Cabot Top Ten Trader Issue: October 20, 2025

Here Comes Earnings Season

After an ugly day October 10 (two Friday’s ago), the major indexes showed solid overall support last week and popped nicely today, but under the hood there’s still plenty of volatile action, with some stocks coming under pressure while many held up well. Right now, we have three main thoughts: First, the market’s intermediate-term trend continues to tilt up, so overall we still advise giving stocks the benefit of the doubt; second, though, we’re still taking things on a stock-by-stock basis because, while more and lots of names flop around, few have truly cracked and some continue to look great; and third, earnings season is about to rev up in a big way this week, which will probably end up telling the true intermediate-term tale for most individual names. In the meantime, we’re just following the plan that’s been working for us: Being selective on the buy side, holding strong names (albeit with some partial profits on the way up) but also raising stops as time passes. We’ll again stick with a level 7 on the Market Monitor, but we’re staying flexible while we see how stocks react to earnings.

This week’s list is a mixed bag in terms of sectors and setups, with some we’re considering entering on strength and others on pullbacks. Our Top Pick is one we missed three weeks ago but are aiming to enter on the recent retreat: AeroVironment (AVAV) is likely in for years of accelerating growth, and after a big run into early October, the recent pullback looks normal. We’re OK starting small here or on a bit more weakness.

Stock 1

AeroVironment (AVAV) ★ Top Pick ★

Why the Strength

Military drones look to be a $70 billion or greater market in the western world as militaries worldwide increasingly see the future of warfare as a combination of AI-linked drones extending the power of soldiers as well as unmanned vehicles. Virginia-based AeroVironment is a leader in unmanned aerial vehicles (UAVs) and CEO Wahid Nawabi says the stars are aligned for business in a way he’s never seen before. To AeroVironment’s benefit, the need for increased defense spending, on drones especially, is the one thing the two major U.S. political parties agree on in the U.S., with increasing investment in Europe, too. The company acquired defense tech contractor BlueHalo earlier this year, allowing AeroVironment to incorporate that firm’s AI and counter-drone technologies into its top offerings for the Defense Department, including the all-electric P550 drone for reconnaissance and strike missions which are part of the Army’s long-range reconnaissance efforts. The Army has also awarded AeroVironment a five-year, $1 billion contract for Switchblade, which is a loitering munitions drone: In a nutshell, it hovers over an area and then crashes into a target, exploding. The company recently released its Red Dragon drone, as part of an increasing emphasis on UAVs that can act unarmed as surveillance vehicles, while also being made into an offensive weapon when armed with munitions. The market for that type of drone in and of itself is probably $10 billion, according to management, with another $15 billion market for smaller intelligence, surveillance and reconnaissance (ISR) drones, like the ones used so effectively in Ukraine. For the current second quarter of fiscal 2026, Wall Street expects revenue to come in at $468 million, a whopping 148% greater than a year ago, with management saying 2025 as a whole should see total sales near $2 billion, with earnings per share in the high $3 range. The one thing making investors jittery is talk the government may ask defense contractors to stop doing stock buybacks and directing that funding to research and development, but that seems minor compared to the underlying multi-year growth story.

Technical Analysis

AVAV built a big, deep base from late last year though mid-June before earnings catapulted it to new highs. However, like so many growth-y names, the stock then started another long, tedious consolidation, with shares forming a 25%-deep rest period of 12 weeks. But the rush higher starting around Labor Day was amazing, with AVAV rushing to round number resistance near 400 before falling back with the market’s wobbles of late. We missed getting in recently, so we’ll take another swing at it here or (preferably) on a bit more weakness, with a looser stop in case we see more gyrations.

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Stock 2

Axsome Therapeutics (AXSM)

