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 27, 2023

Download PDF

Testing Key Levels

gauge7

Last week was the worst week of the market’s recent retreat, with most major indexes down in the 2.5% to 3% range. Overall, it’s fair to say many pieces of evidence are now at or approaching key levels: Most major indexes closed in on their 50-day lines, many individual potential leaders are in a similar boat, and both the broad market and the growth-vs.-defense dynamic are healthy but showing a bit of wear and tear. Ideally, this three-week dip in the market has allowed many strong names (and sectors) to catch their breath, leading to a strong resumption of the January rally—but the next few days should tell the tale. Right now, given the late-Friday firmness and today’s bounce, we’ll leave our Market Monitor at a level 6, but we’re watching closely.

Despite the market action, we actually think this week’s list has a bit more juice than the prior couple of weeks, with many strong stocks with good stories and solid charts. Our Top Pick is Axcelis Technologies (ACLS), which looks like one of the new leaders in the top growth area today (chip stocks); it’s extended, so try to buy on a shakeout.

Stock NamePriceBuy RangeLoss Limit
ATI Inc. (ATI)4038-4034-35
Axcelis Technologies (ACLS) ★ Top Pick ★125116-122101-104
Cirrus Logic (CRUS)10299-10388-90
Emcor (EME)166159-163147-149
Nvidia (NVDA)235225-230195-198
Palo Alto Networks (PANW)189180-185164-167
Super Micro Computer (SMCI)10194-9783-85
United Rentals (URI)463442-455400-406
Wesco (WCC)166161-166143-146
Wynn Resorts (WYNN)105101-10591-94

Stock 1

ATI Inc. (ATI)

Price

Buy Range

Loss Limit

4038-4034-35

Why the Strength
A pandemic-induced slump in business and vacation travel has given way to a boom in new orders for commercial jets as flight demand returns. That’s resulted in a big pickup in orders for ATI, which produces titanium- and nickel-based alloys, stainless steel and specialty components for the global aerospace and defense markets (53% of sales). In its recent Q4 earnings report, the company called the order boom “the most robust aerospace ramp in decades” and said it’s running the business to take full advantage of the opportunities it presents. Total Q4 revenue came in north of $1 billion for the second straight quarter and was 32% higher from a year ago, led by commercial aerospace product sales that soared by over 85%. Per-share earnings of 53 cents beat estimates by a penny while adjusted EBITDA increased almost 50% for Q4 and 90% for the full year. Significantly, ATI generated $148 million in free cash flow for 2022, which exceeded the firm’s guidance by over 60% and compared to the year-ago breakeven-ish figure. The company’s jet engine sales in 2022 doubled from the prior year, which ATI called “astounding,” and 2022 airframe sales grew 79%. Another indication of the jet market’s strength was the firm’s revelation that in Q4, customers made advanced payments to lock in their 2023 production slots due to strong titanium and nickel demand (key metals used in airplane engines and airframes). Management said the commercial airplane market is at a “critical positive inflection point” and believes it will lead to further growth due in part to massive recent orders for major jet manufacturers like Boeing, while the war in Ukraine is accelerating demand for defense materials. Looking ahead, ATI sees steady 10%-ish revenue growth and a near-doubling of EBITDA margins through 2025.

Technical Analysis
ATI actually showed very solid strength last year, with a huge rally to new highs in April, and after a summer dip to the 40-week line, another push to minor new highs in August. Then came a flat, tightening period for a few months, with ATI breaking out in early January and racing to 41 following earnings earlier this month. We like the three-week rest period as the 25-day line catches up—we’re OK picking up some shares around here.

