Some Churning, but Pullback Normal So Far
Current Market Outlook
Sellers finally landed a few punches last week, with many tech-related growth stocks finding resistance and the big-cap indexes losing a little ground. Given the big run of late, lots of speculation and signs of greed, we have our antennae up for abnormal weakness—but so far, there hasn’t been much (if any), with the pullbacks in the indexes and individual stocks appearing normal and other timing indicators (number of new lows, etc.) looking fine. In fact, some solid entry points could appear with a bit more weakness! We are seeing continuing rotation into more cyclical areas and out of some growth names, but the trends of just about all indexes and leaders are up, so we remain mostly bullish.
This week’s list has stocks from many different nooks and crannies of the market. Our Top Pick is Guardant Health (GH), from the strong medical area, as it’s come under major accumulation this year. It’s a bit extended so start small and/or aim for dips.
| Stock Name | Price | ||
|---|---|---|---|
| Cimarex Energy (XEC) | 49.1 | ||
| Enterprise Products Partners L.P. (EPD) | 23.3 | ||
| Farfetch (FTCH) | 58.8 | ||
| Guardant Health (GH) | 160.0 | ||
| Halozyme Therapeutics (HALO) | 48.3 | ||
| Shake Shack (SHAK) | 111.7 | ||
| Sonos (SONO) | 27.0 | ||
| TG Therapeutics, Inc. (TGTX) | 50.2 | ||
| The Timken Company (TKR) | 85.0 | ||
| Upwork (UPWK) | 40.7 |
Cimarex Energy (XEC)
Why the Strength
Talk about back from the dead! The energy sector is enjoying a stunning reversal of fortune with crude oil prices rallying 40% since the beginning of November to above $50 a barrel in recent weeks. Domestic energy explorers like Cimarex are riding that wave as investors see a turnaround after years in the doghouse. Denver-based Cimarex is one of the largest independent oil & gas producers in the mid-continental U.S. and the Permian Basin; the company’s 2019 production was split 59% oil and natural gas liquids (NGLs) and 41% natural gas. Nearly 70% of the company’s total production was generated in the prolific Permian Basin, a cornerstone for U.S. domestic energy production. Obviously, the numbers have been a horror show in recent quarters as the pandemic has crushed pricing, but there are more than a few positives here—while production was still fading in Q3, cash costs continue to decline (down 13% from 2018), and that means that even after a solid dividend (1.8% yield, and the dividend was raised this year!), Cimarex is free cash flow positive, with plenty of room to invest, boost production as needed and pay off debt besides. Also, sales and earnings, while down huge from a year ago, were up big from the Q2 trough. The firm’s solid financial positioning should lead to a great 2021, with analysts expecting the bottom line to rebound back to 2019 levels this year (over $4 per share) while the dividend likely gets hiked again. All told, it’s a solid turnaround story, and we like that the company could easily ramp production if energy prices continue to rise.
Technical Analysis
XEC crashed as low as 12 last March and quickly rebounded to 34, but that started a multi-month base-building effort that took shares as low as 23. Then came the election/vaccine news in early November, and the buyers stepped in, with shares popping above their 40-week line and rallying to 40 within a few weeks. A modest three-week dip to the 10-week line at year-end quickly led to another strong bounce. We wouldn’t chase XEC here, but we’re not expecting a major retreat, either.
