So Far, So Good
Current Market Outlook
Growth stocks suffered another shot across the bow last Monday, and for the next three days, most didn’t bounce much. But last Friday and today’s action was far more encouraging, with leading stocks rebounding nicely and the broad market doing decently, too. Of course, we never put too much emphasis on just a day or two; the market wasn’t hanging by a thread before the latest bounce (the trends of the indexes and leading stocks were up), and today’s action doesn’t necessarily mean it’s up and away from here, either. In fact, with earnings season coming up, we still think focusing on the right stocks and looking for relatively lower-risk entries is your best bet. But until proven otherwise, most of the rubber-meets-the-road evidence remains bullish, so you should, too.
This week’s list has a broad mix of cyclical and growth issues to choose from. For our Top Pick, we’re going a bit speculative—Plug Power (PLUG) is low priced, but very liquid, and the recent pattern (huge-volume rally, controlled pullback) looks very tempting.
| Stock Name | Price | ||
|---|---|---|---|
| ANGI Homeservices Inc. (ANGI) | 14.81 | ||
| Arconic (ARNC) | 17.00 | ||
| Bloom Energy (BE) | 16.22 | ||
| Carrier Global Corporation (CARR) | 26.23 | ||
| D. R. Horton (DHI) | 66.55 | ||
| GDS Holdings Limited (GDS) | 80.15 | ||
| Plug Power (PLUG) | 8.35 | ||
| Saia Inc. (SAIA) | 129.19 | ||
| Spotify (SPOT) | 272.82 | ||
| Vapotherm (VAPO) | 48.53 |
ANGI Homeservices Inc. (ANGI)
Why the Strength
Many businesses have actually been helped by the new reality the virus has brought, and you can add ANGI Homeservices to that list, as it’s developing the largest digital marketplace for connecting homeowners with service professionals. ANGI’s largest shareholder, IAC, sent a letter last week that noted ANGI has seen demand soar by 27% in May and 34% in June. That’s after a 12% and 8% virus-induced decline in March and April, respectively. Granted, those figures haven’t completely translated into sales; monetized transactions rose 8% and 10% as overall revenue was up 15% and 14% in those months. CEO Ridenour says the difference between demand and sales is due to supply change interruptions and price increases, as well as reduced capacity at its service providers related to COVID-19. The CEO also added that huge demand in services such as swimming pool installations, which would be difficult to “fulfill even in normal times,” also impacted that gap. But too much demand is a good problem to have, of course, and it’s a plus that costs per service request have fallen 20%, while costs for ANGI’s outlay on ads are down. Beyond those factors, ANGI’s fixed-price platform, which offers customers and service providers straightforward pricing (no negotiations), is doing well and the company is adding higher-priced services, which should greatly bolster its addressable market. Its new payment options, including financing for its customers and payment processing for its contractors with non-ANGI customers, hold the potential for more revenue growth. Long story short, ANGI has long has a solid niche story, and it certainly looks like business has turned up in a big way in the new virus-centric world.
Technical Analysis
ANGI had been in a downtrend for years, as business lagged and perception worsened. But the March bottom at 4 certainly looks like the bottom for the stock—ANGI has completely changed character since then, quickly bolting back to 13 in May, and after a brief rest that nearly tagged the 10-week line, soaring to 52-week highs on big volume. We’re OK taking a swing at it here, albeit with a loose leash.