Market Cap$5.13BEPS $ Annual (Dec)
Forward P/E18FY 20210.13
Current P/E20FY 20221.99
Annual Revenue $3.84BFY 2023e2.23
Profit Margin7.6%FY 2024e2.75

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr101032%0.53112%
One qtr ago103242%0.53960%
Two qtrs ago96056%0.54N/A
Three qtrs ago83420%0.40N/A

Weekly Chart

ATI WEEKLY CHART

Daily Chart

ATI DAILY CHART

Stock 2

Axcelis Technologies (ACLS) ★ Top Pick ★

Price

Buy Range

Loss Limit

125116-122101-104

Why the Strength
Chip stocks look like the #1 growth-y sector out there, and Axcelis is one of a couple of new leaders that’s in the right place at the right time with offerings perfectly suited for a coming boom in high-performance chips—if all goes well, the Applied Materials for the next many years, of sorts. The firm’s various lines of ion implant chip equipment is in higher demand, as more complex chips needed for things like electric vehicles and advanced power devices demand more implants; in management’s words, Axcelis is the “only ion implant company that can deliver complete coverage for all power device applications.” And broadly speaking, the firm’s Purion line of equipment is a direct play on the current and coming boom in silicon carbide (SiC) chips, which operate far more efficiently at the higher temperatures experienced in things like EVs. Production of SiC chips is expected to double every three years for the next decade (!), and Purion and its other offerings “provide the lowest-risk path to high-volume manufacturing” for this sector. Growth has been cranking ahead for many quarters, with the Q4 report easily surpassing expectations (earnings of $1.71 per share beat by 20%)—and while a sector slowdown in the quarters ahead is likely to slow growth, the focus is on the longer-term: Management thinks revenues can rise a total of 25% or so during the next two or three years, with free cash flow coming in at $10 per share—and, in our view, even those figures could prove conservative if demand continues to ramp.

Technical Analysis
ACLS hit resistance a few times last year in the 85 area, being rejected each time as the market remained weak. But December brought a character change, with shares tightening up—and then ACLS exploded higher when the calendar flipped, rallying straight up to 130 with no dips. Now the stock is taking a minor breather, refusing to pull in much even as the market wobbles. We’ll set our buy range down a bit.

Market Cap$4.03BEPS $ Annual (Dec)
Forward P/E20FY 20212.88
Current P/E23FY 20225.46
Annual Revenue $920MFY 2023e6.07
Profit Margin21.4%FY 2024e7.03

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr26629%1.7163%
One qtr ago22930%1.2149%
Two qtrs ago22150%1.32140%
Three qtrs ago20453%1.22154%

Weekly Chart

ACLS WEEKLY CHART

Daily Chart

ACLS DAILY CHART

Stock 3

Cirrus Logic (CRUS)

Price

Buy Range

Loss Limit

10299-10388-90

Why the Strength
Cirrus Logic specializes in semiconductors that produce audio in products like Apple’s iPhone as well as smart speakers, audio headsets and automobile sound systems. Apple is more than 80% of the company’s business, mostly indirectly by selling into suppliers used by Apple. Such customer concentration is obviously a risk, but it’s a market that management says is secure since Cirrus Logic engineers continue to make advances in low-power, high-performance products for both audio and haptics. In its third quarter, reported at the start of the month, Cirrus crushed expectations, posting $2.40 per share of earnings compared to $1.99 consensus, on $591 million sales. The outlook remains good, with a new 22-nanometer smart codec (a media file converter) on the horizon that promises to be more energy efficient. Cirrus Logic says its audio products have a long revenue visibility thanks to their reliability, so the company expects to sell the same products into multiple generations of iPhones. That allows Cirrus to redeploy engineers into pursuing new areas to diversify the business: One area for expansion is in processors for smartphone cameras, an area management says has been growing in sales each of its last three generations of products; the fourth generation rolls out later this year. Cirrus Logic also sees laptops as a wide-open market for its innovations in energy management, where it can benefit fanless and single-fan devices. Make no mistake: Cirrus’ fortunes will be attached to the iPhone for some time, but executives see diversification lowering iPhone components to about 70% of revenue in the next few years. Analysts don’t see a ton of growth, but those estimates are likely too low and the stock trades at a very reasonable valuation.

Technical Analysis
CRUS peaked way back at the start of 2021 near 100 and found resistance in the 90 to 95 area multiple times during the next couple of years before shares dipped to a bear low of 62 last November. But that was the turning point, with the stock quickly bouncing back to its 40-week line, tightening up in December and then soaring six weeks in a row to new highs. The very calm rest of the past two weeks is a good sign; we’re OK nibbling here or on further dips.