| Market Cap | $4.94B | EPS $ Annual (Dec) | |
| Forward P/E | 12 | FY 2018 | 7.54 |
| Current P/E | 28 | FY 2019 | 4.22 |
| Annual Revenue | $1.78B | FY 2020e | 1.22 |
| Profit Margin | 13.0% | FY 2021e | 4.07 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 402 | -31% | 0.51 | -46% |
| One qtr ago | 249 | -54% | -0.51 | N/A |
| Two qtrs ago | 473 | -18% | 0.58 | -52% |
| Three qtrs ago | 657 | 5% | 1.18 | -41% |
XEC Weekly Chart
XEC Daily Chart
Enterprise Products Partners L.P. (EPD)
Why the Strength
As mentioned in the Cimarex write-up, energy stocks are in the midst of a big recovery, and Enterprise Products Partners looks like another one of the leaders of the move. Headquartered in Houston, the firm is a leading midstream (pipeline) energy partnership (heads up: It will provide a K-1 at tax time) that provides services to energy producers and consumers of natural gas, crude oil, natural gas liquids (NGLs) and other refined products. Think of Enterprise Partners as owning a “toll road” over which oil and gas flows through a large swath of the central and southwest U.S.; it’s one of the most dominant energy infrastructure companies in America with best-in-class pipeline and storage assets at nearly every point in the U.S. energy production and distribution network. The partnership’s NGL Pipelines offers natural gas processing and marketing through 19,900 miles of pipelines, 22 processing facilities, and liquefied petroleum gas and ethane export terminals, while its crude oil division operates 5,300 miles of pipelines and has oil storage and marine terminals located in Oklahoma, New Mexico, and Texas, as well as a fleet of 310 tractor-trailer tank trucks used to transport crude oil. Financially, because a lot of Enterprise’s business is take-or-pay, it really hasn’t been hurt much by energy price declines, as distributable cash flow was actually up a smidge in Q3, allowing it to keep debt in check and hold the line on its substantial dividend (yield of 7.8%). And investors are thinking better times are ahead as explorers begin to ramp production now that prices are rising.
Technical Analysis
Long-term, EPD isn’t going to go to the moon, but right now the stock appears to be in the early stages of a major turnaround after a 75% top-to-bottom decline from 2014 to last March. Like many cyclical names, this name did bounce nicely after its nadir, but spent a few months base-building and is now moving on the upside, back above its 40-week line and showing strong-volume accumulation. We think it’s buyable here or on dips of a point or so.
| Market Cap | $50.3B | EPS $ Annual (Dec) | |
| Forward P/E | 12 | FY 2018 | 1.89 |
| Current P/E | 11 | FY 2019 | 2.15 |
| Annual Revenue | $28.2B | FY 2020e | 2.07 |
| Profit Margin | 6.3% | FY 2021e | 1.95 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 6.92 | -13% | 0.51 | -2% |
| One qtr ago | 5.75 | -31% | 0.48 | -13% |
| Two qtrs ago | 7.48 | -12% | 0.53 | -7% |
| Three qtrs ago | 8.01 | -13% | 0.51 | 4% |
EPD Weekly Chart
EPD Daily Chart
Farfetch (FTCH)
Why the Strength
Worldwide fashion industry sales likely fell more than one-third in 2020, amounting to $640 billion in lost revenue. But fashion and other luxury sellers that quickly adjusted to the pandemic by expanding their online sales channels flourished. That’s the big-picture story with Farfetch, which is a new market leader thanks to having the top online marketplace for luxury fashion, featuring products from over 700 global boutiques. The company had a great end to 2020 after entering a partnership with Alibaba (China is the biggest driver of luxury sales) and its partner, Swiss luxury goods seller Richemont. Under the terms of the agreement, Farfetch will enjoy an e-commerce presence on Alibaba’s Tmall luxury platforms, Luxury Pavilion and Luxury Soho, while Alibaba and Richemont will invest $1 billion to get a 25% stake in Farfetch’s China operations. The deal ensures Farfetch’s leadership status as an online luxury platform, and that means big investors are expecting great results going forward. In Q3 the firm’s top line was a healthy $438 million (up 71%), while gross merchandise volume (GMV) surged 62% in an otherwise weak environment for apparel retailers. Farfetch also added 400,000 new customers in the quarter and achieved its highest digital platform GMV growth in 10 years! Management believes that a “paradigm shift” in the way shoppers buy luxury is taking place, and that the firm is positioned to capture the tidal wave of online demand that kicked off due to the pandemic (a survey of its newer customers found that 45% will increase online shopping now that they’re used to it). Wall Street sees revenues up in the 40% range each of the next three quarters as losses narrow, but there’s a good chance these figures will prove conservative. All told, we think there’s a long runway of growth here.