Why the Strength

Axsome Therapeutics has had a good story and sales growth for a while now, and with earnings set to surge into the black over the next few quarters (or possibly sooner if the firm keeps topping estimates), we think the stock has a chance to change character soon. This biotech focuses on treatments for central nervous system disorders, and unlike a lot of peers, Axsome has a few drugs already on the market and a bunch more likely to come in the not too distant future: Auvelity (for major depressive disorder) is the big driver today, making up 80% of total revenue in Q2 and growing 84% from a year ago; the top brass sees $1 billion to $3 billion peak sales potential here (compared to a $480 million run rate today), so there’s almost surely big upside ahead. Sunosi (sleep apnea or narcolepsy) is also on the market and growing well (up 40% in Q2), as is Symbravo (acute migraines, just launched in Q2), though both are good-sized but smaller opportunities ($400 million peak sales down the road, give or take). Probably more important are two upcoming submissions for approval to the FDA—the big one is called AXS-05 (submission likely in the months ahead) for Alzheimer’s diseases agitation (irritable and disruptive behaviors), which should have peak sales north of $1.5 billion eventually (possibly a lot more), while another (AXS-12, Q4 submission likely) is another drug targeting narcolepsy with peak sales north of $500 million. And then there’s Solriamfetol in Phase III trials that the top brass thinks can eventually be another $1 billion-plus drug for ADHD and other indications. Obviously, how the firm executes will be vital as there are a lot of moving parts here (and will be more soon-ish), but if management pulls the right levers, Axsome is sure to get a lot bigger over time. As it stands now, revenues should continue to grow rapidly for many quarters (up more than 50% in 2026) and the losses are shrinking, with breakeven expected by the middle of 2026. There’s risk, but this is also a high-potential story. Earnings are due November 3.

Technical Analysis

AXSM broke out of a year-long base in January of this year, looking primed for higher prices—but shares got hit with the market into April and then never really could get off its knees even into August. The stock then began to perk up (six weeks up in a row) to 130, and since then has etched a six-week zone with some buying of late. We’ll set our buy range up from here, looking to enter on new multi-month highs.

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Stock 3

Celsius (CELH)

Why the Strength

Celsius (covered in the August 18 issue) is experiencing a surge in popularity for its sugar-free, vitamin-infused beverages—both sparkling and non-carbonated—which are designed to accelerate metabolism and boost energy. The company’s “modern energy” drinks have the appeal of having fewer calories than competitors like Monster Beverage drinks, while containing no sugar, preservatives, artificial colors or flavors. And while competitor Monster remains a juggernaut in the energy drink category, Celsius is fast nipping at its heels and continuing to gain market share at Monster’s expense (which declined 1%, to 27%, in Q2), as buyers increasingly pivot from sugar-based drinks to healthier options. To that end, one analyst recently noted Celsius’s offerings are showing up in a growing number of gyms, as well as retailers like Dunkin’ Donuts, Walmart and 7-Eleven. As for the business, a big part of the appeal here was a distribution deal with Pepsi that was a huge tailwind, though the last few quarters have seen a big growth slowdown due to an inventory adjustment from that consumer giant. But the stock has been strong in recent months because (a) that adjustment seems to be coming to an end, and because of (b) Celsius’s purchase of the Alani Nu brand earlier this year (for a big $1.65 billion), another sugar-free energy drink maker that has a more female-focused audience that’s selling well (Pepsi has also signed up to distribute this brand while boosting its ownership of Celsius to 11%), both of which have helped results. In Q2 the company posted record revenue of $793 million—up 84% from a year ago mostly thanks to the acquisition (Celsius brand revenue was up 9%, though that was a pickup from recent quarters). Earnings of 47 cents a share beat estimates by 23 cents while adjusted EBITDA doubled to $210 million. The strong quarter was further cemented by Celsius reaching a 17% share of the total U.S. energy drink market, including a 43% household penetration, which grew two percentage points year-on-year; beyond the domestic market, international revenue of $25 million jumped 27%. Wall Street sees booming earnings growth from here, with the Q3 report likely out in early November.

Technical Analysis

CELH double topped in the middle of last year and then crashed and burned, falling from nearly 100 to 22 at its nadir in February of this year. The major volume clue after earnings marked the bottom, with shares gaining steam over time, accelerating higher to 63 after Q1 earnings. A four-week dip to the 10-week line has given way to a nice (albeit low-volume) rebound to new recovery highs. We’ll aim to enter on a bit of weakness with a stop in the mid-50s.

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Stock 4

Fabrinet (FN)

Why the Strength

Fabrinet is a contract manufacturer specializing in precision optical and electromechanical components used in industries like optical communications (OC), as well as industrial lasers and medical devices. It also provides manufacturing services, including optical packaging and assembly, to original equipment manufacturers. More importantly, it’s a key player in technologies that power data centers, internet and telecom networks—all of which are booming right now. On that front, demand for the firm’s OC products is being driven by the need for high-speed, high-bandwidth interconnects that support AI data centers and cloud workloads, which is fueling strong growth in its Data Center Interconnect (DCI) business this year. In fact, growth in this area has been so rapid that Fabrinet now reports DCI as a standalone metric within its Optical Communications segment, helping it to sharpen focus on this opportunity, which represents a major part of its overall optical and telecom business. Total revenue of $910 million in fiscal Q4 (ended August) increased 21% year-on-year, led by a 46% increase in telecom sales (thanks mainly to DCI product demand), with earnings of $2.65 beating estimates by two cents. While the shares initially slumped on the mid-August report—mainly on a softer outlook for fiscal Q1, as management warned that ongoing component shortages and related issues with a major data center customer (which is transitioning out of older and into newer technologies) would create headwinds—the selling pressure didn’t last for long. The stock recovered later in the month after an upgrade from a major investment bank that cited the firm’s exposure to AI datacenter and telecom infrastructure end markets, which it said remains “robust and intact.” Analysts see many quarters of high-teens earnings growth ahead; there’s no set date for the next quarterly report, but it’s likely out in early- to mid-November.

