Market Still Fine, but Growth Remains Iffy
Current Market Outlook
The market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.
Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.
| Stock Name | Price | ||
|---|---|---|---|
| Berry Global (BERY) | 64.22 | ||
| Builders FirstSource (BLDR) | 44.12 | ||
| Cerence (CRNC) | 107.77 | ||
| First Solar (FSLR) | 83.74 | ||
| HubSpot (HUBS) | 582.89 | ||
| Innovative Industrial Properties (IIPR) | 214.38 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| L Brands (LB) | 79.48 | ||
| Quanta Services (PWR) | 91.45 | ||
| Shift4 Payments (FOUR) | 89.97 |
Berry Global (BERY)
Why the Strength
Plastics isn’t the red-hot growth industry it was decades ago, yet the world is still as dependent as ever on plastics to meet countless consumer and industrial needs. Berry Global is a leader in this space, manufacturing non-woven, flexible and rigid products mainly used for packaging. It has three core divisions—Consumer Packaging, Health and Engineered Materials—and serves virtually every major industry with its products (over 19,000 customers, including McDonald’s, Procter & Gamble, Coca-Cola and Wal-Mart). As with everything else, there were some COVID-related headwinds, but there were also some tailwinds as demand for protective packaging picked up. In the recently reported quarter, Berry delivered record EBITDA while growing organic volumes 2%. However, it’s not the 2% growth that is bringing in the buyers; cost cuts and a well-run operation have caused earnings ($1.52 per share, up 69%) and free cash flow ($290 million, up 113% from a year ago and totaling nearly $2.20 per share) to surge. And a bullish top brass increased its fiscal 2020 free cash flow guidance to $830 million, which is what’s left after $620 million is spent to support its increasing growth pipeline. Looking ahead, Berry is partially insulated from the effects of pandemic shutdowns thanks to its health and hygiene products. It also has a strong liquidity position of nearly $2 billion (including over $900 million in cash) to weather future storms, and it remains committed to growth through acquisitions. It’s not the most exciting story, but Berry is a reliable operator with a brightening cash flow outlook, both of which should keep big investors interested.
Technical Analysis
BERY topped in April of last year at 59 and hit a low of 25 in this year’s March panic, but it’s been all up from there. After racing back to 49 in June, the stock etched a reasonable seven-week consolidation, with the 50-day line providing support a couple of times. Earnings in late July kicked off the next leg up, with shares gliding higher and finding little selling pressure thus far. We’ll set our entry range a bit lower, as BERY isn’t a run-away-on-the-upside type of stock.
| Market Cap | $7.26B | EPS $ Annual (Sep) | |
| Forward P/E | 11 | FY 2018 | 3.37 |
| Current P/E | 13 | FY 2019 | 3.41 |
| Annual Revenue | $11.7B | FY 2020e | 4.39 |
| Profit Margin | 7.0% | FY 2021e | 5.05 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.91 | 50% | 1.52 | 69% |
| One qtr ago | 2.98 | 53% | 1.19 | 42% |
| Two qtrs ago | 2.82 | 43% | 0.56 | -27% |
| Three qtrs ago | 3.02 | 47% | 0.90 | 0% |
BERY Weekly Chart
BERY Daily Chart
Builders FirstSource (BLDR)
Why the Strength
Although June housing starts were down by 4% over last year, they rose 17.3% from the month prior to an annualized rate of 1.19 million (nicely higher than forecast). That was the highest reading in three months and bodes well for Builders FirstSource, which is a major supplier of wood floors, roof trusses, stairs, siding, insulation, cabinets, and any number of other building products to homeowners, builders and professional remodelers. As we’ve written before, the virus was expected to crunch construction, but it seems to be having the opposite effect, at least on the residential side of the industry. That strength drove this firm’s second quarter earnings to $0.67 per share, which was up just 6% from a year ago but obliterated expectations of $0.27 per share. Revenues also beat forecasts by more than 7%, coming in at $1.95 billion. That’s the fourth quarter in a row that Builders FirstSource has surpassed estimates on both profits and sales. The company said it saw a “sharp sequential rebound in sales” in June, indicating big momentum for the current quarter. Growth was helped by acquisitions, rising demand for windows, doors and millwork, as well as the rise in commodity prices. For the full year, the firm is forecast to earn $2.02 per share on $8.03 billion in sales, but estimates keep rising (this year’s estimate was just $1.25 per share a month ago!). Today, the stock will be added to the S&P MidCap 400 Index, which will make it a touch more attractive to big investors.
