Last Tuesday’s hot inflation report, along with Thursday evening’s earnings warning from FedEx, led to a terrible week for stocks, which keeps the negative top-down evidence in place: Both the intermediate- and longer-term trends of the market, as well as most stocks and sectors, remains pointed south. On the positive side, we still see many stocks doing a solid job of holding their own, and sentiment is firmly on the bearish side of the fence, and both of those represent dry tinder—if something goes right in the world (what a concept!), we think there’s a chance of a really solid rally. But bear markets are all about patience; we’ll leave our Market Monitor at a level 4.
This week’s list has another batch of resilient stocks, and our Top Pick has been bottoming out for months, and a decisive push higher should be buyable.
Cabot Top Ten Trader Issue: September 19, 2022
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No TractionLast Tuesday’s hot inflation report, along with Thursday evening’s earnings warning from FedEx, led to a terrible week for stocks, with the major indexes down in the 4% to 6% range, which keeps the negative top-down evidence in place: Both the intermediate- and longer-term trends of the market, as well as most stocks and sectors, remains pointed south, with any rallies failing to gain traction as fears of the Fed and recession are everywhere. On the positive side, we still see many stocks doing a solid job of holding their own, and sentiment is firmly on the bearish side of the fence, with just about every measure pointing to worry, if not a little panic. To us, both of those represent dry tinder—if something goes right in the world (what a concept!), we think there’s a chance of a really solid rally, even possibly a new bull phase overall. But bear markets are all about patience, and as has been the case for months, we still need to see a spark before doing any major buying. We’ll leave our Market Monitor at a level 4.
This week’s list has another batch of resilient stocks, most of which did get nailed early this year but bottomed out, rallied nicely and are holding up well during the past few weeks. Our Top Pick is squarely in the turnaround category: Las Vegas Sands (LVS) has been decimated in recent days, but has been bottoming out for months—a decisive push higher should be buyable.
| Stock Name | Price | Buy Range | Loss Limit |
| Chargepoint Holdings (CHPT) | 18 | 16.5-17.5 | 14.3-14.9 |
| Chart Industries (GTLS) | 205 | 200-206 | 184-186 |
| Dicks Sporting Goods (DKS) | 114 | 108-111 | 97-99 |
| Interactive Brokers (IBKR) | 69 | 65-67 | 58.5-60 |
| Iveric Bio (ISEE) | 17 | 15.7-16.7 | 13.5-14.0 |
| Las Vegas Sands (LVS) ★ TOP PICK ★ | 39 | 37.5-39.5 | 33.5-34.5 |
| Chesapeake Energy (CHK) | 102 | 98-101 | 89-91 |
| Repligen (RGEN) | 225 | 229-233 | 205-208 |
| Tesla (TSLA) | 309 | 297-310 | 265-270 |
| Uber (UBER) | 32 | 30-31.5 | 26.5-27.5 |
Stock 1
ChargePoint Holdings (CHPT)
| Price | Buy Range | Loss Limit |
| 18 | 16.5-17.5 | 14.3-14.9 |
Why the Strength
ChargePoint is a mid-sized outfit ($6.1 billion market cap) that’s aiming to effectively be the leading “gas station” to the burgeoning EV world, operating 140,000-ish ports in the U.S (North America is 84% of revenue) and another 60,000 or so in 16 European countries (total ports up about 70% from a year ago) where both personal and business fleets can charge up. (80% of the Fortune 50 and 53% of the Fortune 500 are clients of ChargePoint.) Revenue-wise, the firm is mostly about network charging systems (78% of revenue in Q2; total was up 106% from a year ago), but it also has a subscription business for parts/labor, vehicle scheduling/fueling optimization, energy management and more (19% of revenue, up 68%) and some home charging systems as well; over a seven-year span, ChargePoint gets about half of its revenue from recurring sources (the rest is one-time installations), and long term, that’s where the big money will be made. All in all, though, the big idea is that the firm’s revenue is fairly heavily tied to EV sales, and with those expected to boom, there’s little doubt that ChargePoint is going to get a lot bigger from here—while the bottom line is in the red as money is spent to expand, revenues are growing at near-triple-digit rates (Q3 was guided to a 100% gain), with the top line expected to grow another 55%-plus in 2023, and longer-term, as recurring revenue makes up more of the pie, earnings should pick up nicely. ChargePoint is a straightforward, nuts-and-bolts play on the EV trend.
