Same Story
Current Market Outlook
We could pretty much cut our intro from the past couple of weeks and paste it in this week—the primary evidence (trends and overall action of the market and leading stocks, fresh breakouts, blastoff-type green lights from mid November) remains very encouraging, with most of the major potholes seen lately coming from very speculative situations. The main worry is that few investors are worried (in stark contrast to earlier this year, when the market was kiting higher but few believed it), which tells us that risk is rising. Thus, we remain bullish and think putting money to work is the best course of action, but it’s also important to keep your feet on the ground and focus on the best-looking stocks while trailing stops higher and taking partial profits as things stretch higher.
This week’s list is relatively split between growth situations and those benefiting from cyclical/turnaround buying. Our Top Pick is Axon Enterprise (AAXN), which continues to gain sponsorship and has just tightened up nicely for five weeks.
| Stock Name | Price | ||
|---|---|---|---|
| Adient (ADNT) | 34.99 | ||
| Align Technology (ALGN) | 504.11 | ||
| Ambarella (AMBA) | 90.94 | ||
| AAXN (AAXN) | 127.31 | ||
| Baker Hughes Company (BKR) | 21.72 | ||
| fuboTV Inc. (FUBO) | 27.15 | ||
| The Michaels Companies (MIK) | 11.68 | ||
| Micron Technology, Inc. (MU) | 71.54 | ||
| PagerDuty (PD) | 44.18 | ||
| Stitch Fix (SFIX) | 64.06 |
Adient (ADNT)
Why the Strength
Worldwide automotive demand is in the midst of a resurgence after the early-year production shutdowns; China’s SUV, minivan and sedan sales increased by double digits last month, while U.S. consumer car demand has improved in recent months (and new vehicle sales are expected to rise a further 12% in 2021). This is good news for companies that serve the auto industry, including Adient, which is the world’s largest maker of seats for automobiles, and also does good business making seats for airlines, too. Adient (the result of a spin-off from Johnson Controls) suffered with the entire industry during the recession (sales off 61% in the second quarter!), but there were already signs of a big rebound in the summer and fall; in Q3, revenues fell “only” 8% from a year ago, but big investors took heart that per-share earnings of $1.15 coasted past the consensus by 44 cents and were up 83% from last year’s tally. And, of course, with global auto production restarting, vehicle production is trending higher and the company’s cost-cutting measures are paying off. Beyond industry factors, Adient’s recent sale of its automotive fabrics business (for $175 million) will allow the firm to focus on growing its core, high-volume seating business going forward. The company’s liquidity position has also notably improved to a robust $2.5 billion, which should give it plenty of ammo to continue its operational improvement and restructuring efforts. Further, Adient’s order book is quite strong, as the company has lately secured program wins from Ford, Jeep, Tesla and GMC, among other big auto makers. Management believes next year will be a good one, and analysts agree, forecasting 17% revenue growth for 2021 and an earnings rebound to north of $4 per share.
Technical Analysis
ADNT topped out back in 2018 and had a doozy of a decline, falling from a peak of 85 to a rock-bottom low of 6 in March of this year. It rallied with the rest of the market in April and May, then spent all summer building a base between 15 and 20. The kickoff came in early October, when a restart of operations caused a buying spree that continued though the middle of last week. If you want in, we suggest aiming for dips of another point or two.
