Keeping Our Eyes Peeled
Current Market Outlook
After a prosperous last 12 months, 2021 got off to a sour start today, though that wasn’t totally surprising—early-January is known for crosscurrents and profit taking (especially after good years) as big investors un-hedge and reposition their portfolios. That doesn’t mean today’s weakness should be excused, but what counts most is what happens from here: Another couple of rounds of sharp selling in the leaders and major indexes (possibly coinciding with some intermediate-term breakdowns) would tell us the bears are making a stand, while a quick show of support in many key stocks will be a good sign. We’re keeping our eyes peeled, but so far, the trends of the market and the vast majority of stocks remains up, so we remain mostly bullish, though are continuing to pick our spots.
The first Top Ten list of the year is a mixed bag in terms of stocks and sectors. Our Top Pick is Bill.com (BILL), which is finding support after a normal, early-stage retreat.
| Stock Name | Price | ||
|---|---|---|---|
| AGCO Corporation (AGCO) | 102 | ||
| Arvinas, Inc. (ARVN) | 84 | ||
| Bill.com Holdings (BILL) | 138 | ||
| BridgeBio Pharma (BBIO) | 64 | ||
| CrowdStrike (CRWD) | 201 | ||
| Inari Medical (NARI) | 85 | ||
| Kohl’s (KSS) | 39 | ||
| Lam Research (LRCX) | 478 | ||
| Lemonade (LMND) | 113 | ||
| MongoDB (MDB) | 350 |
AGCO Corporation (AGCO)
Why the Strength
Agco Corp. isn’t a household name, but it’s an industry-leading maker of farm equipment that’s currently riding the agricultural boom. Over the past three decades, Agco has acquired more than 30 companies in the sector to form the only large public pure-play agricultural equipment company with a global footprint. The company sells its products through 4,200 dealers in approximately 150 countries worldwide and has five principal brands: Challenger, Fendt, GSI, Massey Ferguson and Valtra. Currently, tractor sales produce 57% of overall company revenue, with the remainder generated from replacement parts (14%), grain storage and protein systems (10%), hay and forage tools (12%), application equipment (3%) and combine sales (3%). Longer-term, food consumption is outpacing population growth as wealthier, more educated societies become more urbanized, but right now, the stock and business is strong on hopes for a big economic turnaround in 2021, goosed in part by promises of super-loose monetary policy (often leading to commodity price inflation) from central banks around the world. Indeed, stronger commodity prices are boosting confidence in the farm belt, and that is flowing through to the company, which began a big turnaround in Q3, when sales (up 18%) and earnings (up 155%) both crushed expectations, leading to a huge hike in estimates—analysts now see earnings north of $6 per share this year, up from an estimate of $4.81 three months ago. Given the strength in commodity prices and demand overseas (sales up 25% in Asia in Q3), even those buoyant figures could be conservative.
Technical Analysis
AGCO’s initial rebound from the March nadir was uneven, with sharp ups and downs as investors looked for a clearer picture of the future. But the advance has smoothed out in recent months, with buyers coming in three separate times near the 10-week line. Interestingly, after the latest 10-week bounce, AGCO has tightened up just above 100, which is a constructive sign. We’re OK nibbling here or on further dips.
| Market Cap | $7.72B | EPS $ Annual (Jan) | |
| Forward P/E | 17 | FY 2018 | 3.89 |
| Current P/E | 20 | FY 2019 | 4.44 |
| Annual Revenue | $8.95B | FY 2020e | 5.15 |
| Profit Margin | 6.3% | FY 2021e | 6.03 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.5 | 18% | 2.09 | 155% |
| One qtr ago | 2.01 | -17% | 1.11 | -39% |
| Two qtrs ago | 1.93 | -3% | 0.86 | 0% |
| Three qtrs ago | 2.51 | -3% | 0.94 | -28% |
AGCO Weekly Chart
AGCO Daily Chart
Arvinas, Inc. (ARVN)
Why the Strength
Within the field of biotherapeutics, there’s an emerging science known as targeted protein degradation that utilizes the body’s natural waste disposal system to selectively degrade and remove harmful proteins, curing diseases where other treatments have failed. Arvinas is a clinical-stage biopharma applying this technique to target cancers and other hard-to-treat diseases. Using small molecules that can be tailored to tag select proteins—known as Proteolysis-Targeting Chimera (PROTAC)—Arvinas’ proprietary technology binds a naturally-occurring protein to destroy a harmful one. Arvinas boasts a big early-stage pipeline that includes 13 investigational therapies, two of which—ARV-110 for metastatic chemotherapy resistant prostate cancer and ARV-471 for breast cancer—have entered the Phase I clinical testing. (Phase II testing for ARV-471, for which the estimated U.S. market is 250,000 patients, is scheduled to begin in the first half of 2021.) Positive developments from both drugs is the reason for the stock’s recent strength, with breast cancer patients using ARV-471 showing evidence of anti-tumor activity and signs of strong efficacy. Trials for ARV-100, meanwhile, suggest anti-tumor activity and benefits in heavily pre-treated prostate cancer patients. Arvinas also has a portfolio of revenue-contributing license agreements and collaborations with several major drug companies, including Bayer and Pfizer. It’s speculative, but the company has plenty of cash in the bank thanks to a recent share offering and some high-potential potential products.