Technical Analysis
BDLR was in a great-looking uptrend for basically all of last year and early this year before the crash wiped away those gains. Like many cyclical names, shares quickly popped back, but after reaching nearly 25 in early June, the stock took a breather for a bit (seven weeks), found support near its 50-day line and has come to life of late, powering to new highs. Usually you’ll see a bit of retrenchment after an index addition, so we’ll set our buy range down a bit from here.
| Market Cap | $3.60B | EPS $ Annual (Dec) | |
| Forward P/E | 16 | FY 2018 | 1.90 |
| Current P/E | 15 | FY 2019 | 2.09 |
| Annual Revenue | $7.48B | FY 2020e | 2.02 |
| Profit Margin | 4.1% | FY 2021e | 2.42 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.95 | 2% | 0.67 | 6% |
| One qtr ago | 1.79 | 10% | 0.34 | 0% |
| Two qtrs ago | 1.76 | -3% | 0.40 | -13% |
| Three qtrs ago | 1.98 | -6% | 0.72 | 7% |
BLDR Weekly Chart
BLDR Daily Chart
Cerence (CRNC)
Why the Strength
For decades, tech firms have tried to replicate the human voice in a way that doesn’t sound robotic. Few have succeeded, but using AI and neural networking, Cerence has developed a computer-generated voice that sounds completely natural. And it’s putting those to use in the auto industry: The company makes voice- and touch-based products which allow individuals to safely and seamlessly interact with their cars on many levels, including listening and responding to text messages while driving and even making dinner reservations at restaurants. Cerence Reader is the firm’s latest product based on its neural text-to-speech (TTS) offerings and is billed as the most advanced TTS available (it brings news to car drivers in a natural, expressive voice). Meanwhile, Cerence Pay allows drivers to pay for gas at the pump by saying, “Pay for gas right now,” eliminating the need for a card reader. High profit margins are a feature of its business as the market for voice-command automotive software is growing rapidly. Despite the pandemic’s impact on global auto production (which was very severe), Cerence delivered strong Q3 results, including per-share earnings of 31 cents (compared to expectations of just eight cents). The firm also generated strong cash flow during the quarter, and management noted that secular technology trends have driven revenues 8% higher year to date. Cerence also had its second-highest bookings quarter ever, thanks to strategic wins in all major markets. Growth is expected to be moderate in the near-term, though we think those expectations will prove conservative as auto production ramps.
Technical Analysis
CRNC came public last October at 30 after being spun off from Nuance Communications (NUAN). After hitting a low at 12 in March, CRNC rounded out a base and eventually broke out to fresh new highs in May reaching 45 in June. The rest period after that was completely normal (six weeks long, support near the 10-week line), and CRNC’s earnings upmove at the start of this month tells us the buyers are still active. We’re OK picking up some shares here, though we’d prefer to sharpshoot an entry a bit lower.
| Market Cap | $1.96B | EPS $ Annual (Dec) | |
| Forward P/E | 35 | FY 2018 | 0.16 |
| Current P/E | 14 | FY 2019 | 3.83 |
| Annual Revenue | $322M | FY 2020e | 1.25 |
| Profit Margin | 16.2% | FY 2021e | 1.49 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 74.8 | -4% | 0.31 | -40% |
| One qtr ago | 86.5 | 23% | 0.43 | 39% |
| Two qtrs ago | 77.5 | 7% | 0.28 | -24% |
| Three qtrs ago | 83 | 10% | 2.63 | 996% |
CRNC Weekly Chart
CRNC Daily Chart
First Solar (FSLR)
Why the Strength
The U.S. solar sector installed 3.6 gigawatts (GW) of new photovoltaic capacity in the first quarter, and while the pandemic will temporarily slow deployments, the U.S. Energy Information Association expects electricity generation from renewable energy sources to rise from 17% in 2019 to 20% this year and to 22% in 2021. Solar is a big part of that, accounting (with wind) for 86% of the growth, and First Solar is grabbing its share. In Q2, the company earned $0.35 per share, beating estimates of $0.23, while revenues of $642 million, surpassed forecasts by a whopping 22%. The company said that Covid-19 “hasn’t materially affected its financial results,” though it did halt its revenue guidance because of uncertainty surrounding the future path of the virus. The company is focusing on the bottom line, selling its operations and maintenance business to a Canadian company, and it’s benefiting from the shift to CuRe technology for its S6 panels, which should improve wattage and energy density to 460 watts in 2022, 480 watts in 2023 and 500 watts beyond that. While we like to steer clear of politics, the upcoming election will probably have an impact here, with a Biden administration having plans to steer $2 trillion to clean energy infrastructure, as well as a goal for a 100% carbon-free clean electricity by 2035. Either way, analysts see earnings picking up a head of steam both this year and next, which is catnip for big investors.