Technical Analysis

FN was just an OK performer during the past couple of years before correcting with everything else into April of this year—but it’s been a completely different beast since that low, with a quick, persistent ramp to new highs by the end of June, and after an August shakeout, shares continued to score nice gains. Last week’s pop to higher highs (ahead of the major indexes) is another plus, though given the market (and FN’s light volume last week), we’ll aim to enter on dips.

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Stock 5

Karman Holdings (KRMN)

Why the Strength

Defense-oriented stocks have been a sneaky strong sector this year, thanks to some bullish macro spending trends (the U.S. continues to bulk up defense spending, and for the first time in forever, Europe is starting to pony up more money both for itself and for Ukraine), some movement into newer weapons systems (think hypersonic missiles, drones and even space-based missile defense systems like the Golden Dome) and thanks to some IPOs in the market—like Karman. The company is a small ($450 million-ish revenue this year) but fast growing provider of advanced, high-tech systems for defense and space clients (it’s a partner on more than 100 projects with at least 70 companies). The firm specializes in things like payload protection and deployment systems, hypersonic propulsion systems and well as interstage offerings (connecting two different parts of a missile, for instance); demand for the aforementioned new-age missile and defense systems is obviously big, and even things as simple as restocking current munition totals for the U.S. and allies is a driver, with most or all of the money for these priorities already passed into law by Congress (in the big bill passed this summer). Also a plus for investors here is that Karmen’s offerings are booked way ahead of time—as of June, the company’s backlog stood at a big $719 million (up 36% from a year ago and obviously well ahead of current annual sales) and the firm’s entire second half of 2025 was 100% booked at that point, which obviously adds to the reliability of the results. There’s no set date for earnings yet, but the report should be out early- to mid-November—analysts are looking for 37% sales growth with 11 cents of earnings, though bookings and backlog will also be key. All told, it’s a good story that should have legs.

Technical Analysis

KRMN came public in February of this year and, after a few weeks of wobbles with the market, took off on a big way to reach 57 in July. Shares did then hesitate for a few weeks, with a post-earnings shakeout below its 50-day line, but KRMN was back at it around Labor Day, breaking out to new highs and running to 80. Now the stock is starting to exhale a bit as the market wobbles—we’ll set our buy range down from here, looking to pick up shares on further weakness with a stop under the 50-day line.

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Stock 6

MKS (MKSI)

Why the Strength

MKS provides process control solutions for the world’s most advanced microchip manufacturing processes. In fact, the company’s claim is that it plays a role at virtually every stage of the chip production process worldwide— from deposition and etch to metrology, inspection, and packaging—by providing measuring instruments, systems and other solutions to top chip and electronics makers. Not surprisingly, hot demand for AI-related applications and advanced packaging offerings is driving much of the growth this year for the Massachusetts-based company. This was underscored in a recent note from a major Wall Street firm, which said that large-scale projects like OpenAI are driving “meaningful” momentum and “general upside to near-term numbers” for chip equipment providers including MKS heading into 2026 (a reason for the stock’s latest show of strength). On that score, MKS just made the decision to sell its specialty chemicals division (likely worth around $1 billion) in a bid to focus more of its attention on supplying chip makers. (The firm is expected to retain a section of the division, which manufactures equipment used in the production of semiconductors and circuit boards.) On the financial front, revenue of $973 million increased 10% from a year ago in Q2, driven by demand growth in the firm’s Semiconductor and Electronics & Packaging end markets, with per-share earnings of $1.77 beating estimates by 13 cents. In the earnings call, management highlighted the continued momentum in its semiconductor segment that relates to flash memory upgrades and remote plasma and gas delivery solutions, and it noted that the firm’s integrated portfolio of power, vacuum, chemistries and photonics “remains well positioned to capitalize on the advanced applications” driving growth across the sector. Moving forward, MKS sees the continuation of the flash upgrade cycle contributing to continued growth, with analysts seeing the bottom line accelerating in each of the next couple of years. Earnings are due out November 5 (post-market).