Technical Analysis
ARVN came public in 2018 and had many ups and downs after that, as you’d expect from a development-stage outfit. But the bullish trial results for ARV-471 in mid December have totally changed the stock’s character, with shares more than doubling on the news and continuing higher since then despite a share offering. We wouldn’t chase it here, but dips of a few points would be interesting.
| Market Cap | $4.04B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.28 |
| Current P/E | N/A | FY 2019 | -2.13 |
| Annual Revenue | $24.5M | FY 2020e | -2.80 |
| Profit Margin | N/A | FY 2021e | -3.38 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 7.6 | -75% | -0.79 | N/A |
| One qtr ago | 5.8 | 43% | -0.65 | N/A |
| Two qtrs ago | 6.2 | 55% | -0.56 | N/A |
| Three qtrs ago | 4.9 | 42% | -0.56 | N/A |
ARVN Weekly Chart
ARVN Daily Chart
Bill.com Holdings (BILL)
Why the Strength
If you’re looking for straightforward, powerful growth stories, Bill.com should be on your list—the company’s platform is aimed at businesses with between 2 and 500 employees (small businesses excluding proprietorships—six million of them in the U.S.), 90%-ish of which do invoicing, bill paying and contracts by paper, resulting in lost time and money plus a ton of errors. Bill.com, on the other hand, allows them to move into the 21st century, syncing with accounting systems and big financial outfits so that these small fries can do things electronically. We’ve been watching the company for a few months, but the stock was met with tedious selling many times during the late spring, summer and fall, which made sense—the firm’s small client base was hit worst during the pandemic, plus more than 10% of revenue was on the float, which has been sliced as interest rates fell to 0%. But investors are re-focusing on the core story (subscription revenue to its platform, plus transaction revenue when clients pay and receive bills), which has remained very strong—in Q3, these revenue streams grew 53% from a year ago, while customers and payment volume both lifted 27%. Big picture, Bill.com looks to be another big winner in the theme of helping small businesses do more online (think Shopify and Square); it’s captured less than 2% of its target market but is making quick progress. Plus, near-term, it’s one of the few firms with a great underlying growth story that also should be helped by the easing of the pandemic (more small business creation, fewer financial strains among the client base). We like it.
Technical Analysis
BILL rallied to nearly 100 after a post-Q1 report surge, but more than six months later, the stock was around 90—shares had some solid rallies but could never quite get going in a decisive way. Now, though, we think the change in character has arrived—after the early-November shakeout with growth stocks, BILL rallied six straight weeks, including three on huge weekly volume, easily notching new price and relative performance highs in the process. We think the recent dip is buyable.