Technical Analysis
FTCH broke out from both a good-looking 10-week base and a huge 25-month post-IPO base in early November and went on a jaw-dropping run both price-wise (doubling in eight weeks) and volume-wise (the advance kicked off with four massive-volume buying weeks). Now FTCH has pulled back for three-plus weeks on low volume to its 10-week line, the first test of that support area—these pullbacks usually prove buyable, though use a loose stop in case the market jerks the stock around.
| Market Cap | $19.7B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.52 |
| Current P/E | N/A | FY 2019 | -0.55 |
| Annual Revenue | $1.52B | FY 2020e | -1.00 |
| Profit Margin | N/A | FY 2021e | -0.72 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 438 | 74% | -0.17 | N/A |
| One qtr ago | 365 | 90% | -0.20 | N/A |
| Two qtrs ago | 331 | 95% | -0.24 | N/A |
| Three qtrs ago | 382 | 90% | -0.08 | N/A |
FTCH Weekly Chart
FTCH Daily Chart
Guardant Health (GH)
Why the Strength
Within the field of cancer detection, liquid biopsies are gaining popularity as they present a less expensive, non-invasive, quicker and (most important) increasingly accurate approach to tumor molecular profiling compared with traditional cancer screening techniques. Guardant (covered in the September 14 issue) develops proprietary blood tests for a range of diseases and uses data sets and advanced analytics in the fight against cancer. The company’s Guardant360 CDx recently became the first liquid biopsy system granted FDA approval for comprehensive tumor mutation profiling on all types of solid tumors. Its liquid biopsy offering was also approved as a companion diagnostic to identify non-small-cell lung cancer patients who may benefit from AstraZeneca’s Tagrisso drug. The company isn’t resting on its laurels, however—it’s presently evaluating target cancer recurrence monitoring and early stage cancer detection for its Lunar-1 and Lunar-2 blood tests (whose combined U.S. market is more than $45 billion). Among them is the 10,000-patient ECLIPSE trial (one of the largest cancer screening studies of its kind) to evaluate the performance of Lunar-2 to detect colorectal cancer in average-risk adults. The big idea here is that Guardant is one of the leaders in this field and, as liquid biopsies not only replace tissue biopsies but are increasingly used for follow-up and check-up screening, the upside in the years ahead is gigantic. Even with pandemic headwinds, revenues have increased 23% each of the past two quarters, and that figure should accelerate into the mid 30s later this year. Liquidity is also plentiful after the firm’s $1 billion capital raise through a private offering of convertible senior notes, which it plans to use in pursuing the sizable opportunities it sees ahead.
Technical Analysis
GH has technically been rallying since early August, but to us, the change in character occurred in late October, when the buying became more persistent (the stock is up 11 of its last 13 weeks). Even better, the relative performance line (not shown) has finally leapt to a new high this year, surpassing its prior peak in June 2019. We like the accelerating power here—you can nibble here or (preferably) on dips.
