Cabot Top Ten Trader Issue: June 9, 2025

Continued Positive Action

It was another positive week for the market, with some major indexes (S&P 500, Nasdaq, NYSE Composite) nosing to new highs, and today we’re seeing broader indexes (small- and mid-caps) test recent resistance, too. As for individual stocks, it’s far from 1999 out there, but we’re seeing very few breakdowns while the leadership ranks gradually expand, with earnings reports or simply normal buying pushing a few more out of consolidations each week. Of course, there remain some headwinds out there, from the wall of resistance in the major indexes right above these levels, to the relative lack of stocks hitting new highs to the fact that it’s been fairly quiet and low stress in the market of late (the market often finds a pothole after a quiet stretch). Even so, the intermediate-term evidence remains positive, and we’re now even seeing some longer-term evidence start to point up. Thus, we’ll nudge our Market Monitor up another notch to a level 8, continuing our strategy of slowly extending our line as the evidence improves.

This week’s list has something for everyone, with some zingers, some steady Eddies and more than a few recent earnings winners. Our Top Pick is Guidewire (GWRE), which looks like an emerging blue chip in the cloud software field, and shares emerged from a big consolidation after earnings last week.

Stock 1

Core & Main (CNM)

Why the Strength
Core & Main is a good-sized infrastructure provider (more than 370 branches, annual sales of $7.4 billion) with an interesting roll-up angle and many long-term tailwinds. The firm’s focus is on water-related infrastructure—valves and pipes make up two-thirds of business while storm drainage products make up another 16%, with fire protection and meters contributing the rest; municipal and non-residential makes up the vast majority of business, which is split evenly between new construction and repairs. Given the aging state of U.S. infrastructure, Core & Main has a relatively steady stream of business coming its way, though a lot of growth comes from M&A, where the firm acquires smaller, local operators and lets them do their thing while being under the Core & Main brand. Last year alone, the company gobbled up 10 outfits that had 40 locations and combined annual sales of $600 million, and given that the sector is extremely fragmented (60% of players are regional and local distributors), the M&A wave should continue as long as Core & Main has access to capital (which, given that it’s now part of the Fortune 500, it should). As for business, there have been some margin pressures, but it’s been relatively steady as she goes, with generally high-single-digit top-line growth (the last quarter got a big pop from M&A), and the top brass sees sales and EBITDA up 5% to 6% this year before any acquisitions help the cause, as they almost surely will. The next big event comes tomorrow morning, when the firm will report its April quarter results; analysts see sales up 6% and earnings up 7%, but the reaction will be key.

Technical Analysis
CNM had a huge post-IPO base for most of 2022 and early 2023 before breaking out that spring and running up beautifully into the middle of last year above 60. Then came a deep 40% correction into last September and, after a rally, another 26% dip into April of this year. But it’s been up since then, with the last two weeks of solid weekly volume pushing CNM back to its high from last year. Tomorrow morning’s quarterly report is obviously key, but we’ll set our buy range down a bit from here, looking to enter on any post-earnings wobble.

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Stock 2

Coupang (CPNG)

Why the Strength
With more people shopping online now than ever before, so-called “horizontal marketplaces” are considered the wave of the future. They involve the integration of all types of goods, including food, household items, health and wellness, automotive and electronics, all available from a one-stop online platform—typically with same-day or next-day delivery. For shoppers in South Korea and other Asian markets, Coupang (covered in the May 12 issue) is fast becoming the horizontal marketplace of choice. The e-commerce giant is known for its ultra-fast deliveries for millions of items across multiple product categories (it offers a wider selection than superstores like Walmart). Its consistent focus on improving delivery times is a big reason for Coupang’s increasing popularity, with its Rocket Delivery service providing customers with next-day delivery and even installation services on thousands of items, from large appliances to furniture, electronics, and even tires for automobiles. The result has been a rapid increase in platform adoption by customers, along with booming growth on the top line for Coupang. Also accounting for the fast expansion is the success of the firm’s Developing Offerings segment, which includes international expansion, food delivery, online streaming and fintech. One of the fastest-growing opportunities in this segment is Taiwan, which management highlighted in its Q1 earnings call as offering “exciting opportunities.” An expansion of the company’s foreign direct suppliers (including most recently Coke, Pepsi and P&G) helped drive a huge product selection increase in the quarter for its Taiwan operations, in turn resulting in greater retention and spending levels for customers in that country. Then there’s Coupang’s WOW program (similar to Amazon Prime), which entitles members to perks like unconditional free shipping and free returns for Rocket Delivery, free access to Coupang Eats (similar to Uber Eats) and free content on the Coupang Play streaming service—all for under $6 a month. Moreover, management believes its business model can be replicated in many other overseas markets beyond Taiwan, with international expansion a key focus going forward. On the financial front, Wall Street sees several quarters of mid-teens sales growth ahead, with margin expansion leading to a booming bottom line.