| Market Cap | $7.45B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | 0.15 |
| Current P/E | 763 | FY 2019 | 0.07 |
| Annual Revenue | $1.37B | FY 2020e | -0.05 |
| Profit Margin | N/A | FY 2021e | 0.10 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 344 | 13% | -0.02 | N/A |
| One qtr ago | 322 | 15% | -0.01 | N/A |
| Two qtrs ago | 357 | 18% | 0.04 | -20% |
| Three qtrs ago | 344 | 17% | 0.01 | -80% |
ANGI Weekly Chart
ANGI Daily Chart
Arconic (ARNC)
Why the Strength
Arconic is the recent result of a spin-off from Howmet Aerospace (formerly part of Alcoa), and it’s expected to benefit from increased aluminum use in the red-hot automotive industry. Arconic makes aluminum sheets, plates and extrusions for the transport, aerospace, electronics, and construction industries, with some 35% of its revenues derived from ground transportation. After the shutdown, analysts anticipated auto production would rise gradually, with consumers expected to avoid mass transit and migrate to automobiles in the pandemic’s wake. But like many economic measures, the forecast was too conservative—auto sales constituted 20% of total U.S. retail sales for both May and June (thanks partly to low interest rates and dealer incentives). Moreover, industry analysts anticipate stronger demand in Q3 for heat-treated aluminum plate as automakers ramp up truck and SUV production, which should benefit Arconic. Despite shutdown-related headwinds (revenues were down 12% in Q1 due to disruptions involving COVID and Boeing’s 737 MAX production), the firm’s segment operating profit rose 26% in Q1 along with an 11% increase in margins. While its aerospace segment has been impacted by an industry slowdown, Wall Street expects it to be a key driver in 2022-24 as build rates increase for customers like Boeing. Management has also reported “positive momentum” at its Chinese outposts and Russian packaging facility, while its North American plants have resumed operations. Altogether, Arconic looks like a direct play on a recovering economy; analysts see earnings recovering later this year and into 2021, while the valuation remains in the basement.
Technical Analysis
We took a swing at ARNC in early June when the broad market was super strong—and then we got knocked out of it a month later when it effectively tripped us out. But shares quickly found support near their 50-day line, and the prior uptrend (from 8 to 19) tells us something is going on with this new spinoff. We’re OK buying some ARNC here, albeit with a stop under the 50-day line.
| Market Cap | $1.77B | EPS $ Annual (Dec) | |
| Forward P/E | 10 | FY 2018 | 1.57 |
| Current P/E | 7 | FY 2019 | 2.07 |
| Annual Revenue | $7.05B | FY 2020e | 1.64 |
| Profit Margin | 3.7% | FY 2021e | 2.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.61 | -12% | 0.55 | 45% |
| One qtr ago | 1.71 | -6% | 1.71 | 88% |
| Two qtrs ago | 1.81 | -4% | -0.06 | N/A |
| Three qtrs ago | 1.92 | 0% | 0.05 | -44% |
ARNC Weekly Chart
ARNC Daily Chart
Bloom Energy (BE)
Why the Strength
With an aging power grid and ever-increasing electricity demand (not just from homes and businesses but all those power-sucking data centers, too), power outages cost the U.S. an estimated $18 to $33 billion per year. What’s more, the need for alternative energy has never been greater. Bloom Energy is meeting these needs by making solid oxide fuel cell-based energy servers that generate clean energy: Its energy platform provides a power source for corporate customers, allowing them to avoid outages and meet sustainability goals, and its servers convert natural gas into electricity through an electrochemical process (without combustion) with solid efficiency. As businesses increasingly turn to on on-site energy generation for power (and greater reliability), Bloom plans to expand into the fastest-growing segments, including data centers, healthcare and microgrids. The company recently entered the commercial hydrogen market, introducing hydrogen-powered fuel cells and electrolyzers that produce renewable hydrogen (to be introduced to the South Korean market in 2021). It also announced a partnership with Samsung Heavy Industries to produce fuel-cell powered cargo ships. As for the numbers, the recent ones aren’t overly impressive, with a sales dip in Q1 and likely a sharper one in Q2. But investors are looking ahead: Bloom says it accepted 306 systems during Q2, a sequential increase of 20% from Q1 and up 13% from a year ago (the company defines acceptances as a key operating metric). The top line, meanwhile, is expected to resume growing in Q4, and analysts see sales up nearly 25% in 2021. It’s a big story with plenty of long-term structural tailwinds, so if management pulls the right levers the potential is there. Earnings are due on July 28.
