke out on powerfully on earnings. The recent rest looks buyable to us.
| Market Cap | $17.6B | EPS $ Annual (Dec) | |
| Forward P/E | 134 | FY 2020 | 1.63 |
| Current P/E | 71 | FY 2021 | 1.33 |
| Annual Revenue | $1.88B | FY 2022e | 0.71 |
| Profit Margin | 20.5% | FY 2023e | 2.31 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 534 | 6% | 0.58 | 9% |
| One qtr ago | 519 | 7% | 0.54 | -5% |
| Two qtrs ago | 450 | -1% | 0.04 | -81% |
| Three qtrs ago | 409 | -14% | 0.18 | -64% |
Stock 4
CF Industries (CF)
| Price | Buy Range | Loss Limit |
| 103 | 98.5-101.5 | 88-90 |
Why the Strength
After skyrocketing in 2021, prices for nitrogen fertilizers like anhydrous ammonia and urea remain stubbornly high, partly because of natural gas costs (the main input for both) and, of course, due to the Russian invasion. CF Industries is the world’s largest nitrogen fertilizer producer, and the high input costs and supply tightness have combined to boost the company’s growth outlook. After briefly falling out of favor with the rest of the industry this spring, CF has rebounded on the back of a head-turning earnings report and an upgrade from a major Wall Street bank. (The upgrade was partly based on gas costs in Europe that are more than seven times higher than in the U.S., making CF’s U.S. ammonia production far more price competitive.) In Q2, revenues more than doubled while earnings were up more than five-fold and topped expectations by a few percent, driven mostly by higher selling prices. The company said it expects the global nitrogen supply-demand balance will remain tight for the foreseeable future, underpinned by resilient, ag-led demand and uncertainty over supply due to high natural gas costs in Europe and Asia, which likely will result in lower ammonia production in those regions. CF also said gross ammonia production will decline in Q3 due to a high level of planned maintenance activities, but expects gross output for 2022 of around 10 million tons (around 8% higher than last year and in-line with historical levels). Moving forward, management plans to continue a $1.5 billion share repurchase program, while analysts see top- and bottom-line growth of 80% and 200%, respectively, for the full year, with earnings remaining elevated in 2023 despite a projected step back.
Technical Analysis
CF had a great 2021 and went bananas earlier this year, finally topping around 113 in mid-April amidst all the good news for the sector, with selling pressure then dragging the stock down to 80 in June, where it tested its 40-week line. That brought support for a few weeks, and now we see a persistent (albeit mild-volume) rally in recent weeks, with CF steadily marching to within 10% of its old high. There should be resistance up near here, so look for dips of a few points if you want in.
| Market Cap | $21.7B | EPS $ Annual (Dec) | |
| Forward P/E | 6 | FY 2020 | 1.27 |
| Current P/E | 6 | FY 2021 | 6.56 |
| Annual Revenue | $10.2B | FY 2022e | 18.60 |
| Profit Margin | 38.2% | FY 2023e | 14.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 3.39 | 113% | 6.21 | 440% |
| One qtr ago | 2.87 | 174% | 5.25 | 650% |
| Two qtrs ago | 2.54 | 130% | 3.71 | 999% |
| Three qtrs ago | 1.36 | 61% | 1.02 | N/A |
Stock 5
Cheniere Energy (LNG)
| Price | Buy Range | Loss Limit |
| 158 | 152-156 | 133-136 |
Why the Strength
With governments worldwide implementing ambitious carbon reduction plans, demand for clean-burning fuels like natural gas is soaring. Cheniere is the leading producer of liquefied natural gas (LNG) in the U.S. and the second-largest LNG operator in the world, marketing its product on five continents. Rising gas prices and sales volumes in recent quarters have put the company firmly on a growth path, and Cheniere is positioning itself for continued growth with a major expansion ($8 billion) of a Texas-based facility—projected to be up and running in 2025—that will produce an additional 10 tons per year of LNG. (The company has already secured contracts from several customers for the upcoming project.) On the financial front, while per-share earnings of $2.90 missed estimates by 59 cents in Q2, sales of $8 billion soared 165% from a year ago, which management attributed to “significant” commercial momentum, “excellent” operating performance and “seamless” execution of the firm’s LNG value chain strategy. Cheniere also signed long-term sales contracts representing approximately 140 million tons of LNG through 2050 (!) during the quarter. The solid results prompted Cheniere to raise full-year guidance thanks to the improved margin environment in the LNG market, which it said underscores the need for new investment globally in natural gas infrastructure. The firm expects distributable cash flow of around $7.2 billion (up a whopping 260% if realized) and adjusted EBITDA of around $10 billion (up 220%) for 2022—a lot of that is going to debt reduction (it prepaid $1.1 billion worth in Q2 alone), but Cheniere also repurchased $540 million in stock in the quarter while offering a token dividend, too. Analysts see earnings catapulting both this year and next.