Technical Analysis
In the last few years, FSLR’s shares have been all over the place, though it has shown the ability to trend when the environment turns up. The action from the crash low has been nearly picture perfect, with strong upmoves, tight consolidations, and (more recently) many bullish weekly volume clues both before and after earnings. Dips of two or three points would be tempting.
| Market Cap | $7.94B | EPS $ Annual (Dec) | |
| Forward P/E | 27 | FY 2018 | 1.36 |
| Current P/E | 22 | FY 2019 | 1.48 |
| Annual Revenue | $3.12B | FY 2020e | 2.82 |
| Profit Margin | 5.7% | FY 2021e | 3.52 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 642 | 10% | 0.35 | N/A |
| One qtr ago | 532 | 0% | 0.85 | N/A |
| Two qtrs ago | 1399 | 102% | 2.02 | 312% |
| Three qtrs ago | 547 | -19% | 0.29 | -46% |
FSLR Weekly Chart
FSLR Daily Chart
HubSpot (HUBS)
Why the Strength
As digitalization and cloud migration proceed at an explosive pace, companies are looking for ways to spread their message across an ad-saturated Internet. Old-school advertising tactics such as direct mail/mass email and phone calls are out. In their place are non-invasive “inbound” methods, in which useful information is provided for free (such as blogs, videos, e-letters and landing pages), attracting potential customers to a company’s website or other sales avenues. Big companies can have their own departments that do this, but small- and mid-sized firms are at a loss. Enter HubSpot, whose marketing software simplifies this process for small and mid-sized clients by providing valuable content and experiences tailored to the customer’s needs. The firm handily beat expectations in Q2, with revenue rising 25% and topping estimates for the fourth consecutive quarter. Per-share earnings of 34 cents also beat forecasts by 42%. Other metrics that impressed were total customer growth of 34%, with net customer additions setting a company record driven by strong demand across its entire product portfolio. Billings were up 21%, and while there was some pressure on retention rates, the firm still maintained an impressive net revenue retention rate of 90%. The company also raised its free cash flow expectations for 2020 to approximately $40 million, and it sits on an impressive $1.2 billion cash pile. For Q3, HubSpot expects the top line to be near $211 million (+21%), while full-year revenue is forecast to be around $830 million (+23%), in-line with estimates. HubSpot has had a steady growth story for a long time, and there’s no reason to expect that won’t continue with the move online only accelerating.
Technical Analysis
Not much has changed since our last review of HUBS in June, and the stock continues to act very well. It encountered a minor rough patch back in July, briefly testing its 50-day line as it meandered sideways for about a month. But it reacted well to earnings and pushed to higher highs last week. We think pullbacks would offer a solid entry opportunity.
| Market Cap | $12.6B | EPS $ Annual (Dec) | |
| Forward P/E | 284 | FY 2018 | 0.89 |
| Current P/E | 215 | FY 2019 | 1.26 |
| Annual Revenue | $762M | FY 2020e | 0.97 |
| Profit Margin | 8.2% | FY 2021e | 1.37 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 204 | 25% | 0.34 | 10% |
| One qtr ago | 199 | 31% | 0.30 | 0% |
| Two qtrs ago | 186 | 29% | 0.38 | 3% |
| Three qtrs ago | 174 | 32% | 0.26 | 53% |
HUBS Weekly Chart
HUBS Daily Chart
Innovative Industrial Properties (IIPR)
innovativeindustrialproperties.com
Why the Strength
You won’t see many real estate investment trusts in Top Ten, but Innovative Industrial Properties isn’t your normal REIT. It’s the only publicly traded firm playing in the cannabis industry, focusing on companies that are involved in the regulated medical-use sector of the weed business (which helps avoid any legal quicksand), often engaging in sale/leaseback transactions (providing customers with capital), with clients signing long-term triple-net leases (average remaining lease term is 16 years!). All in, Innovative currently has 61 properties in 16 states (Illinois and Pennsylvania are where it has its biggest presence), and as you can see in the table below, it’s been growing quickly, with sales and funds from operation (the relevant earnings metric for REITs) booming in recent quarters. And as cash flow grows, so too does the dividend—the firm’s second quarter dividend of $1.06 per share was up 77% from a year ago! (The current yield is 3.5%.) The risk here is the quality of the tenants, which in theory could see some blowups if the industry doesn’t develop as hoped. But (a) the focus on the medical-use segment definitely lowers risk as it’s a regulated industry, (b) the industry is expected to nearly triple from 2019 to 2025, which covers up a lot of issues and (c) Innovative is conservatively managed, with liabilities totaling 18% of assets. Indeed, analysts see the firm’s powerful growth trends continuing, with sales and cash flow booming in the second half of this year and for all of 2021 (which should lead to big increases in the dividend, too). It’s a good story.