Technical Analysis
BE came public in the middle of 2018 and after a few good weeks went through a horrid skid, crashing as low as 2.5 last October and (after a good rally) back to 3 during the March crash. The bounce was good-not-great, but the action since the start of July has been eye-opening, with a huge-volume ramp that’s pushed the stock to new recovery highs. Given the volatility, keep it small and/or aim to enter on weakness.
| Market Cap | $2.13B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.92 |
| Current P/E | N/A | FY 2019 | -1.03 |
| Annual Revenue | $769M | FY 2020e | -1.05 |
| Profit Margin | N/A | FY 2021e | -0.20 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 157 | -10% | -0.34 | N/A |
| One qtr ago | 214 | 36% | -0.29 | N/A |
| Two qtrs ago | 225 | 41% | -0.11 | N/A |
| Three qtrs ago | 174 | 10% | -0.26 | N/A |
BE Weekly Chart
BE Daily Chart
Carrier Global Corporation (CARR)
Why the Strength
We wrote about Carrier in early June, which came a few months after its spinoff from the Raytheon/United Technologies merger, and discussed how COVID-19 has renewed the focus on clean air, and how Carrier was responding with a new Healthy Buildings Program. The program offers advanced solutions such as microscopic filtration systems, touchless building controls, safe start services (after shutdowns), air quality testing, and remote air monitoring and energy management, to provide healthy, safe, efficient, and productive indoor environments. Last week, the company launched its Healthy Homes Program, bringing consumers enhanced ventilation and filtration with its air conditioners, air purifiers and humidifiers, air scrubbers, fire and carbon monoxide detectors, as well as fire extinguishers, mold-killing lamps and other suppression products. And now, with COVID-19 re-surging around the country (and the resulting debate over how much/how fast to reopen businesses and schools), demand for these newer products and services should only go up. Of course, Carrier is also a general economic play, for as housing and business recovers, so too will demand for the firm’s products. (The company has around 18% of the HVAC market.) Q2 results will be out on July 30, with analysts looking for 25 cents in earnings per share and revenues of around $3.7 billion.
Technical Analysis
CARR came public (was spun off) at a great time, right near the March lows, so it’s no surprise it’s been uptrending since. Shares had a sharp dip in early June, followed by a rest for the remainder of that month, but CARR has since blasted out to new highs. If you want in, looks for dips of a point or so.
| Market Cap | $22.9B | EPS $ Annual (Dec) | |
| Forward P/E | 19 | FY 2018 | 3.16 |
| Current P/E | 10 | FY 2019 | 2.81 |
| Annual Revenue | $18.2B | FY 2020e | 1.38 |
| Profit Margin | 7.9% | FY 2021e | 1.64 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.89 | -10% | 0.35 | -27% |
| One qtr ago | 4.76 | 1% | 0.78 | -1% |
| Two qtrs ago | 4.76 | 1% | 0.78 | -1% |
| Three qtrs ago | 4.76 | 1% | 0.78 | -1% |
CARR Weekly Chart
CARR Daily Chart
D. R. Horton (DHI)
Why the Strength
We’re not huge fans of cyclical stocks, which can come and go quickly, but we’re getting more intrigued by housing, because (a) the sector has bounced back very impressively despite the lingering effects of the virus (housing starts rebounded 17% last month, while permits (a leading indicator) for single-family structures rose nearly 12%), and (b) the sector never really got “hot” in terms of construction activity during the last cycle, so if anything the country might be “underbuilt.” D.R. Horton is far from the sexiest name, but it’s probably the most direct way to play any building boom that is coming—it’s the largest homebuilder in the U.S., with operations all over the country and new homes that fit all types of buyers (though it tends to sell mid-level homes, with two-thirds priced under $300k). The big driver is the rebound in housing trends, but also important is that Horton never really got hit during the pandemic, either—while cancellation rates did pick up, both March and April saw the value of new homes closed rise 8%, while net homes sold rose mid single-digits in value. (Net sales orders for February through April as a whole were up 22% from a year ago, while the backlog was up 18%.) Horton is such a big firm that large growth numbers aren’t likely, but we’re thinking the current estimates (small increases in sales and earnings) could prove conservative should housing continue its rebound. It’s an intriguing big-picture play.
