Next Few Days Should be Key
Current Market Outlook
After one of the wildest weeks in months, you’ve probably seen countless articles talking about the action and the reasons for it. To us, though, it’s what happens during the next few trading sessions that will count most—right now, the intermediate-term trend of the major indexes is up, though it’s more of a mixed bag for leading stocks (both growth and cyclical). In our view, there’s been enough iffy action to warrant some action; we’re moving our Market Monitor down to a level 6 in today’s issue and have a fair number of sells. But what comes next will count most, with a strong, broad rebound (including some positive earnings reactions) likely boding well, while an inability to bounce/further selling possibly putting a nail in the coffin of the post-November advance. For now, we’re paring back and tightening stops but still giving most of our winners a chance to hold support and resume their advances.
This week’s list has a surprising number of solid charts given the recent turmoil, though we generally still favor buying on dips or some tightening action. Our Top Pick is PagerDuty (PD), which is refusing to budge.
| Stock Name | Price | ||
|---|---|---|---|
| Affiliated Managers Group, Inc. (AMG) | 114 | ||
| Aphria Inc. (APHA) | 13 | ||
| Axon Enterprise, Inc. (AXON) | 166 | ||
| Marvell Technology Group (MRVL) | 53 | ||
| Matador Resources Company (MTDR) | 16 | ||
| The Michaels Companies (MIK) | 15 | ||
| Novavax, Inc. (NVAX) | 269 | ||
| PagerDuty (PD) | 51 | ||
| Penn National Gaming (PENN) | 104 | ||
| Redfin (RDFN) | 75 |
Affiliated Managers Group, Inc. (AMG)
Why the Strength
Affiliated Managers Group is one of many Bull Market stocks that have changed character for the better in recent months. The company invests in other asset managers, often taking majority stakes in midsize firms, or in some cases smaller stakes in alternative managers. It has over 30 affiliates, including traditional managers Yacktman, Third Avenue, Tweedy Browne and Artemis, plus alternative managers AQR, BlueMountain, Pantheon and Value Act. Managers typically operate independently, but get the advantage of using centralized legal, compliance, and marketing services. Altogether, Affiliated Managers had $751 billion in assets under management (AUM) at the end of Q3 (up nearly 15% from a year ago), with 55% in equities, 37% dedicated to alternative investment strategies and 8% allocated to multi-asset managers—thus, AMG is not as heavily exposed to the impact that passive investing (index funds and ETFs) has had on other active asset managers. As for the stock’s strength, a lot of it has to do with the realization that this bull market is likely to (a) drive asset prices (and revenues) higher, while (b) more investors get into the market (36% of the firm’s EBITDA comes from retail-oriented managers, so there’s lots of leverage there). To be fair, recent results have been poor (earnings likely dipped 10% last year), but the market is all about the future; analysts see the bottom line rebounding 11% in 2021, the stock trades at just 8 times earnings and the company has a history of share buybacks (share count is down 13% over the past two years). The next quarterly report is due out a week from today (February 8).
Technical Analysis
AMG collapsed from 217 in early 2018 to 44 at last March’s bottom, then bounced and consolidated for the next few months. The breakout came in November, and shares entered into a beautiful, persistent advance from there, rallying as high as 120 before meeting with some selling last week. There was a good amount of volume on the dip, so AMG may need some time, but we think further dips would mark a solid risk-reward situation—though if you buy ahead of earnings, it’s best to keep positions small.