Technical Analysis
CHPT came public via a SPAC in late 2020 and had a monstrous run into early 2021 before topping near 50—followed by a long, torturous decline all the way to 9 in May of this year. But was the bottom, and CHPT has slowly been gaining steam, with a pop above its 40-week line in August, a sharp dip to the 50-day line and then a push higher of late despite the market. The 20 area has been tough to crack, so if you’re game, you can start small on dips.
| Market Cap | $6.18B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2021 | -12.90 |
| Current P/E | N/A | FY 2022 | -0.55 |
| Annual Revenue | $335M | FY 2023e | -0.83 |
| Profit Margin | N/A | FY 2024e | -0.61 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 108 | 93% | -0.18 | 223% |
| One qtr ago | 81.6 | 102% | -0.21 | 210% |
| Two qtrs ago | 80.7 | 90% | -0.17 | 40% |
| Three qtrs ago | 65 | 79% | -0.14 | 5% |
Stock 2
Chart Industries (GTLS)
| Price | Buy Range | Loss Limit |
| 205 | 200-206 | 184-186 |
Why the Strength
As companies worldwide increasingly focus on reducing greenhouse gases through carbon capture and storage projects, Chart (covered in the August 1 issue) is one of the leading solutions providers many of them turn to. Chart also provides energy infrastructure equipment and boasts a huge list of orders for large-scale export terminals as exporters rush to meet mushrooming demand for natural gas. The company has lately been boosting its capacity to handle industrial-scale liquified natural gas orders with a series of acquisitions in the U.S. and Europe, ranging from metal fabricators to storage providers. But Chart’s specialty markets division is its fastest growing and highest margin segment, and on that front, the firm offers highly engineered equipment used by clean energy and gas companies (including industrial gases and natural gas) specializing in heat exchangers used in the gas liquefication process as well as bulk cryogenic storage tanks. The stock’s recent strength is partly the result of a record second quarter for orders ($888 million) and gross margin dollars ($95 million), as well as a seventh straight quarterly backlog record (nearly $2 billion). But a couple of high-profile deals this summer have further boosted Chart’s profile, including one in July inked with Canadian energy asset provider Wolf Carbon Solutions to jointly develop carbon capture and storage projects using Chart’s proprietary technology. Chart also just entered a partnership with global contracting specialist C.A.T. Group to bring its full carbon capture solutions to customers in the Middle East and Africa. Looking ahead, analysts see the bottom line doubling this year and booming an additional 60% in 2023.
Technical Analysis
GTLS started off 2022 on a sour note, falling 45% into late January to 110 before double-bottoming at that level a month later. This proved to be the stock’s only major downside of the year, and by early March shares came roaring back. GTLS then spent the next four months in a holding pattern before again shooting higher, only to again be pulled back in by the market. All told, the stock has a giant launching pad to work with—you could nibble here with a reasonable stop in the low/mid 180s.
| Market Cap | $7.36B | EPS $ Annual (Dec) | |
| Forward P/E | 41 | FY 2020 | 2.41 |
| Current P/E | 76 | FY 2021 | 2.76 |
| Annual Revenue | $1.47B | FY 2022e | 4.87 |
| Profit Margin | 9.0% | FY 2023e | 7.89 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 405 | 26% | 0.88 | 10% |
| One qtr ago | 354 | 23% | 0.65 | -12% |
| Two qtrs ago | 379 | 21% | 0.73 | -20% |
| Three qtrs ago | 328 | 20% | 0.49 | -22% |
Stock 3
Dicks Sporting Goods (DKS)
| Price | Buy Range | Loss Limit |
| 114 | 108-111 | 97-99 |
Why the Strength
Sporting goods retailers like Dick’s were among the biggest beneficiaries during the pandemic, as outdoor activities flourished, and while a return to normal is set to crimp earnings this year, business remains solid and more resilient than expected. Dick’s offers an assortment of sports and outdoor equipment, apparel and footwear through more than 850 Dick’s branded stores nationwide, as well as its wholly-owned Golf Galaxy, Field & Stream, Public Lands and Going Going Gone! stores. Supply-chain gaps aren’t an issue for Dick’s as the retailer focused on building inventory last year and into this year’s Q1—an effort that has paid off as the company saw its inventory levels increase nearly 50% in Q2 compared to a year ago. While some analysts worry that this level is too high, management pointed out that the inventory build was relatively in-line with its 38% sales increase compared to the pre-pandemic Q2 2019. And though Q2 sales of just over $3 billion were down 5% from a year ago, it still managed to beat estimates by 15%, while per-share earnings of $3.68 beat estimates by 3%. Dick’s further noted that new customer retention, repeat purchasing and omnichannel sales are “elevated across the board” compared to pre-Covid levels. Going forward, Dick’s is focused on growing its digital marketing footprint with an emphasis on personalization strategies, fueled by its growing ScoreCard loyalty program of over 25 million active members; during Q2, ScoreCard members accounted for over 70% of total sales (up 2%). Earnings are likely to remain elevated, which has some looking at the current valuation (10x this year’s earnings; 1.7% dividend yield) as too low.