| Market Cap | $15.7B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.00 |
| Current P/E | N/A | FY 2019 | -0.84 |
| Annual Revenue | $258M | FY 2020e | -2.20 |
| Profit Margin | N/A | FY 2021e | -1.62 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 74.6 | 23% | -0.78 | N/A |
| One qtr ago | 66.3 | 23% | -0.57 | N/A |
| Two qtrs ago | 67.5 | 84% | -0.29 | N/A |
| Three qtrs ago | 62.9 | 91% | -0.27 | N/A |
GH Weekly Chart
GH Daily Chart
Halozyme Therapeutics (HALO)
Why the Strength
While many tech-related stocks have begun to struggle during the past couple of weeks, the medical area has stayed strong, and one of our favorite ideas in that space remains Halozyme. The company’s claim to fame is its Enhanze technology, which looks like a big deal when it comes to drug delivery—Enhanze breaks down some cellular barriers in the skin that normally prevent bulk fluid flow, allowing for safe, increased absorption and dispersion of large amounts of therapeutics, resulting in quicker treatment time (minutes vs. hours), meaning the injection can be given in less-intensive settings and present less of a cost/time burden on doctors and patients. Many firms (AbbVie, Takeda, Roche, Phizer, J&J, Lilly and others) have licensed Enhanze (the “new,” high flow version of these drugs/combo of drugs still has to go through trials to show they’re safe), and those deals include upfront payments, milestone payments as regulatory goals are met, and eventually, royalties on sales of the newer, Enhanze-enabled drugs. Indeed, global sales of drugs that have licensed Enhanze totaled $18 billion last year, and Halozyme is forecasting a 40% annual growth in royalties (100% in 2021 thanks to ramps in J&J and Roche drugs that have hit the market) through 2027 assuming all goes well, and it also believes it will collect $425 million in milestone payments from 2021 through 2023. Thus, this is no speculative biotech: Halozyme is growing nicely, earnings should leap more than 80% this year and the firm is actually buying back its own stock ($125 million likely in 2021). We think it’s a big idea.
Technical Analysis
Better yet, HALO looks like it’s early in its overall run. Like many medical and biotech titles, shares made no net progress from 2015 through much of last year, but now the stock is freewheeling. The big breakout came in November, and it proceeded to crawl higher over the next few weeks, holding its 25-day line most of the time. After a quick shakeout last week, HALO popped to new highs on decent (not amazing) volume, a clear sign the buyers remain active. We’re OK starting small here or looking for dips of a couple of points.
| Market Cap | $6.40B | EPS $ Annual (Dec) | |
| Forward P/E | 28 | FY 2018 | -0.56 |
| Current P/E | 294 | FY 2019 | -0.50 |
| Annual Revenue | $200M | FY 2020e | 0.93 |
| Profit Margin | 55.4% | FY 2021e | 1.68 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 65.3 | 41% | 0.25 | N/A |
| One qtr ago | 55.2 | 41% | 0.19 | N/A |
| Two qtrs ago | 25.4 | -55% | -0.04 | N/A |
| Three qtrs ago | 53.7 | -11% | -0.24 | N/A |
HALO Weekly Chart
HALO Daily Chart
Shake Shack (SHAK)
Why the Strength
We’re always on the lookout for great cookie-cutter stories—firms that can grow simply by expanding their number of locations, be they stores, restaurants, warehouses, etc.—and Shake Shack seems to have one. Granted, the firm’s history hasn’t been perfect (we’ll get to that in a second), but it’s taken a simple concept and developed a very loyal following: Shake Shack is effectively a modern day roadside burger joint, with premium (no hormones or antibiotics, 100% angus beef) burgers, hot dogs, chicken sandwiches, fries, shakes and the like. Like most restaurants, business has been a rough for a few months because of virus-related restrictions, but also like most, things have been slowly improving since last spring (sales in December down just 1% from a year ago; same-store sales at suburban locations were back to flat in Q4), thanks in part to digital sales (Q4 online sales tripled from a year ago and made up 59% of revenue), and there should be a big inflection in 2021 (analysts see sales up 41%). As for the cookie cutter aspect of the story, Shake Shack has both company-operated and licensed (which are usually overseas) locations (about 310 in total as of year-end) and sees a ton of new openings both this year and next (55 this year and 70 in 2022, mostly company-operated) in the U.S. and internationally! The bugaboo here has always been same-store sales; as opposed to other great retailers, they’ve generally been sluggish over time, which has led to choppy profit growth and a hesitancy of big investors to really get on board (“only” 344 funds owned shares at year-end). The question is whether that changes (a) post pandemic, as demand surges back to normal, and (b) thanks to the firm’s new, popular digital ordering platform that could easily bring in a lot of new customers. Right now, Wall Street is optimistic the results will surprise on the upside.