| Market Cap | $5.03B | EPS $ Annual (Dec) | |
| Forward P/E | 8 | FY 2018 | 14.50 |
| Current P/E | 8 | FY 2019 | 14.24 |
| Annual Revenue | $2.03B | FY 2020e | 12.88 |
| Profit Margin | 30.7% | FY 2021e | 14.36 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 495 | -10% | 3.27 | 3% |
| One qtr ago | 471 | -20% | 2.74 | -18% |
| Two qtrs ago | 507 | -7% | 3.16 | -3% |
| Three qtrs ago | 556 | -2% | 4.52 | 28% |
AMG Weekly Chart
AMG Daily Chart
Aphria Inc. (APHA)
Why the Strength
One sign of the explosive growth underway in the still-young cannabis industry is the recent mega-merger between two of its biggest players. Aphria (based in Ontario) produces medicinal and recreational cannabis products in Canada and internationally and is a primary distributor of medical cannabis to Germany. Its merger with Canada-based Tilray, once completed, will create the world’s largest marijuana company by revenue, with expected annual sales of $685 million; it’ll be in the lead in adult use in Canada and have a bigger position in Germany’s huge medical marijuana market while Tilray will bring a strong position in many European countries, too. Of course, the big story involves legalization: already legal in Canada, experts see marijuana being either fully legalized across the U.S. (or at least the spread of legalization should continue to grow) over the next two years, with legalization in Mexico looking more likely, too. That will give the combined Aphria a huge opportunity for all sorts of cannabis products, a market estimated to reach $94 billion by 2025. On the news front, Aphria’s subsidiary, CC Pharma, entered into a strategic agreement with AMP German Cannabis Group that will allow for joint marketing sales of Aphria brand medical weed offerings. The company is growing horizontally as well, with a foray into the U.S. craft beer industry via its acquisition of SweetWater Brewing, one of America’s largest craft breweries by volume. The plan is to provide a cross-over audience for both companies, as well as provide CBD- or THC-infused beverages to consumers over time. Aphria’s success in growing revenues was seen in the November quarter, when it reported a consensus-beating 33% increase in the top line (up 10% sequentially) to $161 million; net cannabis revenue rose a whopping 99%. Analysts expect a 34% revenue bump in the current quarter (ending February) and big upside ahead. It’s an exciting story.
Technical Analysis
After peaking at 20 three years ago, APHA slid to a lifetime low of 2 last March, mirroring the long bear phase in the sector. An extended base-building effort followed in the next several months after that low, with shares still in the 4 to 5 area through October. But then came the post-election bump, and after that, the Georgia election buying spree, which catapulted the stock off its 10-week line to new highs near 14 before some recent weakness. Yes, it’s extended, and obviously the market is iffy, but the power here is hard to ignore. We’re OK nibbling here or (preferably) on dips.
| Market Cap | $3.91B | EPS $ Annual (May) | |
| Forward P/E | N/M | FY 2019 | -0.07 |
| Current P/E | N/A | FY 2020 | -0.33 |
| Annual Revenue | $348M | FY 2021e | -0.39 |
| Profit Margin | N/A | FY 2022e | 0.04 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 161 | 33% | -0.42 | N/A |
| One qtr ago | 146 | 16% | -0.02 | N/A |
| Two qtrs ago | 152 | 18% | -0.39 | N/A |
| Three qtrs ago | 144 | 96% | 0.02 | N/A |
APHA Weekly Chart
APHA Daily Chart
Axon Enterprise, Inc. (AXON)
Why the Strength
The story and numbers for Axon Enterprises (note the new ticker symbol AXON) have improved in a big way in recent years, but the trick has been holding onto the stock, which remains choppy and sporadic as institutions haven’t quite embraced it—though we think that’s now changing. The company is one of the main players in law enforcement technology, and the big attraction is that it’s becoming a recurring revenue machine: The firm offers bundles (replacement cartridges, training, etc.) for its Taser electrical weapons, but the bigger attraction is its body, vehicle and interview cameras and Evidence.com, a cloud-based digital management system that allows agencies to upload, share and analyze evidence (video and records, etc.). Axon is the hands-down leader in the field, inking deals with departments around the world (it’s signed new or expanded deals in Sao Paulo, Green Bay, France, Italy and Canada since the start of November), including a series of deals announced on January 15 that saw LA, Fairfax, Suffolk (NY), San Jose and Tucson police departments order a huge amount of new Tasers (more than 9,000), body cameras (more than 1,200) and hundreds of car/fleet/interview cameras, too. Combined with the lingering fears of social unrest and this summer’s scrutiny of police departments, demand should continue to rise, which will in turn boost the firm’s recurring revenue; in Q3, annualized recurring revenue totaled $204 million (up 44% from the year before), while total future contracted revenue was $1.51 billion (up 34%). Fundamentally, there’s a lot to like here, with rapid, reliable growth likely for years to come.