Technical Analysis
After nosediving from 26 in late February as the market cratered, CPNG found its legs in early April at 19. It snapped back on nice volume initially, and then last month’s Q1 report broke the stock out from a double bottom base on two straight weeks of big volume. Shares have continued to crawl higher since then as the 25-day line catches up—if you don’t own any, we’re OK starting a position on minor weakness.

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Stock 3

Credo Tech (CRDO)

Why the Strength
Credo Technology is looking more and more like a key cog in the AI/data center infrastructure buildout, and with demand for its wares remaining giant, the stock has come back to life after being hit very hard during the market’s downturn. The big product line here looks to be what are known as active electrical cables (AECs), which are copper-based cables that incorportate circuits to produce far higher speed data transmissions over longer distances (up to seven meters) compared to alternatives (such as direct attached cables and optical solutions), which make them perfect for data centers as they are built out. And Credo looks to have the best AECs on the market in terms of power usage, reliability, performance and size, thanks to its design, ICs and software that helps manage large installations more efficiently. There are other connectivity offerings from Credo, too, and as you can see in the table below, growth hit an inflection point a few quarters ago and things have been soaring since; in the quarter ending April, Credo saw sales ramp for its AECs for two hyperscalers customers, each of which made up more than 10% of the firm’s revenue in the quarter, in addition to Microsoft, which has been a giant customer for years, and all indications are that these huge players will be ordering as much as they can get. The uncertainties here are two-fold, starting with the path of AI infrastructure spending—it’s obviously strong now (Credo actually sees another quarter of sales growth acceleration coming in the July quarter), but the question is, will it slow in 2026, which the market is beginning to look toward. And then there’s customer concentration, as more than half of sales come from Microsoft (though that figure is lessening by the quarter as the other hyperscalers sign up). Translation: Credo is a bit of a down-the-food-chain operation, but that doesn’t mean it won’t do well in the intermediate term as demand for its AECs goes wild as the AI buildout continues.

Technical Analysis
CRDO staged an initial breakout just over a year ago, but it was very herky-jerky, with huge drops in August (with the market) and September (after earnings). However, the last few months of the year were great, seeing the stock skyrocket toward 80 before the market’s implosion took CRDO right back to where it was before the run-up. The recovery of late had some modestly positive clues (five weeks up in a row, recapturing the 200-day line), but it was the quarterly report last week that really brought in the buyers, pushing shares back to 80 before backing off a bit. We think it’s a solid setup—we’ll set our buy range up a bit from here, thinking solid follow-through on last week’s move leads to a more sustained run. If you enter, use a loose stop given the stock’s volatility.

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Stock 4

Duolingo (DUOL)

Why the Strength
Duolingo has always had a good business, with growth remaining rapid and reliable despite numerous worries over time, and investors see that continuing for the firm’s core offering: The company has the top language learning app in the world, with a game-like feel that sets goals, celebrates acheievements and encourages sharing, all of which boosts engagement; indeed, while 130 million use the app each month, a big 46.6 million use it daily (up 49% from a year ago). While Duolingo does make some money from ads for free users, the big driver here is subscriptions, which bring with them added features; at the end of March, there were 10.3 million paid subscribers (up 40%), which obviously leaves a lot of potential to upgrade free users. And many are, thanks to added subscription tiers—its Max offering, at a higher price point, allows users to have a video phone call with an AI bot where they can try having a normal conversation in the language of their choosing (and get feedback for errors), while Family plans are proving popular as well. Language learning will likely drive results for many quarters in the future, but Duolingo is thinking bigger down the road: It launched math and music courses last year, and it’s going to start chess lessons, too, with the goal being a well-rounded educational app that millions more sign up for. As for the numbers, it’s hard to find a firm with a better growth profile, as the company’s top line has been growing in the upper-30%/lower-40% range for many quarters while earnings are beginning to take off (analysts see the bottom line up 61% this year and another 49% in 2026) and free cash flow came in at north of $2 per share in Q1 alone, up 31% from a year ago. The stock can be wild (see below), but this remains a unique growth story.