| Market Cap | $3.37B | EPS $ Annual (Sep) | |
| Forward P/E | 12 | FY 2019 | 1.63 |
| Current P/E | N/A | FY 2020 | -0.04 |
| Annual Revenue | $12.7B | FY 2021e | 3.08 |
| Profit Margin | 3.0% | FY 2022e | 4.21 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.6 | -8% | 1.15 | 83% |
| One qtr ago | 1.63 | -61% | -2.78 | N/A |
| Two qtrs ago | 3.51 | -17% | 0.62 | 100% |
| Three qtrs ago | 3.94 | -5% | 0.96 | 210% |
ADNT Weekly Chart
ADNT Daily Chart
Align Technology (ALGN)
Why the Strength
The days of uncomfortable metal braces to fix a crooked smile are ending thanks to modern clear align technology, which uses transparent plastic that takes less time to align teeth. The demand for this orthodontic technique is expected to grow at a 17% annual clip through 2026. Align Technology, a leader in this field, makes clear aligners and 3D digital scanners which are used to model stages between current and desired teeth positions before the aligners are 3D printed. The company’s Invisalign braces are fast becoming the top choice for patients, while its iTero scanners are widely used within the orthodontic profession. Business fell off for Align after nearly 70% of dental offices worldwide were closed during the worst of the pandemic, but sales have since staged a comeback. The top line rose by a solid 21% in Q3 (up 108% sequentially), with Invisalign case shipments up 29%, reflecting strong sales across all regions for both Invisalign clear aligners and iTero scanners. Moreover, Align is aggressively expanding its digital presence in the pandemic’s wake, recently unveiling its cloud-based ClinCheck Pro 6.0 treatment planning software (which minimizes the doctor-patient interaction), along with the My Invisalign app. Analysts are projecting record revenue for Align in the coming year, with a 34% top line increase predicted for Q1 2021, followed by a massive 120% sales bump in Q2 (total-year revenue is likely to rise in the mid 30% range). Big picture, the market here is 300 million patients, compared to nine million Invisalign customers today; management is hard at work to capture those, including a new program to help customers switch braces patients into Invisalign treatment by buying back their wires and brackets inventory. The long-term potential for Align is huge, and it’s well positioned for growth as the economy reopens.
Technical Analysis
ALGN topped in September 2018 and spent the next two years correcting and consolidating. The breakout on earnings in October of this year was decisive, and while it’s had a few ups and downs, ALGN has pushed solidly higher since then, finishing with a modest, low-volume dip last week. If you want in, we think you can start a position here or on further dips.
| Market Cap | $39.9B | EPS $ Annual (Dec) | |
| Forward P/E | 61 | FY 2018 | 4.92 |
| Current P/E | 122 | FY 2019 | 5.75 |
| Annual Revenue | $2.29B | FY 2020e | 4.73 |
| Profit Margin | 24.2% | FY 2021e | 8.30 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 734 | 21% | 2.25 | 52% |
| One qtr ago | 352 | -41% | -0.35 | N/A |
| Two qtrs ago | 551 | 0% | 0.73 | -42% |
| Three qtrs ago | 650 | 22% | 1.53 | 28% |
ALGN Weekly Chart
ALGN Daily Chart
Ambarella (AMBA)
Why the Strength
Computer vision (CV) is an emerging field that uses computers to “see” or extract information from digital images and videos. which is then used in applications ranging from surveillance, driverless car testing and medical diagnostics. Ambarella is a key player in CV, designing semiconductors for low-power, high-def and ultra HD video compression, image processing and CV processors—its chips are used in several major industries and are widely regarded as among the best for extracting useful data from video. Ambarella’s latest strength follows its selection by Amazon (along with Nvidia) as an initial partner to build an ecosystem of hardware-accelerated machine learning/AI devices for Amazon’s AWS Panorama (which allows companies to bring CV to on-premise cameras in order to automate tasks). As for the numbers, they’re still fading from a year ago but are perking up nicely from the pandemic lows: Q3 featured a 63% gross margin on revenue of $56 million—down 17% from last year, but 12% higher sequentially and above consensus estimates. Meanwhile earnings of 9 cents per share were up 50% sequentially and came in four cents above expectations. Ambarella guided for Q4 revenue in the $56 to $60 million range, about 10% to 20% better than previous estimates, also anticipating security camera revenue will be up in the low-double digits sequentially with auto revenue up 20% both sequentially and year-on-year. Going forward, management believes its AI vision portfolio is well positioned for the security, safety and automation megatrends, and the company has several partnerships with automotive firms to provide state-of-the-art video solutions. Throw in the fact that the Amazon partnership should make it easier for Ambarella to secure future design wins and there’s good potential here during the next couple of years.