Technical Analysis
DHI is a big firm, but the stock can trend (up or down) in a meaningful way depending on the environment. Indeed, the stock doubled from the late 2018 lows to its highs earlier this year before crashing with the market in March. The bounce was fantastic, with shares rallying all the way back to 60 in May before consolidating for six weeks as the 10-week line caught up. Now DHI is moving up again, lifting to new price highs last week. We’re OK buying some here with a stop in the mid 50s.
| Market Cap | $23.1B | EPS $ Annual (Sep) | |
| Forward P/E | 13 | FY 2018 | 4.09 |
| Current P/E | 13 | FY 2019 | 4.29 |
| Annual Revenue | $18.5B | FY 2020e | 4.88 |
| Profit Margin | 10.7% | FY 2021e | 4.96 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 4.5 | 9% | 1.30 | 40% |
| One qtr ago | 4.02 | 14% | 1.05 | 38% |
| Two qtrs ago | 5.04 | 12% | 1.35 | 11% |
| Three qtrs ago | 4.9 | 27% | 1.26 | 7% |
DHI Weekly Chart
DHI Daily Chart
GDS Holdings Limited (GDS)
Why the Strength
The data center market in China is large (over 360 facilities and almost 200 data center providers in the country) and should get a lot larger going forward, with total square footage estimated to increase more than 60% during the next five years. That’s great news for GDS Holdings, which is a leading developer and operator of carrier-neutral data centers in China. Growth has been solid and steady for a long time, but there are a couple of recent developments have boosted interest in the stock. First, last month, two of its long-term investors—Hillhouse Capital and ST Telemedia Global Data Centres—agreed to purchase (via private placement) $505 million of newly issued shares of GDS at a price of 65; that increased their share ownership to 3.9% and 34.2%, respectively, so the smart money obviously sees better times ahead. (The proceeds will be used for operations and acquisitions.) The second potential catalyst was the announcement that GDS was considering listing in Hong Kong, possibly in early 2021, which could raise another $1 billion. (Both JD.com and NetEase recently listed in Hong Kong, with very successful debuts, raising $3.9 billion and $2.7 billion, respectively.) Of course, underlying all of this is a pristine track record of growth that continued right through Q1 (revenues up 32%, committed square footing up 44%, EBITDA up 49%), and demand could pick up further as the virus has accelerated the move of everything online. Thus, GDS has a great long-term story with a couple of near-term catalysts.
Technical Analysis
GDS is known for some choppy action and that’s what we saw earlier this year, with a sharp dip in March with everything else, and after the rebound, lots of ups and downs even as growth stocks went nuts. But the breakout finally came in early June (part of a stretch of 7 up weeks in a row) before the latest rest. This pullback could go on a bit, but grabbing shares near the 25-day line (around here) should work.
| Market Cap | $12.0B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.50 |
| Current P/E | N/A | FY 2019 | -0.50 |
| Annual Revenue | $637M | FY 2020e | -0.14 |
| Profit Margin | N/A | FY 2021e | 0.10 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 175 | 32% | -0.10 | N/A |
| One qtr ago | 169 | 40% | -0.11 | N/A |
| Two qtrs ago | 149 | 35% | -0.12 | N/A |
| Three qtrs ago | 143 | 49% | -0.11 | N/A |
GDS Weekly Chart
GDS Daily Chart
Plug Power (PLUG)
Why the Strength
We wrote up Plug Power three weeks ago and missed our buy price, but with some growth stocks pulling in, we’re going back to the well again to get in on weakness. While we’re not normally fans of very low-priced stocks (you usually get what you pay for in the market), Plug Power has been around for a while, is liquid and is just beginning what looks like a multi-year growth wave thanks to two big drivers. The first is its hydrogen fuel cells (hydrogen goes in, electricity is produced, heat and water are the only by-products; it’s greener and cheaper for customers), which are quickly being adopted in a bunch of transportation (30% of the country’s groceries are transported on vehicles that use its fuel cells, and there’s plenty of growth potential from there) and materials handling uses (forklifts are a giant opportunity, with firms like Walmart, Kroger, Fiat Chrysler and Sysco already customers, and there are millions more forklifts that could be retrofitted). Beyond that is Plug’s hydrogen infrastructure, which has taken a big leap thanks to its recent buyout of United Hydrogen—Plug is actually the country’s leading consumer of hydrogen, and should fuel cells grow in popularity, it thinks supplying hydrogen to others could eventually be a bigger market than selling fuel cells! During the next four years, management has a target to grow revenue nearly fivefold while cash flow (EBITDA) expands at a very healthy clip. Don’t invest in the rent money, but Plug looks like an interesting speculation that may finally be turning the corner.