Technical Analysis
DKS double topped at 140 in September and November of last year and went down the chute with everything else after that, dipping as low as 63.5 in May. But the stock found massive, massive support volume at that point, bottomed out for a few weeks and then began a solid advance—DKS pushed as high as 120 last week before getting jerked around by the market, but it acts fine. If you want in, consider nibbling on a bit more weakness.
| Market Cap | $8.80B | EPS $ Annual (Jan) | |
| Forward P/E | 10 | FY 2021 | 6.12 |
| Current P/E | 9 | FY 2022 | 15.70 |
| Annual Revenue | $11.9B | FY 2023e | 11.43 |
| Profit Margin | 10.2% | FY 2024e | 11.81 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 3.11 | -5% | 3.68 | -28% |
| One qtr ago | 2.7 | -7% | 2.85 | -25% |
| Two qtrs ago | 3.35 | 7% | 3.64 | 50% |
| Three qtrs ago | 2.75 | 14% | 3.19 | 59% |
Stock 4
Interactive Brokers (IBKR)
| Price | Buy Range | Loss Limit |
| 69 | 65-67 | 58.5-60 |
Why the Strength
With the broad U.S. equity market in bear market territory, interest in stock trading isn’t exactly booming right now—a fact underscored by Interactive’s latest monthly report. The firm reported daily average revenue trades in August that were down 9% from a year ago, with client equity down 15%. However, those numbers obscure the stunning growth in client accounts, which rose 33% last month to nearly two million. Interactive, which offers access to stocks, bonds and funds through its electronic trading platform (the largest in the U.S. based on average revenue trades per client), is tilted toward institutional customers. Client growth among this class of traders is partly driven by the access the firm offers clients to alternative assets like cryptocurrencies and hedge fund investing, and its strong presence in the alternative asset management space has prompted a major Wall Street bank to put an overweight rating on the stock (a reason for the strength). Although the company reported an earnings miss in Q2 (EPS of 84 cents missed by eight cents), sales and earnings were relatively flat while commission revenue increased 5% to $322 million on higher customer options and futures trading. Other highlights include net interest income jumping 27% on higher benchmark interest rates (a trend that should continue given where the Fed is at) and customer balances, and the firm also saw account growth across all five of its client categories (led by a 44% increase in individual accounts). The bottom line here is that, despite the bear phase, Interactive should see earnings up this year and accelerate in 2023, which is impressive. It also doesn’t hurt that some larger peers are also showing relative strength.
Technical Analysis
Like most of its brokerage peers, IBKR’s story during the first several months of this year was one of declines, with the stock falling as low as 52 in May before beginning its bottoming process. It held that area into July, found big-volume buying into early August and soared again all the way to 70 this month, notching seven-month highs before pulling in with the market. You can keep an eye on it, or if you want in, consider a small stake in the mid 60s.
