Still a Bunch of Crosscurrents
Current Market Outlook
This morning’s positive news of a possible COVID vaccine helped the major indexes surge, but it also revealed some of the crosscurrents that remain—today saw a big bout of rotation, as leading growth titles were mostly lower while the lagging (usually economically-sensitive) areas did well. Even so, we don’t advise getting too involved in the day-to-day news or gyrations; overall, there’s still more positive evidence than negative, with the intermediate-term trend still up (today’s action helped on that front) and just about every leading stock remaining in a firm uptrend. Given the crosscurrents, we don’t advise going hog wild on the buy side, but we continue to think holding your strong performers (maybe with some partial profits here or there) and looking for decent entry points on strong names is the way to go. While we were going to knock our Market Monitor down late last week, the action of the past two sessions has us keeping it at a level 7.
This week’s list is a bit more diversified than in recent weeks, with strength seen in a few more sectors. Our Top Pick is PayPal (PYPL), which appears to have resumed its run after a multi-month rest period. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 102.00 | ||
| Beyond Meat (BYND) | 132.87 | ||
| Fastly (FSLY) | 39.31 | ||
| Fortinet Inc. (FTNT) | 137.53 | ||
| Inphi (IPHI) | 120.16 | ||
| MyoKardia (MYOK) | 108.56 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| PayPal (PYPL) | 147.00 | ||
| Scotts Miracle-Gro (SMG) | 155.72 | ||
| Tesla, Inc. (TSLA) | 818.87 |
Avalara (AVLR)
Why the Strength
Figuring out interstate sales and use tax rates can be a daunting task for companies that do cross-border business. To do the job, more retailers are turning to Avalara’s suite of sales and use-tax products, which help clients automate sales tax calculations and return filing processes, greatly simplifying and easing the regulatory burden. The firm’s cloud-based geolocation technology calculates rates instantly, decides which products and services are taxable and files tax reports instantly. Avalara rose to prominence in 2018 when the Supreme Court ruled that all U.S. e-commerce companies must charge sales tax (if levied by a state) for online transactions, and the firm is again commanding attention thanks to a lockdown-related surge in online sales. The firm’s Q1 report was impressive, with total revenue rising 31% to $111 million, while subscription and returns revenue (95% of total revenue) rose 35%. The company said revenues were impacted in March and April by COVID, but added that most clients were insulated from the crisis. It also guided for Q2 revenues of $110 million and subscription and returns revenue growth in the low-to-mid 20% area. Though earnings aren’t yet in the black, gross margins are a respectable 71%, and it estimates the total addressable U.S. market at around $8 billion, leaving plenty of room for growth. With a growing number of smaller and mid-sized firms seeking an automated solution to the sales tax puzzle, there’s no reason Avalara can’t post many years of steady growth from here.
Technical Analysis
AVLR had a big run up to 94 in the middle of last year before doing a double dip (to 64 in October, and then as low as 56 during the market’s crash this year) like many of its cloud software peers. Shares didn’t look great for the first couple of weeks after the low, but they finally kicked into gear in mid-April and continued to levitate to new highs two weeks ago following earnings. We think aiming to enter on modest weakness makes sense.
| Market Cap | $8.00B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.68 |
| Current P/E | N/A | FY 2019 | -0.12 |
| Annual Revenue | $409M | FY 2020e | -0.20 |
| Profit Margin | N/A | FY 2021e | 0.01 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 111 | 31% | -0.05 | N/A |
| One qtr ago | 108 | 40% | -0.03 | N/A |
| Two qtrs ago | 98.5 | 41% | -0.03 | N/A |
| Three qtrs ago | 91.3 | 43% | -0.03 | N/A |
AVLR Weekly Chart
AVLR Daily Chart
Beyond Meat (BYND)
Why the Strength
While many conventional meat producers are facing production issues (supply chain hiccups, COVID outbreaks, etc.), companies that produce so-called alternative meats are thriving. The most successful (and well known) alt-meat producer is Beyond Meat, which uses plant-based substitutes to make products that closely mimic their livestock-based counterparts, with similar texture, aroma and appearance. (We’ve tried them a couple of times—not bad at all.) The entire industry is growing rapidly as consumers look for plant-based food alternatives, and Beyond is certainly one of the leaders in the field, with its various products (breakfast sausage, fried chicken and ground beef are recent new offerings) available at 43,000 retail outlets and 51,000 foodservice locations in the U.S. and overseas (including a test with McDonalds in a few dozen restaurants earlier this year and an expansion with Starbucks in China). Growth has been phenomenal as Beyond gains share, and the stock is strong today because those trends continued in Q1; U.S. retail and foodservice revenues each grew just over 150% from a year ago, while total revenues leapt 141% (international foodservice growth was “only” 57%). Encouragingly, gross profit margins expanded nicely (38.8% vs. 26.8% a year ago) and Beyond even turned a small profit. Growth will likely slow some going forward, but with meat shortages at many locations and with summer grilling season picking up steam, the company sees a lot of opportunity; in the nine weeks ended May 2, alternative meat sales at grocery stores were up 264% (compared to 45% for regular meat) as stockpiling took effect. Bigger picture, Beyond has just a fraction of the $1.4 trillion global meat industry, so there’s no reason it can’t grow many-fold in the years ahead.