Technical Analysis
PLUG broke out from a good-looking four-month base in June and had a quick, powerful, giant-volume advance, lifting from 6 to 10.5 before finally pulling in. But so far, we’re impressed with the pullback—volume has been drying up, and the depth of the dip certainly isn’t abnormal given the prior run. If you’re game, we think you can start small around here with a loose stop in the 7 area.
| Market Cap | $2.92B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.30 |
| Current P/E | N/A | FY 2019 | -0.36 |
| Annual Revenue | $249M | FY 2020e | -0.34 |
| Profit Margin | N/A | FY 2021e | -0.23 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 40.8 | 89% | -0.12 | N/A |
| One qtr ago | 91.7 | 53% | -0.06 | N/A |
| Two qtrs ago | 58.5 | 10% | -0.08 | N/A |
| Three qtrs ago | 58.5 | 66% | -0.08 | N/A |
PLUG Weekly Chart
PLUG Daily Chart
Saia Inc. (SAIA)
Why the Strength
Trucking is a massive industry, generating nearly $800 billion in revenue and moving 12 billion tons of freight in the U.S. last year. Although COVID put a crimp in freight volumes this spring, the industry is expected to bounce back to pre-COVID levels well before other major industries (the retail sales and housing recoveries will help). Saia is a Louisiana-based, less-than-truckload (LTL) shipper with more than 26,000 daily shipments via 169 terminals across the U.S. and offering extended and partner coverage to Canada, Mexico and Puerto Rico. One of the nation’s oldest trucking companies, Saia has benefited from a focus on improving service levels and offering competitive pricing, while building more terminals to increase market share. It achieved record top-line and bottom-line sales in Q1, and its LTL yield (a measure of efficiency and cost-effectiveness) rose for the 39th consecutive quarter (+3%). While COVID-related disruptions are expected to dent Q2 revenue and earnings, growth should return by the fourth quarter and continue in the next two years. For the year as a whole, analysts see earnings off just a bit this year before leaping in 2021, bolstered in part by lower fuel costs. It’s not revolutionary, of course, but more cyclical plays are setting up for an expected economic rebound later this year and into 2021, and Saia is one of the strongest. Earnings are expected July 29.
Technical Analysis
After tumbling from a pre-pandemic high of 104 in February, SAIA bottomed out in April, hitting a low of 61. The post-COVID rebound was excellent, actually bringing the stock to new highs at 199 before a four-week rest saw the stock meet up with its 10-week line. And now SAIA is freewheeling, with a modest-volume breakout earlier this month. With earnings coming up, we advise starting small and aiming for dips.
| Market Cap | $3.39B | EPS $ Annual (Dec) | |
| Forward P/E | 31 | FY 2018 | 3.96 |
| Current P/E | 29 | FY 2019 | 4.23 |
| Annual Revenue | $1.82B | FY 2020e | 4.08 |
| Profit Margin | 6.3% | FY 2021e | 5.36 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 446 | 9% | 1.06 | 25% |
| One qtr ago | 443 | 9% | 0.74 | -24% |
| Two qtrs ago | 469 | 10% | 1.25 | 17% |
| Three qtrs ago | 464 | 8% | 1.40 | 22% |
SAIA Weekly Chart
SAIA Daily Chart
Spotify (SPOT)
Why the Strength
Spotify smells like a fresh liquid leader in the market, with a strong story that’s only getting stronger; in fact, the company reminds us of a “new-age” Netflix, as it extends its dominance in streaming music and appears to have the pole position in podcasts. Music is still the main driver today: Spotify offers both free (ad supported, fewer features—163 million free users as of March) and premium service (no ads, more features—130 million paying subscribers); both segments are growing at 25%-plus rates, partially thanks to the stickiness of the offering (even among those who cancel, 70% come back within 45 days!) and continued expansion (it just entered 13 new markets across Europe). The real excitement these days is the podcast end of things, which is small today but growing quickly (listening trends have been up at triple-digit rates), and growth should accelerate as Spotify has made some huge splashes in recent weeks, signing deals for both “regular” podcasts (Joe Rogan, Michelle Obama, Kim Kardashian and others) as well as original content (stories on podcast via deals with DC Comics, Warner Brothers and Archie Comics), all of which should attract new users, increase the stickiness of the overall platform and eventually drive huge advertising revenue, too. The picture isn’t perfect, as Spotify continues to bleed red ink, but again, we think it’s following the Netflix model of sorts, investing heavily in one-of-a-kind content that will eventually produce huge profits and margins—and big investors are paying up for that future today. We like it.
