Please ensure Javascript is enabled for purposes of website accessibility
Top Ten Trader
Discover the Market’s Strongest Stocks

Cabot Top Ten Trader Issue: February 21, 2023

Download PDF

Antennae Up? Yes. Most Evidence Positive? Also Yes (So Far).


Stop us if you’ve heard this scenario before: The market gets a head of steam going, but after some inflationary reports, the Fed begins to jawbone the market, which leads to the market giving up the ghost. That happened at least a couple of times in 2022, so our antennae are up given the recent inflation reports, tough talk from Fedheads last week and recent market slippage. That said, most of the key evidence is still bullish, including the intermediate- and longer-term trends, the health of the broad market and the action of most leading (and potential leading) stocks. We’re definitely honoring stops and pruning some weaker names, but we’re also holding onto names that are acting normally and keeping a list of stocks that could be great “pullback resumption” buys (our term) should the bulls return. We’ll drop our Market Monitor down a notch (to a level 6) to respect the recent dip, but we’re most interested in how the market responds now that it’s near support.

Once again, the list this week is mixed, with plenty of earnings winners, value plays and a couple of young growth titles, too. Our Top Pick looks like a leader in a surprising industry group—Autonation (AN) is one of the top dogs in the auto dealership group, where there have been lots of strong breakouts. The firm’s Q4 report and aggressive share buyback plan should keep buyers interested.

Stock NamePriceBuy RangeLoss Limit
Airbnb Inc. (ABNB)129123-127108-110
Allison Transmission Holdings (ALSN)4949.5-50.543.5-44.5
Autonation (AN) ★ Top Pick ★144140-144123-126
Bloomin’ Brands (BLMN)2826-2723-23.5
Builders FirstSource (BLDR)7774.5-76.567-69
Deere & Co. (DE)427418-428389-393
Hexcel Corp. (HXL)7168.5-7162-63
Procore Technologies (PCOR)6460-6254-55
Revance Therapeutics (RVNC)3331.5-3427-28
Uber (UBER)3433-34.528.5-29.5

Stock 1

Airbnb Inc. (ABNB)


Buy Range

Loss Limit




Why the Strength
Inflation concerns aren’t slowing down travelers, with Airbnb reporting Q4 revenue of $1.9 billion, up 24% from a year-ago and beating expectations. Particularly encouraging for the business is that cross-border travel is up (nearly 50% in Q4!) as well as city visits – the core of Airbnb’s market – where people are staying longer and paying up for rooms. The asset-light business of renting out other people’s property also turned profitable for the full year (big profits, in fact), the first time in its history, with net income of $1.9 billion on sales of $8.4 billion. While it’s not a business with a great competitive moat – plenty of reservation sites exist – there’s no doubt the company is the top brand in the sector, benefiting from the network advantage of having a large slate of offerings, totaling 6.6 million property listings and more than 1.4 billion stays since 2008. A sign of that advantage is seen in that more people are using AirBNB on mobile phones, with data for major markets showing its app use far exceeds Expedia and Booking Holdings. While many well-off, well-touristed locations are putting restrictions on short-term rentals, the company is seeing advances is working with large landlords to greenlight listings in cities including Phoenix and Jacksonville, Florida. The company is also simplifying the process for new owners to list their property, through Airbnb It, a guided listing service for first timers. Travelers get AirCover, a kind of trip insurance for free, too, which now guarantees to find users a better room if a host cancels, as well as provide 24-hour phone service to report safety concerns. Investors expect the momentum to continue, with sales and earnings up 14% and 24% (respectively) this year, while free cash flow remains very healthy (nearly $5 per share last year) and much larger than net income.

Technical Analysis
ABNB tried to build a big base for the better part of 2021, but the breakout attempt failed as the bear market began—and shares were clobbered from there, falling from 213 to 87 in July and then shaking out below that low (down to 81) around year-end. But ABNB has changed charter since then, rallying six weeks in a row to get above its 40-week line, and after a shakeout, booming on massive volume (third heaviest week ever) last week. We like the potential here, but we think it’s best to keep it small and aim for dips if you want in.