Technical Analysis

After topping in the summer of 2024 and going over the falls with everything else earlier this year, MKSI rebounded steadily from the low up to 108 or so by the middle of July. Shares went on to build a tidy eight-week zone after that, with a solid breakout coming in early September, leading to a ramp as high as 142 earlier this month. The market-induced gyrations since then look normal, and MKSI’s recent bounce back looks encouraging. If you want in, we’re OK starting a position on dips.

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Stock 7

Morgan Stanley (MS)

Why the Strength

As a top-tier global financial services provider, Morgan Stanley needs no introduction—it’s currently the world’s fourth-largest investment bank by revenue and is consistently ranked in the top three among M&A deal-making advisors. Driving the strength for the firm in recent quarters has been robust recovery in institutional securities, the steady, high-margin performance of its wealth management division plus strategic investments in technology such as (what else?) AI. On the investment banking front, Morgan Stanley’s revenues have sharply increased this year due to a recovery in M&A, IPOs and strategic financing, while a more favorable regulatory environment under the current White House is also contributing to optimism for continued deal activity. Strength in these areas was highlighted by last week’s release of the firm’s fiscal Q3 (ended September) results, which revealed a 44% year-on-year surge in investment banking revenue of $2.1 billion. The quarter, which featured record total revenue of $31 billion rising 14% and record earnings of $2.80 a share beating estimates by 35%, was bolstered by M&A transactions that led to a strong advisory fee performance (fees jumped 25% thanks to an increase in completed M&As), and by the cyclical rebound in deal-making across the entire market. Elsewhere in the business, the firm’s equity trading revenue rose significantly (up 35%), fueled by increased client activity and strong performance (mainly from hedge funds) in its prime brokerage business, while institutional securities revenue grew 25% and wealth management revenue improved 13%. In the earnings call, management highlighted the firm’s investments in technology—including AI initiatives such as DevGen AI, Parable and LeadIQ—which it sees as “laying the foundation to drive productivity across the firm.” The firm also reiterated a goal of surpassing $10 trillion in total client assets (up from $8.9 trillion now) and said Morgan Stanley was “well positioned in each of our businesses and is demonstrating consistent execution.” Additionally, the outfit said it’s considering buying back shares at a “slightly higher cadence” going forward. Analysts see more upside for earnings after a booming past two years.

Technical Analysis

MS obviously isn’t going to be your fastest horse, but when times are good the stock can trend nicely. The stock started to get going late last year before the Q1 market nosedive took it down—but shares have been trending higher along the 10-week line since the initial recovery, with last week’s earnings pop a good sign. Of course, the market is again a bit iffy here, but we’re OK starting a position around here with a stop under the recent lows.

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Stock 8

Nvidia (NVDA)

Why the Strength

A significant ramp-up in Nvidia’s Blackwell GPU products is a big reason behind this year’s revenue momentum for the chip giant, not to mention the recent share price strength. In the first half of this year, Nvidia was already reporting billions in Blackwell sales, calling it the firm’s fastest product ramp in its history—and with management touting it as the main chip platform that’s at the center of the AI race. Major hyperscale customers like Amazon and Google have been among the first clients to deploy large volumes of Blackwell systems, driving accelerating demand, while Nvidia’s manufacturing partner, Taiwan Semi, is increasing Blackwell production to keep up with the demand—including the production of the first Blackwell wafers at TSMC’s newer Arizona facility this month. It came as no surprise that Blackwell figured prominently in Nvidia’s fiscal Q2 results (ended July). With revenue of nearly $47 billion jumping 56% from a year ago and earnings of $1.05 a share exceeding estimates by four cents—thanks in part to Blackwell platform sales reaching record levels (up 17% sequentially), the company outlined what it sees as a $3 to $4 trillion AI infrastructure opportunity over the next five years as Blackwell continues to boom. Moreover, Nvidia’s new Blackwell Ultra platform (aimed at high-scale AI factory workloads) also had a strong quarter, with the outfit stating that it’s actively lobbying for the U.S. federal government to approve Blackwell for China in order to further enhance the platform’s revenue profile. Also contributing to the strength in Q2 was networking revenue of $7.3 billion that nearly doubled year-on-year thanks to “escalating demands of AI compute clusters.” Gaming revenue of $4.3 billion increased 49%, too, driven by the ramp of Blackwell GeForce GPUs, while automotive revenue of $586 million rose 69%, primarily driven by Nvidia’s latest self-driving solutions. To be fair, growth has decelerated a bit and is expected to gradually continue along that path, but overall earnings growth is expected to remain strong, rising 43% next year, and all of these estimates are likely to prove conservative. Earnings are likely out in later November.