Technical Analysis
AXON was up and down for much of 2019 and 2020, but it looks to be changing character since last summer—shares bounced off their 40-week line in September and popped to 130 in November after earnings. Shares chopped sideways after that for two months (including a shakeout below its 50-day line) but have had a very strong start to the year, with huge-volume buying pushing the stock nicely higher. The pullback last week was very reasonable—further retrenchment would be tempting.
| Market Cap | $10.4B | EPS $ Annual (Dec) | |
| Forward P/E | 124 | FY 2018 | 0.74 |
| Current P/E | 138 | 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% |
AXON Weekly Chart
AXON Daily Chart
Marvell Technology Group (MRVL)
Why the Strength
The accelerating digital transformation of the global economy necessitates that large data loads be moved quickly and efficiently. Marvell, a leader in fabless chip design, specializes in chips and other items that meet these growing needs. The company’s recent acquisition of networking equipment outfit Inphi (the leading provider of high-speed interconnects, especially in and between data centers) has been a key source of the strength, as that buyout is expected to increase Marvell’s cloud leadership and 5G position and boost profit margins. (Indeed, management expects to develop multiple $100 million-plus cloud customers for the combined company.) Third-quarter revenue for Marvell rose 13% from a year ago, led by stronger-than-expected growth from its networking business (which was up 35%), a growth rate that’s expected to keep up as high-end computing demand ramps. In 5G, the company saw a fifth straight quarter of sequential revenue growth as the 5G rollout outside of China picked up steam. Management expects consumer demand for 5G services will continue to grow worldwide, following the launch of new 5G-enabled phones from Apple. Marvell also anticipates its storage business (37% of revenue) will rebound strongly in Q4, with revenues growing in the low teens sequentially, driven by multiple products and cloud storage revenue expansion. Looking ahead, Marvell is focused on the estimated $110 billion opportunity in data infrastructure, as well as on the automotive ethernet market, which it sees as contributing “meaningfully” toward revenue growth in the coming years. Analysts see 2021 earnings up a big 47%.
Technical Analysis
After breaking out from a multi-year base last May, MRVL stair-stepped higher for the next few months. A brief drop below the 50-day line in October proved to be a shakeout and was quickly met with renewed buying interest, with the stock powering into record territory after the calendar flipped. The latest dip looks normal, and we think you could nibble here or on further weakness.
| Market Cap | $34.5B | EPS $ Annual (Jan) | |
| Forward P/E | 38 | FY 2019 | 1.19 |
| Current P/E | 64 | FY 2020 | 0.66 |
| Annual Revenue | $2.89B | FY 2021e | 0.93 |
| Profit Margin | 22.4% | FY 2022e | 1.37 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 750 | 13% | 0.25 | 47% |
| One qtr ago | 727 | 11% | 0.21 | 31% |
| Two qtrs ago | 694 | 5% | 0.18 | 13% |
| Three qtrs ago | 718 | -4% | 0.17 | -32% |
MRVL Weekly Chart
MRVL Daily Chart
Matador Resources Company (MTDR)
Why the Strength
Despite the shenanigans in the market (which often coincide with economic worries), energy stocks (and especially energy prices) have held relatively firm, adding to the evidence that the sector is likely early in a solid turnaround. Matador Resources looks like a potential small-cap (market cap less than $2 billion) leader in that move, thanks mostly to its position in the Delaware Basin (part of the Permian)—the firm does have some acreage and production in the Haynesville (all of it natural gas) and Eagle Ford (mostly oil in south Texas), but 90% of its output is from the Delaware (about 61% oil, the rest gas and liquids). Despite the horrid environment during the past year, Matador has actually been able to expand production (up 5% year-on-year in Q3) while slashing costs (whopping 46% decline in CapEx per barrel of production) and focusing on free cash flow—indeed, even after exploration costs, Matador expects to be free cash flow positive in Q4 and 2021 as a whole. Throw in a pristine balance sheet (tons of liquidity and no debt maturities until 2026) and a very solid collection of acreage (Matador believes it has 1,100 gross locations that would be solidly profitable even at $35 oil and $1.75 natural gas—both well below current prices) and investors see little downside even if prices have a hiccup from here. And if things stay afloat or improve, Matador could quickly ramp production and free cash flow in the quarters to come. Analysts saw earnings for 2021 of 79 cents per share three months ago, but now that estimate has nearly doubled ($1.44 per share) and could still prove conservative if things go well.