Market Cap$85.0BEPS $ Annual (Dec)
Forward P/E38FY 2021-0.57
Current P/E50FY 20222.79
Annual Revenue $8.39BFY 2023e3.46
Profit Margin16.8%FY 2024e4.11

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1.9024%0.48500%
One qtr ago2.8829%1.7947%
Two qtrs ago2.1058%0.56N/A
Three qtrs ago1.5170%-0.03N/A

Weekly Chart


Daily Chart


Stock 2

Allison Transmission Holdings (ALSN)


Buy Range

Loss Limit




Why the Strength
With lingering supply chain snags and growing transport demand, a widely publicized trucker shortage in the U.S. is a major issue. Compounding the problem is that many of the newer generation of truck drivers aren’t familiar with manual transmissions. Enter Allison, the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial and defense vehicles and a leader in electrified propulsion systems (used in electric hybrid and combat vehicles). Its products are used in a wide variety of applications, including semi trucks, buses, motor homes and mining and construction equipment. Allison’s automatic transmissions for trucks are helping ease the burden of finding qualified truckers for companies across many industries, and the company is benefiting from rising regional haul demand and increasing last-mile delivery fleets (typically the most expensive and time-consuming part of the truck shipping journey). Last week, Allison reported record revenue for 2022, driven by strong customer demand across most markets, with North American on-highway sales increasing 15% and sales outside North America (Europe, Asia and South America) jumping 22%. Q4 revenue of $718 million increased 11% from a year ago, while EPS of $1.65 beat estimates by 27 cents. Moving forward, Allison is preparing for huge growth in truck electrification, developing a new line of products aimed at “electrucks,” while also focusing on increasing its electric powertrain options, including motors, axles and other components. Don’t get us wrong, it’s not a hypergrowth story, but analysts see nearly 10% earnings growth this year and next, while the 1.7% dividend and 9x P/E ratio add to the attractiveness.

Technical Analysis
ALSN topped back in early 2020 (three years ago) just shy of and has had a bunch of big downs and ups since then, starting with the pandemic crash and ending with a rally back to 45 last December. Then came the character change, with shares building a tight, proper base for a couple of months—and last week’s earnings report kicked the stock back to the 50 area. Shares were yanked lower with the market today, so we’ll set our buy range up a bit, thinking a snapback would reaffirm last week’s strong breakout.

Market Cap$4.59BEPS $ Annual (Dec)
Forward P/E8FY 20214.13
Current P/E9FY 20225.53
Annual Revenue $2.77BFY 2023e6.02
Profit Margin19.6%FY 2024e6.59

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr71811%1.5232%
One qtr ago71025%1.4563%
Two qtrs ago66410%1.2625%
Three qtrs ago67715%1.3021%

Weekly Chart


Daily Chart


Stock 3

Autonation (AN) ★ Top Pick ★


Buy Range

Loss Limit




Why the Strength
Believe it or not, car dealerships have all come to life (Group 1 Auto was in Top Ten two weeks ago), mostly because a familiar story among cyclical stocks is playing out here: With supply crimped and consumer demand strong, selling prices and earnings went wild during the pandemic, but due to a couple of factors, those dynamics are sticking around (new vehicle sales were 13.7 million last year, compared to 16.9 million yearly average from 2013-2019, mostly because of supply issues), resulting in sky-high earnings for much longer than expected. When it comes to Autonation, there are some company-specific good tidings as well. First, the company has expanded into ancillary fields, including finance and after-sales repair and transportation; for last year as a whole, those two categories combined made up 20% of revenues, while after-sales activities made up 36% of gross profit, giving some reliability to the business outside of car sales. Also vital here is management’s super-aggressive share buyback program—as of mid February, shares outstanding were down about 43% from the end of 2020 (two-ish years), which is obviously going to keep per-share metrics higher than they would have been otherwise. Moreover, in the conference call, management effectively said that, while the firm is definitely investing in growth (and some small acquisitions), it shouldn’t affect their buyback approach. Gravity should should an impact on results this year—sales are likely to be flat with earnings down some, but (a) Autonation regularly tops estimates, and (b) even at $20 per share, the stock looks dirt cheap.