| Market Cap | $6.94B | EPS $ Annual (Dec) | |
| Forward P/E | 18 | FY 2020 | 2.48 |
| Current P/E | 21 | FY 2021 | 3.39 |
| Annual Revenue | $2.64B | FY 2022e | 3.75 |
| Profit Margin | 10.9% | FY 2023e | 4.69 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 768 | -2% | 0.84 | 2% |
| One qtr ago | 695 | -29% | 0.82 | -16% |
| Two qtrs ago | 658 | 1% | 0.83 | 20% |
| Three qtrs ago | 515 | -13% | 0.78 | 47% |
Stock 5
Iveric Bio (ISEE)
| Price | Buy Range | Loss Limit |
| 17 | 15.7-16.7 | 13.5-14.0 |
Why the Strength
As the global population ages, eyesight disorders like macular degeneration and retinal problems are becoming a growing burden for millions of people. A potential leader in this market is Iveric, a biopharma focused on the discovery and development of treatments for retinal diseases (as the stock symbol suggests). The catalyst for the latest strength was the report that Iveric’s drug called Zimura met its main goal on a second Phase III trial (called Gather 2) to treat an eye disease called geographic atrophy (GA); the drug is the company’s lead candidate for treatment of GA secondary to age-related macular degeneration (AMD). Zimura met the main endpoint of a 14% reduction of the mean growth rate in GA over one year, which represents a statistically significant improvement compared to the study’s control group. The drug’s safety profile was also promising, as no eye tissue inflammation or optic nerve blood flow was reported. The company intends to use data from Gather 2 (along with previous studies) to submit a New Drug Application to the FDA by the end of next March, with plans to make Zimura commercially available to physicians and their patients “as quickly as possible.” The sanguine results prompted at least one major institution to raise its price target on the stock, which helped the cause. The current numbers obviously don’t mean much, with Q2 seeing a per-share earnings loss of 41 cents. More significantly, the company just announced it garnered a $250 million non-dilutive long-term loan to strengthen the balance sheet and help finance the potential Zimura launch. Going forward, Iveric is exploring Zimura’s potential to treat early-stage AMD, with a clinical trial to begin in Q4.
Technical Analysis
ISEE rallied to 19 late last year and, after a big correction, actually made it back to that level in early April before the bear market finally got its chunk of flesh, pulling the development stage stock to 9 in June. The action after that was very hectic, but we’re thinking the move two weeks ago on the Zimura results has changed the landscape—ISEE not only surged on the news, but followed through nicely for a few days and has held firm since. We’ll set our buy range down a bit if you want to take a swing at it.
| Market Cap | $2.09B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -1.14 |
| Current P/E | N/A | FY 2021 | -1.12 |
| Annual Revenue | Nil | FY 2022e | -1.51 |
| Profit Margin | N/A | FY 2023e | -1.61 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | Nil | N/A | -0.41 | N/A |
| One qtr ago | Nil | N/A | -0.29 | N/A |
| Two qtrs ago | Nil | N/A | -0.29 | N/A |
| Three qtrs ago | Nil | N/A | -0.23 | N/A |
Stock 6
Las Vegas Sands (LVS) ★ TOP PICK ★
| Price | Buy Range | Loss Limit |
| 39 | 37.5-39.5 | 33.5-34.5 |
Why the Strength
Las Vegas Sands applied for a new, 10-year license to operate in Macau, the Chinese island where it opened the first western-style casino in 2004. Almost assuredly it’ll be approved: The company works closely with the local government to develop Macau as a tourist destination (it’s a ferry ride away from Hong Kong) and is investing heavily as well in its local job training academy. Despite its name, Las Vegas Sands is now a pure-play on Asian gambling—the company sold off its Sin City properties earlier this year to Apollo Group for $6.25 billion (though the corporate headquarters remain in Nevada). Macau at full strength is a massive gambling center that was six times the size of Las Vegas’ in terms of gambling revenue before the pandemic. Sands has the largest footprint of any casino operator on the island where its European themed resorts – the Londoner, Parisian and Venetian, plus Vegas-style Plaza and Sands– are themselves attractions beyond access to gambling. Long-term, that’s good, but right now, China’s zero-COVID policy continues to crimp action; August total gaming revenue for the island was just 9% of pre-pandemic levels, at $271 million. Sale of the Las Vegas properties provided enough cash for the debt-laden ($15.4 billion) business to weather the intermittent pandemic problems in China until cash flow returns again. In Singapore, where Sands has one of the island’s two casinos, it’s a similar story, with airport arrivals still about half of pre-COVID levels. Recovery region-wide is expected next year, when analysts expected $1 a share net income, big cash flow and revenue of $7.7 billion. We think it’s a big potential turnaround play.