Technical Analysis
BYND came public last April and wowed investors for the next three months, basically quadrupling over that period. But then came the post-IPO droop, and it was a doozy—it didn’t stop until the stock had fallen back to 48 during the market’s crash in March. The initial bounce wasn’t anything to write home about, but BYND did pick up steam in late April and then gapped above its 200-day line on earnings two weeks ago and has continued higher since. Shares remain very volatile, but we’re OK nabbing a small position on dips.
| Market Cap | $8.34B | EPS $ Annual (Dec) | |
| Forward P/E | 846 | FY 2018 | -0.49 |
| Current P/E | N/A | FY 2019 | -0.17 |
| Annual Revenue | $355M | FY 2020e | 0.16 |
| Profit Margin | 1.9% | FY 2021e | 0.56 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 97.1 | 141% | 0.03 | N/A |
| One qtr ago | 98.5 | 213% | -0.01 | N/A |
| Two qtrs ago | 92 | 250% | 0.10 | N/A |
| Three qtrs ago | 67.3 | 287% | -0.16 | N/A |
BYND Weekly Chart
BYND Daily Chart
Fastly (FSLY)
Why the Strength
In the white-hot world of cloud computing, a trend has emerged to host content closer to end users. This process increases the speed and efficiency of cloud networks, allowing for heavier traffic loads and forming the basis of what’s known as edge cloud computing—it’s become increasingly in vogue as consumers demand ever-faster experiences online, whether that’s election results, buying tickets, streaming music/video or more. Fastly is a top edge cloud provider that offers content delivery, Internet security, load balancing and video and streaming services; it’s essentially a next-generation content delivery network, helping it to post rapid growth in recent years, which has only accelerated during the shut-in. The success was obvious in Q1, which saw revenue growth of 38% and a same-customer revenue growth rate of 30% as big names like Twitter, Yelp, Airbnb and New York Times expand their usage. (Total customer count was up a more modest 5% to 1,837 in Q1.) Management said platform traffic increased in Q1 along with social distancing measures and expects the trend to continue, significantly boosting its Q2 revenue outlook to around $71 million (up 53% from a year ago) while expecting its net loss will continue shrinking, possibly hitting breakeven; for the year, analysts see the top line rising nearly 30%. Bigger picture, Fastly believes it’s playing in a market worth $18 billion, and that total is increasing 25% a year, providing a very long runway of growth should management continue to make the right moves.
Technical Analysis
FSLY came public last May, spent two and a half months base building and then had a huge two weeks in August, rallying to new highs at 35. But then came the dreaded post-IPO droop, which took shares down to 18 in December and as low as 11 during the market’s crash. Like most of the current crop of leaders, FSLY rebounded nicely right away (five weeks up in a row off the bottom), and after a two-week rest, exploded to new highs following earnings on its two heaviest volume weeks ever. We suggest aiming for small positions on any retreat.
