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Top Ten Trader
Discover the Market’s Strongest Stocks

Cabot Top Ten Trader Issue: January 27, 2025

We’ll let everyone else fight it out over the meaning and truthfulness of the DeepSeek revelations—as always, we’ll stay focused on the actual evidence, and here’s what we see: First off, the broad AI infrastructure areas look very iffy; the odds favor most chips, networking and electricity stocks are in the so-called penalty box. That said, the rest of the market took on water today but didn’t look abnormal. We do view the dramatic action as a yellow flag but we’re also not panicking as many of the names that had begun to perk up/break out are still acting well enough. We think it’s prudent to drop our Market Monitor back to a level 6 and take things on a stock-by-stock basis from here.

This week’s list does have a couple of AI-related names that got whacked, but the rest are from other areas that look fine. Our Top Pick is a name that looks like it’s finally, decisively changed character. Start small and aim for dips.

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Damage Control with AI stocks; Rest of the Market OK

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We’ll let everyone else fight it out over the meaning and truthfulness of the DeepSeek revelations—as always, we’ll stay focused on the actual evidence, and here’s what we see: First off, the broad AI infrastructure areas, especially the names that have had huge runs over many months (or over a year) look very iffy, with many showing double tops and intermediate-term damage today—near-term, bounces are possible, but the odds favor most chips, networking and electricity stocks are in the so-called penalty box. (If you own a few of these sorts of names, we advise paring back at least.) That said, the rest of the market, including other growth names, took on water today but didn’t look abnormal, while the major indexes are still trending sideways. Putting it all together, we do view the dramatic action as a yellow flag—when an extended leading theme gets walloped after a huge run, it usually has reverberations—but we’re also not panicking as many of the names that had begun to perk up/break out are still acting well enough. We hate to keep moving it around, but we think it’s prudent to drop our Market Monitor back to a level 6 and take things on a stock-by-stock basis from here.

I also wanted to say two more things: First, we’re here for you in tumultuous times, so if you have questions, don’t hesitate to email me directly. Second, on the back page today you’ll notice many sells as most AI-related names tripped their stops — if you still own some of them, it’s OK to sell some/hold some in some form or fashion, but we’re following the system and honoring the stops. And, again, we’d be paring back on that group in general as the odds favor damage repair is needed.

As for this week’s list, it does have a couple of AI-related names that got whacked, but the rest are from other areas that look fine. Our Top Pick is Guardant Health (GH), a name we’ve tried our hand at a couple of times to no avail—but the stock looks like it’s finally, decisively changed character. Start small and aim for dips.

Stock Name

Price

Buy Range

Loss Limit

Axsome Therapeutics (AXSM)

103

98.5-101

89.5-91

Beacon Roofing (BECN)

119

115.5-118

106-107

Boot Barn (BOOT)

168

171-175

152-154

Corning (GLW)

50

51.5-53

46.5-47.5

Crescent Energy (CRGY)

16

15.3-15.9

13.8-14.1

Deere (DE)

483

472-485

430-435

GE Aerospace (GE)

194

197-200

177.5-180

Guardant Health (GH) ★ Top Pick ★

47

44.5-47

36.5-38

Nebius Group (NBIS)

26

31-33

27-28

Netflix (NFLX)

968

940-960

860-870

Stock 1

Axsome Therapeutics (AXSM)

Price

Buy Range

Loss Limit

103

98.5-101

89.5-91

Why the Strength
Last week Axsome said that it expects FDA approval for its new treatment for Alzheimer’s, dubbed AXS-05, and one for narcolepsy, AXS-12, both of which have been in Phase III trials. The announcement revived shares, which had drifted down recently after a readout of trial results for its Alzheimer’s drug (in late December) was interpreted by the market bearishly. Sentiment was also helped by preliminary Q4 results, also released last week, with $118 million in revenue, up 65% from the year before and slightly ($1 million) over estimates. Though trial results weren’t as robust as some wanted, Axsome says the Phase III Alzheimer’s data met goals for rapidly reducing agitation without increasing the risk of death, falls or sedation; about 40% of people with Alzheimer’s have a form of treatable agitation, making for a promising market. (Results for the Phase III narcolepsy trials haven’t been discussed but the fact the company believes it can get approval is obviously bullish.) At this point, Axsome is a two-drug business. Its largest treatment is Auvelity, which came to market in late 2022 and treats major depressive disorder (MDD); it makes up about three-quarters of the top line at this point. Its other treatment, Sunosi, came via an acquisition in 2022 when Axsome bought the drug from Jazz Pharmaceuticals for $53 million (and future royalties). It treats narcolepsy in adults in a different way than AXS-12 and is growing well. On just the existing Auvelity and Sunosi businesses, investors have been expecting 2025 to see a big leg up, with expectations of a two-thirds jump in revenue to $643 million and a sharp narrowing of losses on the path to profitability in 2026, all of which provides a solid underpinning here—though investor sentiment likely hinges on what management says about AXS-05 and AXS-12 on the February 18 Q4 conference call.