Technical Analysis

NVDA had a big “re-set” correction from the summer of 2024 (when it stopped outperforming the market) to its lows in April of this year, when it fell to levels first achieved 13 months before, undercutting a major low. The rally from there was very smooth and persistent (up 11 weeks in a row) before hitting turbulence around 185. Since then, the stock has been down a bit, up and then back down, basically making no net progress for 11 weeks. We’ll set our buy range up from here, thinking a resumption of the uptrend will lead to another solid advance.

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Stock 9

Resideo Technologies (REZI)

Why the Strength

Resideo Technologies specializes in making consumer home safety products—things like smoke and carbon monoxide detectors and water monitoring devices—and distributing low voltage products for home and commercial uses. Those include the detectors it makes as well as audio-visual, smart home and communications management products from third parties. The company’s portfolio includes well-known brands including Honeywell (for home safety products) and First Alert as well as Snap One, an audio-visual, surveillance tech and wiring company it bought earlier this year. Business has been good, with sales up 21% over the first two quarters of the year thanks to a combination of strong demand and the addition of Snap One. Some forward buying to get ahead of tariff hikes probably helped too, though management feels it has a strategy to manage those cost hikes: Phasing in price increases to consumers for its own products and passing along price hikes immediately on what it distributes, squeezing suppliers and moving manufacturing to less-taxed locales. There are also expectations that shareholders will see more value creation from splitting the business into two—one will keep the Resideo name and hold the consumer-focused safety products and the other will be the distribution business called ADI, which generates about two-thirds of revenue and one-third net income. The split is expected to take place in about a year, with Resideo making a lump sum payment of $1.59 billion this quarter to satisfy payment obligations to Honeywell, which it was spun out of in 2018. For the year, management says revenue should come in around $7.5 billion, 11% higher than 2024, with analysts seeing a net loss per share of $0.81 including the Honeywell buyout, $2.76 excluding. It’s an interesting special situation.

Technical Analysis

REZI began falling as soon as the calendar flipped into 2025, bottoming out at the market’s April low. The initial recovery (helped by earnings) was quick, and after grinding higher for a couple of months, the change in character came in late June, leading to a stunning, straight-up run that took the stock to the low 40s. REZI has now chopped mostly sideways for four weeks as the 10-week line races to catch up—if you’re game, we advise entering on dips with a stop under that support line.

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Stock 10

Roblox (RBLX)

Why the Strength

We’ve never been huge fans of traditional video game stocks, which tend to have very lumpy results based on the timing of new product releases and the like. But Roblox, the popular mobile gaming firm, is a true platform where developers make the vast majority of games that Roblox hosts, and they get paid based how popular the game becomes. (Developer fees are one of the company’s biggest expenses, making up 22% of bookings in Q2.) Of course, the platform is still mainly for kids, but the company is reaching into higher age groups—in fact, those 13 or older now make up about two-thirds of users and of hours online, a figure that continues to increase, even as the overall user base booms (up 41%). The big uncertainly of late has been regarding safety: Numerous states and some private individuals have sued Roblox, saying that they’re not providing enough protections for their (still young) user base from online creeps; the company has spent the past few months adding tons of safety features and culling through old content and users that could be inappropriate, among other moves. With that said, none of this has affected business: The numbers here can be a bit wonky, but bookings and free cash flow are the key metrics, and both are large and soaring—in Q2, bookings lifted 51% from a year ago while free cash flow is expected to come in around $1.50 per share this year, up more than 60%, with more bulky gains in 2026. Of course, the uncertainly surrounding any legal (or regulatory) actions is an overhang, but the underlying story remains strong, and we’ll take our cue from the stock if big investors think the risks are fading, aiming to buy on a show of strength (see below).

Technical Analysis

RBLX was one of the leaders coming out of the market low earlier this year, lifting above resistance in late April, hitting new highs in May and booming as high as 150 after earnings in July when profit taking finally set in. And since then the stock has … done very little, with what’s turned out to be an 11-week, choppy, up-and-down consolidation. We’ll look to start a position if the stock can make it above resistance in the 142 range in this volatile name.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on October 27, 2025.

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