Technical Analysis
SHAK has had a history of multi-month uptrends followed by equally large and long downtrends during the past few years. But there’s a good chance the stock has changed character—not only has it been pushing higher during the past nine months, but it’s done so relatively persistently, with support near its 10-week line supporting shares along the way. And last week, SHAK boomed on big volume after its Q4 update and 2021 store opening plan. We’re game for taking a swing at it on a pullback.
| Market Cap | $4.60B | EPS $ Annual (Dec) | |
| Forward P/E | 528 | FY 2018 | 0.71 |
| Current P/E | N/A | FY 2019 | 0.72 |
| Annual Revenue | $516M | FY 2020e | -0.67 |
| Profit Margin | N/A | FY 2021e | 0.21 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 130 | -17% | -0.11 | N/A |
| One qtr ago | 91.8 | -40% | -0.45 | N/A |
| Two qtrs ago | 143 | 8% | 0.02 | -85% |
| Three qtrs ago | 151 | 22% | 0.06 | 0% |
SHAK Weekly Chart
SHAK Daily Chart
Sonos (SONO)
Why the Strength
If you have a home theater (or just a really nice TV room setup), you’re probably familiar with Sonos, which makes some of the highest quality (and highest priced) speaker systems out there, giving it the top share in the industry. While producing the clearest, crispest sound possible is important, there’s a lot more to the story than that; the firm’s home audio products play into the smart home movement (the company calls it Whole House Audio), where users can stream audio from any device to a variety of speakers or zones in the house so you’re hearing what you want no matter where you are in your abode. It also has a subscription offering for its HD radio, with some exclusive content and no ads. Together, this means that Sonos isn’t just a one-off seller of speakers—instead, it has some recurring-type revenue as users continually expand the number of Sonos products they have (35% to 40% of items sold are to existing customers). And attracting new users has never been a problem, as 2020 marked the 15th straight year that the number of homes with Sonos items grew at least 20%! The outlook is bright, too, punctuated by a multi-year agreement with Legrand, a big (~$8 billion in revenue) French outfit that will pay fees to Sonos after licensing its patents. All told, it’s not changing the world, but this company is doing good business and should grow nicely in 2021 and beyond—analysts see the bottom line rising 25% this year, bolstered in part by a solid share buyback program.
Technical Analysis
SONO came public in late 2018 and immediately hit the skids, eventually hitting a lifetime low near 7 during the March crash. The rebound from that low was solid, with the stock eventually building a good-looking base from August through mid November. The Q3 report was the game changer, with a gap to new highs on 10x average volume, and while SONO hasn’t been straight up since then, it’s made solid progress. We’re OK nibbling on dips.
| Market Cap | $2.98B | EPS $ Annual (Sep) | |
| Forward P/E | 31 | FY 2019 | -0.05 |
| Current P/E | N/A | FY 2020 | -0.18 |
| Annual Revenue | $1.33B | FY 2021e | 0.68 |
| Profit Margin | 5.4% | FY 2022e | 0.85 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 340 | 16% | 0.15 | N/A |
| One qtr ago | 249 | -4% | -0.52 | N/A |
| Two qtrs ago | 175 | -17% | -0.48 | N/A |
| Three qtrs ago | 562 | 13% | 0.60 | 9% |
SONO Weekly Chart
SONO Daily Chart
TG Therapeutics, Inc. (TGTX)
Why the Strength
With an estimated one million American adults afflicted with multiple sclerosis (MS), finding new treatments is a top priority for drug makers. TG Therapeutics, which specializes in targeted and immune therapies that bypass toxic chemotherapy in cancer patients, is focusing more of its efforts on discovering ways to effectively treat MS. In fact, the main source of the stock’s latest strength was recently announced positive results from two Phase III studies. The studies evaluated the company’s ublituximab drug, comparing it with teriflunomide (an oral MS treatment made by Sanofi) in patients with relapsing forms of MS. Both studies met their primary endpoint, with ublituximab demonstrating a statistically significant reduction in annualized relapse rate over a 96-week period of 50% or more over teriflunomide. Another source of strength was the news of a promising Phase III study data for ublituximab to treat chronic lymphocytic leukemia—based on the positive results, TG has requested FDA approval for the combination of ublituximab and the experimental drug umbralisib. (The company expects to complete the submission in the first half of 2021.) And, nearer term, the firm is looking for approval of umbralisib (two different indications, one mid February and the other mid June) for certain lymphomas. On the financial front, TG hasn’t had much to talk about (no sales, never mind earnings), but that looks set to change as TG storms out of the development stage: Analysts see revenues of $41 million this year and a huge pickup in the years to follow as these drugs hit the market.