Technical Analysis
IIPR had a massive run into June of last year, before a climax top led to a 50% decline last fall and a crash with everything else in March. However, the damage was repaired after that, and by late July, IIPR had set up a nice five-month base with some tightness near the century mark. The stock broke out three weeks ago, and while volume has been just OK, the stock has followed through nicely on the upside. You can buy some here or (preferably) on dips.
| Market Cap | $2.23B | FFO $ Annual (Dec) | |
| Forward P/E | 23 | FY 2018 | 1.30 |
| Current P/E | 27 | FY 2019 | 3.17 |
| Annual Revenue | $75M | FY 2020e | 5.13 |
| Profit Margin | 54.7% | FY 2021e | 7.53 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 24.4 | 182% | 1.19 | 102% |
| One qtr ago | 21.1 | 210% | 1.12 | 107% |
| Two qtrs ago | 17.7 | 270% | 1.18 | 211% |
| Three qtrs ago | 11.6 | 194% | 0.86 | 126% |
IIPR Weekly Chart
IIPR Daily Chart
iRhythm Technologies (IRTC)
Why the Strength
Heart disease claims the lives of more than half a million Americans each year, making it the nation’s leading cause of death. The ability to diagnose and treat irregular heartbeat is therefore paramount, and iRhythm is making that task easier for healthcare workers and heart patients. Using its cloud-based ZIO platform, iRhythm’s wearable devices obtain info from millions of heartbeats and diagnose arrhythmias faster than traditional approaches, representing a change in the way arrhythmia is detected and treated. The growth story has been solid for a long time, but it should get a boost going forward: A recent Centers of Medicare and Medicaid Services proposed payment rate change for heart monitoring devices (which replaces the temporary codes covering the ZIO system) could have a positive impact on the company’s sales. While revenue declined in Q2 (-3%) due to COVID-related impacts, iRhythm saw a steady recovery throughout the quarter, exceeding its expectations. Average daily and weekly registration rates expanded steadily through the quarter, with June hitting nearly 90% of pre-COVID levels—thanks to its digital platform-enabled home enrollment service (the firm sees this platform as integral to its future success). While management suspended guidance, analysts see the top line rising 10% in Q3, with growth steadily accelerating from there (39% revenue bump expected in 2021, though a lot will depend on how the Medicare change affects it). Moreover, iRhythm sees its addressable market at $2 billion, leaving lots of room for expansion as it establishes a leadership position in first-line heart monitoring.
Technical Analysis
IRTC was one of the first stocks to burst to new highs in April, but instead of following through, it wasn’t done consolidating, building a new 11-week structure through July. But now the strength seen soon after the market lows has reappeared, with the stock going nuts on earnings and on the Medicare news, soaring wildly before pulling back on light volume in recent days. IRTC has a history of being squirrelly, but we think the recent dip marks a solid entry point.