| Market Cap | $3.69B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.28 |
| Current P/E | N/A | FY 2019e | -0.38 |
| Annual Revenue | $218M | FY 2020e | .-13 |
| Profit Margin | N/A | FY 2021e | -0.06 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 62.9 | 38% | -0.06 | N/A |
| One qtr ago | 58.9 | 44% | -0.10 | N/A |
| Two qtrs ago | 49.8 | 35% | -0.09 | N/A |
| Three qtrs ago | 46.2 | 34% | -0.11 | N/A |
FSLY Weekly Chart
FSLY Daily Chart
Fortinet Inc. (FTNT)
Why the Strength
Cybersecurity is more imperative than ever now that more and more people are working from home, and companies that provide cyber threat management solutions are rushing to fill this need. Fortinet is an established player in the field, providing end-to-end cybersecurity for enterprise customers, which eliminates the need to build a system with multiple vendors. It offers a robust range of products and services, with its SD-WAN and VPN offerings seeing rising demand from larger firms in COVID’s wake since they allow users to avoid delays in accessing applications and can handle order-of-magnitude workload increases. It’s worth noting that Fortinet is one of the fastest growing SD-WAN providers and the only major player in that market that provides security and SD-WAN networking in a single solution. Growth has been strong and steady for a while, and that shows no sign of stopping; in Q1, billings rose 21% to $668 million, while total revenue increased 22% to $577 million (including an 18% increase in product revenue and a 24% increase in service revenue) and earnings of 60 cents per share (+30%) easily topped expectations. For Q2, the firm expects billings to increase 7% sequentially, with sales and earnings showing healthy increases, too. All told, Fortinet has always had a solid story and growth numbers, and if anything, those trends are picking up steam as more of everything moves online.
Technical Analysis
FTNT had a huge run into late 2018, then went on to consolidate into October of last year. The run after that was a beauty as shares left behind that big base, but then the market’s crash pulled FTNT all the way back to multi-month lows. Now, though, it looks like the stock is resuming its post-October 2019 uptrend—after a quick recovery, shares broke out nicely on earnings and have continued higher since. Modest dips are possible but we’re not expecting a major pullback.
| Market Cap | $23.1B | EPS $ Annual (Dec) | |
| Forward P/E | 49 | FY 2018 | 1.84 |
| Current P/E | 53 | FY 2019 | 2.47 |
| Annual Revenue | $2.26B | FY 2020e | 2.80 |
| Profit Margin | 18.1% | FY 2021e | 3.26 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 577 | 22% | 0.60 | 30% |
| One qtr ago | 614 | 21% | 0.76 | 29% |
| Two qtrs ago | 548 | 21% | 0.67 | 37% |
| Three qtrs ago | 522 | 18% | 0.58 | 41% |
FTNT Weekly Chart
FTNT Daily Chart
Inphi (IPHI)
Why the Strength
Inphi continues to look like the market’s top networking-related play, as it’s one of the only firms out there that’s firing on all cylinders. The company’s products are all about speed, helping quicken data transmissions for a variety of end users and environments, be it within a data center (it has the dominant market share with its PAM4 platforms; Amazon and Google are upgrading now, with Alibaba, Facebook and others likely to in the near future), interconnecting data centers (partnership with Microsoft for its ColorZ platform is helping now, and the next-gen system should boost business in the first half of 2021) or for 5G-related mid- and back-haul connections. Demand is booming thanks to a combination of data center upgrade cycles and the boom in bandwidth demand as the world has gone heavily mobile. First quarter results were outstanding (partially thanks to the closing of its acquisition of eSilicon), and while Huawei (an Inphi customer) is once again a political football, the plan was for that company to become a small (low single digit percentage of revenues) portion of business starting in the second half of this year. Thus, there could be a couple of small hiccups if the trade war re-escalates, but management believes it will crank out quarter-over-quarter growth well into 2021 as business ramps, and Wall Street agrees; analysts see the bottom line booming 65% this year and another 31% next, and that could likely prove conservative if current trends continue. This remains a great mid-cap story.
Technical Analysis
IPHI bottomed with the market in March below its 200-day line, but it’s been a sterling performer since then, first showing excellent volume right off the bottom, then pushing to new closing highs in early April and nailing the century mark by the end of that month. There was a brief pullback to the 25-day line ahead of earnings, but that was snapped up, too. Now IPHI is again resting a bit, and that could continue—but the uptrend remains very much intact. We’re OK snagging some here or on further dips.