Technical Analysis
The strength behind TGTX since the turnaround last March has been excellent, including multi-year highs reached in May, which was an early clue to its leadership. Since then, it’s made great progress, though it’s been more of a stair-step advance with many rests along the way. The December blastoff was fantastic, with two huge-volume weeks driving prices higher, and the latest hesitation looks very reasonable. Further dips would be tempting.
| Market Cap | $6.90B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -2.30 |
| Current P/E | N/A | FY 2019 | -1.96 |
| Annual Revenue | N/M | FY 2020e | -2.21 |
| Profit Margin | N/A | FY 2021e | -2.04 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | N/M | N/M | -0.47 | N/M |
| One qtr ago | N/M | N/M | -0.48 | N/M |
| Two qtrs ago | N/M | N/M | -0.44 | N/M |
| Three qtrs ago | N/M | N/M | -0.69 | N/M |
TGTX Weekly Chart
TGTX Daily Chart
The Timken Company (TKR)
Why the Strength
Expectations of an economic turnaround this year (despite some recent weakness, core leading economic indicators remain very strong) have boosted prospects for companies that serve a wide array of critical industries. A case in point is Timken, a leading U.S. manufacturer of ball bearings and mechanical power transmission components such as gear drives, belts, chains and lubrication systems used in the mining, construction and agriculture industries, as well as in trucking, rail equipment and aircraft. Investors have taken note of Timken in part due to its acquisitions in several markets. Last month, Timken acquired the assets of Aurora Bearing, which makes rod ends and spherical plain bearings for the aerospace, racing and packaging industries; Aurora’s 2020 sales are expected to be around $30 million and it will augment Timken’s global leadership position in engineered bearings. Also expected to boost sales is Timken’s recent foray into the renewable energy market via its bearings and lubrication for wind and solar systems; it just announced more than $75 million in capital investments through early 2022 to increase its renewable footprint. Management believes revenues from this market alone will account for around 12% of total sales for 2020 and could become the firm’s largest market down the road. Also driving strength is Timken’s efforts to reduce costs, increase liquidity and improve cash flow. (Management projects that its cost reduction actions will generate around $55 to $60 million in year-over-year savings for 2020, while total liquidity is over $900 million.) Looking ahead, analysts expect 2021 top- and bottom-line growth of 7% and 16%, respectively (both are probably low), and a steady dividend (current yield 1.4%) rounds out a solid cyclical story.
Technical Analysis
After years of chopping around in a sideways range between 40 and 60, TKR was hard hit during the 2020 March crash. But after bottoming at 24 last March, the stock embarked on what has been a steady advance to new highs, with some timely consolidations along the way. The latest pause last month saw TKR find support at the 25-day line before launching to its latest new high at 86. You could start small here or use pullbacks to nibble.