Technical Analysis
LNG got going during the vaccine-induced market blastoff in November 2020 and has really kept going ever since, albeit with plenty of corrections along the way—indeed, since June of last year, the stock had had three flat-ish consolidation periods, including the latest one, which lasted about three months and saw the stock tag its 40-week line for the first time. But now LNG is back in gear on the upside, surging to new highs on good volume two of the past three weeks. If you want in, we suggest looking for dips of a few points.
| Market Cap | $40.0B | EPS $ Annual (Dec) | |
| Forward P/E | 18 | FY 2020 | -0.34 |
| Current P/E | N/A | FY 2021 | -9.25 |
| Annual Revenue | $25.2B | FY 2022e | 8.57 |
| Profit Margin | 9.3% | FY 2023e | 16.06 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 8 | 165% | 2.90 | N/A |
| One qtr ago | 7.48 | 142% | -3.41 | N/A |
| Two qtrs ago | 6.56 | 135% | -5.22 | N/A |
| Three qtrs ago | 3.2 | 119% | -4.27 | N/A |
Stock 6
Flex Ltd (FLEX)
| Price | Buy Range | Loss Limit |
| 19 | 18.2-19.2 | 16.2-16.6 |
Why the Strength
Electronics manufacturers are still feeling the sting of global supply-chain constraints, but Flex is doing its part to ease the pain. The Singapore-based global contract firm is one of the world’s largest supply chain and electronics manufacturing solutions providers, offering components, circuit board fabrication, design and engineering services to some of the world’s biggest companies, including Ford, HP and Cisco. In fiscal Q1, Flex saw its revenue increase 16% from a year ago, to $7.3 billion, driven by strong demand and punctuated by the firm’s ability to deliver despite ongoing semiconductor supply constraints. Per-share earnings of 54 cents were 17% higher and set a record, beating estimates by six cents. Flex cautioned that it expects the chip shortage to continue and said it sees “indications of slowing in some consumer markets,” however, the firm said it’s prepared for this and expects any slowdown to be mitigated by the accelerating demand for its burgeoning solar business, NEXTracker, which provides equipment and sun-tracking solutions for utility-scale solar projects. NEXTracker revenue was up 16% in Q1 and is now on a run rate to be over $1 billion this year, which will constitute a “sizable portion” of the company’s industrial revenue, according to management. Flex also reported impressive auto segment bookings in Q1, as well as “very strong” growth in its cloud business, driven by continued enterprise cloud migration and growth in digital services. Looking ahead, Flex guided for fiscal Q2 (current quarter) revenue of around $7.2 billion (up 16%) and full-year midpoint sales of $29 billion (up 12%), in-line with estimates, and sees its operating agility enabling it to navigate the uncertain macro environment. It’s not changing the world but Flex is a big, steadily-growing outfit at a very low valuation with a growth “kicker” from its solar operation.