| Market Cap | $4.74B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.98 |
| Current P/E | N/A | FY 2019 | -2.16 |
| Annual Revenue | $228M | FY 2020e | -2.12 |
| Profit Margin | N/A | FY 2021e | -1.07 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 50.9 | -3% | -0.75 | N/A |
| One qtr ago | 63.5 | 31% | -0.34 | N/A |
| Two qtrs ago | 59.1 | 41% | -0.65 | N/A |
| Three qtrs ago | 54.7 | 43% | -0.72 | N/A |
IRTC Weekly Chart
IRTC Daily Chart
L Brands (LB)
Why the Strength
If you’re looking for a great growth story, you’ve … come to the wrong place; as you can see in the table below, L Brands has been struggling for a while. But L Brands is a classic turnaround and special situation that has very good potential if management pulls the right levers. L Brands is an apparel retail outfit that owns Bath & Body Works (1,729 stores) and Victoria’s Secret (1,181 stores). The former has been a solid performer over time; while sales for Bath & Body Works are expected to be down about 10% in the second quarter, this is mostly pandemic-related, as the operation has seen steady, high single-digit rises in sales and income in recent years, thanks in part to a strong online presence (made up 18.5% of total sales last year). Victoria’s Secret, meanwhile, has been a mess, with steadily falling profitability (nearly breakeven last year!) and with business falling off a cliff this year (down 40% in the current quarter, again, partly pandemic related). So what is the attraction here? First, management is getting its act in order, with a $400 million cost improvement plan for Victoria’s Secret (including $175 million by the end of this year, or 63 cents per share) through headcount reductions, inventory management, 250 store closures and more. Second, and possibly more important, the top brass is committed to splitting into two companies, effectively unlocking the value of Bath & Body Works. Throw in a bunch of liquidity ($2.5 billion in cash) and its stores being reopened, and big investors are thinking the earnings power of L Brands is a lot higher than most thought a few months back. The next big update will come this Wednesday morning (August 19), when the firm will report earnings.
Technical Analysis
LB trended steadily lower for years before crashing as low as 8 in March. And the immediate aftermath wasn’t overly encouraging, either, as the stock gyrated wildly, including a dip from 20 to 13 in June. But the action since then has been solid, highlighted by a huge-volume rebound in late July after the company announced its $400 million cost savings plan; LB has actually tacked on gains since then, too, which is encouraging. Turnaround situations are tricky, but we’re OK picking up shares on minor weakness.
| Market Cap | $7.36B | EPS $ Annual (Jan) | |
| Forward P/E | 133 | FY 2019 | 2.82 |
| Current P/E | 23 | FY 2020 | 2.29 |
| Annual Revenue | $11.9B | FY 2021e | 0.20 |
| Profit Margin | N/A | FY 2022e | 1.93 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.65 | -37% | -0.99 | N/A |
| One qtr ago | 4.71 | -3% | 1.88 | -12% |
| Two qtrs ago | 2.68 | -4% | 0.02 | -88% |
| Three qtrs ago | 2.9 | -3% | 0.24 | -33% |
LB Weekly Chart
LB Daily Chart
Quanta Services (PWR)
Why the Strength
The American Society of Civil Engineers gives a D+ grade to the 7,300 power plants and nearly 160,000 miles of high-voltage power lines that connect 145 million customers throughout the country—due to “aging equipment, capacity bottlenecks, increased demand, as well as increasing storm and climate impacts.” But that’s good news for Quanta! The company builds, installs and repairs electric power transmission and distribution infrastructure and substation facilities not only in the U.S., but also in Canada, Australia and other countries. Its second quarter results were solid, with earnings of $0.74, rising 139% from last year and handily beating analysts’ forecasts of $0.48, though the top line disappointed (revenues slightly missed estimates and also declined 12% year over year). That was primarily due to sharply lower collections (down 35%) in its Pipeline and Industrial Infrastructure Services segment, as the company’s gas utility infrastructure services and reduced demand for refining facilities were affected by COVID-19. But investors are looking ahead, and they like what they see: The firm still had remaining performance obligations (basically all money under contract that it’s set to collect) of $13.9 billion at the end of June (actually up 9% from a year ago), including $7.66 billion that should be collected within 12 months (also up from a year ago). Partially because of that (as well as the fact that Quanta’s LUMA Energy joint venture was selected for a 15-year agreement to operate, modernize and maintain Puerto Rico’s electric transmission and distribution system), management hiked earnings expectations for the rest of the year (now flat-ish with last year, which is a big win given the pandemic’s impact) and analysts see 2021 being very fruitful for the company. Quanta is a get-your-hands-dirty kind of story that looks set for a couple of good years as the economy emerges from the brief, sharp recession.