| Market Cap | $11.1B | EPS $ Annual (Jun) | |
| Forward P/E | N/A | FY 2018 | -0.04 |
| Current P/E | N/A | FY 2019 | -0.15 |
| Annual Revenue | $169M | FY 2020e | -0.25 |
| Profit Margin | N/A | FY 2021e | -0.17 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 46.2 | 31% | -0.04 | N/A |
| One qtr ago | 42.1 | 33% | -0.02 | N/A |
| Two qtrs ago | 41.2 | 46% | -0.04 | N/A |
| Three qtrs ago | 39.1 | 50% | -0.05 | N/A |
BILL Weekly Chart
BILL Daily Chart
BridgeBio Pharma (BBIO)
Why the Strength
In the underserved market for rare diseases, treatments are often hard to find and may not even exist. BridgeBio is taking advantage of this fact by finding breakthrough treatments for rare diseases, targeting the drivers of genetic diseases at their source and applying precision medicine techniques. Through partnerships and ownership stakes in several biopharma companies, it boasts an extensive and growing pipeline of 21 drug candidates—including four in Phase III development—for several diseases, ranging from autism and hearing loss to various cancers. The stock’s strength first appeared in September, when the FDA began review of fosdenopterin, which is designed to treat molybdenum cofactor deficiency (MoCD) type A patients. In October, Bridge announced a merger with Eidos Therapeutics, which is developing acoramidis—a potential best-in-class transthyretin (TTR) stabilizer for patients with TTR amyloid cardiomyopathy and polyneuropathy. Then, in December, infigratinib, an oral treatment for bile duct cancer patients with tumor growth driven by FGFR2 mutations, went under review. More recently was the announced alliance between Bridge and the University of California San Francisco to advance precision medicine approaches for treating cardiovascular disease. This is obviously a speculation, but BridgeBio is expected to crank out revenues of $88 million next year, with a lot more upside in the years to come. With over $700 million in cash and the backing of several major venture funds, Bridge is positioned to be a major player in the rare disease space for years to come.
Technical Analysis
BBIO came public in June 2019 at 31 and sank to 18 in October before rebounding to 48 by the end of 2019. Then came the pandemic, which pushed shares to a lifetime low of 15 last March. BBIO bounced back to the mid-30s by May and spent several months chopping around before the above-mentioned series of positive developments—net-net, the stock etched a great-looking 10-month post-IPO launching pad, and the stock has been running since mid-November (rallying nine weeks in a row). Today’s shakeout was normal, and a bit more weakness would be tempting.
| Market Cap | $8.72B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.06 |
| Current P/E | N/A | FY 2019 | -2.17 |
| Annual Revenue | $21.9M | FY 2020e | -3.50 |
| Profit Margin | N/A | FY 2021e | -3.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 8.1 | -70% | -0.98 | N/A |
| One qtr ago | N/M | N/M | -1.03 | N/A |
| Two qtrs ago | N/M | N/M | -0.78 | N/A |
| Three qtrs ago | 13.8 | N/M | -0.62 | N/A |
BBIO Weekly Chart
BBIO Daily Chart
CrowdStrike (CRWD)
Why the Strength
Every year there seems to be a headline-grabbing hack that re-emphasizes the need for new, best-in-class cybersecurity solutions, and the recent SolarWinds breach provided a spark for a group that’s already in a strong, long-term growth phase. The name that we think is the leader of the new-age pack is CrowdStrike, whose endpoint (any device that connects to the network) protection platform (dubbed Falcon) is looking more and more like a must-have solution for blue chip (as well as tons of mid-sized) firms. The secret sauce here (as its name suggests) is the crowdsourcing element—the software installed on every client’s various endpoint devices communicate data to a central system (called Threat Graph), which uses artificial intelligence algorithms and pattern-matching to analyze that data (four trillion events per week!) and automatically update all devices with new threat information and protections; the system effectively becomes “smarter” the more users it has. The proof here is in the pudding—other new-age firms in the group (like Okta) actually use Falcon for their own operations, and SolarWinds deployed Falcon after the recent breach. (It was also reported that the hackers tried to infiltrate CrowdStrike via a reseller—but failed!) Long story short, CrowdStrike looks and quacks like an emerging blue chip, and its growth is hard to match; revenues (including annualized recurring revenue) have been rising at north of an 80% clip, while the bottom line is in the black and beginning to take off. Both the long-term tailwinds for the sector, the firm’s own offering and the SolarWinds hack should all keep growth humming in the years to come.