Technical Analysis
FLEX broke out way back in October 2020 and had a solid multi-month run, but it petered out in early 2021 and the stock began a long, very slow decline from 20 at that point to a low under 14 in early July. But that last dip looks now to be the final one, with FLEX rallying four of five weeks (including two of the past three on big volume) as it tests its prior highs. Given the buying volume, we’re OK nibbling here or on minor weakness.
| Market Cap | $8.78B | EPS $ Annual (Mar) | |
| Forward P/E | 9 | FY 2021 | 1.57 |
| Current P/E | 9 | FY 2022 | 1.96 |
| Annual Revenue | $27;1B | FY 2023e | 2.16 |
| Profit Margin | 3.5% | FY 2024e | 2.35 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 7.35 | 16% | 0.54 | 17% |
| One qtr ago | 6.85 | 9% | 0.52 | 6% |
| Two qtrs ago | 6.62 | -2% | 0.50 | 2% |
| Three qtrs ago | 6.23 | 4% | 0.48 | 33% |
Stock 7
Global Foundries (GFS)
| Price | Buy Range | Loss Limit |
| 63 | 60.5-62.5 | 51-53 |
Why the Strength
A few weeks ago chip stocks looked toast—but today they look very peppy, and Globalfoundries is a newly-public name (the vast majority of shares are still owned by the investment firm of the United Arab Emirates, FYI) that made a run in April but, after falling back with the market, is perking up again. The company is one of the five largest foundries in the world, with a specialty in making chips for firms that dominate the smart mobile market (making up about half of revenues; sales rose 14% in Q2), but also for things like communications/data centers (17% of revenue, up 50%) and home/industrial IoT (also 17% of revenue, up 72% in the latest quarter), all of which are growing nicely—due to both higher prices and growing output (production was up 6% sequentially in Q2). Still, the attraction here is that Globalfoundries has years worth of business lined up, as it’s busy expanding capacity in conjunction with long-term deals with major players. For instance, after the CHIPS act passed Congress recently (which, by the way, the top brass thinks could expand its already-solid margins), the firm extended a deal with Qualcomm by another $4 billion (totaling $7 billion through 2028) and inked a deal to jointly operate a new chip facility with ST Micro down the road; all told it’s added $7 billion of long-term deals since its IPO last October ($27 billion total). To be fair, analysts see earnings leveling off next year as chip prices may ease some, but (a) that’s almost surely conservative and (b) there’s little doubt the long-term picture here is great.
Technical Analysis
GFS looked bound for glory in March when it broke out during the market’s false rally, but it obviously wasn’t ready, with shares basically being cut in half after that. But as chip stocks have revved up, so has GFS—the stock has ramped higher six weeks in a row on growing volume, including last week’s big-volume push above resistance near 60 to multi-month highs. We think dips toward that prior resistance would mark a solid entry point.
| Market Cap | $35.4B | EPS $ Annual (Sep) | |
| Forward P/E | 25 | FY 2020 | -2.49 |
| Current P/E | 47 | FY 2021 | -0.05 |
| Annual Revenue | $7.48B | FY 2022e | 2.61 |
| Profit Margin | 15.9% | FY 2023e | 2.49 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 1.99 | 23% | 0.58 | N/A |
| One qtr ago | 1.94 | 37% | 0.42 | N/A |
| Two qtrs ago | 1.85 | 74% | 0.18 | N/A |
| Three qtrs ago | 1.7 | 56% | 0.06 | N/A |
Stock 8
New Fortress Energy (NFE)
| Price | Buy Range | Loss Limit |
| 59 | 54.5-57.5 | 46-48 |
Why the Strength
New Fortress bills itself as being at the forefront of the clean energy trend, helping its customers lower costs and reduce emissions by replacing oil-based fuels with liquified natural gas (LNG), while aiming to be the world’s largest provider of carbon-free power. The company helps businesses of all sizes convert existing power generation into clean-burning LNG facilities. While LNG operations remain the lion’s share of its business, New Fortress is currently expanding into the green energy space via Zero Parks, which plans to provide carbon-free power by replacing fossil fuels with affordable zero-emission hydrogen. New Fortress just entered an agreement with Plug Power to build a 120-megawatt industrial-scale green hydrogen plant in Texas, expected to be one of the largest of its kind in North America, enabling the production of more than 50 tons a day of green hydrogen. An even bigger tailwind for New Fortress comes from the war in Ukraine, which has accelerated its Fast LNG segment, which provides modular, midsize platform-and-jack-up-mounted natural gas liquefaction plants or similar offshore infrastructure designed for faster buildout than today’s floating liquefaction vessels and onshore liquefaction terminals. Customers are now contracting with New Fortress to build the liquification terminals (typically produced in 18-to-20 months) to help alleviate the energy crisis in Europe. In Q2, New Fortress saw its revenue expand 161% from a year ago, and while there was an accounting loss business is big and getting bigger: The company said it remains on track to achieve its goal of over $1 billion in adjusted EBITDA in 2022 and over $1.5 billion in 2023 before taking into account the expected contribution from the Fast LNG units. Analysts see high double-digit growth into 2024. It’s an intriguing story.