Technical Analysis
LVS peaked just before the pandemic at 74, and it’s no surprise that shares have suffered since COVID-19 spread. However, while the stock isn’t clearly uptrending, it’s also showing real signs of bottoming—the low was back in May, and after a few weeks of resilience, LVS popped on earnings in July. And now it’s tightened up for two months right near the 40-week line with no real signs of distribution. We’re OK nabbing a position here, and if the market can shape up and LVS can surge into the low 40s, possibly adding more.
| Market Cap | $29.3B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -1.80 |
| Current P/E | N/A | FY 2021 | -1.18 |
| Annual Revenue | $3.85B | FY 2022e | -1.00 |
| Profit Margin | N/A | FY 2023e | 1.37 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 1045 | -11% | -0.34 | N/A |
| One qtr ago | 943 | -21% | -0.40 | N/A |
| Two qtrs ago | 1008 | -1% | -0.22 | N/A |
| Three qtrs ago | 857 | 92% | -0.45 | N/A |
Stock 7
Chesapeake Energy (CHK)
| Price | Buy Range | Loss Limit |
| 102 | 98-101 | 89-91 |
Why the Strength
Many energy stocks (and energy prices) have taken a hit, but one of our overriding thoughts given the current evidence is this: With recession fears everywhere and the Fed on the rampage, oil prices remain north of $80 and natural gas prices are still in the upper $7 range, which is twice what gas went for earlier this year. Obviously, that can change, but it really lines up Chesapeake Energy to have some jaw-dropping numbers, especially if things go right in the months ahead. The firm is one of the big gas plays in the U.S., with more than 15 years of drilling inventory (mainly in the Marcellus and Haynesville, but also has some stuff going on in the Eagle Ford) that are far more efficient than its peers, and now that its debt load is chopped (just 0.5x cash flow, and less than 1x cash flow even at $2.50 gas!), it also has a best-in-class shareholder return program: In Q2, Chesapeake cranked out nearly $500 million in free cash flow (3.9% of the current market cap), which led to a 10% boost in the base dividend (55 cents per share, per quarter; 2.2% annual yield), paid out a large variable dividend (another $1.77 per share in Q2 alone) and, in the first half of the year, it repurchased more than 2% of outstanding shares with more coming (after they convert some warrants to common shares). Interestingly, the company is aiming for a little growth, too, with exit production in the Haynesville likely to be up 6% from year-end 2022 to year-end 2023 as it adds a couple of rigs. Near-term, natural gas prices have actually increased on average in Q3 vs Q2 (~$8 vs. $7.50 or so), so the next payout could be even bigger. Long story short, this cash flow story should play out for a long time even if gas prices pull in--and if they don’t, look out.
Technical Analysis
CHK had a smooth, multi-month advance, and then went vertical after the Russian invasion before pulling in with all energy stocks in June. The dip was sharp (30%, give or take), but CHK held the 40-week line and has rallied … all the way back to its old highs! And it’s held up there in recent weeks even as the market has suffered and gas prices have given ground. We’ll set our buy range down a bit.