Technical Analysis
AN’s post-pandemic run was excellent but topped out in October 2021 near 135 and kicked of a long, up-and-down sideways phase, with support in the 95 to 100 area and resistance near 140. But now you can see shares have left that launching pad behind—AN has been strong since mid January, with last week’s earnings-induced rip decisively leaving shares at new highs. Of course, we’re again seeing selling on strength in the market, which hit AN today, but if you want in, we’re OK grabbing some shares on further dips.

Market Cap$7.71BEPS $ Annual (Dec)
Forward P/E8FY 202118.14
Current P/E6FY 202224.58
Annual Revenue $27.0BFY 2024e19.87
Profit Margin4.8%FY 2023e17.81

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr6.702%6.3719%
One qtr ago6.674%6.0017%
Two qtrs ago6.87-2%6.4834%
Three qtrs ago6.7514%5.78107%

Weekly Chart


Daily Chart


Stock 4

Bloomin’ Brands (BLMN)


Buy Range

Loss Limit




Why the Strength
Casual dining took a big hit during 2020 but has bounced back strongly in the last two years, helped by a return of sit-down dining of course, but also thanks to takeout orders making up an increasing part of the overall sales picture. Bloomin’ Brands is one of the world’s largest casual dining companies, with more than 1,450 restaurants across the U.S. and in 17 countries (brands include Outback Steakhouse, Bonefish Grill and Carrabba’s Italian Grill). In sync with changing customer preferences, Bloomin’s post-pandemic growth strategy is centered around shrinking the size of its kitchens and dining areas, while expanding takeout and delivery options, as digital sales become an increasingly important contributor to the bottom line. In Q4, Bloomin’ beat earnings estimates and delivered profits and margins “well above pre-pandemic levels despite significant inflation” for full-year 2022. (Worth noting, Bloomin’ didn’t raise prices at its restaurants last year, which it believes will have “long-term benefits” for its business.) All its U.S. brands finished the year with positive same-store sales, while Outback Steakhouse Brazil achieved record sales and earnings. All in all, revenue of around $1.1 billion just missed the consensus but rose 5%, while per-share earnings of 68 cents beat estimates by four cents. Moving forward, management said 2023 is off to a good start and the firm is rolling out new cooking technology, including advanced grills and ovens, which it expects will increase customer satisfaction and efficiency. The company sees EPS of around 88 cents in Q1—up 10% if realized and 30% higher than Q4—and guided for U.S. comp sales across its brands to increase 3% for 2023 (likely conservative) while analysts see full-year earnings rising 24%. A solid 3.5% dividend yield is an added attraction.

Technical Analysis
BLMN hit an all-time peak at 33 in April 2021, as dining-out demand roared back from the pandemic. However, much of the business recovery that followed was likely already baked into the share price, and the stock entered a multi-month decline that cut shares in half by last June. The recovery was choppy, but BLMN eventually built a tidy cup-with-handle base that it decisively left behind last week. We’ll set our buy range down a bit, thinking a dip of a few dimes is likely.

Market Cap$2.41BEPS $ Annual (Dec)
Forward P/E10FY 20212.70
Current P/E11FY 20222.38
Annual Revenue $4.43BFY 2023e2.78
Profit Margin5.7%FY 2024e3.01

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1.105%0.6813%
One qtr ago1.064%0.35-39%
Two qtrs ago1.134%0.68-16%
Three qtrs ago1.1416%0.7316%

Weekly Chart


Daily Chart


Stock 5

Builders FirstSource (BLDR)