Technical Analysis
NFE had a decent post-crash run in 2020, but that was mostly erased until the Russian invasion—which caused the stock to more than double in just a couple of months. From there, shares bobbed and weaved in the second quarter, but after a shakeout to the mid 30s, NFE is back at it, running higher (first on low volume, but then big volume last week) in a persistent manner. There’s some old overhead to chew through, so look for a pullback to enter and, given the stock’s volatility, use a loose leash.
| Market Cap | $12.3B | EPS $ Annual (Dec) | |
| Forward P/E | 28 | FY 2020 | -1.71 |
| Current P/E | 59 | FY 2021 | 0.47 |
| Annual Revenue | $2.04B | FY 2022e | 2.13 |
| Profit Margin | N/A | FY 2023e | 4.37 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 585 | 161% | -0.81 | N/A |
| One qtr ago | 505 | 247% | 1.13 | N/A |
| Two qtrs ago | 649 | 345% | 0.72 | 999% |
| Three qtrs ago | 305 | 123% | -0.05 | N/A |
Stock 9
Pure Storage (PSTG)
| Price | Buy Range | Loss Limit |
| 30 | 29-31 | 26-27 |
Why the Strength
Many years ago there was Adobe combined a dominant position in a big-selling area (content creation software) along with a change in the business model (to subscriptions, away from one-time upgrades) to send its earnings and stock price soaring over many years. Pure Storage isn’t an exact comparison—storage demand is steady while content creation was just taking off a decade ago—but there are many similarities, and we think that’s one reason Pure is acting well. The firm has been a new-age leader in the storage wars, benefitting from the secular shift toward flash-based storage (away from hard drives and bulk memory), which offer speed and power advantages, with Pure’s own hardware and software leading to even better performance and longer lifetimes, not to mention simplicity when it comes to installation. That’s the big reason why the firm has been on the growth path for years, but the extra juice of late and going forward should come from its move into various subscriptions offerings, allowing clients (more than half the Fortune 500 are customers) to have storage-as-a-service (the firm recently expanded its so-called Evergreen subscription service) and providing a growing stream of recurring revenue to Pure, which should make growth more reliable. In the quarter ending April, total revenues lifted 50% (accelerating growth of late), bolstered by some big purchases, but subscription revenue was up also up a solid 29%, with annualized recurring revenue up to $900 million, and the bottom line continued to push higher, too. To be fair, growth is expected to slow, but even with that Wall Street sees 20%-ish top- and bottom-line growth this year and next, and given that Pure usually tops expectations, we could be looking at a 25% to 30% grower for a long time to come. The next quarterly report is due August 31.
Technical Analysis
PSTG isn’t lighting up the charts, but there are many signs of strength: First, big picture, there have been tons of big-volume buying weeks in the past year, a sign institutional investors are active; second, the earnings reaction in early June saw the heaviest volume in more than a year; and third, PSTG has changed character since then, with a calm retreat the next few weeks and a persistent push higher with the market of late. It’s not free and clear, of course, but we’re OK nibbling here or on dips.