Technical Analysis
Like every oil stock, MTDR hit the toboggan slide from mid 2018 through the March crash of last year, and after a sharp post-crash bounce, it sagged for a few months and was hovering in the 6 to 7 area in early November. But it’s been a different animal since, spiking to nearly 14 in December, resting for three weeks, and rallying as high as 17 last week before hitting some turbulence with the market. The action has been volatile, but also resilient; we’re OK starting a position here or on further weakness with a stop just under the 50-day line.
| Market Cap | $1.82B | EPS $ Annual (Dec) | |
| Forward P/E | 11 | FY 2018 | 1.62 |
| Current P/E | 25 | FY 2019 | 1.20 |
| Annual Revenue | $476M | FY 2020e | 0.38 |
| Profit Margin | 5.7% | FY 2021e | 1.44 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 203 | -27% | 0.10 | -69% |
| One qtr ago | 62.9 | -74% | -0.03 | N/A |
| Two qtrs ago | 372 | 114% | 0.20 | 5% |
| Three qtrs ago | 289 | 0% | 0.39 | 5% |
MTDR Weekly Chart
MTDR Daily Chart
The Michaels Companies (MIK)
Why the Strength
Even as U.S. states re-open their economies, the craft-related hobby boom that kicked off during last year’s shutdown persists, a point made clear by Michaels’ latest earnings report (covered in the December 14 report). The arts-and-crafts retailer boasted impressive same-store sales in Q3 along with an eye-opening 128% jump in e-commerce revenue. While states are loosening Covid restrictions, many Americans are still reluctant to travel, eat out at restaurants or stay at hotels, at least compared to a year ago. And that should translate into more spending on hobbies (especially for the kiddos trying to fill in weekend winter time), which Michaels plans to capitalize on in 2021. The company’s top priority is investing in its long-term growth initiatives, which include an optimized pricing and promotions strategy aimed at improving customers’ perception of the value offered by the stores. Michaels also improved its capital structure in Q3, paying down $150 million of debt. Adding even more allure was the recent addition of a former Walmart executive as the firm’s new CEO (whose expertise should help the firm compete against Amazon, et al). Should there be another flare-up of the virus, Michaels is well positioned to benefit from any restrictions after significantly expanding its e-commerce channels, curbside pickup and delivery options last year. On the financial front, sales have picked up each of the past two quarters, and the key holiday quarter continues to see upward revisions to estimates (analysts expect $1.43 per share, up from a $1.30 forecast two months ago), and given that Michaels has trounced these figures of late, results should please when reported in the weeks ahead.