Technical Analysis
AMBA had a huge run from 2012 to 2015, but topped there and spent five years in the wilderness, generally gyrating between 30 and 80 during that time as business softened. But this rally looks like the real McCoy—shares tightened up nicely in the summer, found big-volume buying in late August after earnings and, after trending up for a few weeks, have let loose on the upside on massive volume of late. Last week’s pullback looks modest given the run; a bit more downside in AMBA should offer up a nice entry point.
| Market Cap | $3.06B | EPS $ Annual (Dec) | |
| Forward P/E | 160 | FY 2019 | 0.73 |
| Current P/E | 275 | FY 2020 | 0.75 |
| Annual Revenue | $218M | FY 2021e | 0.27 |
| Profit Margin | 5.9% | FY 2022e | 0.54 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 56.1 | -17% | 0.09 | -72% |
| One qtr ago | 50.1 | -11% | 0.06 | -73% |
| Two qtrs ago | 54.7 | 16% | 0.04 | N/A |
| Three qtrs ago | 57.2 | 12% | 0.14 | 0% |
AMBA Weekly Chart
AMBA Daily Chart
(AAXN)
Why the Strength
Axon Enterprise doesn’t get many headlines, but the company’s continued business model transformation is going well, which has kept growth humming and the stock headed north. The company is best known for its Taser electrical weapons (stun guns), and those are still a big part of the package today; in Q3, Taser-related revenue made up around half of total revenue and was up 18% from the year before. But the real drivers now are Axon’s other products like body cameras and in-car video systems, as well as the firm’s cloud-based systems like Evidence (manage, store, share digital evidence), Records (integrated reports) and Respond (real-time operations and response platform). In other words, Axon offers law enforcement a complete, end-to-end solution, and it generally does so on a subscription basis (even 75% of Taser sales are now part of a bundle that includes training and updates), leading to rapid and reliable growth. Sales have been growing in the mid 20% range while earnings pick up steam, but even more impressive is the firm’s recurring revenue-related metrics; annualized recurring revenue is now $203 million, up 44% from a year ago, while total contracted future revenue ended Q3 at $1.51 billion, up 34%. To be fair, growth is expected to slow in the quarters ahead (analysts see mid-teens sales and earnings growth), but (a) these estimates are usually conservative and (b) investors are more likely to key off future contracted revenue, which shows little sign of slowing down. Axon isn’t a big, liquid leader, but it’s made itself into a fine company with foreseeable growth, which is one reason big investors are buying (572 funds now own it, up from 403 at the start of the year).
Technical Analysis
AAXN has been up and down since mid 2018, with slightly higher highs and higher lows but lots of volatility making it hard to hold onto. But it’s been looking different in recent months; the stock began building a new launching pad in June, saw a lot of tightness near its 40-week line in August and September and then had a great run to new highs before and after earnings in November. Now AAXN has tightened up for five weeks, a constructive sign. We’re OK taking a swing at it here with a stop in the low 110s.