Technical Analysis
As we wrote a month ago, DUOL can be a wild child, with big swings up and down—but that’s what makes the recent action so intriguing, especially following a big recovery rally. The stock got hit with everything else in March and April, but it flashed relative strength (held the 200-day line; April low was higher than the March low) and then zoomed higher both before and especially after earnings. Now, after DUOL tightening up for the past three weeks, DUOL has pulled back a bit while testing the 500 area. Further dips are possible, but if you don’t own any, we’re OK starting a position here or on more retrenchment, with a stop near 440.

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Stock 5

Guidewire Software (GWRE) ★ Top Pick ★

Why the Strength
Insurance tech developer Guidewire is bringing cloud platforms to the conservative world of property and casualty insurance. The California-based business offers software that supports the entire insurance lifecycle, including managing call centers and handling policies, billing and claims – or just one or two of those functions, if clients prefer. P&C insurance is an area populated by many legacy, COBOL-based mainframe systems, and Guidewire convinces firms to embrace digital transformation by providing them more cost savings than they pay the company, which is a small percentage of policy premiums directly written using its platform. Today, the business has 570 insurance clients and is growing at a solid double-digit pace, revenue-wise. For the third quarter, reported last week, Guidewire sales rose 22% to $294 million (the second fastest quarterly growth rate of the past couple of years) with earnings per share of $0.88 that nearly doubled estimates. The current fiscal fourth quarter is typically Guidewire’s best, and it should bring in $336 million in sales, according to management, while consensus sees a touch higher sales (up 16% from a year ago) and EPS of $0.63. Longer term, the emergence of AI and a widening of gaps in end-market coverage due to inflationary factors are probably tailwinds for Guidewire. Fear of missing out on AI advances should send more legacy-based insurers seeking to reinvent their IT systems, while the opportunity to find more creative and flexible ways to expand into new markets left underserved by competitors should generate more business, too. A small acquisition of a Polish insurance pricing platform, Quantee, also gives Guidewire the tech to expand its product offerings into insurance pricing, which would move the company’s product line to the underwriting process, before policies are issued. It’s a solid story.

Technical Analysis
GWRE had a big run last year (especially in the second half) before finally running into a wall near Thanksgiving, when earnings caused the stock to get hit hard. Shares did bounce back from there, but then got caught in the market’s downturn—net-net, GWRE made no net progress for about six months and, in the process, undercut its December low (which often re-sets an advance). And now, after a tight period, the stock is freewheeling again, gapping up huge on earnings. We’re OK starting a position here or (preferably) on dips with a stop just above the prior highs.

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Stock 6

HealthEquity (HQY)

Why the Strength
Spiraling health care costs, combined with tax advantages, are reasons for the widespread embrace of health savings accounts (HSAs) among Americans of all ages, particularly Millennials. The popularity of HSAs is due to their usefulness as a tool for both current and long-term health care expenses, while providing the ability to invest and grow funds tax-free (similar to retirement plans). With more than 17 million total accounts and nearly 10 million HSAs, Utah-based HealthEquity is America’s leading non-bank HSA trustee, with a cloud-based platform that allows customers to use HSAs with high-deductible plans (which carry lower monthly premiums) and long-term payments, while further serving as a custodian of tax-free HSAs regardless of which financial institution the funds are deposited with. Last week’s fiscal Q1 (ended April) results are the reason for the stock’s latest show of strength, which featured record quarterly revenue and EBITDA, in turn prompting higher guidance for the full year. Total sales of $331 million increased 15% from a year ago, and earnings of 97 cents beat estimates by 16 cents, while EBITDA of $140 million jumped 19%. The number of HSAs under its wing increased 9%, while HSA assets of $31 billion increased 15%, and invested assets were up 24%; it also introduced custom brokerage investing in its HSAs on a mobile platform, which means users can now research and trade directly through the app. Other highlights in the quarter included an expansion of cross-selling to its existing client base, as well as an increased integration of AI and advanced security to expedite claims while diminishing fraud. HealthEquity is seeing a strong enterprise pipeline build for driving future growth, and the pending tax bill in the U.S. Senate would include expanded HSA flexibility and usefulness, which should encourage more adoption if passed. For fiscal 2026 (ending next January), the company expects revenue of around $1.3 billion (up 9% if realized), earnings of about $3.70 (up 19%) and EBITDA of $540 million at the midpoint (up 23%).

Technical Analysis
HQY was stuck in a lateral range for over two years before finally overcoming strong resistance around 80 and breaking out last November. The stock continued climbing over the next few months before encountering strong resistance at 115 in mid-February. It then skidded lower with the market for the next several weeks, with 75 serving as a base of support at the early April market low. After an immediate rebound, HQY fully recovered its losses after last week’s earnings-induced pop, with strong volume supporting the move back to resistance. We think the path of least resistance is up, though with resistance in this area, we’d target weakness to enter.