Technical Analysis
The latest phase of MIK’s turnaround commenced in November, when the stock pulled out of a two-month funk that had brought the stock back under 8. The initial pop to 13 was powerful, with shares bolting as high as 18 two weeks ago on heavy volume. Not surprisingly, there was a little churning last week with the market’s shenanigans, but MIK has thus far held up well; with the 50-day line at 13, we think nibbling on further dips is a solid risk-reward situation.
| Market Cap | $2.31B | EPS $ Annual (Jan) | |
| Forward P/E | 7 | FY 2019 | 2.35 |
| Current P/E | 10 | FY 2020 | 2.11 |
| Annual Revenue | $5.08B | FY 2021e | 2.17 |
| Profit Margin | 9.2% | FY 2022e | 2.30 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($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
Novavax, Inc. (NVAX)
Why the Strength
Novavax is a clinical-stage biotechnology company, focused on the development of vaccines to prevent infectious diseases, with candidates to respond to both known and emerging disease threats by using its proprietary recombinant nanoparticle vaccine technology. Novavax received a big boost last week when its COVID-19 vaccine was shown to be 89% effective against the disease in a Phase III trial in the U.K.; Novavax will now submit its data to regulators the world over. The U.K. and E.U. are expected to rule soon with the U.K. ordering 60 million doses of the company’s vaccine in advance, while the E.U. is in talks to buy 100 million doses, with an option for 100 million more! The company has already struck deals to produce the vaccine in the U.K., Germany and the Czech Republic. Novavax CEO Stan Erck said it would ramp capacity to eventually produce two billion doses a year — and one billion doses as soon as this year. Although its Covid treatment is driving the stock’s strength, the firm has other leading vaccine candidates including ResVax and NanoFlu. RexVax is a vaccine candidate that is in Phase III clinical trials to protect infants from RSV disease, while NanoFlu is also in Phase III clinical trials to treat seasonal influenza in older adults. Driven by the vaccine, analysts see 2021 as a ridiculous boom year (earnings north of $16 per share!), though a lot will come down to how sustainable business is once the initial vaccine sales wear off. Right now, though, there’s no question the wind is at the firm’s back.
Technical Analysis
NVAX was a giant winner early last year (we had it in Top Ten for a chunk of that run), but it topped near 200 and entered into a multi-month consolidation. Impressively, the stock bounced in November and tightened up nicely for much of December and January. Last week’s blastoff (partly due to J&J’s so-so vaccine trial results) was dramatic and likely kicked off a new advance. That said, we wouldn’t chase it here; if you want in, aim for dips.
| Market Cap | $14.0B | EPS $ Annual (Dec) | |
| Forward P/E | 12 | FY 2018 | -9.99 |
| Current P/E | N/A | FY 2019 | -5.88 |
| Annual Revenue | $205M | FY 2020e | -4.98 |
| Profit Margin | N/A | FY 2021e | 17.64 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 157 | 999% | -3.21 | N/A |
| One qtr ago | 35.5 | 958% | -0.30 | N/A |
| Two qtrs ago | 3.4 | -15% | -0.58 | N/A |
| Three qtrs ago | 8.8 | 44% | -1.13 | N/A |
NVAX Weekly Chart
NVAX Daily Chart
PagerDuty (PD)
Why the Strength
E-commerce has never been more critical, which means incident response is a high priority for IT departments—snafus such as app failures or website crashes can turn into major problems, costing large retail companies as much as half a million dollars a minute, and (possibly worse) that doesn’t include lost customer goodwill. PagerDuty’s cloud subscription platform addresses such problems by helping enterprises monitor their online assets in order to spot problems and fix them before they impact their customers. PagerDuty’s software also automates the diagnosis of and resolution of such problems, while using predictive machine learning to help customers become more proactive in preventing future flare-ups. The firm’s latest strength was sparked by a stellar Q3 report in which PagerDuty topped expectations and saw its revenue jump 26% from a year ago, to $54 million. The company expanded its customer count by almost 400 in the quarter (bringing the total to 13,725), while same-customer revenue growth of 20% was very solid. (Big customers were even more active, with the company registering a 40% hike in customers with revenue north of $500,000.) Management anticipates Q4 (which ended January 31) revenue of $57.5 million (up 25% at the midpoint), which is likely conservative; meanwhile, analysts predict the recent top-line growth trend of around 22% to 25% will continue for the next several quarters. Beyond near-term trends, PagerDuty believes it’s benefiting from many secular tailwinds, including cloud migration, digital acceleration and global embracement of e-commerce, which it sees persisting for a long time to come. With a total market estimated at $100 billion, the company should have lots of upside if the top brass continues to pull the right levers.