Technical Analysis
AXSM tested all-time highs near 100 in February of last year before correcting sharply, and it gradually and jaggedly worked its way back to the century mark in recent months … but it’s been unable to really break through, with the most recent dip below 80 looking ugly. But AXSM’s snapback the past two weeks on positive comments has been excellent, raising the odds that the December slide was the final shakeout. We’ll set our entry range down a bit with a stop in the low 90s.

Market Cap$5.08BEPS $ Annual (Dec)
Forward P/EN/AFY 2022-4.73
Current P/EN/AFY 2023-5.27
Annual Revenue $339MFY 2024e-5.45
Profit MarginN/AFY 2025e-1.73
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr10581%-1.00N/A
One qtr ago87.287%-1.08N/A
Two qtrs ago75.0-21%-1.02N/A
Three qtrs ago71.5194%-3.08N/A

Weekly Chart

AXSM (1).png

Daily Chart

AXSM.png

Stock 2

Beacon Roofing (BECN)

Price

Buy Range

Loss Limit

119

115.5-118

106-107

Why the Strength
According to a recent construction industry report, roofing should be one of the fastest-growing construction sub-sectors of the next decade, growing 7% annually projected between now and 2032, and as one of the largest distributors of commercial and roofing products, Virginia-based Beacon will be a big beneficiary of this trend. Despite continued supply chain disruption and a tedious housing market, roof repair is a fairly steady business and is far less cyclical than the overall real estate market—plus the extreme weather events of recent months have provided roofers with an additional boost. Beacon also has an M&A component to its story—the company gobbled up seven smaller firms last year, driving daily sales 6% higher year over year in Q3, to a record $2.8 billion, while earnings of $2.80 missed estimates by three cents but also hit a record; helping the cause are consistent double-digit margins (12% in Q3). But an even bigger reason for Beacon’s latest share price strength are reports that the building products supplier is actively courting interest from strategic and private equity shops in an attempt to thwart an $11 billion takeover offer by rival QXO Inc. (No interest has yet been forthcoming, although a major investment bank’s report suggested takeover interest from retail giant Lowe’s is a “compelling” possibility; QXO is aiming to go directly to Beacon shareholders for approval.) Back to the company itself, management said it has “multiple paths” to continued record growth and margin expansion, while its end markets are underpinned by the repair and replacement cycle of exterior weatherproofing products on residential housing and commercial buildings. Analysts see 11% bottom-line growth for 2025, but any buyout rumors will certainly play into the stock’s movements.

Technical Analysis
BECN had a nice run from mid-2023 to early 2024 before it stalled out just above the century mark for a few months, followed by a correction with the market in the summer. Shares did pop back to new highs briefly in November before pulling back again—resulting in eight months of no net progress. But the QXO offer (and rejection) caused the stock to pop two weeks ago on huge volume and hold firm since. BECN will likely be news- and rumor-driven, but we think perception has turned up. We’ll aim to enter on a little weakness.