| Market Cap | $6.35B | EPS $ Annual (Dec) | |
| Forward P/E | 17 | FY 2018 | 4.18 |
| Current P/E | 21 | FY 2019 | 4.60 |
| Annual Revenue | $3.52B | FY 2020e | 4.17 |
| Profit Margin | 9.7% | FY 2021e | 4.83 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 895 | -2% | 1.13 | -1% |
| One qtr ago | 804 | -20% | 1.02 | -20% |
| Two qtrs ago | 923 | -6% | 1.11 | -18% |
| Three qtrs ago | 896 | -2% | 0.84 | -16% |
TKR Weekly Chart
TKR Daily Chart
Upwork (UPWK)
Why the Strength
With an estimated 80% of U.S. companies planning to increase freelance hires, the outlook for the “gig” economy looks like a boom area for 2021 and beyond. That’s right up the alley of Upwork, whose online talent pool facilitates gigs by making it easier for firms to hire skilled freelancers, with a longer-term employment focus. Last year’s pandemic-led, work-from-home economy is expected to keep growing, and recent surveys have made clear that millions of workers prefer the flexibility of independent or contract work as opposed to full-time, in-the-office employment. Taking advantage of this opportunity, Upwork just launched its Project Catalog, which contains tens of thousands of predefined projects in more than 300 categories (including design, web development, translation and writing). The catalog promises to help customers fill their advertised gigs much faster. What’s more, rising expectations for the gig economy to strengthen in 2021 have convinced some Wall Street analysts to raise their price targets for Upwork (which partly accounts for the stock’s latest strength), especially as the firm plans to market freelance work to even bigger enterprise clients going forward. Also setting the tone for Upwork’s strength was its Q3 results, which saw accelerating revenue growth ($97 million, up 24% from a year ago) along with consensus-beating earnings. When Upwork releases Q4 results (likely mid- to late-February), the top line is expected to rise by 22% to $98 million, with an additional 22% increase expected in this year’s Q1 and (small) profits continuing. Management sees a tremendous growth opportunity ahead, and with the remote work trend likely here to stay, it’s hard to disagree.
Technical Analysis
UPWK’s most recent breakout (from 20 to over 30) occurred on the day of its Q3 earnings release in November. Since then, the stock has advanced nicely, though not without a lot of volatility (from 37 to 30 to 41 to 33 to 44 and back to 37 this morning). Sure, maybe this is the top, but the trend remains up and selling volume has slackened—we’re OK starting a position around here, with a stop in the low 30s.
| Market Cap | $4.84B | EPS $ Annual (Dec) | |
| Forward P/E | N/M | FY 2018 | -0.01 |
| Current P/E | N/A | FY 2019 | 0.06 |
| Annual Revenue | $348M | FY 2020e | -0.02 |
| Profit Margin | 5.1% | FY 2021e | 0.02 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 96.7 | 24% | 0.04 | 300% |
| One qtr ago | 87.5 | 19% | -0.03 | N/A |
| Two qtrs ago | 83.2 | 21% | -0.03 | N/A |
| Three qtrs ago | 80.3 | 19% | 0.03 | 0% |
UPWK Weekly Chart
UPWK 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 | |||||
| 12/14/20 | Adient | ADNT | 32.5-34.5 | 35 | |
| 1/4/21 | AGCO Corp | AGCO | 99-103 | 116 | |