Technical Analysis
CRWD broke out of a big post-IPO base in August and enjoyed nine weeks up in a row into October, a sign of persistent buying that usually bodes well. Indeed, after a six-plus-week rest, CRWD emerged near Thanksgiving and has gone through the roof, with the stock rallying on three straight weeks of very heavy volume after the SolarWinds news. The recent drop isn’t pleasant, but it’s normal, and if you don’t own any we’re fine starting a position here or on further weakness.
| Market Cap | $46.9B | EPS $ Annual (Jan) | |
| Forward P/E | 662 | FY 2019 | -0.60 |
| Current P/E | 999 | FY 2020 | -0.32 |
| Annual Revenue | $6545M | FY 2021e | 0.22 |
| Profit Margin | 8.0% | FY 2022e | 0.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 233 | 86% | 0.08 | N/A |
| One qtr ago | 199 | 84% | 0.03 | N/A |
| Two qtrs ago | 178 | 85% | 0.02 | N/A |
| Three qtrs ago | 152 | 89% | -0.02 | N/A |
CRWD Weekly Chart
CRWD Daily Chart
Inari Medical (NARI)
Why the Strength
Inari Medical is yet another young medical outfit with a unique offering that’s likely to drive rapid growth for years to come. The story revolves around thrombectomies, which are procedures used to remove blood clots, most of which occur in and around the arteries. However, many dangerous clots are venous (occurring deep in the veins) and even break loose and travel into the lungs (dubbed a pulmonary embolism), and these present doctors with their own unique set of conditions (different blood flows, larger and harder clots, larger vessels, etc.). Doctors have had to tackle these types of clots with repurposed arterial devices and (usually) clot-busting drugs, but the results are so-so at best and the cost is huge. Enter Inari, which has developed a better way—the firm’s ClotTriever and FlowTriever deveices are designed for these venous clots, eliminating the need for costly drugs and provide hugely better outcomes (re-admission rates declined by 70% and deaths by more than 90%). And because the products are relatively easy to learn how to use, adoption is picking up fast—while Inari is very small (revenues of less than $40 million last quarter), growth has been triple-digits despite any pandemic headwinds as procedures ramp (3,700 in Q3, up 172% from a year ago and up 52% from Q2). Very impressively, despite the small size, earnings have been in the black three of the past four quarters, and while analysts see growth slowing down next year (“only” 35% sales growth and a loss for the year), we tend to think that will prove very conservative. The valuation is certainly up there, but that doesn’t seem to be bothering big investors—despite its newness, 188 funds have already started positions, including a few top-notch ones. It’s an intriguing story.
Technical Analysis
NARI just came public in May and, as new issues usually do, has had a ton of sharp ups and downs since then. But there are many things we like in this chart: The excellent uptrend (up 12 of 15 weeks) after coming public, the sideways (very volatile) consolidation after that, the expansion of volume during the past two months and the big-volume move to new price highs in December. NARI can move around a few percent each day, so position size accordingly, but we’re OK starting small here or on a dip of a few points.
| Market Cap | $4.25B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.22 |
| Current P/E | 620 | FY 2019 | -0.03 |
| Annual Revenue | $111M | FY 2020e | 0.14 |
| Profit Margin | N/A | FY 2021e | -0.08 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 38.7 | 172% | 0.12 | 999% |
| One qtr ago | 25.4 | 152% | -0.08 | N/A |
| Two qtrs ago | 27 | 288% | 0.09 | N/A |
| Three qtrs ago | 19.9 | 999% | 0.01 | N/A |
NARI Weekly Chart
NARI Daily Chart
Kohl’s (KSS)
Why the Strength
2020 wasn’t a banner year for brick-and-mortar retailers, but a few managed to thrive despite reduced foot traffic. One such standout is Kohl’s, which bucked the retail downtrend by strategically partnering with other brands in order to drive more traffic to its stores, even forming a partnership with Amazon and accepting Amazon returns. COVID headwinds forced Kohl’s to step up its digital presence and the firm proved equal to the task. Though Q3 revenue was 14% lower due to limited store traffic, that was actually an improvement from the prior two quarters as digital sales took up the slack, increasing 25% and accounting for 32% of total sales (up from 22% a year ago). Driving the latest strength was Kohl’s announcement that it has formed a strategic alliance with Sephora, a division of luxury brand Louis Vuitton Moet Hennessy; the new partnership will feature 2,500 square-foot Sephora shops located at the front of Kohl’s stores. Heading into the December shopping season, Kohl’s expressed confidence that it was well-positioned to capture market share. It’s also adjusting to consumers’ shifting tastes in the pandemic’s wake by moving away from dressier clothing and focusing on comfortable clothes and active wear, including plans to increase the space devoted to activewear in its stores by around 20%. Kohl’s also wants to triple beauty product sales, which it sees as a significant opportunity going forward after steady growth of nearly 40% in the last five years. Analysts see earnings rebounding to $2.33 per share this year.