Market Cap$7.23BEPS $ Annual (Dec)
Forward P/E15FY 20226.71
Current P/E16FY 20230.71
Annual Revenue $9.65BFY 2024e7.17
Profit Margin8.7%FY 2025e8.00
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr2.777%2.80N/A
One qtr ago2.677%2.323%
Two qtrs ago1.9110%0.41-24%
Three qtrs ago2.3017%1.7246%

Weekly Chart

BECN (1).png

Daily Chart

BECN.png

Stock 3

Boot Barn (BOOT)

Price

Buy Range

Loss Limit

168

171-175

152-154

Why the Strength
We’ve noticed more and more retailers acting well—both turnaround players and growth-ier outfits—which has us intrigued with Boot Barn, a firm we’ve written about many times over the years, including three times in 2024 The growth story is unique and should be long-lasting now that the pandemic’s effects (same-store sales exploded more than 50% in 2022, but then the post-virus hangover saw those sales down 6%-plus in total in 2023 and early 2024) have basically worn off. The company remains the top national player in western/country-style apparel and blue-collar work wear, a growing niche due to the growing popularity of many western/southern lifestyle trends, and due to the relative lack of competition, margins are healthy and discounting here is very low. (Boot Barn has also focused more of its business on exclusive brands, another factor protecting it from pricing pressures.) The firm has a great cookie-cutter angle, too, with the store count rising from 345 in March 2023 to 400 a year later and an expected 460 at the end of March 2025, with 10%-plus annual growth likely for many years to come—bolstered by excellent and improving store economics (18-month payback of the initial investment). Now, October did bring some fundamental uncertainty, with the CEO leaving to head Ross Stores, but big investors have grown comfortable that the underlying business is in good shape: In Q3, sales growth accelerated to 14% as same-store sales rose 4.9%, and then in January at the ICR retail conference, the top brass said Q4 sales likely rose nearly 17% while same-store sales increased 8.6%, providing more evidence that the fundamental turnaround is in place. The full quarterly report is due out Thursday (January 30) morning, which sets up a potential opportunity on a positive reaction (see below).

Technical Analysis
BOOT broke out in March 2024 and embarked on an excellent advance, rallying into May, pulling back for a few weeks with the market and then booming to new highs in the fall. However, the Q3 report brought a big gap down (partially due to the CEO departure news), which looked bad—but it likely whacked out most weak hands, and BOOT started to get going after just three down days, and shares are now back to that prior peak. With earnings coming up, we’ll set our buy range up from here, looking to enter on a positive reaction and breakout to higher highs.

Market Cap$5.10BEPS $ Annual (Mar)
Forward P/E29FY 20235.57
Current P/E34FY 20244.83
Annual Revenue $1.76BFY 2025e5.81
Profit Margin9.5%FY 2026e6.81
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr42614%0.956%
One qtr ago42310%1.208%
Two qtrs ago389-9%1.01-33%
Three qtrs ago5201%1.814%

Weekly Chart

BOOT (1).png

Daily Chart

BOOT.png

Stock 4

Corning (GLW)

Price

Buy Range

Loss Limit

50

51.5-53

46.5-47.5

Why the Strength
Lost in the AI and data center hubbub of recent months is the continued deployment of 5G mobile networks, with global 5G subscriptions projected to reach over six billion by 2030 (and accounting for nearly 70% of all mobile subscriptions). Nearer term, experts predict massive growth in 5G network adoption in 2025, including the expansion of 5G standalone networks and the early implementation of 5G-Advanced technology. But before 5G data reaches customers, it must travel through the wired portion of the Internet via fiber-optic cables, which is where glass and ceramics manufacturer Corning enters the picture: The firm has been benefiting from the massive growth in AI data centers, but it’s also a top manufacturer of fiber-optic cable globally (and in fact was the inventor of low-loss optical fiber, which significantly advanced fiber optic communication technology). Corning also provides some of the main components of 5G systems used in buildings to deploy wireless signals, including small-cell antennas and related software. The biggest part of Corning’s revenue comes from optical communications (36%), with display technologies accounting for 30% (including the damage-resistant “Gorilla Glass” used in Apple’s iPhones) and specialty materials, environmental tech and life sciences providing the rest. Q3 was headlined by top- and bottom-line growth of 7% and 20%, respectively, thanks to continued strong adoption of Corning’s new optical connectivity products for generative AI (which in turn drove 55% year-over-year growth in the enterprise portion of the segment). And in the fiber segment, the company also announced multiyear purchase agreements with AT&T to provide next-generation fiber, cable and connectivity solutions to support AT&T’s deployment goals, and Verizon is also planning to increase its fiber footprint by 20% by 2028 with Corning’s help, too. Today, of course, shares were clonked with all others that had an AI angle, but the truer tale will be told when Corning reports Q4 results on Wednesday (pre-market).