Buy Range

Loss Limit




Why the Strength
The residential housing market is likely to slow meaningfully as inflation and rising mortgage rates keep prospective homebuyers at bay (while all those with super-low mortgage rates become less-apt to put their house on the market). But with inflation cooling somewhat and mortgage rates retreating, investors are thinking the housing downturn won’t be as severe as feared; indeed, December saw pending U.S. home sales up almost 3%—the first increase in seven months. Builders FirstSource might not be a household name, but it’s the nation’s largest supplier of structural building products and services to the professional market for new residential construction, repair and remodeling. Although the company experienced increasing macro headwinds last year, its leading market position, high cash levels and focus on innovation have made for a resilient business model allowing Builders FirstSource to navigate the challenging environment. Revenue in Q3 increased 5% from a year ago, including nearly 20% sales growth in its higher margin value-added offerings, while per-share earnings of $5.20 beat estimates by a mile. The firm also achieved record adjusted EBITDA of $1.2 billion during the quarter (up 20%), driven by higher margins and acquisitions (the company completed four tuck-in acquisitions last summer alone). Amazingly, the top brass thinks 2022 likely brought in $3.3 billion of free cash flow (about $22 per share!), and their confidence in the future led them to aggressively repurchase shares, buying back nearly 30% of total shares outstanding since August 2021 (!) and recently boosting the repurchase plan by $1 billion (analysts estimate the firm will repurchase more than 10% of its market cap in the next 12 months). To be fair, 2023 should take a big step back in profitability as the industry slows, but (a) those estimates are probably very conservative, and (b) even if they’re not, you’re still likely looking at a stock trading at ~11x free cash flow during an industry downturn, which is enticing to many.

Technical Analysis
BLDR logged a record high of 86 at the start of 2022 before embarking on a downward course for the first half of the year, falling 43% before it hit bottom in June. That was followed by a quick 25-point snap-back rally and a retreat to a higher low in late September. Three more months of base-building followed, with the New Year seeing shares rally nicely back to their old highs. Given the run and that earnings are coming up, we advise keeping it small and aiming to enter on pullbacks.

Market Cap$12.0BEPS $ Annual (Dec)
Forward P/E14FY 20203.15
Current P/E5FY 202110.32
Annual Revenue $23.0BFY 2021e17.54
Profit Margin14.1%FY 2022e5.87

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr5.765%5.2053%
One qtr ago6.9324%6.26127%
Two qtrs ago5.6836%3.90175%
Three qtrs ago4.6383%2.78116%

Weekly Chart


Daily Chart


Stock 6

Deere & Co. (DE)


Buy Range

Loss Limit




Why the Strength
Commercial farming is big business today, which means growers must embrace the latest technologies that help control their costs while boosting crop yields. Deere is the world’s largest agricultural equipment maker and a leader in developing farm vehicles that use cutting edge artificial intelligence and machine learning to achieve these goals. Two-plus years of elevated crop prices have boosted farmers’ incomes, allowing them to replace aging equipment following years of low prices. Last week, Deere reported fiscal Q1 (ending January 29) revenue of nearly $13 billion—a 32% increase from a year ago—driven by “favorable market fundamentals and healthy demand” for its equipment. Per-share earnings of $6.55, meanwhile, beat estimates by $1.01 and sent shares higher. A big contributor to the strong Q1 performance was an increase in the company’s Production and Precision Agriculture sales—up a whopping 55%—as growers embraced Deer’s latest offerings of high-tech planters and sprayers. The firm’s Small Ag and Turf business posted healthy sales (up 14%), due to price increases and higher shipment volumes, while Deere’s Construction and Forestry segment also chipped in with a 26% sales increase. Looking ahead, the company expects Production and Precision Ag to continue to be the main growth driver, with full-year segment sales 20% higher, while Construction and Forestry sales increase around 15% and Small Ag and Turf sales remain flat. Wall Street sees the 2023 top and bottom lines jumping 14% and 27%, respectively. A 1.1% dividend doesn’t hurt the cause.

Technical Analysis
DE has effectively been building a giant launching pad since May 2021. The first phase. of that was nearly straight sideways, but the breakout attempt in the spring of last year failed, leading to a 36% plunge with the market. DE then tested its highs again in November, but that didn’t stick, either. Now we see a very tight 12-week range, with last week’s big-volume earnings bump setting the stage for higher prices … if the market holds together. We’re fine starting small here and buying more on decisive move above 450.