| 12/21/20 | Alcoa | AA | 21-22.5 | 23 | |
| 11/16/20 | Albemarle | ALB | 121-126 | 185 | |
| 10/26/20 | Align Technology | ALGN | ? | 420-440 | 562 |
| 12/14/20 | Ambarella | AMBA | 84-88 | 106 | |
| 12/7/20 | Applied Materials | AMAT | ? | 85-90 | 109 |
| 1/4/21 | Arvinas | ARVN | 74-78 | 91 | |
| 12/14/20 | Baker Hughes | BKR | 20.8-21.8 | 23 | |
| 1/4/21 | Bill.com | BILL | 133-138 | 129 | |
| 1/4/21 | BridgeBio | BBIO | 61-64 | 69 | |
| 11/16/20 | Canopy Growth | CGC | 23.5-25 | 34 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 40 | |
| 11/2/20 | Cloudflare | NET | 49-52 | 81 | |
| 1/4/21 | CrowdStrike | CRWD | 194-202 | 222 | |
| 12/21/20 | Elastic | ESTC | 147-153 | 170 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 185 | |
| 12/21/20 | Floor & Décor | FND | 95-98 | 97 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 32 | |
| 10/26/20 | General Motors | GM | 34-36 | 55 | |
| 10/26/20 | GrowGeneration | GRWG | 16.5-18 | 52 | |
| 11/23/20 | Halozyme | HALO | ? | 38.5-41 | 48 |
| 11/9/20 | HubSpot | HUBS | 335-350 | 390 | |
| 1/4/21 | Inari Medical | NARI | 81-85 | 98 | |
| 11/23/20 | Inspire Medical | INSP | 172-182 | 223 | |
| 12/21/20 | Kodiak Sciences | KOD | 136-142 | 164 | |
| 1/4/21 | Kohl’s | KSS | 37.5-39.5 | 44 | |
| 11/16/20 | Lam Research | LRCX | ? | 415-435 | 581 |
| 11/16/20 | Marvell Tech | MRVL | 41.5-43.5 | 54 | |
| 12/14/20 | Michaels Co. | MIK | 10.9-11.8 | 16 | |
| 1/4/21 | MongoDB | MDB | 342-352 | 368 | |
| 1/11/21 | Mosaic | MOS | 25-27 | 29 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 167 |
| 12/14/20 | PagerDuty | PD | 41.5-43.5 | 48 | |
| 12/21/20 | PayPal | PYPL | 232-238 | 247 | |
| 12/7/20 | Pinduoduo | PDD | 140-147 | 168 | |
| 8/3/20 | PINS | 33.5-37 | 71 | ||
| 12/7/20 | Qorvo | QRVO | 158-163 | 186 | |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 164 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 78 |
| 12/21/20 | Redfin | RDFN | 72-75.5 | 77 | |
| 7/13/20 | Roku | ROKU | 147-154 | 432 | |
| 12/21/20 | Smartsheet | SMAR | 70-73 | 72 | |
| 11/16/20 | Snap | SNAP | 37.5-39.5 | 50 | |
| 11/23/20 | Sonos | SONO | 20.5-22 | 27 | |
| 1/11/21 | Spotify | SPOT | 335-347 | 320 | |
| 1/11/21 | Sunrun | RUN | 87-91 | 86 | |
| 12/7/20 | Tapestry | TPR | 27-28.5 | 33 | |
| 11/16/20 | Timken | TKR | 69-72 | 85 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 382 | |
| 11/9/20 | Uber | UBER | 45-47.5 | 56 | |
| 12/7/20 | U.S. Steel | X | 15.3-16.3 | 21 | |
| 1/11/21 | Vale S.A. | VALE | 17.4-18.2 | 18 | |
| 12/21/20 | Wesco | WCC | 72-75.5 | 86 | |
| 11/9/20 | Zillow | Z | 100-105 | 144 | |
| 12/7/20 | Zscaler | ZS | 174-180 | 212 | |
| WAIT | |||||
| 1/11/21 | 8x8 Inc | EGHT | 32.5-34.5 | 37 | |
| 1/11/21 | LPL Financial | LPLA | 108-112 | 120 | |
| 1/11/21 | Palo Alto Networks | PANW | 345-360 | 364 | |
| 1/11/21 | Progyny | PGNY | 40.5-43 | 49 | |
| SELL RECOMMENDATIONS | |||||
| 12/21/20 | Cardlytics | CDLX | 135-141 | 117 | |
| 12/21/20 | Coeur Mining | CDE | 9.5-10.0 | 8 | |
| 11/23/20 | Celsius Holdings | CELH | 31.5-34 | 69 | |
| 11/9/20 | Yeti | YETI | 50-53 | 69 | |
| DROPPED | |||||
| 1/4/21 | Lemonade | LMND | 106-113 | 146 | |
The next Cabot Top Ten Trader issue will be published on January 25, 2021.