Technical Analysis
GLW broke out in May of last year and ran up nicely into July before a sharp correction with the market pulled it below the 50-day line. But, while not as powerful, shares did march up from there until hitting a peak near the 50 level around Halloween. The 10-week rest that followed was tight, leading to a nice surge to new highs the past two weeks—only to be followed by today’s DeepSeek-induced decline. That said, the stock isn’t in bad shape and we see a clear potential entry after earnings: A move back up a few points after the report would likely indicate today’s selling was temporary.

Market Cap$46.5BEPS $ Annual (Dec)
Forward P/E24FY 20222.09
Current P/E30FY 20231.70
Annual Revenue $12.6BFY 2024e1.95
Profit Margin17.8%FY 2025e2.30
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr3.397%0.5420%
One qtr ago3.250%0.474%
Two qtrs ago2.98-6%0.38-7%
Three qtrs ago2.99-12%0.39-17%

Weekly Chart

GLW (1).png

Daily Chart

GLW.png

Stock 5

Crescent Energy (CRGY)

Price

Buy Range

Loss Limit

16

15.3-15.9

13.8-14.1

Why the Strength
Many energy stocks were left for dead during the past couple of years as prices waned and shareholder returns (dividends and share buybacks) did the same, but most companies stuck with the discipline seen during the prior upcycle—controlled CapEx and cost improvements, low-ish debt levels, focus on free cash flow—and now, with prices moving up somewhat, investor perception may be turning. Crescent is a less-well-known name in the group but it has a great financial profile: The firm operates mostly in the Eagle Ford (about 70% of production with three rigs; also drills with one rig in the Rockies), where it’s a top-three oil and gas producer, and it sports about 10 years of low-risk drilling inventory (with another decade of less-well-defined drilling locations) that have much lower decline rates than many peers (25% first-year well decline rate vs. about 35% for peers), which has huge effects on production over time. Throw in solid operational controls (drilling and completion costs down 10% per well this year) and the free cash flow outlook is big even at modest prices: At $75 oil and $3.50 gas (about where the market is today), Crescent thinks it can crank out around $700 million of free cash flow annually, which translates into $2.75 per share (or about 17% of the current price), and of course the figures go up a lot if prices do. Another part of the story here is M&A, though not in a huge way—the firm regularly buys “bolt-on” properties that boost returns and expand its inventory, with three completed last year and a fourth (announced in December) that adds about a year (100 net wells) to its low-risk drilling inventory likely to be completed soon. Obviously, if oil and gas prices tank, all bets are off, but Crescent looks like a small-cap explorer that could get a lot bigger if oil stocks enter a true bull market.

Technical Analysis
CRGY topped in 2022 with the entire group, fell for a year and then bottomed out for a long time before changing character in early October of last year, with a solid move up over 15 before a tough December correction arrived. However, shares did find solid support around 13 and CRGY again perked up, gliding to new highs on average volume in recent weeks before its latest, low-volume exhale. We’re OK entering on this retreat with a stop around 14.

Market Cap$4.07BEPS $ Annual (Dec)
Forward P/E7FY 20233.01
Current P/E11FY 20241.12
Annual Revenue $2.71BFY 2025e1.63
Profit Margin13.0%FY 2026e2.21
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr74516%0.3911%
One qtr ago65333%0.31107%
Two qtrs ago65811%0.4541%
Three qtrs ago658-4%0.29-54%

Weekly Chart

CRGY (1).png

Daily Chart

CRGY.png

Stock 6

Deere (DE)