Technical Analysis
From 60 in mid 2019 to 12 last March, PD had a long decline that knocked all the weak hands out. The initial rebound was solid (back to 32 in June), but then there was a buyer’s strike for five months, with shares chopping sideways into late November. Then came the liftoff, which was part of a stretch of eight weeks up in a row (and 11 of 12), and PD has barely hesitated despite the iffy market action. We’re OK nibbling on dips of a couple of points with a stop in the low 40s.
| Market Cap | $3.92B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2019 | -0.21 |
| Current P/E | N/A | FY 2020 | -0.30 |
| Annual Revenue | $200M | FY 2021e | -0.29 |
| Profit Margin | N/A | FY 2022e | -0.21 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($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
Penn National Gaming (PENN)
Why the Strength
Online gambling (both sportsbooks and casino-type gambling) made big strides last year, and now half of all U.S. states have made sports wagering legal (including three states in November). And with many states suffering tax revenue shortfalls in the pandemic’s wake, the pressure is on for even more states to legalize sports betting to gain revenues from this $200 billion market. Penn (last covered in the October 12 report) is positioned to be a frontrunner in the gambling industry via a multi-channel approach—it owns several casinos and racetracks and has the largest number of gambling licenses in the U.S., but the real excitement surrounds its big investment in Barstool sports (and, now, its accompanying online gambling app), presenting a ton of cross-selling opportunities (62% of Barstool readers gamble on sports, and many of Penn’s in-casino bettors would love the opportunity to do the same online). Thus, Penn is both a re-opening and a pure growth play: Analysts are predicting a 36% revenue spike this year as customers come back to the casino, and Penn plans to use the first half of this year to further push its leadership role, with a particular focus on the iGaming and online sportsbook space. Penn’s capital raise of nearly $1 billion in September (which allowed it to pay down $670 million in debt) increased its cash balance to $2 billion and provides it with plenty of liquidity to pursue growth. Moreover, the company plans to roll out several new interactive products and expansion initiatives this year (its latest acquisition was the Hollywood Casino Perryville in Maryland). All told, Penn appears to be on track for a solid rebound in 2021. Earnings are due out on Thursday (February 4).
Technical Analysis
PENN broke out of a deep, crash-induced base in early August and has had a couple of good runs since then—one from 40 to 75 by mid September, and then another from 75 to 110 more recently. We’re impressed with PENN’s resilience of late, as it’s refused to close below its 25-day line, which is a great sign, though with earnings this week, we’d either keep new positions small or preferably look for a pre- or post-earnings shakeout to start a position.