Market Cap$5.87BEPS $ Annual (Mar)
Forward P/E16FY 20214.58
Current P/E14FY 20226.90
Annual Revenue $2.02BFY 2023e6.35
Profit Margin23.0%FY 2024e6.52

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr5918%2.40-6%
One qtr ago54116%1.999%
Two qtrs ago39442%1.12107%
Three qtrs ago49067%2.01205%

Weekly Chart

CRUS WEEKLY CHART

Daily Chart

CRUS DAILY CHART

Stock 4

Emcor (EME)

Price

Buy Range

Loss Limit

166159-163147-149

Why the Strength
The reshoring, infrastructure spending and green energy trends are creating some big tailwinds for Emcor (covered in the November 21 report). The firm, which is made up of over 80 companies, is a leading global engineering and specialty contractor with a focus on electrical and mechanical construction along with building, industrial and facilities services. Last week, Emcor surprised the market with strong top- and bottom-line beats (the reason for the strength), with record sales of almost $3 billion increasing 12% from a year ago and EPS of $2.63 topping estimates by 36 cents and growing 39% year-on-year. Even better, forward-looking measures like remaining performance obligations (RPOs, or all the money set to come its way via current contracts) looked great, coming in at $7.5 billion (up 33% and the ninth consecutive quarter of RPO growth), underscoring the strength of the company’s pipeline. The momentum was led by Emcor’s construction business, notably the U.S. Mechanical Construction segment, which had an “exceptional” year of 10% sales growth (all of which was organic) and operating margins of 8% driven by demand for semiconductor, data center, wastewater and healthcare projects. The firm’s U.S. Building Services also had an excellent year, driven by performance across most of its service lines including repair service, site-based services, building controls and HVAC projects (due to clients desire to extend HVAC equipment life). U.S. Industrial Services segment sales, meanwhile, rose 13%. The strong showing prompted management to guide for 2023 revenue of around $12.3 billion (up 12% if realized and above Wall Street’s expectations). It sees future growth driven by construction of hyperscale data centers, chip fabs, life science and EV battery facilities. It’s not changing the world, but Emcor is a solid business that should see steady mid-teens earnings growth ahead.

Technical Analysis
EME hit a major peak at 135 in November 2021, then went down the chute for the next eight months before bottoming in the mid 90s last July. Shares turned the corner after that with a 25% rally into August, followed by a six-week pullback, then another 35% moonshot to new highs in November. Another three months of very tight action set up last week’s earnings-induced breakout to new highs. Minor weakness should provide a decent entry point.

Market Cap$7.83BEPS $ Annual (Dec)
Forward P/E18FY 20217.06
Current P/E20FY 20228.10
Annual Revenue $11.1BFY 2023e9.15
Profit Margin4.3%FY 2024e10.56

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr2.9512%2.6339%
One qtr ago2.8312%2.1617%
Two qtrs ago2.7111%1.9912%
Three qtrs ago2.5913%1.39-10%

Weekly Chart

EME WEEKLY CHART

Daily Chart

EME DAILY CHART

Stock 5

Nvidia (NVDA)

Price

Buy Range

Loss Limit

235225-230195-198

Why the Strength
Nvidia is one of the world’s largest semiconductor companies and enjoys a powerful position in the perennially popular video gaming market, with a growing footprint in artificial intelligence (AI) for data centers. At first glance, last week’s earnings report for Nvidia appeared to be a disappointment, as revenue was down over 20% for fiscal Q4 and flat for fiscal 2023 (ended January 29). But both revenue and Q4 per-share earnings of 88 cents handily beat estimates—and sent shares soaring—while gaming revenue of $1.8 billion jumped 16% from the previous quarter (though still down 46% from a year ago) as Nvidia’s customers enthusiastically responded to its newest line of desktop gaming processors. As usual, the story here is all about what comes next: The company said the gaming market is recovering strongly from a post-pandemic slump, and online sales outlets are having a hard time keeping up with demand for Nvidia’s flagship RTX 4090 graphic cards for gaming. But even more impressive was Nvidia’s data center revenue (includes cloud computing and AI applications), which grew 11% in Q4 from a year ago. Adoption of the company’s new H100 data center graphics processing unit is “strong,” and Nvidia believes AI adoption is at an “inflection point” and just announced multiple partnerships with leading cloud service providers to offer AI-as-a-service that will provide them with direct access to Nvidia’s generative AI platform. Additionally, Nvidia announced a partnership with Deutsche Bank and Dell to extend the use of AI in the financial services and computer tech sectors. Wall Street is over the moon on Nvidia’s growth prospects, with several institutions upping their share price targets last week, while forecasting a 30% earnings bump in each of the next three years, which should be like catnip for institutional investors. The valuation is still up there, but the next leg of the growth story appears to be underway.