| Market Cap | $4.83B | EPS $ Annual (Dec) | |
| Forward P/E | 41 | FY 2018 | 0.86 |
| Current P/E | 58 | FY 2019 | 1.61 |
| Annual Revenue | $423M | FY 2020e | 2.66 |
| Profit Margin | 22.6% | FY 2021e | 3.49 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 139 | 70% | 0.62 | 88% |
| One qtr ago | 103 | 19% | 0.47 | 4% |
| Two qtrs ago | 94.2 | 21% | 0.45 | 50% |
| Three qtrs ago | 86.3 | 24% | 0.35 | 133% |
IPHI Weekly Chart
IPHI Daily Chart
MyoKardia (MYOK)
Why the Strength
MyoKardia has five treatments in the works for serious heart disease, focusing on small molecule therapeutics aimed at the proteins of the heart that regulate cardiac muscle contraction. As with all development-stage outfits, the company is very news-driven, but the stock has gone nuts thanks to some positive headlines last week: MyoKardia announced that mavacamten, its experimental treatment for hypertrophic cardiomyopathy, met its primary goal and all secondary targets in a Phase III clinical trial. Hypertrophic cardiomyopathy is a genetic heart condition in which the heart muscle becomes abnormally thick and makes it harder for the heart to pump blood; it can cause shortness of breath, chest pain or abnormal heart rhythms (arrhythmias) and affects one in every 500 people or so. The big question in the trial was drug safety, and the drug not only improved symptoms in 251 patients but passed the safety tests with flying colors during its 30-week study. Next up, the company will present the data to a professional powwow later this year and plans to submit a new drug application in the first quarter of 2021. Analysts estimate mavacamten could eventually (seven or eight years from now) rake in sales of $3.7 billion in the U.S. and $2.1 billion in the EU. Of course, the numbers right now are non-existent, but it looks like MyoKardia has a potential blockbuster on hand. Consider it an interesting speculation.
Technical Analysis
Shares of MYOK meandered for most of 2018 and 2019, though shares did move out to new highs around the start of this year. That move stalled out, though, and shares retreated back to 43 at the market’s nadir in March. But that’s all changed now; last week, MYOK exploded to new highs on the Phase III results and it’s continued higher since. We suggest aiming for further dips if you want in.
| Market Cap | $5.64B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.76 |
| Current P/E | N/A | FY 2019 | -6.17 |
| Annual Revenue | N/M | FY 2020e | -6.05 |
| Profit Margin | N/A | FY 2021e | -6.61 |
| 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 | -1.50 | N/M |
| One qtr ago | N/M | N/M | -1.31 | N/M |
| Two qtrs ago | N/M | N/M | -3.07 | N/M |
| Three qtrs ago | N/M | N/M | -0.83 | N/M |
MYOK Weekly Chart
MYOK Daily Chart
Ollie’s Bargain Outlet (OLLI)
Why the Strength
Ollie’s was a leading cookie-cutter story from late 2016 through late 2018, but a combination of bad luck (weather issues), inventory mismanagement and some other snafus leading to crimped margins and growth; the loss of its founder late last year also damaged investor perception, and of course the shut-in hasn’t helped. However, that’s the past; Ollie’s is strong again because big investors increasingly see the firm resuming its multi-year growth trend. As for the story, the company is the leading non-apparel player in the $65 billion closeout market, selling toys, furniture (including patio furniture, which is likely to enjoy pent-up demand as states reopen), books, flooring, food, pet supplies, sporting goods, housewares and much more through 345 stores in the U.S. While the shut-in has hurt in some ways, in some areas it’s helped (the poor economy is boosting opportunities for Ollie’s to acquire goods at very cheap prices), and after a couple of sour quarters (the one ending January saw same-store sales down 4.9%), most think the arrow will soon turn up—some see same-store sales getting back to their historical 1% to 3% growth rate by year-end, which along with consistent new store openings (the count was up 14% last year; the top brass believes it can nearly triple its store base in the U.S. before all is said and done) should drive earnings meaningfully higher later this year and into 2021. The next report is coming next Thursday (May 28) after the close.