| Market Cap | $12.7B | EPS $ Annual (Dec) | |
| Forward P/E | 6 | FY 2020 | 19.34 |
| Current P/E | 8 | FY 2021 | 33.47 |
| Annual Revenue | $8.43B | FY 2022e | 16.92 |
| Profit Margin | 20.7% | FY 2023e | 21.30 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 3520 | 408% | 4.87 | 197% |
| One qtr ago | 935 | -18% | 3.09 | -89% |
| Two qtrs ago | 3086 | 147% | 2.39 | -79% |
| Three qtrs ago | 890 | -7% | 2.38 | -53% |
Stock 8
Repligen (RGEN)
| Price | Buy Range | Loss Limit |
| 225 | 229-233 | 205-208 |
Why the Strength
Repligen (covered in the July 25 issue) makes equipment and materials used in the production of biologic drugs, from cell cultures through purification (chromatography) to the formulation of vaccines, and its equipment is widely used in the development and manufacture of mRNA and DNA therapies. While the outlook for Repligen’s Covid-related revenue has diminished this year as Covid fades (it accounted for just 17% of sales in the latest quarter), it has been more than offset by market momentum for its monoclonal antibody and gene therapy markets (80% of Q2 sales), with expectations that it will more than pick up the slack going forward. Accordingly, the company is encouraged by the strength of its non-Covid related base business, which was up over 40% in Q2, led by the filtration and chromatography segments. Further justifying the optimism was Q2 sales of $207 million that rose 27% from a year ago, while per-share earnings of 88 cents topped estimates by 28% and adjusted EBITDA increased 13%. The company also reported a strong first half of the year for orders—revenue was up 35% in the first six months—and it expects further growth from new manufacturing capacity coming on-line. (As an aside, there have been rumors that drug company Catalent is interested in buying Repligen, though neither company has confirmed it.) Looking ahead, Repligen expressed confidence in the outlook for the rest of 2022, guiding for full-year revenue of $800 million at the midpoint—an overall growth rate of 20% if realized and in-line with estimates, with base business revenue projected to increase 32% (which is what big investors are keying on). It’s likely that earnings estimates here will prove very conservative.
Technical Analysis
After hitting a record high of 320 one year ago, then sinking to a two-year low of 138 in April, RGEN kicked off a 12-week base-building phase. The stock surged in July after an upgrade, and so far the correction from that point has been reasonable, with support near the 50-day line a couple of times. Of course, in this environment, a break of support is always possible, so we’ll set our buy range up a bit, as a strong rally off support will probably tell you a run higher has begun.
| Market Cap | $12.2B | EPS $ Annual (Dec) | |
| Forward P/E | 69 | FY 2020 | 1.66 |
| Current P/E | 68 | FY 2021 | 3.06 |
| Annual Revenue | $779M | FY 2022e | 3.20 |
| Profit Margin | 24.8% | FY 2023e | 3.57 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 208 | 27% | 0.91 | 15% |
| One qtr ago | 206 | 44% | 0.92 | 35% |
| Two qtrs ago | 187 | 72% | 0.81 | 56% |
| Three qtrs ago | 178 | 89% | 0.78 | 95% |
Stock 9
Tesla (TSLA)
| Price | Buy Range | Loss Limit |
| 309 | 297-310 | 265-270 |
Why the Strength
EVs are one of the clear winners of the recent green energy bill, which directs more than $350 billion in funding to renewable energy and decarbonization efforts. As the largest EV automaker, Tesla benefits generally, but it also gets a specific boost as its cars once again qualify for tax credits. Prior credits ended when automakers reach a total of 200,000 EV sales, which Tesla eclipsed in 2019. The law now allows domestically built EVs, which would include most Teslas, to qualify for a fresh $7,500 tax credit depending on your annual income. The credit also provides a bit of a hit to foreign competitors, like Hyundai, which is building an EV plant in Georgia but hasn’t been planning to manufacture enough of the car parts domestically to qualify under new rules (it would have under the prior guidelines). But Tesla’s business doesn’t rely on government support; it remains very well-run, with strong gross margins and a path to growing EV production 50% a year for the foreseeable future. Elon Musk’s decision to open up its Supercharger network to other vehicles likely adds notable incremental sales, too, given its position as the largest of the faster EV charging networks. Telsa also has a head start on using its EV customer base to expand its services into the home, with its solar panel and battery storage divisions. That’s a space Ford is only starting to enter through joint ventures, while solar installers are looking for ways to move downward from the roof. Non-EV revenue was more than $1.7 billion of Tesla’s $17 billion sales in Q2. All in all, the growth story here is great and the numbers are still terrific; analysts see earnings up nearly 80% this year and another 45% in 2023.