| Market Cap | $7.90B | EPS $ Annual (Dec) | |
| Forward P/E | 94 | FY 2018 | 0.74 |
| Current P/E | 105 | FY 2019 | 1.04 |
| Annual Revenue | $626M | FY 2020e | 1.14 |
| Profit Margin | 15.3% | FY 2021e | 1.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 166 | 27% | 0.40 | 43% |
| One qtr ago | 141 | 26% | -0.01 | N/A |
| Two qtrs ago | 147 | 27% | 0.40 | 90% |
| Three qtrs ago | 172 | 50% | 0.40 | 400% |
AAXN Weekly Chart
AAXN Daily Chart
Baker Hughes Company (BKR)
Why the Strength
The current incarnation of Baker Hughes was formed in 2017 via the merger of Baker Hughes with General Electric’s Oil & Gas business. After its combination with GE, the company now offers a full spectrum of equipment and services to all kinds of oil and gas outfits, from upstream to downstream; overall, it’s now the third largest U.S. oil services company, with 54% of revenues (and 57% of operating income) coming from its Oilfield Services Business, and 23% of revenues (and 45% of operating income) coming from Turbomachinery & Process Solutions. (Oilfield Equipment and Digital Solutions make up the rest.) Company specifics aside, the stock was under pressure due to macro forces for the past couple of years, with this year’s collapse in drilling activity obviously hurting. But with several vaccine candidates now in production or on the horizon, oil demand looks set to recover, which means a recovery in the energy services sector as well. In fact, the company reported last week that the number of active U.S. drill rigs rose to 258, and while that’s down 60% from a year ago it’s now up three straight weeks and up from 172 at the lows in August. Moreover, despite the horrid environment, Baker Hughes has remained profitable (except Q2 when the pandemic closed everything down) and third-quarter revenue came in above analysts’ estimates. All of the focus is on the future, though, with analysts seeing earnings more than doubling next year as the world turns right side up. This sort of turnaround action has been seen many times throughout the years in the oil patch, and this time shouldn’t be much different as activity surges from depressed levels in the months ahead.
Technical Analysis
BKR bumped downhill for years before bottoming below 10 during the March crash; even the ensuing rally could only bring it up to its falling 40-week line, leading to another dip into October. But it’s been a different kettle of fish since that time—BKR popped above its 40-week in early November and has persistently rallied since then, advancing eight straight weeks (six of them on above-average volume) to multi-month highs. We don’t expect a straight-up advance from here, but we’re OK starting a position here or on further weakness.
| Market Cap | $23.0B | EPS $ Annual (Dec) | |
| Forward P/E | 38 | FY 2018 | 0.65 |
| Current P/E | 62 | FY 2019 | 0.85 |
| Annual Revenue | $21.6B | FY 2020e | 0.27 |
| Profit Margin | 0.5% | FY 2021e | 0.59 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 5.05 | -14% | 0.04 | -81% |
| One qtr ago | 4.74 | -21% | -0.05 | N/A |
| Two qtrs ago | 5.42 | -3% | 0.11 | -27% |
| Three qtrs ago | 6.35 | 1% | 0.27 | 4% |
BKR Weekly Chart
BKR Daily Chart
fuboTV Inc. (FUBO)
Why the Strength
Cord cutting has been a major trend for years, and the pandemic has only accelerated that movement, both on the consumer side (number of traditional TV hours watch by 18- to 49-year olds fell 17% in Q3!) and the producer side (more alternatives to cable TV). FuboTV isn’t a streaming provider (like Disney+ or Netflix), but instead competes with the likes of YouTube TV and Hulu TV Live to replace cable altogether, and it’s separating itself by focusing on a good-sized niche: Fubo ($60 per month base price with upgrades available) has a sports-first offering with more than 100 channels focusing on live sporting events, broadcasting most of them in the highest quality (4K) and, via its Multiview feature, allowing split-screens to many users so they can watch four events at once on their giant TVs. (It’s not just sports, either; Fubo recently inked a deal to include EPIX and its various entertainment offerings for an extra $6 per month.) Growth here has been terrific and there’s no reason it can’t go on for many years—in Q3, Fubo had 455,000 paying subscribers, up 58% from a year ago, driving subscription revenue up 64% and advertising revenue (small now but huge potential) up 153%; total hours watched rose 83% to 133 million! That alone is enough to keep investors interested, but Fubo is also moving into the online sports betting arena, which makes sense given its sports-crazy user base; it recently acquired Balto Sports, which develops tools for fantasy gaming and sports wagering. In all, analysts see revenues rising nearly 80% next year. It’s a big idea.