Market Cap$128BEPS $ Annual (Oct)
Forward P/E15FY 202118.99
Current P/E15FY 202223.28
Annual Revenue $55.7BFY 2023e28.16
Profit Margin15.5%FY 2024e29.69

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr12.732%6.55124%
One qtr ago15.537%7.4481%
Two qtrs ago14.122%6.1616%
Three qtrs ago13.411%6.8120%

Weekly Chart


Daily Chart


Stock 7

Hexcel Corp. (HXL)


Buy Range

Loss Limit




Why the Strength
Hexcel is uniquely positioned to support the rapid growth of two major industries—alternative energy and commercial aerospace. For the former, the company produces carbon fibers, advanced composites, laminates and other products to strengthen turbines used in wind power. For the latter, Hexcel is the is the world leader in honeycomb manufacturing, which offers stiffness and strength but without much added weight. The key driver behind Hexcel’s recent growth spurt is the aerospace field, as aircraft production is soaring due to the recovery in global travel demand. Hexcel’s lightweight carbon fiber composites are heavily used in this industry—they account for nearly 60% of its revenue, with space/defense and industrial accounting for the remaining sales—and they offer significant cost savings via weight reduction and strength improvements (versus traditional materials) for the airlines that use them. Accelerating demand for Hexcel’s products drove a notable top-line bump in Q4, as sales improved 19% from a year ago, supported by a “continuing robust recovery” in the commercial aerospace market, with per-share earnings of 40 cents beating estimates by 21%. For the full year, revenue of $1.6 billion was 23% higher while earnings moved up in a big way. Hexcel expects the strength to continue this year and has just restarted construction of a new carbon fiber line at its Decatur, Alabama facility (previously paused in 2020). Best of all is that this growth looks sustainable: Management sees sales up 11% this year while both earnings and free cash flow should rise more than 40%, with 2024 very likely to be another great year, too.

Technical Analysis
HXL’s post-pandemic rally petered out in the middle of 2021 near 65, leading to a correction 47 near the end of that year. Interestingly, that was the bottom, with shares basically meandering sideways with many probes below 50 and one test of resistance (in August). The end of 2022 brought a real base, and the breakout came a month ago on earnings. It’s not a go-go name but we like the look of HXL—we’re OK buying some here or on dips.

Market Cap$6.10BEPS $ Annual (Dec)
Forward P/E39FY 20210.27
Current P/E57FY 20221.28
Annual Revenue $1.58BFY 2023e1.86
Profit Margin7.8%FY 2024e2.50

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr42919%0.40150%
One qtr ago3659%0.33154%
Two qtrs ago39323%0.33313%
Three qtrs ago39126%0.22N/A

Weekly Chart


Daily Chart


Stock 8

Procore Technologies (PCOR)


Buy Range

Loss Limit




Why the Strength
Procore has a great story: The firm is a cloud software outfit that has a tailormade solution for the construction industry, which is gigantic (Procore’s customers tend to deal with infrastructure and multi-family and commercial projects), complex (dealing with all different contractors, financiers, insurers and suppliers—and countless change orders, too), inefficient (large non-residential construction projects like infrastructure, mining or oil/gas average an 80% budget overrun!) and way behind on digital adoption. Procore’s solution is a hit and works, with a business model (fixed-fee subscription based on mix of products and construction volume; no per-user fees) that incentivizes adoption and a platform that deals with all facets of a project, from workers to payments to execution and more, connecting everyone to the same information. (Half of its recurring revenue comes from project management, but financials, invoices, analytics and quality/safety are all meaningful chunks.) Procore claims its offering saves an average of 15 days of a typical project, which is obviously huge, and the top brass thinks it has 50% growth potential just from cross-selling current clients more of its modules. It’s not likely to be an explosive growth story, but the runway here is very long and Procore looks like the hands-down leader in bringing the sector into the 21st century. The numbers to this point have been solid, with Q4 seeing revenues up 38% and, for the full year, free cash flow came in near 30 cents a share (earnings were in the red). The company forecast a 25%-ish sales gain for 2023, which will probably prove conservative, with free cash flow taking another leap forward. We’re also intrigued that one sharp growth fund (T Rowe Price New Horizons) owns about 5% of the company.