Technical Analysis
TSLA had a monstrous run during the last upcycle, topped in November, then fell about 50% from that point until May. Shares then had an eight-week bottoming area before rallying nicely to the 40-week line and the 300 area in late July and early August. The pullback with the market found support near the 50-day line and it’s bounced right back, ignoring last week’s market selloff. If you want in, you can start here or (preferably) on dips, but use a tight stop just under the 50-day line.
| Market Cap | $941B | EPS $ Annual (Dec) | |
| Forward P/E | 74 | FY 2020 | 0.75 |
| Current P/E | 92 | FY 2021 | 2.26 |
| Annual Revenue | $67.2B | FY 2022e | 4.05 |
| Profit Margin | 15.5% | FY 2023e | 5.86 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 16.9 | 42% | 0.76 | 58% |
| One qtr ago | 18.8 | 81% | 1.07 | 245% |
| Two qtrs ago | 17.7 | 65% | 0.85 | 215% |
| Three qtrs ago | 13.8 | 57% | 0.62 | 148% |
Stock 10
Uber (UBER)
| Price | Buy Range | Loss Limit |
| 37 | 30-31.5 | 26.5-27.5 |
Why the Strength
Uber needs no introduction, as it’s the ride sharing and delivery leader both in the U.S. and around the globe, with over 100 million active customers that use billions of rides and deliveries every year. The attraction here is two-fold. First, Uber has two separate businesses that should do well going forward: Its Rides business obviously tanked during the pandemic, but it’s surging back (bookings in that segment are up 57%, 62%, 67% and 63% over the past four quarters) and should continue to do so as things get back to fully normal and as more firms want people back in the office. Meanwhile, the Delivery business surged in the pandemic and is now slowing, though still growing (bookings growth of 12%, 15%, 33% and 46% in recent quarters), and things should pick up as Uber expands its offerings (not just restaurant delivery but going into groceries, prescriptions, etc.). There’s also a small but growing freight business (up 427% in Q2!) that has bright prospects. Second, and probably more important, is that after years of burning though massive amounts of money, the top brass is finally laser focused on profits, or at least, bullish cash flow: EBITDA actually turned positive in Q3 of last year and has been building since ($364 million in Q2), while free cash flow came in around the same amount ($382 million, or 20-ish cents per share)—and, better yet, the top brass sees a lot of improvement from here, with Q3 EBITDA in the $420 million range and an annualized target of $5 billion ($1.25 billion per quarter) by 2024. After going through the wringer, we think investor perception has plenty of room to improve here if Uber executes.
Technical Analysis
UBER topped in late 2020 and essentially trended down into May of this year, finally finding support near 20; the bottoming effort was fine but not particularly amazing, lasting for a few weeks as the sellers ran out of ammo. But the stock may have changed character after earnings—not only did shares gap and run for a few days afterwards, but the pullback that followed was modest, there was tightness in the 28 area for three weeks (a sign of accumulation) and the stock tested new recovery highs last week. We’re OK nibbling on this latest dip with a stop under the 50-day.
| Market Cap | $62.0B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -3.86 |
| Current P/E | N/A | FY 2021 | -0.26 |
| Annual Revenue | $25.6B | FY 2022e | -4.65 |
| Profit Margin | N/A | FY 2023e | -0.10 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 8.07 | 105% | -1.32 | N/A |
| One qtr ago | 6.85 | 136% | -3.04 | N/A |
| Two qtrs ago | 5.78 | 83% | 0.44 | N/A |
| Three qtrs ago | 4.85 | 72% | -1.28 | N/A |
Previously Recommended Stocks
Below you’ll find Cabot Top Ten Trader recommended stocks. Those rated HOLD are stocks that traded within our suggested buy range within two weeks of appearing in the Top Ten and still look good; hold if you own them. Stocks rated WAIT have yet to dip into our suggested buy range … but can be bought if they do so within the next week.
Those stocks rated SELL should be sold if you own them; they will no longer be listed here. Finally, Stocks in the DROPPED category are those that failed to trade within our buy range within two weeks of our recommendation; that’s not a bad thing, we just never got the price we wanted. Please use this list to keep up with our latest thinking, and don’t hesitate to call or email us with any questions you may have. New recommendations each week are in bold.