Technical Analysis
FUBO essentially came public (was listed on the NYSE) in early October, and it’s been explosive since, rising into the mid-teens a month later and accelerating higher after that. Now the stock has finally met some resistance—after spiking to nearly 33 last Wednesday, FUBO has pulled in a few points. Certainly, further dips are possible, as this is a hot, volatile IPO. But we think a small position on further dips would make for a solid entry point.
| Market Cap | $1.86B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.16 |
| Current P/E | N/A | FY 2019 | -0.52 |
| Annual Revenue | $113M | FY 2020e | -5.78 |
| Profit Margin | N/A | FY 2021e | -1.65 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 61.2 | 950% | -1.13 | N/A |
| One qtr ago | 44.2 | N/M | -1.13 | N/A |
| Two qtrs ago | 7.3 | N/M | -0.86 | N/A |
| Three qtrs ago | N/M | N/M | -0.29 | N/A |
FUBO Weekly Chart
FUBO Daily Chart
The Michaels Companies (MIK)
Why the Strength
Craft-related hobbies have experienced something of a renaissance thanks to this year’s shutdowns, as millions of Americans look for ways to alleviate stay-at-home cabin fever (and to keep little ones busy). Sales for Michaels, a leading nationwide chain of arts and crafts retail outlets, have been brisk during the hobby boom. Its COVID-friendly shopping policies have made it easy for craft enthusiasts to purchase supplies with free curbside pickup or direct-to-home delivery, and the chain has been rewarded with a growing customer base. Michaels’ third quarter revealed significant margin expansion and consensus-beating results (revenue up 15% following an 11% increase in the prior quarter); the big driver came from e-commerce, which rose a whopping 128% from a year ago. While per-share earnings of 40 cents were flat from a year ago, the firm cranked out a huge $380 million of free cash flow in the quarter, equal to about one-fifth of the firm’s entire market cap! Free cash flow so far this year has been an even larger $633 million for the year. The firm plans on using its significant $850 million cash position to pay down debt and look for opportunities to repurchase shares, and indicated it’s open to potential acquisitions. While the company offered no specific guidance for Q4, management said it was pleased with customer traffic so far in the quarter and expects sales growth to be consistent with its October trends in the mid-single digits. To be fair, this isn’t a great growth story; management sees the top line lifting low single digits per year, but (a) that’s probably too conservative given that its addressable market boomed 28% this year, and (b) the driver today is the turnaround and free cash flow aspects, which should attract buyers in the months ahead.
Technical Analysis
MIK entered a long decline starting in 2016, sliding from a peak of 32 to an all-time low of 1 at this year’s panic bottom. But since then there has been a decisive change in the stock’s character, starting with a lively rally to 9 in June, followed by another leg higher into September. The pullback after that was sharp but reasonable given the huge off-the-bottom advance, and now MIK is under powerful accumulation again following the quarterly report. We’re OK starting a position around here.
| Market Cap | $1.87B | EPS $ Annual (Jan) | |
| Forward P/E | 5 | FY 2019 | 2.35 |
| Current P/E | 8 | FY 2020 | 2.11 |
| Annual Revenue | $5.08B | FY 2021e | 2.17 |
| Profit Margin | 9.2% | FY 2022e | 2.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.41 | 15% | 0.40 | 0% |
| One qtr ago | 1.15 | 11% | 0.30 | 58% |
| Two qtrs ago | 0.8 | -27% | -0.43 | N/A |
| Three qtrs ago | 1.72 | -4% | 1.26 | -13% |
MIK Weekly Chart
MIK Daily Chart
Micron Technology, Inc. (MU)
Why the Strength
Micron is a leading maker of memory and storage chips that are used in a wide range of electronic devices; the company is number three in market share for total memory/storage shipments after Samsung and SK Hynix. DRAM (dynamic random-access memory) accounts for roughly two-thirds of the firm’s revenue, with NAND flash memory chips making up the remainder. Micron operates in a highly competitive and cyclical market; as such, its long-term profitability has been very up-and-down (prices can swing wildly), though recent consolidation in the industry has helped lessen the sharp swings that Micron and its peers have experienced in the past. Even so, the reason the stock is strong today is that business is turning up after a rough few quarters. For its most recent quarter, Micron’s earnings per share soared 93% year over year to $1.08 a share, and also topped estimates by a few pennies. Revenue for the quarter of $6.1 billion was up by 24% from the same period last year, which likewise beat analyst estimates and marked the second straight quarter of growth after five quarters of shrinkage. It’s not all peaches and cream, though, as Apple’s announcement last week that it’s launched its own set of chips sent a few shockwaves through the sector; while that firm’s M1 chip is mainly a rival for Intel processors, it raises doubt as to whether Apple intends to bring more of its chip designs in house. That’s something to keep an eye on, but right now the focus is more on the turnaround in Micron’s fortunes—analysts see current fiscal year earnings (ending next August) rising 28%, with accelerating growth after that.