Technical Analysis
OLLI rallied all the way to 98 at the end of 2018 and 103 in June of last year before topping out; it fell to 54 last August, to 47 in early February of this year and as low as 29 during the market’s crash. However, it’s completely changed character since then; not only did OLLI bounce nicely right away, it’s persisted higher, notching eight weeks up in a row and pushing all the way back into the mid 70s. Earnings are a risk, but we’re OK grabbing a few shares here or (preferably) on dips.
| Market Cap | $4.69B | EPS $ Annual (Jan) | |
| Forward P/E | 40 | FY 2018 | 1.83 |
| Current P/E | 37 | FY 2019 | 1.96 |
| Annual Revenue | $1.41B | FY 2020e | 1.82 |
| Profit Margin | 11.5% | FY 2021e | 2.36 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 422 | 7% | 0.74 | 4% |
| One qtr ago | 327 | 15% | 0.41 | 28% |
| Two qtrs ago | 334 | 16% | 0.35 | -13% |
| Three qtrs ago | 325 | 18% | 0.46 | 12% |
OLLI Weekly Chart
OLLI Daily Chart
PayPal (PYPL)
Why the Strength
PayPal is one of the leaders in the digital payment movement, helping millions of merchants and consumers more easily and safely buy, sell and (via its popular Venmo platform) transfer money online; the firm ended March with 325 million active accounts, and in Q1, those customers engaged in 3.3 billion transactions (up 15% from a year ago) worth $191 billion (up 18%). This is a long-term growth trend, of course, and that’s propelled the firm’s sales and earnings steadily higher over the years, but the reason the stock has come back to life is that the virus shut-in, which hurt business initially, is now pushing a wave of new users to PayPal. While Q1 saw sales growth slow and earnings flatten out, April saw an average of 250,000 new accounts per day (more than double new account additions from a year ago), while revenue (up 20%) and gross merchandise volume (up 22%) reaccelerated in a big way. In fact, on May 1, PayPal had its largest single day of transactions ever, bigger than even Black Friday or Cyber Monday last year! Thus, while larger peers like Mastercard (down 16%) and Visa (down 7%) are expected to see earnings slip this year, PayPal is expecting growth even as consumer spending as a whole slumps—analysts see the bottom line up 12% this year and 23% next, but both figures could prove low if the trends seen in April persist. There is some risk that, as the world returns to normal, some of the online spending surge will shift back to the brick-and-mortar world, but there’s little doubt that most of these new customers will stick around. All in all, this remains a solid long-term growth story, and it has a near-term catalyst, too.
Technical Analysis
PYPL was one of many stocks that topped out in the middle of last year (121 in July) and had two big dips afterwards, first to 95 in October, and then down to 82 during the market’s crash this year. The stock’s recovery from the lows was excellent, but it was the quarterly report two weeks ago that really changed the landscape; PYPL gapped to new highs on its heaviest daily volume in more than two years, traded tightly for a few days and nosed to new highs today, despite weakness in growth stocks. We’re OK grabbing a position here or on dips.
| Market Cap | $170B | EPS $ Annual (Dec) | |
| Forward P/E | 43 | FY 2018 | 2.42 |
| Current P/E | 49 | FY 2019 | 2.96 |
| Annual Revenue | $18.3B | FY 2020e | 3.33 |
| Profit Margin | 17.0% | FY 2021e | 4.11 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 4.62 | 12% | 0.66 | 0% |
| One qtr ago | 4.96 | 17% | 0.83 | 20% |
| Two qtrs ago | 2.38 | 19% | 0.76 | 31% |
| Three qtrs ago | 4.31 | 12% | 0.71 | 22% |
PYPL Weekly Chart
PYPL Daily Chart
Scotts Miracle-Gro (SMG)
Why the Strength
Scotts has two hands in the weed business—annihilating your lawn weeds and providing marijuana growers with equipment. Not surprisingly, it’s the latter business that’s causing all the investor excitement with Scotts. The company’s Hawthorne Gardening subsidiary makes hydroponic equipment, lighting and nutrient solutions that it sells to U.S. cannabis businesses, and that segment is growing nicely. In the first quarter, Hawthorne’s sales soared 60% to $230 million, and the segment’s revenues are expected to grow north 30% for the remainder of the year, boosting Scotts’s total sales by 6% to 8%. That’s pretty amazing considering that the pot industry—after an incredible climb in the last few years—has hit more than a few potholes in recent quarters. But Hawthorne’s market is expanding, and it’s effectively the ammunition supplier to the armies fighting the cannabis wars. Meanwhile, the rest of Scotts’s business is also doing great as more people are stuck in their house, spending more time taking care of their lawns and gardens. For its second quarter, the company posted EPS of $4.50 on sales of $1.38 billion, both of which beat beat estimates (it’s topped expectations three of the past four quarters). And the future looks promising: The company said it recently recorded its “strongest seven-day period in company history, with consumer purchases of more than $190 million at its largest four retail partners.” The 1.6% dividend yield is a plus, too.