| Market Cap | $9.03B | EPS $ Annual (Jan) | |
| Forward P/E | 32 | FY 2021 | 0.20 |
| Current P/E | 31 | FY 2022 | 0.78 |
| Annual Revenue | $2.39B | FY 2023e | 0.94 |
| Profit Margin | 12.8% | FY 2024e | 1.12 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 620 | 50% | 0.25 | N/A |
| One qtr ago | 709 | 41% | 0.36 | 177% |
| Two qtrs ago | 563 | 37% | 0.22 | 999% |
| Three qtrs ago | 497 | 23% | 0.14 | 133% |
Stock 10
Trade Desk (TTD)
| Price | Buy Range | Loss Limit |
| 75 | 70-74 | 58-61 |
Why the Strength
Online advertising is in a funk, with some of Silicon Valley’s biggest tech giants—including Google, Twitter, Microsoft and Apple—reporting shrinking ad budgets due to economic uncertainty. Customers of Trade Desk, however, apparently didn’t get the memo, as ad spending on the company’s digital platform continues to boom. Trade Desk is the largest aggregator of connected TV (CTV) ad impressions across every major content provider, and its software platform allows advertisers to purchase optimal impressions across various ad formats while quantifying the value of each ad placement and making real-time adjustments. The value customers place on the firm’s platform was highlighted in an estimate-beating Q2 report which featured revenue of $377 million that grew 35% from a year ago and per-share earnings of 20 cents that rose 11%. The company sees its CTV in general and its platform in particular as offering far more advertising flexibility than traditional “walled gardens” of companies like Google, Facebook and others, which aren’t neutral (they need to sell ads on their own site; Trade Desk is a neutral operator that sells whatever ad space its clients want) and management indicated a growing number of the world’s leading brands are signing “major new or expanded long-term agreements” with Trade Desk, including a “record rate” of new deals in Q2. Other highlights included customer retention remaining over 95% during Q2 (as it has for the last eight years) and recent partnerships with Amazon Web Services and Disney (to help advertisers to make programmatic buys on Disney’s media platforms). Trade Desk guided for Q3 sales of ~$385 million (up 27%) and adjusted EBITDA of ~$140 million (up 14%), above Wall Street’s estimates and likely conservative.
Technical Analysis
After a breakout attempt from a sloppy, deep basing pattern last November, the bear phase crushed TTD, with the stock falling in three waves down to 39 in May. Then began a bottoming phase, with three of four retests of the area before a rally began—but it was the earnings reaction that opened eyes, with TTD gapping up 36% on more than six times average volume. Volatility will be extreme, but we’re OK with a nibble on weakness.
| Market Cap | $36.0B | EPS $ Annual (Dec) | |
| Forward P/E | 75 | FY 2020 | 0.69 |
| Current P/E | 71 | FY 2021 | 0.91 |
| Annual Revenue | $1.39B | FY 2022e | 1.00 |
| Profit Margin | 26.2% | FY 2023e | 1.16 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 377 | 35% | 0.20 | 11% |
| One qtr ago | 315 | 43% | 0.21 | 50% |
| Two qtrs ago | 396 | 24% | 0.42 | 14% |
| Three qtrs ago | 301 | 39% | 0.18 | 38% |
Previously Recommended Stocks
Below you’ll find Cabot Top Ten Trader recommended stocks. Those rated HOLD are stocks that traded within our suggested buy range within two weeks of appearing in the Top Ten and still look good; hold if you own them. Stocks rated WAIT have yet to dip into our suggested buy range … but can be bought if they do so within the next week.
Those stocks rated SELL should be sold if you own them; they will no longer be listed here. Finally, Stocks in the DROPPED category are those that failed to trade within our buy range within two weeks of our recommendation; that’s not a bad thing, we just never got the price we wanted. Please use this list to keep up with our latest thinking, and don’t hesitate to call or email us with any questions you may have. New recommendations each week are in bold.