Technical Analysis
Shares of PWR traded sideways for the last few years and crashed in March, but have changed character since then. The first three months of the rally were solid, bringing the stock all the way back toward its multi-year highs; that was followed by a tidy eight-week rest as volume dried up. But since August began, PWR has been very impressive, with a straight-up advance on heavy volume and no give back. Of course, short-term, some wobbles are possible, but we like the power behind the move and think you can buy some here.
| Market Cap | $6.81B | EPS $ Annual (Dec) | |
| Forward P/E | 15 | FY 2018 | 2.81 |
| Current P/E | 15 | FY 2019 | 3.33 |
| Annual Revenue | $11.7B | FY 2020e | 3.31 |
| Profit Margin | 4.2% | FY 2021e | 4.00 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.51 | -12% | 0.74 | 139% |
| One qtr ago | 2.76 | -2% | 0.47 | -51% |
| Two qtrs ago | 3.11 | 0% | 0.91 | -3% |
| Three qtrs ago | 3.35 | 12% | 1.14 | 30% |
PWR Weekly Chart
PWR Daily Chart
Shift4 Payments (FOUR)
Why the Strength
Shift4 Payments is newly public, but it’s well situated in the payment ecosystem—it bills itself as the leading provider of integrated payment processing and technology solutions for businesses of all sizes. A big part of Shift4’s attractiveness is that it’s a one-stop shop for hardware, software, security, reporting, analytics and more, which makes it easier and cheaper for merchants, whether they’re operating online, in stores or both. Throw in strong market share in many key industries (food and beverage, hospitality, specialty retail) and best-in-class distribution and it’s no surprise Shift4 is popular and growing—the company counts more than 200,000 merchant customers that in 2019 processed 3.5 billion transactions and $200 billion worth of spending, and of course it’s grabbing many new clients along the way. (One recent win: The new Raiders stadium in Las Vegas.) Going forward, there’s growth potential both from the market as a whole (electronic payments are of course steadily rising) but also from cross-selling if it can get more customers to trade up to its end-to-end offering. Due to the pandemic, Q2 was a bummer (sales down 21%), but those trends had already changed by June (volume was up this June vs. a year ago), and management guided to solid performance for the rest of the year; farther down the road, analysts see the top line surging 38% in 2021. And there’s a pretty good chance those figures will prove low—a report last week showed that retail sales had already recouped their entire pandemic plunge, far faster than many expected just a few weeks ago. Shift4 is a solid story that should see many years of solid growth ahead.
Technical Analysis
Recent IPOs are usually volatile, and FOUR is no exception, with wild moves up and down every week or two. But taking a step back, we see that the stock mostly consolidated between the mid 30s and mid 40s for a few weeks, and since earnings on August 6, shares have rallied nicely to new highs. Given the choppiness, we wouldn’t chase it here, but a small position on a shakeout is fine by us.
| Market Cap | $4.06B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.62 |
| Current P/E | N/A | FY 2019 | -0.72 |
| Annual Revenue | $737M | FY 2020e | -0.95 |
| Profit Margin | N/A | FY 2021e | 0.28 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 142 | -21% | -0.92 | N/A |
| One qtr ago | 199 | 29% | -0.06 | N/A |
| Two qtrs ago | 202 | 34% | -0.17 | N/A |
| Three qtrs ago | 194 | 30% | -0.28 | N/A |
FOUR Weekly Chart
FOUR Daily Chart
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 green.