Technical Analysis
MU is another stock that is breaking out from a long, multi-year base. In this case, shares topped in early 2018 just above 60, corrected sharply into the trade war-related bottom later that year and then chopped around after that. Encouragingly, the stock did begin to tighten up this summer, and as the market has kicked into gear during the past few weeks, MU has let loose on the upside, rallying five weeks in a row to all-time highs before pausing to catch its breath last week. We suggest aiming for dips of a couple of points if you want in.
| Market Cap | $77.7B | EPS $ Annual (Dec) | |
| Forward P/E | 19 | FY 2019 | 6.35 |
| Current P/E | 25 | FY 2020 | 2.83 |
| Annual Revenue | $21.4B | FY 2021e | 3.60 |
| Profit Margin | 20.3% | FY 2022e | 6.87 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 6.06 | 24% | 1.08 | 93% |
| One qtr ago | 5.44 | 14% | 0.82 | -22% |
| Two qtrs ago | 4.8 | -18% | 0.45 | -74% |
| Three qtrs ago | 5.14 | -35% | 0.48 | -84% |
MU Weekly Chart
MU Daily Chart
PagerDuty (PD)
Why the Strength
In the business world, Murphy’s Law (whatever can go wrong will go wrong) often applies, and a big difference in costs, customer satisfaction and general corporate headaches is how fast and efficiently firms respond to incidents, whether it’s with inventories, network or website uptime, manufacturing snafus, you name it. That’s the big-picture story with PagerDuty, which is a leader in digital operations management. The firm’s platform inputs machine (unstructured) data from just about anywhere, combines it with years of human response information and interprets all of it to see what issues need to be addressed, who should be the ones to address them and provides them the information they need to solve it, all in real time (no queued tickets and such). It sounds like a platform that would benefit most large companies, which is probably why a ton have been using PagerDuty for years; 57 of the Fortune 100 are customers, as well as a ton of fast-growing names like Okta, DocuSign, Square, Netflix, Shopify, Peloton, Bill.com, Vanguard, Lululemon, Salesforce, American Express, Workday and more, all of whom tend to stick around (95% renewal rates) and expand their usage (Q3 saw a 35% growth in customers who pay PagerDuty six figures annually). The virus has had a bit of an impact on business—while the move to all things digital will help in the long run, some deals are taking longer to close. Even so, revenue growth has remained solid in the mid 20% range this year, and while analysts see the top line growing at 23% next year (not exactly lightning fast), those figures often prove too low. More important, there’s no question PagerDuty is doing a solid business that should grow nicely for years to come.