| Market Cap | $16.2B | EPS $ Annual (Dec) | |
| Forward P/E | 68 | FY 2018 | 0.93 |
| Current P/E | N/A | FY 2019 | 0.37 |
| Annual Revenue | $3.90B | FY 2020e | -4.86 |
| Profit Margin | 12.5% | FY 2021e | 1.52 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.13 | -17% | 0.93 | 145% |
| One qtr ago | 0.31 | -77% | -1.69 | N/A |
| Two qtrs ago | 1.12 | -13% | -5.26 | N/A |
| Three qtrs ago | 1.34 | 16% | -0.80 | N/A |
PENN Weekly Chart
PENN Daily Chart
Redfin (RDFN)
Why the Strength
A few economic worries have popped up on the horizon, but one of the stronger areas of the economy remains housing: New home sales in December were up 15%, prices were up a huge 10% and housing permits (more of a leading indicator) were up 17% in December. And Redfin—one of the largest real estate websites and a nationwide brokerage firm that’s upending the industry—is seeing similarly strong trends, including the fact that 55% of pending sales it tracks were under contract within two weeks (up from 44% a year ago)! Obviously, the industry backdrop is key here, which bolsters Redfin’s brokerage business; thanks to a lower price (1% lower commission at least) and a technology-driven model that delivers faster and higher-priced sales than the competition, the firm has been gaining share, accounting for 1.04% of existing home sales by value in Q3, up from 0.96% a year ago and 0.85% two years ago. And there’s a lot of hope for Redfin’s homebuying and selling business (RedfinNow), which just launched in Phoenix, is up and running in all major metro areas of California and is operational in Seattle and various parts of Texas, too. Long-term, this business (very similar to Zillow’s) should be profitable, lead to ancillary revenue (mortgages, etc.) and improve the bottom line as prices head higher. If the housing market really hits a pothole (possibly if mortgage rates really perk up), that would hurt, but there are likely bigger factors at work this time around as people are rethinking their living situations (bigger spaces, farther from cities, etc.) in the wake of the pandemic and other factors. While total revenues were down 1% in Q3, that was mostly because of the temporary shutdown of RedfinNow (real estate services gross profit up 70%!); analysts see the top line rising 45% this year, which we believe will prove conservative.
Technical Analysis
RDFN can have some big swings up and down, including its latest, market-induced wobble, which yanked the stock from nearly 85 to 71 in just a few days. Still, we think there’s potential here—the stock remained a few points north of its 50-day line after last week, and the humongous buying volume cluster in December (when RDFN rose 14 days in a row!) suggests there should be some support on further weakness. Sure, if the market implodes, all bets are off, but we think nibbling here with a stop in the low 60s is a solid risk-reward situation.
| Market Cap | $7.27B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.49 |
| Current P/E | N/A | FY 2019 | -0.88 |
| Annual Revenue | $875M | FY 2020e | -0.35 |
| Profit Margin | 14.4% | FY 2021e | -0.05 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 237 | -1% | 0.32 | N/A |
| One qtr ago | 214 | 8% | -0.02 | N/A |
| Two qtrs ago | 191 | 73% | -0.64 | N/A |
| Three qtrs ago | 233 | 88% | -0.08 | N/A |
RDFN Weekly Chart
RDFN 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 | |||||
| 1/25/21 | 10x Genomics | TXG | 175-185 | 177 | |