Technical Analysis
SMG had a really nice breakout in late January and looked ready for a solid upmove, but the market yanked it down during the crash. But now it appears to effectively be resuming that move—SMG has been in a persistent advance since early April, easily moving out to new highs, including a string of big-volume up days earlier this month. You could nibble here or (preferably) on a little weakness.
| Market Cap | $7.80B | EPS $ Annual (Sep) | |
| Forward P/E | 27 | FY 2018 | 3.71 |
| Current P/E | 16 | FY 2019 | 4.47 |
| Annual Revenue | $3.50B | FY 2020e | 5.30 |
| Profit Margin | 18.4% | FY 2021e | 5.84 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1383 | 16% | 4.50 | 24% |
| One qtr ago | 366 | 23% | -1.12 | N/A |
| Two qtrs ago | 498 | 170% | -0.91 | N/A |
| Three qtrs ago | 1170 | -50% | 3.11 | 16% |
SMG Weekly Chart
SMG Daily Chart
Tesla, Inc. (TSLA)
Why the Strength
Tesla CEO Elon Musk is frequently in the news, and that’s been the case recently; he won the battle to open the company’s Fremont, California factory after he defied Alameda County’s shutdown order (the country backed off), and rumor has it that Musk is close to choosing Austin, Texas (the other contender is Tulsa, OK) for its fourth manufacturing site to make the Model Y and the Cybertruck. Of course, the stock is strong because of more than that; the bulls expect Tesla to be making more than one million electric vehicles (EVs) by 2022, with demand for its newer vehicles strong in the U.S. and with significant growth in Europe and China (its Shanghai manufacturing facility is once again operating at full capacity). Industry watchers are waiting on a rumored June announcement of significant battery improvements for its Model 3, perhaps bringing the cost to manufacture them under $100 per kWH and expanding vehicle driving range, which could lead to price reductions/margin enhancements, and boost Tesla’s addressable market. Supposedly, the batteries can be charged up to 4,000 times and are good for a million miles and could be as durable as those found in gasoline-powered autos. The company’s numbers have turned around the past couple of quarters, and while the shut-in has dropped estimates some, analysts still see a solid profits this year and north of $12 per share in 2021.
Technical Analysis
TSLA’s Q3 report last year changed everything, kicking off what turned into an unreal run for the stock up until late January. Since then, the stock crashed with the market (all the way back to 350!) and had a huge recovery to around 800, and so far this month, it’s basically been consolidating sideways. We think TSLA is acting fine; you could start a position here or on dips, with the idea of averaging up on a push above 850.
| Market Cap | $148B | EPS $ Annual (Dec) | |
| Forward P/E | 217 | FY 2018 | -1.33 |
| Current P/E | 193 | FY 2019 | 0.02 |
| Annual Revenue | $26.0B | FY 2020e | 3.71 |
| Profit Margin | 3.8% | FY 2021e | 12.91 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 5.99 | 32% | 1.24 | N/A |
| One qtr ago | 7.38 | 2% | 2.14 | 11% |
| Two qtrs ago | 6.3 | -8% | 1.91 | -34% |
| Three qtrs ago | 6.35 | 59% | -1.12 | N/A |
TSLA Weekly Chart
TSLA 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.