Technical Analysis
NVDA obviously had a monster run in recent years, which works against it being a leader in any bull move this time around. But there are exceptions to every rule, and the action in recent months has been noteworthy: After plunging nearly 70% from its highs through September, shares snapped back nicely into the 40-week line, then pulled back to etch a higher low in December. And now the buyers are back, with NVDA rallying eight weeks in a row, most of them on big, above-average volume. We suggest aiming for dips, though if the market hangs in there (a big if), we’re not expecting a big retreat.

Market Cap$571BEPS $ Annual (Jan)
Forward P/E53FY 20224.44
Current P/E71FY 20233.34
Annual Revenue $27.0BFY 2024e4.41
Profit Margin35.9%FY 2025e5.79

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr6.05-21%0.88-33%
One qtr ago5.93-17%0.58-50%
Two qtrs ago6.703%0.51-51%
Three qtrs ago8.2946%1.3649%

Weekly Chart

NVDA WEEKLY CHART

Daily Chart

NVDA DAILY WEEKLY

Stock 6

Palo Alto Networks (PANW)

Price

Buy Range

Loss Limit

189180-185164-167

Why the Strength
Cybersecurity spending is expected to continue on its upward path, as hybrid work and the use of cloud computing drive spending. Both factors are also driving growth for Palo Alto, a leading player in the cybersecurity space that’s fairly dominant in firewalls and network security, but has a growing focus on providing security solutions for hybrid cloud and remote workforces; it’s benefiting both from upgrades to those older firewalls but also next-generation security spending, too. In fiscal Q2 (ending January 31), Palo Alto’s revenue and billings each grew 26% from a year ago, to $1.7 billion and $2 billion, respectively, while per-share earnings of $1.05 crushed estimates by 27 cents, all of which contributed to a few price target hikes on Wall Street. The ongoing cloud transformation is a big part of Palo Alto’s story, as the company’s remaining performance obligations (RPO, the total value of customer contracts yet to be fulfilled) rose 40% in Q2 to almost $9 billion. Significantly, the number of deals the firm closed worth over $1 million grew nearly 20%, while the value of these transactions increased 60%. Moreover, the number of $10 million-plus transactions increased by an eye-popping 144% (!), which the company said is critical for it being able to drive its platform consolidation. Other highlights included a healthy number of large competitive wins in secure access service edge (SASE) offerings, which Palo said was one of its most promising pipelines looking 12 months out, and a software firewall business that it said was “going strong.” Wall Street sees the growth story (with booming cash flow) playing out for many quarters to come.

Technical Analysis
Cybersecurity stocks were taken apart last year, and many remain in poor shape, but PANW has been a notable standout in terms of relative strength. The stock actually registered an all-time high at 210 in April, but fell on hard times with the rest of the sector after that, falling to 140 in May and dipping to a slightly lower low in early January. But the last seven weeks have witnessed a change of character, with a persistent advance and, last week, a strong earnings gap and (importantly) PANW holding those gains even as the market wobbled. Dips of a few points would be tempting.

Market Cap$56.4BEPS $ Annual (Jul)
Forward P/E47FY 20212.05
Current P/E58FY 20222.52
Annual Revenue $6.16BFY 2023e3.96
Profit Margin20.0%FY 2024e4.62

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1.6626%1.0581%
One qtr ago1.5625%0.8351%
Two qtrs ago1.5527%0.8051%
Three qtrs ago1.3929%0.6030%

Weekly Chart

PANW WEEKLY CHART

Daily Chart

PANW DAILY CHART

Stock 7

Super Micro Computer (SMCI)