| 1/4/21 | AGCO Corp | AGCO | 99-103 | 115 | |
| 10/26/20 | Align Technology | ALGN | ? | 420-440 | 543 |
| 12/7/20 | Applied Materials | AMAT | ? | 85-90 | 101 |
| 11/16/20 | Canopy Growth | CGC | 23.5-25 | 40 | |
| 1/19/21 | Cimarex Energy | XEC | 44.5-47.5 | 44 | |
| 1/25/21 | Cleveland-Cliffs | CLF | ? | 15.4-16.4 | 16 |
| 11/2/20 | Cloudflare | NET | 49-52 | 80 | |
| 1/25/21 | Cronos | CRON | 9.5-10.2 | 10 | |
| 1/4/21 | CrowdStrike | CRWD | 194-202 | 215 | |
| 1/19/21 | Enterprise Pdct Ptnrs | EPD | 22-23.5 | 21 | |
| 1/19/21 | Farfetch | FTCH | 56-58.5 | 59 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 173 | |
| 12/21/20 | Floor & Décor | FND | 95-98 | 94 | |
| 10/26/20 | General Motors | GM | 34-36 | 52 | |
| 1/25/21 | Goldman Sachs | GS | 276-284 | 275 | |
| 10/26/20 | GrowGeneration | GRWG | 16.5-18 | 46 | |
| 1/19/21 | Guardant Health | GH | 152-162 | 155 | |
| 11/23/20 | Halozyme | HALO | ? | 38.5-41 | 48 |
| 1/4/21 | Inari Medical | NARI | 81-85 | 98 | |
| 1/25/21 | Inseego Corp. | INSG | 18.5-20 | 19 | |
| 1/11/21 | LPL Financial | LPLA | 108-112 | 111 | |
| 11/16/20 | Marvell Tech | MRVL | 41.5-43.5 | 53 | |
| 12/14/20 | Michaels Co. | MIK | 10.9-11.8 | 15 | |
| 1/4/21 | MongoDB | MDB | 342-352 | 375 | |
| 1/11/21 | Mosaic | MOS | 25-27 | 27 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 162 |
| 1/25/21 | One Medical (1Life) | ONEM | 48.5-50.5 | 54 | |
| 12/14/20 | PagerDuty | PD | 41.5-43.5 | 51 | |
| 1/11/21 | Palo Alto Networks | PANW | 345-360 | 361 | |
| 12/21/20 | PayPal | PYPL | 232-238 | 243 | |
| 1/25/21 | Peloton | PTON | 152-159 | 147 | |
| 12/7/20 | Pinduoduo | PDD | 140-147 | 174 | |
| 8/3/20 | PINS | 33.5-37 | 71 | ||
| 8/3/20 | Qualcomm | QCOM | 106-110 | 162 | |
| 12/21/20 | Redfin | RDFN | 72-75.5 | 76 | |
| 7/13/20 | Roku | ROKU | 147-154 | 416 | |
| 1/25/21 | Schrodinger | SDGR | 88-92 | 92 | |
| 1/19/21 | Shake Shack | SHAK | 106-110 | 112 | |
| 1/25/21 | Shopify | SHOP | 1170-1220 | 1145 | |
| 11/16/20 | Snap | SNAP | 37.5-39.5 | 57 | |
| 11/23/20 | Sonos | SONO | 20.5-22 | 27 | |
| 1/11/21 | Spotify | SPOT | 335-347 | 333 | |
| 12/7/20 | Tapestry | TPR | 27-28.5 | 32 | |
| 1/19/21 | TG Therapeutics | TGTX | 46.5-49.5 | 48 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 372 | |
| 11/9/20 | Uber | UBER | 45-47.5 | 53 | |
| 1/25/21 | Unity Software | U | 148-153 | 153 | |
| 1/19/21 | Upwork | UPWK | 37.5-40 | 45 | |
| 1/11/21 | Vale S.A. | VALE | 17.4-18.2 | 17 | |
| 12/21/20 | Wesco | WCC | 72-75.5 | 81 | |
| 12/7/20 | Zscaler | ZS | 174-180 | 204 | |
| WAIT | |||||
| None this week | |||||
| SELL RECOMMENDATIONS | |||||
| 12/14/20 | Adient | ADNT | 32.5-34.5 | 34 | |
| 11/16/20 | Albemarle | ALB | 121-126 | 167 | |
| 1/4/21 | Arvinas | ARVN | 74-78 | 77 | |
| 1/4/21 | Bill.com | BILL | 133-138 | 131 | |
| 1/4/21 | BridgeBio | BBIO | 61-64 | 57 | |
| 12/21/20 | Elastic | ESTC | 147-153 | 152 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 28 | |
| 12/21/20 | Kodiak Sciences | KOD | 136-142 | 132 | |
| 11/16/20 | Lam Research | LRCX | ? | 415-435 | 501 |
| 12/7/20 | Qorvo | QRVO | 158-163 | 183 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 73 |
| 1/11/21 | Sunrun | RUN | 87-91 | 70 | |
| 11/16/20 | Timken | TKR | 69-72 | 79 | |
| 12/7/20 | U.S. Steel | X | 15.3-16.3 | 18 | |
| 11/9/20 | Zillow | Z | 100-105 | 137 | |
| DROPPED | |||||
| None this week | |||||
The next Cabot Top Ten Trader issue will be published on February 8, 2021.