Price

Buy Range

Loss Limit

483

472-485

430-435

Why the Strength
Potentially significant price increases are forecast this year for key grains like wheat due to tighter supplies and potential weather-related challenges, while higher demand for ethanol production and geopolitical issues impacting Black Sea imports are expected to contribute to strength in oilseed crops like corn and soybeans. However, the projected busy year for the farm sector is facing a challenge in the form of critical labor shortages, with statistics showing 2.4 million unfilled farm jobs annually, not to mention labor issues with construction and landscaping areas, too. Positioned to benefit from each of these trends is Deere, the world’s largest agricultural equipment maker and also a top producer of vehicles used in the construction, forestry and turf care industries. At a major consumer electronics show earlier this month, Deere unveiled its latest autonomous machines that address all three commercial sectors; the firm’s second-generation autonomy kit features advanced computer vision, AI, cameras and other tools for improved navigation for tractors, tillage tools, orchard sprayers and articulated dump trucks, and which are designed to enable machines to operate safely and independently in complex environments. (Select machines will be autonomy-ready from the factory and the second-generation perception system will be available as a retrofit kit for certain existing machines.) Additionally, the company’s Operations Center Mobile platform allows users to manage the machines remotely, providing access to live video, data and the ability to make real-time adjustments. Deere’s aggressive foray into autonomous and remote vehicles is part of its broader AI and tech strategy, which it views as essential for boosting efficiency and cost savings in the ultra-competitive farm economy. A growing number of analysts agree with Deere’s assessment, including a major bank that just named the stock among its top dividend-growth picks for 2025. Analysts aren’t expecting much in the way of sales and earnings growth in the near term, but most see business turning up in the summer, and if the anticipated crop price rebound unfolds, the turnaround could be powerful.

Technical Analysis
While it’s not a typical Top Ten stock—DE has been flat as a pancake for a couple of years—shares certainly look like investors are positioning themselves for a turnaround. After rallying in August/September, shares dipped calmly before taking off on earnings in November … but the weak market pulled DE back down in December. Now shares are at it again, pushing nicely to new all-time highs as volume picks up. We’re OK starting small around here or on modest dips.

Market Cap$130BEPS $ Annual (Oct)
Forward P/E21FY 202334.63
Current P/E19FY 202425.62
Annual Revenue $51.7BFY 2025e19.48
Profit Margin13.6%FY 2026e22.45
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr11.1-28%4.55-45%
One qtr ago13.2-17%6.29-38%
Two qtrs ago15.2-12%8.53-12%
Three qtrs ago12.2-4%6.23-5%

Weekly Chart

DE (1).png

Daily Chart

DE.png

Stock 7

GE Aerospace (GE)

Price

Buy Range

Loss Limit

194

197-200

177.5-180

Why the Strength
Aerospace stocks remain a “sneaky” growth sector—few people lump them in with chips, software or even fast-growing retail outfits, but they have a history of trending over time when conditions are fruitful because fleet upgrades happen over many years, the recurring revenue (from multi-year service deals) is huge and, frankly, there aren’t that many players in the sector, so competition is limited and there are less surprises (something big investors appreciate). GE Aerospace is the leading jet engine maker, claiming that three-quarters of commercial flights are powered by its engines, and that’s the big attraction here: If anything, demand is outstripping supply, so GE is focusing on execution, with total commercial and defense units sold rising to 1,298 in the second half of 2024, up 19% from the first half of the year. As mentioned above, recurring revenue is a big part of the story, too—it makes up about 70% of total revenue, as every jet engine brings with it many years of revenue (usually three times the amount of the initial sale over a couple of decades). To be fair, the defense business has been growing at a snail’s pace, but the commercial business has been making up for it, and big investors are attracted to the multi-year outlook for earnings and free cash flow, as well as signs that demand is continuing strong: In Q4, revenue lifted 14%, free cash flow grew 21% (and came in larger than reported earnings) while new orders soared a solid 46% from a year ago (for 2024 as a whole, orders were up 32%), which backs up the view that 2025 will be a solid year (free cash flow and earnings in the $6.40 range, both likely conservative) while sales ramp in the low double digits. Moreover, the top brass is shareholder friendly: It plans to buy back something like $7 billion of shares this year (3.5% of the current market cap) and it pays a small dividend. It’s a solid long-term growth story that shouldn’t be overly affected by the day-to-day news.

Technical Analysis
GE had a giant, persistent run in late 2023 and early 2024, finally hitting a wall near 170 in April, and while shares did go on to new highs in the fall, the relative performance (RP) line never really did, and the stock sagged back—all told, the stock went about eight months with no net progress. But GE has perked up this year, first on its own and then after earnings last week, hitting new highs before some selling on strength appeared, which is par for the course. We’ll set our buy range up a bit from here, looking to enter if the stock can resume its recent rally.