Technical Analysis
PCOR came public during the software boom of mid 2021—it had a decent first couple of months before sinking like stone in the bear market, dropping from near 105 to 40 in about seven months. But that began the bottoming process, with a nice summer rally followed by a bottoming base (including a higher low) into year-end. And now the buyers are starting to flex their muscle, sending PCOR up five of the past six weeks, including a big-volume earnings rally last week. There is some resistance up here, so we think aiming for a pullback toward support near 60 is a better bet.

Market Cap$8.95BEPS $ Annual (Dec)
Forward P/EN/AFY 2021-0.25
Current P/EN/AFY 2022-0.51
Annual Revenue $720MFY 2023e-0.50
Profit MarginN/AFY 2024e-0.35

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr20238%-0.08N/A
One qtr ago18641%-0.09N/A
Two qtrs ago17240%-0.19N/A
Three qtrs ago16040%-0.15N/A

Weekly Chart


Daily Chart


Stock 9

Revance Therapeutics (RVNC)


Buy Range

Loss Limit




Why the Strength
The introduction of Botox to the broad market more than 30 years ago created a $5 billion market for neuromodulators – cosmetic injections to counteract wrinkles. It’s a segment that has seen little innovation since, but that’s the big idea behind Revance: The firm believes it has a superior neuromodulator, called DaxibotulinumtoxinA for Injection. It’s a proprietary stabilizing peptide that is injected for the same aesthetic reasons as Botox and which has a promising extension into therapeutics for people with muscular disorders, which is a potential $1 billion-plus market on its own. Marketed as Daxxify, the drug has FDA approval for treatment of glabellar lines, which are the frown lines that appear between eyebrows, as well as for lip lines. Revance says Daxxify is a better version of AbbeVie’s Botox since injections last as long as 24 weeks, twice as long as the low-end for Botox. Revance just rolled out Daxxify in December in a limited release with 400 of the top aesthetic treatment practices in the U.S., selling about $11 million of product; the full rollout of Daxxify is coming this quarter or early in Q2. The core of Revance’s business today is its RHA Collection, a series of dermal fillers for wrinkles, which did well over $100 million in sales last year – the bulk of company revenue according to preliminary results. The company also has payments system, Opul, a cheaper alternative to traditional bank payments it markets to beauty practices. Revance has $340 million of cash on hand, which should help it manage the expenses of getting Daxxify to market: 2022 expenses were around $375 to $400 million The losses will continue in 2023, with consensus for a $2.74 loss per share. Sales, however, are seen soaring to the $230 million area with much more upside down the road.

Technical Analysis
An early autumn rally for RVNC after FDA approval was short-lived, with profit takers and bears running shares down to test long term support entering 2023. But since the calendar flipped, the stock has found plenty of buyers—the preliminary 2022 results in early January brought a massive gap, and shares stretched all the way to 36 before easing back to its 25-day line with the market over the past two weeks. It’ll be super volatile, but we’re OK nibbling at RVNC here or on further dips.

Market Cap$2.77BEPS $ Annual (Dec)
Forward P/EN/AFY 2020-4.86
Current P/EN/AFY 2021-4.17
Annual Revenue $109MFY 2022e-2.74
Profit MarginN/AFY 2023e-2.26

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr29.047%-1.17N/A
One qtr ago28.451%-0.88N/A
Two qtrs ago25.390%-0.94N/A
Three qtrs ago26.0133%-0.93N/A

Weekly Chart


Daily Chart


Stock 10

Uber (UBER)