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Stock 7

Intuit (INTU)

Why the Strength
Technology platform Intuit is a household name, providing software for tax preparation, small business accounting and credit management. Its flagship TurboTax offering is regarded as the number-one software offering for individuals and businesses preparing tax returns, while its QuickBooks software helps small businesses manage finances, payroll and accounting. Other top-selling products include Credit Karma (for managing credit and accessing financial advice) and Mailchimp (for creating and sending emails and automating marketing efforts). A successful transformation to a subscription model over the last few years, along with strong momentum in its core business lines, has been a key driver of the firm’s growth spurt, led by QuickBooks Online and TurboTax Live (which offers access to live tax experts). However, the even more recent introduction of Intuit Assist Gen AI is another reason for the business’ strength, with the tool providing personalized recommendations that reach more than 100 million Intuit customers, helping them make faster and more informed business and personal finance decisions (while also nudging them to the Intuit product(s) that are right for them). In fiscal Q3 (ended April), Intuit boasted top- and bottom-line beats, including a 15% year-on-year revenue increase, to $7.8 billion, with per-share earnings of $11.65 exceeding estimates by 7%. The top brass said the tax business had an “outstanding year,” including a significant acceleration in TurboTax Live revenue growth (up 47%), which it said is disrupting the assisted tax category. Its Global Business Solutions Group grew revenue by 19%, while Online Ecosystem revenue rose 20%, led by 19% growth in Mailchimp sales. Elsewhere, ProTax Group revenue increased 9%, while Credit Karma revenue soared 31%. Going forward, the company said it will rely increasingly on AI agents to help customers get paid faster and reduce tedious and repetitive tasks. (Intuit will soon introduce a refreshed end-to-end platform that completes key jobs in one place, with a virtual team of AI agents doing much of the work alongside customers.) Analysts see earnings up 19% this year and 14% next, and both of those should prove conservative.

Technical Analysis
INTU glided up to the 650 area last February, but that began a tedious sideways stretch, with resistance in that area popping up on numerous occasions while the stock tested the 530 to 550 area a few times, including during the April market meltdown. But the upturn since then has been very impressive, with INTU soaring seven straight weeks, including two big-volume buying weeks after earnings that drove the stock to new highs. If you want in, we suggest buying on weakness with a stop under 680.

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Stock 8

Pan American Silver (PAAS)

Why the Strength
A combination of factors—ranging from a growing interest from investors looking for protection against persistent inflation pressures to a potential re-acceleration of geopolitical turmoil—has resulted in the silver price hitting its highest level in 13 years. That move was the main driver behind across-the-board strength in the shares of leading silver miners, including Vancouver-based Pan American Silver, though there are also some company-specific factors at work, too, such as the company’s recent purchase of the tier-one primary silver miner MAG Silver for $2.1 billion (set to close later this year). Analysts view this as a major development aimed at solidifying Pan America’s role as the leading Americas-focused silver producer. Under the terms of the transaction, Pan American will acquire all of Vancouver-based MAG’s 44% joint venture interest in the large-scale, high-grade Juanicipio mine in Mexico, operated by Fresnillo (one of Mexico’s largest gold and silver producers), which holds the remaining 56% interest in the venture. The acquisition is also expected to bring to Pan America’s portfolio one of the best, low-cost silver mines in the world and see it leading to a meaningful increase in the firm’s exposure to high-margin silver ounces. Moreover, management views future growth opportunities through the significant exploration potential at Juanicipio, as well as MAG’s Deer Trail silver exploration project in Utah and the Larder property in Ontario (which analysts see containing substantial gold deposits in the highly productive Abitibi Greenstone Belt). On the financial front, Pan American posted revenue of $773 million in Q1, a 29% year-over-year increase and led by higher realized gold and silver prices, with earnings of 42 cents beating estimates by a whopping 22 cents. Significantly, the outfit’s all-in sustaining costs (AISC, a key metric) for gold declined 1%, to $1,485 per ounce, while silver AISC dropped 10%, which should help boost profit margins going forward. Looking ahead, management expects production levels to increase over the coming quarters, while Wall Street sees the bottom line doubling in 2025 and continuing to rise nicely next year.

Technical Analysis
After a couple of sour years, PAAS changed character last March, zooming to multi-month highs and, while choppy, notching slightly higher highs over time as the months passed. This year’s trading has been hectic, with whippy action up and down depending on the market and precious metals prices, but last week’s rally looks decisive, with shares gapping to new highs. You can take a swing at it here or (preferably) on dips.