| Date | Stock | Symbol | Top Pick | Original Buy Range | Price as of 9/19/2022 |
| HOLD |
| 9/12/22 | Academy Sports | ASO | ★ | 48.5-51.5 | 48 |
| 8/29/22 | Advanced Drainage | WMS | ★ | 135-140 | 136 |
| 8/15/22 | Albermarle | ALB | ★ | 272-283 | 297 |
| 7/5/22 | Alliance Resource Ptnr | ARLP | | 17.3-18.3 | 24 |
| 8/22/22 | Alnylam | ALNY | | 208-215 | 216 |
| 9/12/22 | Alteryx | AYX | | 65-67 | 65 |
| 9/6/22 | Array Tech | ARRY | | 19.5-21 | 18 |
| 9/6/22 | ATI Inc. | ATI | | 28-29.5 | 31 |
| 9/6/22 | Cameco | CCJ | ★ | 27.5-29 | 28 |
| 5/16/22 | Celsius | CELH | | 53-56 | 106 |
| 9/6/22 | Chipotle Mex Grill | CMG | | 1590-1640 | 1703 |
| 8/29/22 | Chord Energy | CHRD | | 141-146 | 142 |
| 7/25/22 | Chesapeake Energy | CHK | | 89-92 | 102 |
| 8/1/22 | Chart Industries | GTLS | | 187-193 | 205 |
| 9/12/22 | Comstock Res. | CRK | | 18-19 | 19 |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 66 |
| 6/6/22 | Enphase Energy | ENPH | | 197-205 | 316 |
| 8/1/22 | EQT Corp. | EQT | | 40.5-43 | 47 |
| 9/12/22 | Evolent Health | EVH | | 36.5-38 | 38 |
| 8/8/22 | First Solar | FSLR | | 100-104 | 137 |
| 8/15/22 | Globalfoundries | GFS | | 60.5-62.5 | 58 |
| 8/22/22 | Hyatt | H | | 94-96 | 90 |
| 9/12/22 | Karuna Therapeutics | KRTX | | 245-260 | 235 |
| 8/29/22 | Livent Corp. | LTHM | | 30-32 | 35 |
| 9/6/22 | LPL Financial | LPLA | | 215-222 | 232 |
| 6/13/22 | Neurocrine Bio | NBIX | | 89-92 | 108 |
| 8/8/22 | Onsemi | ON | | 64-66 | 70 |
| 8/8/22 | Paylocity | PCTY | ★ | 248-263 | 254 |
| 9/6/22 | Pinduoduo | PDD | | 62-65 | 66 |
| 9/12/22 | Plug Power | PLUG | | 27-29 | 28 |
| 7/11/22 | PTC Therapeutics | PTCT | | 41-43 | 53 |
| 9/12/22 | Regeneron Pharm | REGN | | 700-720 | 715 |
| 8/1/22 | Shoals | SHLS | | 21-22.5 | 24 |
| 6/27/22 | Shockwave Medical | SWAV | | 185-195 | 293 |
| 8/29/22 | Stem Inc. | STEM | | 13-14 | 17 |
| 9/6/22 | TripAdvisor | TRIP | | 25-26 | 24 |
| 8/1/22 | WillScot | WSC | | 37-38.5 | 43 |
| 8/22/22 | Wingstop | WING | | 115-120 | 136 |
| 8/22/22 | Wolfspeed | WOLF | ★ | 104-109 | 122 |
| WAIT |
| None this week | | | | | |
| SELL RECOMMENDATIONS |
| 8/22/22 | Carlisle Co. | CSL | | 297-307 | 297 |
| 8/22/22 | Denbury | DEN | | 86-89 | 83 |
| 8/22/22 | Insulet | PODD | | 257-264 | 254 |
| 7/18/22 | Lantheus | LNTH | | 65-67.5 | 77 |
| 8/15/22 | New Fortress Energy | NFE | | 54.5-57.5 | 50 |
| 8/29/22 | Palo Alto Networks | PANW | | 550-565 | 175 |
| 9/6/22 | Privia Health | PRVA | | 37-39 | 38 |
| 8/29/22 | RBC Bearings | ROLL | | 238-248 | 236 |
| 8/29/22 | Steel Dynamics | STLD | | 82-85 | 77 |
| 8/29/22 | Super Micro Computer | SMCI | | 64.5-67.5 | 58 |
| 9/12/22 | Wesco | WCC | | 136-141 | 130 |
| 8/1/22 | WW Grainger | GWW | | 530-550 | 535 |
| DROPPED |
| 9/6/22 | Cytokinetics | CYTK | | 48-50 | 52 |
The next Cabot Top Ten Trader issue will be published on September 26, 2022.
About the Analyst
Mike Cintolo
A growth stock and market timing expert, Michael Cintolo is 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 is 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.