Technical Analysis
SPOT etched a huge 20-month post-IPO base and broke out in mid May on excellent volume. But that was just the beginning—after a tight period, the stock leapt on what we call “double skyscrapers,” which are two giant-volume weekly advances just as a stock is breaking out. SPOT pulled back last week with everything else, but has also boomed back to new highs on good volume. It’s extended, but we think you can nibble here or (preferably) on weakness.
| Market Cap | $49.0B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -3.07 |
| Current P/E | N/A | FY 2019 | -1.15 |
| Annual Revenue | $7.90B | FY 2020e | -1.27 |
| Profit Margin | N/A | FY 2021e | -0.35 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.04 | 20% | -0.22 | N/A |
| One qtr ago | 2.08 | 22% | -1.28 | N/A |
| Two qtrs ago | 1.89 | 20% | 0.39 | N/A |
| Three qtrs ago | 1.7 | 28% | -0.48 | N/A |
SPOT Weekly Chart
SPOT Daily Chart
Vapotherm (VAPO)
Why the Strength
Even before COVID, respiratory diseases were among the leading causes of death and disability globally, with asthma alone afflicting 334 million people. Vapotherm is focused on making it a lot easier to breathe for patients with asthma, pneumonia, bronchiolitis and other ailments. Known for its Hi-VNI technology products, it provides mask-free, non-invasive ventilation by delivering heated, humidified and oxygenated air at a high velocity to patients. Its technology addresses many limitations of the present standard of respiratory care in hospitals, and it’s been a hit—more than two million patients have been treated with its systems, and it has a global installed base of over 17,000 units. The COVID-19 pandemic has resulted in increased demand for treating respiratory distress, and the firm has responded by ramping up production of its high-flow nasal cannula systems (should enable increased production of Precision Flow systems by up to 20 times pre-pandemic levels) in anticipation of a second virus wave. Vapotherm was also recently awarded a $10 million blanket purchase agreement from the U.S. Defense Department, which allows the DoD’s 51 hospitals to acquire Precision Flow units. Top-line growth had been slow and steady for a while, but there was a huge pickup in Q1, with a 55% increase due partly to increased pandemic-related sales, while analysts believe revenue grew an astonishing 180% in Q2 along with a 52% per-share earnings boost. Vapotherm puts its total global market at $1.5 billion, giving the firm a huge runway for future expansion. COVID’s persistence, meanwhile, should keep the growth story going from here. Earnings are expected on August. 3.
Technical Analysis
VAPO went public in November 2018, hit 22 a few weeks later and tested that level a few other times by the middle of last year. But then the stock hit the skids, with shares bottomed out in single-digit territory for months. But COVID changed everything, and VAPO has been in a steep uptrend since, and it’s completely ignored the recent growth stock selling. We wouldn’t chase it, but any shakeout would be tempting.