Price

Buy Range

Loss Limit

10194-9783-85

Why the Strength
AI needs a wealth of computing power, and Super Micro Computer provides a lot of it. The company’s Plug-n-Play Rack-Scale, an easy-to-install server system, saw sales double last quarter thanks to AI demands, helping the business blow past expectations for its fiscal Q2, reported at the end of January. Total sales in the period were $1.8 billion, up 54%, with earnings growing even stronger, to $3.26 a share, well beyond consensus, thanks in part to lower production costs from a new Taiwan factory. The firm has beaten expectations in every quarter since late 2019, but are downplaying the current period, saying it could bring headwinds as customers ease off purchases due to some economic uncertainty. Even so, sales are expected to rise 30% to $6.8 billion for fiscal 2023, which ends in June. Momentum should continue in the back half of the calendar year as Super Micro rolls out new server systems called Sapphire Rapids, Genoa and H100. Powered with NVIDIA and AMD chips, the company says they are seeing a lot of test orders from the market, which suggests an expanding customer base that could result in faster sales growth than seen in previous product cycles. In addition to AI, the Internet of Things, 5G networks, cloud and ever-increasing corporate data center use will fuel demand, leading management to say fiscal 2024 should generate sales growth of 20%. Long term, the company’s focus on energy efficient products is a differentiator; Super Micro’s Green Computing offerings use energy efficient chips, free air cooling (using cooler exterior air to help regulate temperatures) and pooled computing resources which results in power usage up to a third less than a traditional data center. Analysts see earnings leveling out soon, but (a) that’s almost surely conservative, and (b) the figures remain in nosebleed territory.

Technical Analysis
SMCI has been strong but wild in recent months, with big upmoves and downmoves, but with much higher highs and lows over time. The correction that began last November looked iffy, with shares cracking intermediate-term support on big volume last month, and, interestingly, the morning of its earnings report a month ago had the stock quoted way down near 60. But the buyers showed up in a huge way, and SMCI powered back to its old high, and after a quick shakeout, have blasted back to new highs. Volatility here is very extreme, so we’ll set our entry range down a few points.

Market Cap$5.21BEPS $ Annual (Jun)
Forward P/E9FY 20212.48
Current P/E9FY 20225.65
Annual Revenue $6.65BFY 2023e10.34
Profit Margin10.3%FY 2024e9.57

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1.8054%3.26270%
One qtr ago1.8579%3.42490%
Two qtrs ago1.6453%2.62223%
Three qtrs ago1.3651%1.55210%

Weekly Chart

SMCI WEEKLY.png

Daily Chart

SMCI DAILY CHART

Stock 8

United Rentals (URI)

Price

Buy Range

Loss Limit

463442-455400-406

Why the Strength
There’s no question interest rate fears are everywhere, but under the surface, there remain a ton of cyclical stocks that look good. United Rentals might be the best of all: It’s the equipment rental king of North America, with more than 1,400 branches and the largest market share (17%) and biggest fleet (more than one million units!) in the sector. The vast majority of business is from either industrial or non-residential construction (i.e., housing market weakness isn’t an issue), and the industry is in a long-term uptrend as it’s cheaper/easier to rent big equipment instead of buying and shelling out huge money. The stock is strong for a variety of reasons. First, United has spent years focused on costs and specialty offerings (everything from mobile power to trench safety to port-a-potties to portable storage) that have been growing fast, all of which has resulted in a sea change in free cash flow for the better. Second, it will be using that cash flow to increase returns to shareholders, including a new dividend (1.3% yield) and the intent to buy back $1 billion of stock (~3% of the firm) in 2023. But the biggest reason for the strength is that business is good and getting better: Q4 sales and earnings were solid, and the 2023 outlook was much better than expected, with revenue and EBITDA expected to rise 20% while free cash flow should come in north of $2.2 billion (around $31 per share). Clearly, if the Fed really overdoes it and crushes the economy, United’s new bookings are likely to fade, but if anything, signs point to stronger growth, and big investors certainly think the future is bright.

Technical Analysis
URI went through the wringer in the first half of last year and repaired some of the damage for a few months after that; we recommended shares in mid-November, and after tightening up, shares bolted higher in January, helped in large part by the Q4 report. We took our profit then, but in the month since selling, it’s hard not to be impressed with URI’s resilience, even as the market has wobbled, dipping only to their 25-day line before bouncing. We’ll set our buy range a touch lower here, thinking a bit more rest could be in order before the uptrend resumes.