Buy Range

Loss Limit




Why the Strength
Uber has always had emerging blue chip written all over it, especially as its delivery business has become a huge contributor (about the same number of bookings in Q4 between Rides and Delivery), but (a) when the firm came public with a lot of fanfare the valuation was ridiculous, and (b) Uber was still bleeding a tremendous amount of red ink as the top brass focused on expansion. But management got the message (from investors and the bear market), and now the pieces are all aligned on the upside: Both Rides (which just surpassed pre-pandemic metrics in Q4) and Delivery are on solid growth tracks, bolstered by resilient economies and travel sectors around the globe; in Q4, currency-neutral bookings were up a strong 37% for Rides and 14% in Delivery, with management adding the pandemic’s push-pull effects on Delivery is basically over now (i.e., no more boom-bust but steady growth ahead). Overall, bookings rose 26%, and the top brass sees Q1 bringing another round of 20%-plus growth. But the big difference here is that all those bookings and trips are hitting the bottom line: EBITDA has risen from $86 million in Q4 2021 to $168, $364, $516 and then $664 million in Q4 of last year, with free cash flow north of 21 cents per share in Q4 alone—and all those figures should continue to improve going forward, with a target of $5 billion of EBITDA in 2024. Sure, the days of go-go growth are over, but big investors should be thrilled with 15% to 25%-type bookings growth while cash flow goes to the moon.

Technical Analysis
UBER fell by more than two-thirds during the bear market, but the progress on the cash flow front helped the stock explode higher on earnings in August. Shares didn’t get going from there because of the market, but built a multi-month bottoming base—and like many names, UBER has come alive since year-end, actually tagging 10-month highs. It’s up eight weeks in a row, though has hacked around a bit since earnings. We’re OK starting a position in this area with a looser stop.

Market Cap$69.2BEPS $ Annual (Dec)
Forward P/EN/AFY 2021-0.26
Current P/EN/AFY 2022-4.66
Annual Revenue $31.9BFY 2023e-0.09
Profit Margin6.9%FY 2024e0.62

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr8.6149%0.29-34%
One qtr ago8.3472%-0.61N/A
Two qtrs ago8.07105%-1.32N/A
Three qtrs ago6.85136%-3.04N/A

Weekly Chart


Daily Chart


Previously Recommended Stocks

DateStockSymbolTop PickOriginal Buy Range2/21/23
9/12/22Academy SportsASO48.5-51.559
1/30/23ASML IncASML632-655630
1/30/23Boot BarnBOOT81-8476
2/6/23Box Inc.BOX32.5-33.534
1/30/23Discover Fin’lDFS112-115109
1/17/23Exact SciencesEXAS63-65.561
11/7/22Five BelowFIVE145-150208
2/6/23Group 1 AutoGPI218-228223
1/17/23Hyatt HotelsH102-105113
1/23/23Inspire MedicalINSP247-254265
1/17/23Jabil Inc.JBL74.5-7783
2/13/23New RelicNEWR73.5-75.574
2/6/23Old DominionODFL352-362342
1/30/23On HoldingONON21.5-22.521
2/13/23Prometheus BioRXDX113-118120
1/9/23Reliance SteelRS211-215242
2/13/23Seagate TechSTX68-7067
11/21/22Shift4 PaymentsFOUR44-4658
1/30/23Southern CopperSCCO71-73.574
1/30/23Starbulk CarriersSBLK21.2-22.222
1/30/23Steel DynamicsSTLD114-117122
1/23/23Toll BrothersTOL53-5556
1/23/23United AirlinesUAL47.5-5048
12/5/22Wynn ResortsWYNN81-84107
2/13/23Allegro MicroALGM40.5-42.543
2/13/23Royal CaribbeanRCL67-7072
1/23/23Abercrombie & FitchANF26-27.529
1/17/23American AirlinesAAL16.3-17.316
12/5/22BioMarin PharmBMRN101-105106
1/17/23First SolarFSLR170-175161
1/3/23Freeport McMoRanFCX39.5-4143
1/23/23Noble Corp.NE39-40.540
1/30/23Valero EnergyVLO134-138132
None this week

The next Cabot Top Ten Trader issue will be published on February 27, 2023.

A growth stock and market timing expert, Michael Cintolo is Chief Investment Strategist of Cabot Wealth Network and 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 was 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.