Technical Analysis
PD came public in April 2019 and had a nice few weeks before hitting the toboggan slide, falling from a high of 60 to a low of 12 during the March crash. The bounce back into the low 30s was just OK, and there was a huge pothole in early September, when earnings disappointed. But PD shaped up from there, and gapped up huge on earnings (up 26% on eight times average volume) and has continued higher in the days since. If you want in, aim for dips, though we’re not expecting a major retreat.
| Market Cap | $3.49B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2019 | -0.21 |
| Current P/E | N/A | FY 2020 | -0.30 |
| Annual Revenue | $200M | FY 2021e | -0.29 |
| Profit Margin | N/A | FY 2022e | -0.22 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 53.8 | 26% | -0.09 | N/A |
| One qtr ago | 50.7 | 26% | -0.04 | N/A |
| Two qtrs ago | 49.8 | 33% | -0.04 | N/A |
| Three qtrs ago | 45.9 | 36% | -0.03 | N/A |
PD Weekly Chart
PD Daily Chart
Stitch Fix (SFIX)
Why the Strength
When customers order from Stitch Fix, they’re buying clothing they haven’t even seen based on a series of profile questions. For a $20 fee, buyers answer a series of questions that help the company’s data scientists determine which clothing best fits their size, style, budget and taste. After delivery (but before purchasing), customers try the clothes on at home and send back what they don’t want (with no shipping charge—customers are only “in” for $20 per shipment). The company believes its unique model has solved the “paradox of choice,” and its styling algorithms seem to do a good job of deciphering customers’ wants better than the customers themselves. A case in point was the company’s fiscal Q1 2021, which saw Stitch Fix report the highest rate of success (the percentage of items customers who keep in their boxes) in its history. The seismic shift to online shopping helped Stitch Fix achieve several records in fiscal Q1, including 10% active client count growth to 3.8 million. Revenue of $490 million was up 10% (and up 11% sequentially), and per-share earnings of 9 cents beat estimates by a whopping 26 cents. Short-term, the company is focused on several new initiatives to improve the buying experience, including Shop by Category and Fix Preview (to remove friction and to improve cold-start experience and conversion), as well as a program to strengthen the firm’s ability to respond to clients’ changing behaviors. But what’s really got the buyers active is the firm’s rosy outlook: The top brass sees accelerating growth going forward, with revenues expected to rise 13% in the current quarter and 23% for the fiscal year that ends next July, both of which will probably be conservative. It’s an exciting story, and with shoppers increasingly going online to buy clothes, there’s a lot of potential here.
Technical Analysis
After coming public in November 2017 at 15, SFIX zoomed to a high of 52 in 2018 before collapsing to 16 and spending the next several months chopping around. The turning point came earlier this year when SFIX hit a lifetime low of 11, then turned around when the pandemic drastically boosted the company’s outlook. Shares were already in a volatile uptrend before last week’s earnings news caused a rush of buying, pushing the stock to all-time highs. If you want in, aim to enter on dips.
| Market Cap | $6.20B | EPS $ Annual (Jul) | |
| Forward P/E | N/A | FY 2019 | 0.36 |
| Current P/E | N/A | FY 2020 | -0.66 |
| Annual Revenue | $1.76B | FY 2021e | -0.26 |