Market Cap$31.0BEPS $ Annual (Dec)
Forward P/E11FY 202122.06
Current P/E14FY 202232.49
Annual Revenue $11.6BFY 2023e40.82
Profit Margin20.6%FY 2024e43.87

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr3.3019%9.7432%
One qtr ago3.0518%9.2741%
Two qtrs ago2.7721%7.8669%
Three qtrs ago2.5223%5.7366%

Weekly Chart

URI WEEKLY CHART

Daily Chart

URI DAILY CHART

Stock 9

Wesco (WCC)

Price

Buy Range

Loss Limit

166161-166143-146

Why the Strength
Wesco is an established name in the electrical parts space, and its catalog boasts an impressive 1.5 million products marketed to an estimated 140,000 active customers globally. More recently, however, the company has been pursuing a high-growth opportunity in the audio/video conferencing space, as well as in automation and the Internet of Things (IoT), believing that the digital transformation trend is the key to driving futures sales and margin expansion. Wesco set records in several metrics in 2022, including sales of $21 billion (up 18% from a year ago), EBITDA of $1.7 billion (up 47%), gross margin of 22% and earnings of $16.42 (up 65%). Additionally, Wesco’s three segments (Electrical and Electronics, Communications and Security and Utility and Broadband) delivered double-digit sales and profit growth for both the full year and Q4, driven by the firm’s advances in digital capabilities, with Wesco posting record free cash flow of $400 million for the quarter (nearly $8 per share). Another key to Wesco’s growth strategy is acquisitions, led by a 2020 merger with cable and electrical wire provider Anixiter International that doubled Wesco’s size while significantly boosting its digital capabilities. In Q4, Wesco closed its purchase of Rahi Systems, a leading provider of global hyperscale data center solutions (another high-growth opportunity). The acquisitions have allowed Wesco to substantially raise its free cash flow expectations, to around $4 billion through 2026 (a cumulative total of $78 per share!). For 2023, the company plans to initiate a dividend (which it expects to pay in Q1), along with continuing share repurchases under its $1 billion buyback authorization. Wall Street sees mid-single-digit growth in this year’s top and bottom lines, but that could prove too conservative given the secular tailwinds in Wesco’s key markets.

Technical Analysis
We just wrote about WCC a couple of weeks ago, thinking a modest post-earnings reaction would be a good entry. It was the right idea, but it turns out the Q4 report was “too good,” with shares gapping up strongly after the numbers. Now we see a controlled dip in WCC with the market since the move—we think you can enter here or (preferably) on a little weakness, as the path of least resistance has turned up.

Market Cap$8.35BEPS $ Annual (Dec)
Forward P/E9FY 20219.98
Current P/E10FY 202216.42
Annual Revenue $21.4BFY 2023e17.50
Profit Margin4.2%FY 2024e18.94

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr5.5615%4.1330%
One qtr ago5.4515%4.4964%
Two qtrs ago5.4819%4.1959%
Three qtrs ago4.9322%3.63156%

Weekly Chart

WCC WEEKLY CHART

Daily Chart

WCC DAILY CHART

Stock 10

Wynn Resorts (WYNN)

Price

Buy Range

Loss Limit

105101-10591-94

Why the Strength
There are never any sure things in the market, especially in this news-driven environment where the entire market can turn up or down based on an economic report or Fed speech. But the China reopening theme seems to be as close to a good bet as there is, and Wynn Resorts is one of the main ways to play it, with leverage to the U.S. travel boom as well. We’ve written about the Macau recovery before with Las Vegas Sands, and the story is playing out, with booming visitor and gaming activity since China dropped its Zero Covid policy a couple of months ago—the recent Chinese New Year period saw mass table gambling for Wynn’s properties at 95% of 2019 levels, while VIP activity was above pre-Covid levels and Wynn’s total EBITDA was running at a $1.5 billion annual clip! Now, that holiday was just a short period of time, so the overall recovery will surely take longer, but it’s obvious that China’s case of cabin fever should lead to a sustained boom in Macau. Then there’s Las Vegas, where Wynn is thriving, with EBITDA of $219 million in Q4 and with forward bookings suggesting great strength into Q1; and Boston, with its Encore property solidly profitable and recently saw a quick uptake of in-person sports betting (at 80% of Vegas levels within the first few weeks), which was recently legalized in Massachusetts, with online sports betting coming in a couple of weeks likely to help, too. All in all, Wynn has leverage to the travel boom in the U.S., which shows no sign of slowing, and EBITDA at its Macau properties should boom as that country leaves the virus behind.