Technical Analysis
After peaking at 83 in 2018, it was a long, horrid drop for KSS, with the stock eventually crashing below 12 during the pandemic low last March. The initial bounce was OK, but the stock really didn’t get going until after the election—KSS rose above its 40-week line for the first time in more than a year in mid November and went vertical to 40 in just a few weeks. The recent month-long rest around that area looks like a solid entry point to us.
| Market Cap | 6.41 | EPS $ Annual (Jan) | |
| Forward P/E | 17 | FY 2019 | 5.61 |
| Current P/E | N/A | FY 2020 | 4.86 |
| Annual Revenue | $18.5B | FY 2021e | -2.74 |
| Profit Margin | 0.1% | FY 2022e | 2.33 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.98 | -14% | 0.01 | -99% |
| One qtr ago | 3.41 | -23% | -0.25 | N/A |
| Two qtrs ago | 2.43 | -41% | -3.20 | N/A |
| Three qtrs ago | 6.83 | 0% | 1.99 | -11% |
KSS Weekly Chart
KSS Daily Chart
Lam Research (LRCX)
Why the Strength
In a sense, semiconductor equipment companies like Lam (covered in the November 16 issue of Top Ten) are providing the infrastructure behind the expanding work- and learn-from-home trends, which has boosted demand—add to those the 5G rollout and all indications are that demand should remain strong in 2021. Lam’s global leadership position in semi equipment manufacturing, coupled with a big exposure to the memory market (accounting for over half its revenues), is expected to drive continued growth. Indeed, management is optimistic about the year ahead and expects DRAM and 3D NAND memory chip demand—boosted by continued cloud expansion and artificial intelligence growth—to remain buoyant. Lam saw rapid growth in PC, notebook and workstation shipments in Q3, pushing sales (up 47%) and earnings (up 78%) through the roof, and it further believes the remote work trend is structural and will drive long-term growth for the chip industry, partially due to accelerated build-outs of cloud datacenters and high-speed communication networks. Moreover, Lam’s recent partnership with ASML Holding is expected to increase its reach in the deposition and etch markets, as ASML has a monopoly in EUV lithography systems that are increasingly critical for today’s high-tech chip production. On the trade front, China is the largest regional market for Lam (representing some 15% of its revenue) and there is a growing optimism that the incoming U.S. presidential administration will ease trade tensions between the two nations. Analysts see excellent numbers in Q4 and Q1 (sales up 28% to 30%, with earnings up even more) and estimates keep creeping higher. The Q4 report is due out January 27.
Technical Analysis
Even better than the story is the chart—LRCX is one of a few chip equipment makers that broke free of a long-term consolidation in early November, showing excellent upside action (breakout near 390, didn’t run out of gas until 517). And now the stock has pulled back for four weeks on generally tame volume as the 50-day line (now at 441) quickly catches up. We’re game for buying some on this dip with a stop under that support area.
| Market Cap | $68.0B | EPS $ Annual (Jun) | |
| Forward P/E | 19 | FY 2019 | 14.55 |
| Current P/E | 26 | FY 2020 | 25.93 |
| Annual Revenue | $11.1B | FY 2021e | 22.30 |
| Profit Margin | 26.3% | FY 2022e | 24.95 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.18 | 47% | 5.67 | 78% |
| One qtr ago | 2.79 | 18% | 4.78 | 32% |
| Two qtrs ago | 2.5 | 3% | 3.98 | 8% |
| Three qtrs ago | 2.58 | 2% | 4.00 | 3% |
LRCX Weekly Chart
LRCX Daily Chart
Lemonade (LMND)
Why the Strength
Lemonade was one of the top performing IPOs of 2020, and the stunning performance is for good reason. Lemonade provides insurance for renters and homeowners in the U.S. for stolen or damaged property as well as personal liability, but this isn’t some old school player—the firm is actually aiming to replace traditional brokers by using a platform powered by artificial intelligence (AI), behavioral economics and machine learning to better evaluate risk and for claims processing. As the platform “learns” and improves, the firm is expanding into adjacent fields, adding pet health insurance and personal life insurance to its product lineup recently, and also moving into new markets (it launched in France in early December). On New Year’s Eve the company said it reached a milestone of one million active customers “just” 1,500 days since its 2016 launch. That accomplishment was reached decades earlier than some of its leading competitors in the industry, including State Farm, Allstate and GEICO, according to the company. Not surprisingly, growth has been fantastic—while reported figures in Q3 slipped from a year ago, that was mainly due to a change in accounting methods, as the underlying metrics were outstanding: Total customer count was up 67%, in-force premiums were up 99%, gross earned premiums rose 104% while the gross loss ratio fell 7.7% despite a bunch of catastrophes all over the place. The question is whether Wall Street will look at it as a “regular” insurance company—but so far, it certainly seems big investors are willing to pay up for what looks like a long period of rapid growth ahead.