| HOLD | |||||
| 8/10/20 | Agnico Eagle Mines | AEM | 79.5-82.5 | 82 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 257 |
| 7/20/20 | Arconic | ARNC | 15-16.5 | 23 | |
| 5/4/20 | Bandwidth | BAND | ? | 90-94 | 150 |
| 6/22/20 | Big Lots | BIG | 32.5-35 | 50 | |
| 6/1/20 | Bill.com | BILL | 69-73 | 94 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 30 | |
| 8/10/20 | Chart Industries | GTLS | 69-73 | 72 | |
| 5/11/20 | Chegg | CHGG | ? | 58-62 | 80 |
| 3/23/20 | Cloudflare | NET | 19-21 | 40 | |
| 3/23/20 | Coupa Software | COUP | 124-132 | 294 | |
| 6/29/20 | Crispr Therapeutics | CRSP | 71.5-75 | 92 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 441 | |
| 8/10/20 | Digital Turbine | APPS | 21.5-24 | 26 | |
| 9/9/19 | DocuSign | DOCU | ? | 55-58 | 208 |
| 7/20/20 | DR Horton | DHI | 61.5-64 | 73 | |
| 7/27/20 | Floor & Décor | FND | 69-72 | 71 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 14 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 110 | |
| 5/26/20 | Horizon Therapeutics | HZNP | 45.5-48 | 75 | |
| 4/20/20 | Immunomedics | IMMU | 20.5-22 | 42 | |
| 7/27/20 | Invitae | NVTA | 30-32.5 | 32 | |
| 7/13/20 | Kinross Gold | KGC | 7.2-7.6 | 9 | |
| 8/3/20 | Kirkland Lake | KL | 49-52 | 53 | |
| 6/22/20 | LGI Homes | LGIH | 84-87 | 115 | |
| 8/10/20 | LivePerson | LPSN | 55-58.5 | 60 | |
| 6/15/20 | Lululemon | LULU | ? | 291-301 | 355 |
| 6/29/20 | Meritage Homes | MTH | 71.5-74 | 103 | |
| 3/30/20 | Nvidia | NVDA | 250-270 | 493 | |
| 3/30/20 | Okta | OKTA | ? | 118-126 | 200 |
| 8/10/20 | Ollie’s Bargain Outlet | OLLI | 100-103.5 | 107 | |
| 7/13/20 | Pacira Pharmaceuticals | PCRX | 54-56 | 62 | |
| 6/1/20 | Pan American Silver | PAAS | 27-29 | 35 | |
| 4/27/20 | PayPal | PYPL | ? | 117-122 | 196 |
| 4/6/20 | Peloton | PTON | 27-29 | 65 | |
| 8/3/20 | Penn Nat’l Gaming | PENN | 34-36.5 | 53 | |
| 8/3/20 | Pinduoduo | PDD | 91-96 | 89 | |
| 8/3/20 | PINS | 33.5-37 | 35 | ||
| 7/20/20 | Plug Power | PLUG | ? | 8.0-8.7 | 12 |
| 8/3/20 | Qorvo | QRVO | 127-131 | 134 | |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 112 | |
| 7/13/20 | Redfin | RDFN | 34.5-36.5 | 44 | |
| 7/13/20 | Roku | ROKU | 147-154 | 146 | |
| 7/20/20 | SAIA Inc | SAIA | 120-125 | 131 | |
| 7/27/20 | Sailpoint Tech | SAIL | 30-32 | 36 | |
| 8/3/20 | Scott’s Co. | SMG | 154-159 | 166 | |
| 7/27/20 | Sea Ltd | SE | 110-116 | 134 | |
| 5/26/20 | Spotify | SPOT | ? | 184-191 | 260 |
| 7/13/20 | Sunrun | RUN | 27.5-29.5 | 48 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 80 | |
| 11/11/19 | Tesla | TSLA | 320-335 | 1836 | |
| 6/8/20 | Trade Desk | TTD | 338-358 | 475 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 248 | |
| 7/6/20 | Ultragenyx Pharm. | RARE | ? | 83-88 | 88 |
| 7/27/20 | Watsco | WSO | 220-230 | 243 | |
| 5/11/20 | Wingstop | WING | 116-122 | 157 | |
| 8/10/20 | Zillow | Z | ? | 77-80 | 80 |
| 4/6/20 | Zscaler | ZS | 61-64 | 124 | |
| WAIT | |||||
| 8/10/20 | Maxar Technologies | MAXR | 22-23.5 | 27 | |
| SELL RECOMMENDATIONS | |||||
| 7/20/20 | ANGI Homeservices | ANGI | 14.5-16 | 14 | |
| 7/20/20 | GDS Holdings | GDS | 78-82 | 82 | |
| 6/8/20 | Marvell Tech | MRVL | 32.5-34 | 34 | |
| 6/15/20 | Novovax | NVAX | 47-50.5 | 156 | |
| 7/6/20 | Nu Skin Enterprises | NUS | 42.5-45 | 47 | |
| 6/8/20 | Thor Industries | THO | 101-106 | 113 | |
| 7/13/20 | XP Inc. | XP | 43-46 | 44 | |
| 2/24/20 | Zoom Video | ZM | ? | 96-104 | 266 |
| DROPPED | |||||
| 8/3/20 | Advanced Micro | AMD | 72.5-75 | 82 | |
| 8/3/20 | Fortune Brands | FBHS | 74-77 | 86 | |
The next Cabot Top Ten Trader issue will be published on August 31, 2020.