| Date | Stock | Symbol | Top Pick | Original Buy Range | 5/18/2020 |
| HOLD | |||||
| 4/20/20 | Acadia Pharma | ACAD | 48-51 | 52 | |
| 2/18/20 | Acceleron Pharma | XLRN | 88-92 | 105 | |
| 4/20/20 | Advanced Micro Devices | AMD | 53-56 | 55 | |
| 4/27/20 | Alnylam Pharm | ALNY | 136-141 | 145 | |
| 3/16/20 | Apple | AAPL | 238-248 | 315 | |
| 4/20/20 | ASML Holdings | ASML | 285-295 | 305 | |
| 5/11/20 | Atlas Air Worldwide | AAWW | 36.5-38.5 | 38 | |
| 3/30/20 | Atlassian | TEAM | 139-144 | 182 | |
| 5/4/20 | Bandwidth | BAND | ? | 90-94 | 111 |
| 3/30/20 | Barrick Gold | GOLD | 18-19.5 | 27 | |
| 5/11/20 | Chegg | CHGG | ? | 58-62 | 62 |
| 3/23/20 | Chewy | CHWY | ? | 29-32 | 41 |
| 4/13/20 | Ciena | CIEN | 42.5-44 | 51 | |
| 3/23/20 | Cloudflare | NET | 19-21 | 28 | |
| 3/23/20 | Coupa Software | COUP | 124-132 | 210 | |
| 4/20/20 | CrowdStrike | CRWD | 65-67.5 | 76 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 414 | |
| 9/9/19 | DocuSign | DOCU | ? | 55-58 | 123 |
| 5/4/20 | DraftKings | DKNG | 19.5-21.5 | 30 | |
| 4/27/20 | Exelixis | EXEL | 25-26.5 | 26 | |
| 4/6/20 | Five9 | FIVN | 74.5-78 | 104 | |
| 4/20/20 | Franco Nevada | FNV | 122-126 | 147 | |
| 4/27/20 | Freshpet | FRPT | 74-78 | 74 | |
| 5/4/20 | Halozyme | HALO | 22.5-24 | 24 | |
| 4/20/20 | Immunomedics | IMMU | 20.5-22 | 34 | |
| 3/16/20 | Inphi | IPHI | ? | 62.5-66 | 109 |
| 5/4/20 | Lattice Semi | LSCC | 20-21.5 | 24 | |
| 4/27/20 | MarketAxess | MKTX | 420-440 | 493 | |
| 5/11/20 | MercadoLibre | MELI | 750-790 | 795 | |
| 3/23/20 | Moderna | MRNA | 25.5-28 | 80 | |
| 3/30/20 | Netflix | NFLX | 355-375 | 453 | |
| 3/9/20 | Newmont Corp | NEM | 46.5-48.5 | 66 | |
| 3/30/20 | Nvidia | NVDA | 250-270 | 350 | |
| 3/30/20 | Okta | OKTA | ? | 118-126 | 179 |
| 4/27/20 | PayPal | PYPL | 117-122 | 146 | |
| 4/6/20 | Pelaton | PTON | 27-29 | 44 | |
| 4/27/20 | Pinduoduo | PDD | ? | 48-51.5 | 66 |
| 4/6/20 | RingCentral | RNG | 213-225 | 263 | |
| 4/20/20 | Sea Ltd. | SE | 51-53 | 69 | |
| 5/11/20 | Schrodinger | SDGR | 53-56 | 59 | |
| 3/2/20 | Seattle Genetics | SGEN | ? | 107-111 | 159 |
| 4/20/20 | Shopify | SHOP | 575-615 | 738 | |
| 4/27/20 | Snap | SNAP | 15.5-17 | 17 | |
| 10/28/19 | Teladoc | TDOC | 69-72 | 172 | |
| 11/11/19 | Tesla | TSLA | 320-335 | 814 | |
| 5/11/20 | TG Therapeutics | TGTX | 17.5-19 | 20 | |
| 4/20/20 | Tradeweb Markets | TW | 50-52 | 62 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 183 | |
| 10/28/19 | Vertex Pharm. | VRTX | ? | 191-196 | 284 |
| 4/13/20 | Wheaton Precious Metals | WPM | 31-32.5 | 45 | |
| 5/11/20 | Wingstop | WING | 116-122 | 122 | |
| 2/24/20 | Zoom Video | ZM | ? | 96-104 | 165 |
| 4/6/20 | Zscaler | ZS | 61-64 | 74 | |
| WAIT | |||||
| None This Week | |||||
| SELL RECOMMENDATIONS | |||||
| 4/13/20 | American Tower | AMT | 238-248 | 236 | |
| 3/23/20 | Gilead Sciences | GILD | 69-72 | 75 | |
| 3/16/20 | Repligen | RGEN | 83-86 | 136 | |
| 3/23/20 | Smartsheet | SMAR | 41-43.5 | 54 | |
| DROPPED | |||||
| 5/4/20 | Bill.com | BILL | 52.5-55.5 | 76 | |
| 5/4/20 | Datadog | DDOG | 43-45 | 67 | |
| 5/4/20 | West Pharm. | WST | 182-189 | 218 | |
The next Cabot Top Ten Trader issue will be published on May 26, 2020.