| Market Cap | $1.20B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -2.30 |
| Current P/E | N/A | FY 2019 | -2.74 |
| Annual Revenue | $55M | FY 2020e | -2.08 |
| Profit Margin | N/A | FY 2021e | -1.94 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 19.1 | 55% | -0.66 | N/A |
| One qtr ago | 13 | 11% | -0.60 | N/A |
| Two qtrs ago | 10.8 | 15% | -0.65 | N/A |
| Three qtrs ago | 12 | 14% | -0.76 | N/A |
VAPO Weekly Chart
VAPO 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 | |||||
| 7/6/20 | Alarm.com | ALRM | 64-67 | 73 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 255 |
| 5/4/20 | Bandwidth | BAND | ? | 90-94 | 133 |
| 6/22/20 | Big Lots | BIG | 32.5-35 | 39 | |
| 6/1/20 | Bill.com | BILL | 69-73 | 89 | |
| 7/6/20 | Biohaven Pharm. | BHVN | 68-72 | 74 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 26 | |
| 5/11/20 | Chegg | CHGG | ? | 58-62 | 77 |
| 3/23/20 | Cloudflare | NET | 19-21 | 38 | |
| 3/23/20 | Coupa Software | COUP | 124-132 | 316 | |
| 6/29/20 | Crispr Therapeutics | CRSP | 71.5-75 | 95 | |
| 4/20/20 | CrowdStrike | CRWD | 65-67.5 | 107 | |
| 6/8/20 | Datadog | DDOG | 72.5-77 | 92 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 432 | |
| 9/9/19 | DocuSign | DOCU | ? | 55-58 | 202 |
| 6/29/20 | Farfetch | FTCH | 16-17.5 | 22 | |
| 5/18/20 | Fastly | FSLY | 36-39 | 85 | |
| 5/26/20 | Horizon Therapeutics | HZNP | 45.5-48 | 59 | |
| 4/20/20 | Immunomedics | IMMU | 20.5-22 | 44 | |
| 3/16/20 | Inphi | IPHI | ? | 62.5-66 | 127 |
| 7/13/20 | Kinross Gold | KGC | 7.2-7.6 | 8 | |
| 6/22/20 | LGI Homes | LGIH | 84-87 | 111 | |
| 6/15/20 | Lululemon | LULU | ? | 291-301 | 327 |
| 6/8/20 | Marvell Tech | MRVL | 32.5-34 | 37 | |
| 5/11/20 | MercadoLibre | MELI | 750-790 | 1025 | |
| 6/29/20 | Meritage Homes | MTH | 71.5-74 | 84 | |
| 6/22/20 | Mersana Therapeutics | MRSN | 20-22 | 23 | |
| 6/15/20 | Novovax | NVAX | 47-50.5 | 138 | |
| 6/22/20 | Nuance Communications | NUAN | 23.5-25 | 27 | |
| 7/6/20 | Nu Skin Enterprises | NUS | 42.5-45 | 45 | |
| 3/30/20 | Nvidia | NVDA | 250-270 | 420 | |
| 3/30/20 | Okta | OKTA | ? | 118-126 | 213 |
| 7/13/20 | Pacira Pharmaceuticals | PCRX | 54-56 | 55 | |
| 6/1/20 | Pan American Silver | PAAS | 27-29 | 36 | |
| 4/27/20 | PayPal | PYPL | ? | 117-122 | 179 |
| 4/6/20 | Peloton | PTON | 27-29 | 65 | |
| 7/13/20 | Redfin | RDFN | 34.5-36.5 | 40 | |
| 6/22/20 | Restoration Hardware | RH | ? | 240-255 | 280 |
| 7/13/20 | Roku | ROKU | 147-154 | 150 | |
| 3/2/20 | Seattle Genetics | SGEN | ? | 107-111 | 184 |
| 5/26/20 | Spotify | SPOT | ? | 184-191 | 291 |
| 7/13/20 | Splunk | SPLK | 192-198 | 208 | |
| 6/29/20 | Staar Surgical | STAA | 56-59 | 58 | |
| 7/13/20 | Sunrun | RUN | 27.5-29.5 | 38 | |
| 10/28/19 | Teladoc | TDOC | 69-72 | 227 | |
| 11/11/19 | Tesla | TSLA | 320-335 | 1643 | |
| 6/8/20 | Thor Industries | THO | 101-106 | 112 | |
| 6/8/20 | Trade Desk | TTD | 338-358 | 458 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 263 | |
| 7/6/20 | Ultragenyx Pharm. | RARE | ? | 83-88 | 88 |
| 5/11/20 | Wingstop | WING | 116-122 | 137 | |
| 7/13/20 | XP Inc. | XP | 43-46 | 45 | |
| 2/24/20 | Zoom Video | ZM | ? | 96-104 | 269 |
| 4/6/20 | Zscaler | ZS | 61-64 | 128 | |
| WAIT | |||||
| None this week | |||||
| SELL RECOMMENDATIONS | |||||
| 5/26/20 | BJ’s Wholesale | BJ | 34-36.5 | 40 | |
| 6/22/20 | PagSeguro | PAGS | 33.5-35.5 | 38 | |
| 7/6/20 | Upwork | UPWK | 13-14 | 15 | |
| 10/28/19 | Vertex Pharm. | VRTX | ? | 191-196 | 303 |
| DROPPED | |||||
| None this week | |||||
The next Cabot Top Ten Trader issue will be published on July 27, 2020.