| Date | Stock | Symbol | Top Pick | Original Buy Range | Price as of 8/15/2022 |
| HOLD |
| 7/5/22 | Alliance Resource Ptnr | ARLP | | 17.3-18.3 | 23 |
| 8/1/22 | Analog Devices | ADI | | 167-172 | 180 |
| 6/21/22 | Argenx | ARGX | | 345-355 | 383 |
| 7/18/22 | Axonics | AXNX | | 60-62 | 74 |
| 6/27/22 | Biomarin Pharm | BMRN | | 83-86 | 97 |
| 5/23/22 | Bumble | BMBL | | 25.5-27.5 | 34 |
| 8/1/22 | Cadence Design | CDNS | ★ | 178-183 | 193 |
| 5/16/22 | Celsius | CELH | | 53-56 | 101 |
| 7/18/22 | Consol Energy | CEIX | | 53.5-56.5 | 67 |
| 7/25/22 | Chesapeake Energy | CHK | | 89-92 | 96 |
| 7/18/22 | Chewy | CHWY | | 39.5-42 | 49 |
| 8/1/22 | CH Robinson | CHRW | | 107-110 | 118 |
| 8/1/22 | Chart Industries | GTLS | | 187-193 | 205 |
| 7/18/22 | Crisper Therapeutics | CRSP | | 75.5-78.5 | 80 |
| 6/21/22 | CrowdStrike | CRWD | | 161-168 | 202 |
| 7/18/22 | Day One Pharma | DAWN | | 16-17.5 | 25 |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 64 |
| 8/8/22 | Duolingo | DUOL | | 105-107.5 | 105 |
| 6/6/22 | Enphase Energy | ENPH | | 197-205 | 301 |
| 8/1/22 | EQT Corp. | EQT | | 40.5-43 | 45 |
| 8/8/22 | First Solar | FSLR | | 100-104 | 118 |
| 8/8/22 | Frontier Group | ULCC | | 13.7-14.5 | 15 |
| 7/25/22 | Gitlab | GTLB | ★ | 53.5-56 | 70 |
| 4/18/22 | Halozyme | HALO | | 40.5-42 | 43 |
| 7/18/22 | Lantheus | LNTH | | 65-67.5 | 84 |
| 7/25/22 | Lattice Semi | LSCC | | 54.5-56 | 64 |
| 7/25/22 | Levi Strauss | LEVI | | 18.0-18.8 | 20 |
| 8/8/22 | Monolithic Power | MPWR | | 512-532 | 537 |
| 5/23/22 | Nexstar Media | NXST | | 173-178 | 199 |
| 6/13/22 | Neurocrine Bio | NBIX | | 89-92 | 107 |
| 8/8/22 | Oak St Health | OSH | | 27.5-29 | 29 |
| 6/21/22 | Ollie’s Bargain Outlet | OLLI | | 56-58.5 | 65 |
| 8/8/22 | Onsemi | ON | | 64-66 | 71 |
| 8/8/22 | Paylocity | PCTY | ★ | 248-263 | 272 |
| 8/1/22 | Petrobras | PBR | | 13.5-14 | 14 |
| 7/11/22 | PTC Therapeutics | PTCT | | 41-43 | 53 |
| 7/25/22 | Qualcomm | QCOM | | 147-153 | 152 |
| 6/13/22 | Scorpio Tankers | STNG | | 31-33 | 41 |
| 8/1/22 | Shoals | SHLS | | 21-22.5 | 25 |
| 6/27/22 | Shockwave Medical | SWAV | | 185-195 | 297 |
| 8/1/22 | WillScot | WSC | | 37-38.5 | 44 |
| 8/1/22 | WW Grainger | GWW | | 530-550 | 583 |
| WAIT |
| 8/8/22 | Adv Drainage Sys | WMS | | 134-138 | 150 |
| 8/1/22 | ATI Inc. | ATI | | 27-28.5 | 32 |
| 8/1/22 | Shoals | SHLS | | 21-22.5 | 25 |
| 8/1/22 | Shoals | SHLS | | 21-22.5 | 25 |
| SELL RECOMMENDATIONS |
| 7/18/22 | Acadia Health | ACHC | ★ | 73-76 | 83 |
| 7/11/22 | Agilon Health | AGL | ★ | 24-25.5 | 23 |
| 7/18/22 | Axsome Therepeutics | AXSM | | 38.5-40.5 | 47 |
| 5/16/22 | Intra-Cellular Therapies | ITCI | | 54-57 | 53 |
| 7/11/22 | Vertex Pharmaceuticals | VRTX | | 288-296 | 306 |
| 7/11/22 | Zoom Communications | ZM | | 105-109 | 113 |
| DROPPED |
| None this week | | | | | |
The next Cabot Top Ten Trader issue will be published on August 22, 2022.
About the Analyst
Mike Cintolo
A growth stock and market timing expert, Michael Cintolo is Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable is his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times.