Market Cap$213BEPS $ Annual (Dec)
Forward P/E31FY 20232.98
Current P/E44FY 20244.60
Annual Revenue $38.7BFY 2025e5.34
Profit Margin16.3%FY 2026e6.38
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr10.814%1.32103%
One qtr ago9.846%1.1520%
Two qtrs ago9.094%1.2062%
Three qtrs ago8.9514%0.9447%

Weekly Chart

GE (1).png

Daily Chart

GE.png

Stock 8

Guardant Health (GH) ★ Top Pick ★

Price

Buy Range

Loss Limit

47

44.5-47

36.5-38

Why the Strength
Timing is very important in the stock market, as the same company with mostly the same products can see its stock languish for many quarters—until investor perception changes, which can kick off a sustained advance as big investors decide to build positions. We’ve written about Guardant Health twice in recent months, but the stock couldn’t continue higher, but now we’re thinking shares have finally turned the corner. The firm has long been a big player in a huge but still developing market of liquid biopsies, with its Guardant 360 platform helping analyze DNA (via a couple tubes of blood) in patients with advanced solid tumors to better guide treatment options or even provide monitoring of current treatments—that business has been growing steadily, as you can see from the table below. But this year should see an uptake in Sheild, which is the firm’s blood-based colorectal cancer test approved by the FDA (as a primary screening option) last June that has been shown to have similar detection capabilities as stool-based tests (like Cologuard). And then, just a couple of weeks ago, the firm’s Reveal test, which is a test that can better predict cancer recurrence, essentially got Medicare approval for certain colorectal cancer patients, which itself is big but also opens the door to broader approval for other cancers. (The company thinks just 3% of the potential 18 million patients that would benefit from this sort of testing in a variety of areas are being tested.) To be fair, estimates here are just OK, with sales growth expected to rise just 17% this year while the bottom line is deep in the red, but those could prove conservative if Sheild and Reveal pick up steam. It’s a bit speculative given the numbers, but the story is enticing.

Technical Analysis
GH imploded during the bear market and actually didn’t bottom until April of last year when shares had a nice rally thanks to the Sheild approval … but that move went up in smoke, with shares falling sharply into October. Then the Q3 report in October brought another round of buying, with the stock briefly tagging 15-month highs. And while shares did dip from there, the retreat wasn’t nearly as severe as the prior one, and now we see the buyers really flexing, with GH ripping to multi-year highs after the Reveal news. Shares are very volatile, so we advise starting small here or (preferably) on weakness and using a loose stop.

Market Cap$5.83BEPS $ Annual (Dec)
Forward P/EN/AFY 2022-4.26
Current P/EN/AFY 2023-3.15
Annual Revenue $693MFY 2024e-3.34
Profit MarginN/AFY 2025e-2.91
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr19234%-0.45N/A
One qtr ago17729%-0.48N/A
Two qtrs ago16931%-0.46N/A
Three qtrs ago15522%-0.64N/A

Weekly Chart

GH (1).png

Daily Chart

GH.png

Stock 9

Nebius Group (NBIS)

Price

Buy Range

Loss Limit

26

31-33

27-28

Why the Strength
Nebius is an AI infrastructure startup with boatloads of cash, hundreds of engineers, a partnership with NVIDIA and a state-of-the-art data center. Nebius used to be part of a U.S.-traded business called Yandex, a Russian Internet search outfit (used to be known as the Google of Russia back in the day) and e-commerce giant that was kicked off of the Nasdaq in 2022 with the invasion of Ukraine. The next two years were spent cleaving apart the Russian operations from everything else; in October, with the Nasdaq convinced there was no more link with Russia, the stock was welcomed back to the exchange under the name Nebius. Now Amsterdam-based, with operations in Israel and elsewhere in Europe, Nebius is wildly ambitious. Management says they expect only a handful of companies to be leaders in AI infrastructure, names including Google, Apple, Amazon and Microsoft. Nebius intends to be part of that group, aiming to use most of the $2.3 billion in cash it sits on to load up on NVIDIA Blackwell chipsets and build out full-stack AI infrastructure, meaning building its own complete architecture with back-end programming and customer-facing services. The business also holds Tripleten, a western hemisphere-focused tech platform that retrains workers for tech skills, Avride, which develops autonomous driving technology for the auto industry, and a 28% stake in Clickhouse, a database analytics business. (In a 2022 venture round, Clickhouse was valued at $2 billion, so that stake is likely worth a good chunk of change.) Since Nebius is gearing up and focused on building its AI, it is only starting to generate revenue—the company reported $79.6 million in sales for the first three quarters of 2024, though management projects 2025 sales building to a year-end run rate somewhere in the wide range of $500 million to $1 billion, with somewhere over $750 million most likely. Of course, today’s DeepSeek-induced wipeout calls into question the future of AI CapEx demand, but we’ll let the stock tell its own story on that over the next couple of weeks (see below).