| Profit Margin | 1.9% | FY 2022e | -0.11 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 490 | 10% | 0.09 | N/A |
| One qtr ago | 443 | 3% | -0.44 | N/A |
| Two qtrs ago | 372 | -9% | -0.33 | N/A |
| Three qtrs ago | 452 | 22% | 0.11 | -8% |
SFIX Weekly Chart
SFIX 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 | |||||
| 11/16/20 | Albemarle | ALB | 121-126 | 135 | |
| 10/26/20 | Align Technology | ALGN | ? | 420-440 | 506 |
| 12/7/20 | Applied Materials | AMAT | ? | 85-90 | 88 |
| 10/19/20 | Avalara | AVLR | 147-152 | 169 | |
| 10/26/20 | Axon Enterprise | AAXN | 99.5-102.5 | 129 | |
| 11/2/20 | Bunge | BG | 56-58.5 | 64 | |
| 11/16/20 | Canopy Growth | CGC | 23.5-25 | 25 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 37 | |
| 11/23/20 | Celsius Holdings | CELH | 31.5-34 | 36 | |
| 11/2/20 | Cloudflare | NET | 49-52 | 82 | |
| 11/9/20 | Enphase Energy | ENPH | 112-118 | 145 | |
| 10/26/20 | Exact Sciences | EXAS | 103-107 | 130 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 160 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 24 | |
| 10/26/20 | General Motors | GM | 34-36 | 42 | |
| 10/26/20 | GrowGeneration | GRWG | 16.5-18 | 33 | |
| 11/23/20 | Halozyme | HALO | ? | 38.5-41 | 42 |
| 11/23/20 | Huazhu Group | HTHT | 49.5-51 | 47 | |
| 11/9/20 | HubSpot | HUBS | 335-350 | 382 | |
| 11/23/20 | Inspire Medical | INSP | 172-182 | 195 | |
| 10/19/20 | Invitae | NVTA | 47-49.5 | 54 | |
| 11/16/20 | Lam Research | LRCX | ? | 415-435 | 492 |
| 11/16/20 | Marvell Tech | MRVL | 41.5-43.5 | 44 | |
| 11/2/20 | Mattel | MAT | 13-13.5 | 16 | |
| 10/26/20 | MercadoLibre, Inc. | MELI | 1180-1240 | 1615 | |
| 11/23/20 | Moderna | MRNA | 95-98 | 155 | |
| 11/16/20 | Norfolk Southern | NSC | 235-245 | 229 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 170 |
| 10/19/20 | Paycom Software | PAYC | 360-375 | 427 | |
| 12/7/20 | Pinduoduo | PDD | 140-147 | 142 | |
| 8/3/20 | PINS | 33.5-37 | 70 | ||
| 12/7/20 | Qorvo | QRVO | 158-163 | 154 | |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 147 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 69 |
| 7/13/20 | Roku | ROKU | 147-154 | 324 | |
| 10/26/20 | Shift4 Payments | FOUR | 51.5-54 | 64 | |
| 11/16/20 | Snap | SNAP | 37.5-39.5 | 52 | |
| 12/7/20 | Snowflake | SNOW | 360-380 | 329 | |
| 11/23/20 | Sonos | SONO | 20.5-22 | 21 | |
| 9/28/20 | Square | SQ | 157-162 | 216 | |
| 10/19/20 | SunPower | SPWR | 16.5-17.5 | 22 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 104 | |
| 12/7/20 | Tapestry | TPR | 27-28.5 | 29 | |
| 9/14/20 | Target | TGT | 145-149 | 171 | |
| 11/16/20 | Timken | TKR | 69-72 | 76 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 351 | |
| 11/9/20 | Uber | UBER | 45-47.5 | 51 | |
| 11/9/20 | Yeti | YETI | 50-53 | 71 | |
| 10/5/20 | Zendesk | ZEN | 101-105 | 138 | |
| 11/9/20 | Zillow | Z | 100-105 | 134 | |
| 12/7/20 | Zscaler | ZS | 174-180 | 134 | |
| WAIT | |||||
| 12/7/20 | Cleveland-Cliffs | CLF | 11.5-12.3 | 13 | |
| 12/7/20 | Vale S.A. | VALE | 14.7-15.7 | 16 | |
| 12/7/20 | U.S. Steel | X | 15.3-16.3 | 17 | |
| SELL RECOMMENDATIONS | |||||
| 11/23/20 | Bilibili | BILI | 57.5-60.5 | 79 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 133 | |
| 11/2/20 | Martin Marietta | MLM | 263-273 | 260 | |
| 8/24/20 | Natera | NTRA | 60-63 | 98 | |
| 11/23/20 | Omnicell | OMCL | 100-104 | 114 | |
| 10/5/20 | ST Microelectronics | STM | 32-33.5 | 35 | |
| DROPPED | |||||
| None this week. | |||||
The next Cabot Top Ten Trader issue will be published on December 21, 2020