Technical Analysis
WYNN fell from 144 in early 2021 to 50 last June, etched a higher low in October and has been in a persistent uptrend since, with the only “real” dip (in December to the 10-week line) finding lots of buyers. The post-earnings move is losing some altitude, but the retreat has been very well controlled, with WYNN only nicking its 25-day line to this point. We’re OK adding some here or (preferably) on further dips.

Market Cap$12.0BEPS $ Annual (Dec)
Forward P/E192FY 2021-6.12
Current P/EN/AFY 2022-4.47
Annual Revenue $3.76BFY 2023e0.55
Profit MarginN/AFY 2024e4.01

Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr1005-5%-1.23N/A
One qtr ago890-2%-1.20N/A
Two qtrs ago9091%-0.82N/A
Three qtrs ago9536%-1.21N/A

Weekly Chart

WYNN WEEKLY CHART

Daily Chart

WYNN DAILY CHART

Previously Recommended Stocks

DateStockSymbolTop PickOriginal Buy Range2/27/23
HOLD
9/12/22Academy SportsASO48.5-51.559
2/21/23AirbnbABNB123-127124
2/13/23Allegro MicroALGM40.5-42.543
2/21/23Allison TransmissionALSN49.5-50.548
1/30/23ASML IncASML632-655632
1/30/23AutolivALV89-9193
2/21/23AutonationAN140-144140
2/21/23Bloomin’ BrandsBLMN26-2726
2/6/23Box Inc.BOX32.5-33.533
2/21/23DeereDE418-428422
2/6/23DynatraceDT44-45.543
11/7/22Five BelowFIVE145-150205
2/6/23Group 1 AutoGPI218-228225
2/21/23HexcelHXL68.5-7173
1/17/23Hyatt HotelsH102-105116
1/23/23Inspire MedicalINSP247-254264
2/13/23InsuletPODD295-304282
1/17/23Jabil Inc.JBL74.5-7783
1/3/23MobileyeMBLY31.5-33.540
2/13/23New RelicNEWR73.5-75.573
2/6/23Old DominionODFL352-362342
1/9/23PenumbraPEN218-226263
2/13/23Prometheus BioRXDX113-118119
2/6/23PulteGroupPHM54.5-56.554
2/13/23RambusRMBS42-4444
1/9/23Reliance SteelRS211-215244
2/21/23Revance ThereapeuticsRVNC31.5-3435
2/13/23Royal CaribbeanRCL67-7072
2/13/23Seagate TechSTX68-7064
11/21/22Shift4 PaymentsFOUR44-4657
2/6/23SmartsheetSMAR42.5-44.544
1/30/23Southern CopperSCCO71-73.573
1/30/23Starbulk CarriersSBLK21.2-22.224
1/30/23Steel DynamicsSTLD114-117121
1/23/23Toll BrothersTOL53-5559
2/21/23UberUBER33-34.533
1/23/23United AirlinesUAL47.5-5051
8/22/22WingstopWING115-120173
12/5/22Wynn ResortsWYNN81-84105
WAIT
2/21/23Builders FirstSourceBLDR74.5-76.582
2/21/23Procore TechPCOR60-6266
SELL RECOMMENDATIONS
1/23/23BoeingBA200-205200
1/30/23Boot BarnBOOT81-8476
1/30/23Discover Fin’lDFS112-115112
1/17/23Exact SciencesEXAS63-65.560
2/6/23NucorNUE163-168164
1/30/23On HoldingONON21.5-22.521
DROPPED
None this week


The next Cabot Top Ten Trader issue will be published on March 6, 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.