Technical Analysis
For a stock that just came back to life in October, NBIS is extremely well-traded and has been strong, with a huge-volume ramp to 39 in early December and, after a tough correction with growth stocks later that month, it saw more big-volume advances to new highs last week. Then we have today’s maelstrom, which obviously hit the stock extremely hard but sets up an obvious strategy: NBIS could be done for, but we’ll set our buy range up from here, as a strong snapback will raise the odds that today was a big, headline-driven shakeout that paves the way for a solid rally.

Market Cap$15.1BEPS $ Annual (Dec)
Forward P/EN/AFY 20220.39
Current P/EN/AFY 2023-0.63
Annual Revenue $79.6MFY 2024eN/M
Profit MarginN/AFY 2025eN/A
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($M) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr43.3766%-0.24N/A
One qtr ago24.9430%-0.25N/A
Two qtrs ago11.4153%-0.26N/A
Three qtrs agoN/M16%N/MN/M

Weekly Chart

NBIS (1).png

Daily Chart

NBIS.png

Stock 10

Netflix (NFLX)

Price

Buy Range

Loss Limit

968

940-960

860-870

Why the Strength
The customer growth strategy that video streaming giant Netflix has used to great success in the last couple of years continues to pay off, as the firm has seen double-digit paid membership increases in each of the last six quarters. In fact, Netflix is now the most-subscribed video-on-demand streaming service in the world, with over 300 million paid memberships as of Q4, an increase of 16% from a year ago, adding a record 19 million members in Q4 alone. Driving this impressive growth is the company’s investments in creating exclusive content (including highly-rated series like Squid Game, Stranger Things and Daredevil), along with bringing high-demand TV series (such as Raw and other WWE programming) to the platform. More recently, the company’s foray into live events like NFL football and, more recently, boxing events like Mike Tyson versus Jake Paul (the most streamed sporting event in history!), is providing Netflix with new sources of revenue. The company is also increasing its focus on advertising, having launched an ad-supported tier at a lower price point to attract new subscribers—and which has already resulted in a substantial growth in ad sales (over 55% of new subscriptions in its ad-supported markets came from its Netflix with Ads plan, and the firm’s U.S. ad revenues are expected to surpass $2 billion this year). Netflix has also just announced a price increase, which should boost operating margins (22% in Q4). To further expand its footprint, Netflix has entered the mobile gaming market, offering games that appeal to multiple age groups, from toddlers up to younger—and even older—adults. Last week’s Q4 report was excellent, showing revenue of $10.3 billion, up 16% from a year ago, and earnings of $4.27 beat estimates by seven cents, which brought along with it a spate of analyst upgrades. Aside from potential currency headwinds in 2025, management sees clear skies for 2025, with revenues likely to rise nearly 14% and with the bottom line lifting 24%.

Technical Analysis
NFLX broke out from a good-sized base a year ago and had a nice run into April, but that started another listless stretch, as shares didn’t make much net progress for many months. Even so, the tightness seen in the fall was a bullish clue, and NFLX ran nicely higher into December before the weak market pulled it down for five weeks. But last week’s earnings move was excellent and should pave the way for higher prices should the market hold its own. If you want in, aim for dips of 10 or 20 points.

Market Cap$416BEPS $ Annual (Dec)
Forward P/E32FY 202212.03
Current P/E50FY 202319.83
Annual Revenue $39.0BFY 2024e24.62
Profit Margin27.5%FY 2025e30.17
Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
($B) (vs. yr-ago-qtr)($)(vs. yr-ago-qtr)
Latest qtr10.2016%4.27102%
One qtr ago9.8215%5.4045%
Two qtrs ago9.5617%4.8848%
Three qtrs ago9.3715%5.2883%

Weekly Chart

NFLX (1).png

Daily Chart

NFLX.png

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The next Cabot Top Ten Trader issue will be published on February 3, 2025.


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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.