Technical Analysis
LMND came public in early July, and after a good first couple of days dipped into a cup-shaped post-IPO base for the next few months. Shares moved out above some low-level resistance in early December and enjoyed a moonshot after that, rallying as high as 137 before the latest pullback. We’ll set our buy range down a bit, though we’d really prefer to see LMND chill out for a few days, which would be a constructive sign.
| Market Cap | $6.93B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.94 |
| Current P/E | N/A | FY 2019 | -1.92 |
| Annual Revenue | $97M | FY 2020e | -3.25 |
| Profit Margin | N/A | FY 2021e | -2.96 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 17.8 | -6% | -0.55 | N/A |
| One qtr ago | 29.9 | 117% | -0.37 | N/A |
| Two qtrs ago | 26.2 | 138% | -0.65 | N/A |
| Three qtrs ago | 23.5 | 161% | -0.58 | N/A |
LMND Weekly Chart
LMND Daily Chart
MongoDB (MDB)
Why the Strength
The cumbersome Excel-based model for database management is fast becoming obsolete, thanks to the growing popularity of the cross-platform “document model.” At the leading edge of this technology is MongoDB, which offers a cloud-based database program based on the less cumbersome document model--instead of using multiple Excel files for storing data like most legacy databases, MongoDB’s document-based system provides a single unified view of data across multiple servers, making it much easier for developers (its primary users) to manage data and quickly deploy it for building apps. Growth has been strong for years, and the company crushed views in Q3, beating per-share earnings estimates by 13 cents and reporting an eye-popping top line of $150 million (up 38%)—well above expectations and a big reason for the stock’s latest strength. Subscription revenue rose 39%, while services revenue was up 19%. Total customer count rose 2,400 to over 22,600 (up 42%), driven largely by MongoDB Atlas, which became the first and only cloud database to enable an application to run simultaneously across multiple cloud providers (and putting the firm in a leadership position in so-called “multi-cloud” services). Moreover, management reported that growth from existing Atlas customers returned to pre-COVID levels during the quarter. The company also guided for Q4 revenue to grow 27% at the midpoint to around $156 million—in line with Wall Street’s estimates. Big picture, the size of the firm’s opportunity is huge, so if management continues to pull the right levers, Mongo should see rapid growth for many years.
Technical Analysis
MDB was one of many stocks that had a “re-set” consolidation, with two big corrections in late 2019 and, of course, in March 2020. It quickly snapped back to new highs after the pandemic lows (early sign of leadership), though it again entered a prolonged rest, this time making no net progress for five months. Since earnings, though, MDB has mushroomed to new highs, with the recent pullback from 400 looking normal on the chart. If you’re game, you can grab shares around here.