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Stock 9

SiTime (SITM)

Why the Strength
SiTime designs, manufactures and sells silicon timing systems worldwide. While timing systems suggests clocks, what SiTime makes is far more sophisticated. Product lines include things like jitter cleaners, which allow for clocks on a chip to avoid complications from vibrations and extreme temperatures; MEMS resonators, which are vacuum-sealed and can be embedded on chips and provide a precise stable frequency; and other very small equipment that protects clocks and timers, providing simpler design and improved power usage than alternatives. Timing of this sort is a $10 billion market, and SiTime serves the most sophisticated tech businesses, including aerospace, AI and automated vehicle end markets. These are customers who are eager for technical advancements, and the company believes its latest Cascade line of timers is destined to be the highest-grossing product line in the entire industry, thanks to improvements in size, power usage and simplicity, which in turn allows customers to design smaller, simpler and less energy-needy equipment. It’s still a small outfit but it’s growing fast: In SiTime’s first quarter, ended March 31, sales exploded 83% higher thanks to strength in Internet of Things, defense and mobile sectors. For the current period ending June 30, management says sales should be 45% to 50% higher to $64.7 million at the midpoint of guidance, with earnings per share coming in around $0.28, more than double last year. Tariffs do create some uncertainty here given that SiTime builds in Taiwan and Hong Kong, as well as the U.S., but management says they haven’t seen signs of any concern from customers: No sales have been pulled forward to beat tariffs, and the order pipeline is as steady as it has been when looking more than three months out, after the tariffs would hit with full force. Analysts still see earnings booming this year and next.

Technical Analysis
January’s tariff announcement knocked SITM from its all-time highs in the 260s, with the market downturn in February adding fuel to the fire, hammering shares as low as 119 on a closing basis in April. As confidence that the tariffs would hold lessened, SITM rebounded, getting back over long-term moving average resistance/support in May, helped by management’s outlook and the quarterly report. SITM has been trading tightly with the market of late and is now testing new recovery highs—we’ll set our buy range up a bit from here, looking to enter on a cleaner breakout above resistance.

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Stock 10

Soleno Therapeutics (SLNO)

Why the Strength
Soleno (covered in the April 21 issue) is a clinical-stage biotech outfit focused on developing new treatments for rare diseases, with a primary focus on Prader-Willi syndrome (PWS), a genetic disorder that affects many parts of the body and can lead to cognitive impairment—and which has a relatively large (in rare disease terms) diagnosed population of approximately 10,000 patients in the U.S. alone. In Q1, the company achieved what management called the “most significant milestone” in its history with the FDA approval of its first commercial therapy, Vykat XR, a once-daily oral treatment for hyperphagia in adults and children four years of age and older with PWS, intended for treating a particular symptom that involves feelings of extreme hunger. Although it has been only a couple of months since the drug’s approval, Soleno said it has already experienced a “high level of interest” as reflected in both patient start forms and unique prescribers, which the firm said reflects the “significant unmet need” that Vykat XR can address as a first-to-market treatment for this disease. (The evidence for the drug’s early uptake was seen in the 268 start forms received from 131 prescribers and with some coverage policies already in place, prompting a number of big institutions to upgrade the shares.) The launch is expected to allow Soleno to maximize its commercial advantage for the new drug for at least the next couple of years, as well as allowing it to enjoy a pricing premium. As of Q1, the company had not generated any revenue, but with the successful launch, management expects to see sales in the current (second) quarter to the tune of around $2.8 million, with sales growth picking up steam in the quarters to follow. In Q1, Soleno used $33 million in cash in support of the Vykat XR rollout, and it had $290 million in cash and equivalents at the end of the quarter (which analysts see providing a runway of almost four years at current burn rates). Going forward, Soleno is actively pursuing European approval for Vykat XR as part of its near-term strategy to achieve cash flow breakeven. Wall Street sees revenue increasing to around $30 million by Q4, with earnings expected to reach the black by next year’s Q2. It’s an interesting speculation.

Technical Analysis
We missed getting into SLNO in April after it never pulled back into our suggested buy range. The stock’s recent phase of outperformance was preceded by a multi-year lateral base, an effort that paid dividends in October 2023 when it broke out on news that the firm’s prime treatment candidate showed promise. Over the next 13 months, the stock continued to trend higher and doubled before meeting with strong resistance at 60 last November. But after a pullback to 42, SLNO took flight again in March after the FDA approval announcement. We’ll set our buy range up from here, thinking a move above resistance will signal a renewed rally.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on June 16, 2025.

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