| Market Cap | $21.6B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2019 | -1.00 |
| Current P/E | N/A | FY 2020 | -1.00 |
| Annual Revenue | $543M | FY 2021e | -1.04 |
| Profit Margin | N/A | FY 2022e | -0.97 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 151 | 38% | -0.31 | N/A |
| One qtr ago | 138 | 39% | -0.22 | N/A |
| Two qtrs ago | 130 | 46% | -0.13 | N/A |
| Three qtrs ago | 124 | 45% | -0.25 | N/A |
MDB Weekly Chart
MDB 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 | 34 | |
| 12/21/20 | Alcoa | AA | 21-22.5 | 23 | |
| 11/16/20 | Albemarle | ALB | 121-126 | 153 | |
| 10/26/20 | Align Technology | ALGN | ? | 420-440 | 526 |
| 12/14/20 | Ambarella | AMBA | 84-88 | 91 | |
| 12/7/20 | Applied Materials | AMAT | ? | 85-90 | 87 |
| 12/14/20 | Baker Hughes | BKR | 84-88 | 21 | |
| 11/2/20 | Bunge | BG | 56-58.5 | 66 | |
| 11/16/20 | Canopy Growth | CGC | 23.5-25 | 26 | |
| 12/21/20 | Cardlytics | CDLX | 135-141 | 136 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 37 | |
| 11/23/20 | Celsius Holdings | CELH | 31.5-34 | 50 | |
| 11/2/20 | Cloudflare | NET | 49-52 | 75 | |
| 12/21/20 | Coeur Mining | CDE | 9.5-10.0 | 11 | |
| 12/21/20 | Elastic | ESTC | 147-153 | 141 | |
| 10/26/20 | Exact Sciences | EXAS | 103-107 | 129 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 167 | |
| 12/21/20 | Floor & Décor | FND | 95-98 | 93 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 27 | |
| 10/26/20 | General Motors | GM | 34-36 | 40 | |
| 10/26/20 | GrowGeneration | GRWG | 16.5-18 | 39 | |
| 11/23/20 | Halozyme | HALO | ? | 38.5-41 | 42 |
| 11/9/20 | HubSpot | HUBS | 335-350 | 388 | |
| 11/23/20 | Inspire Medical | INSP | 172-182 | 182 | |
| 12/21/20 | Kodiak Sciences | KOD | 136-142 | 138 | |
| 11/16/20 | Lam Research | LRCX | ? | 415-435 | 478 |
| 11/16/20 | Marvell Tech | MRVL | 41.5-43.5 | 46 | |
| 12/14/20 | Michaels Co. | MIK | 10.9-11.8 | 13 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 161 |
| 12/14/20 | PagerDuty | PD | 41.5-43.5 | 41 | |
| 10/19/20 | Paycom Software | PAYC | 360-375 | 428 | |
| 12/21/20 | PayPal | PYPL | 232-238 | 232 | |
| 12/7/20 | Pinduoduo | PDD | 140-147 | 167 | |
| 8/3/20 | PINS | 33.5-37 | 68 | ||
| 12/7/20 | Qorvo | QRVO | 158-163 | 165 | |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 149 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 68 |
| 12/21/20 | Redfin | RDFN | 72-75.5 | 67 | |
| 7/13/20 | Roku | ROKU | 147-154 | 318 | |
| 12/21/20 | Smartsheet | SMAR | 70-73 | 68 | |
| 11/16/20 | Snap | SNAP | 37.5-39.5 | 50 | |
| 11/23/20 | Sonos | SONO | 20.5-22 | 23 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 112 | |
| 12/7/20 | Tapestry | TPR | 27-28.5 | 33 | |
| 11/16/20 | Timken | TKR | 69-72 | 76 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 334 | |
| 11/9/20 | Uber | UBER | 45-47.5 | 51 | |
| 12/7/20 | U.S. Steel | X | 15.3-16.3 | 17 | |
| 12/21/20 | Wesco | WCC | 72-75.5 | 77 | |
| 11/9/20 | Yeti | YETI | 50-53 | 68 | |
| 11/9/20 | Zillow | Z | 100-105 | 131 | |
| 12/7/20 | Zscaler | ZS | 174-180 | 131 | |
| WAIT | |||||
| None this week. | |||||
| SELL RECOMMENDATIONS | |||||
| 10/19/20 | Avalara | AVLR | 147-152 | 164 | |
| 10/26/20 | Axon Enterprises | AAXN | ? | 99.5-102.5 | 117 |
| 12/14/20 | FuboTV | FUBO | 24.5-26.5 | 24 | |
| 11/23/20 | Huazhu Group | HTHT | 49.5-51 | 45 | |
| 10/26/20 | MercadoLibre | MELI | 1180-1240 | 1640 | |
| 11/23/20 | Moderna | MRNA | 95-98 | 112 | |
| 11/16/20 | Norfolk Southern | NSC | 235-245 | 233 | |
| 12/7/20 | Snowflake | SNOW | 360-380 | 278 | |
| 10/19/20 | SunPower | SPWR | 16.5-17.5 | 25 | |
| 9/14/20 | Target | TGT | 145-149 | 178 | |
| DROPPED | |||||
| 12/14/20 | Micron Tech | MU | 66-69 | 74 | |
| 12/14/20 | StitchFix | SFIX | 57-61 | 56 | |
The next Cabot Top Ten Trader issue will be published on January 11, 2021.