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Current Market Outlook
Last week brought some upside-down action, with the leading growth stocks doing OK (some up, some down) while the lagging names (small- and mid-caps, economically sensitive sectors) did very well. And that trend continued today, with growth stocks getting hit while the major indexes ramped up. Overall, the upmove in the beaten-down areas means the intermediate-term trend has survived its first test, and while taking on some water, growth stocks remain in fine shape, with very little abnormal selling. (In fact, pullbacks in some of the hot names could offer up some solid entry points, but we’ll see how that goes.) All in all, the divergent environment isn’t ideal and will probably lead to further crosscurrents; it remains important to pick your stocks and entry points carefully, and taking some partial profits on the way up isn’t a bad idea, either. But overall, most of the evidence remains positive, so you should, too. Our Market Monitor remains at a level 7.
This week’s list has many names that have just come to life after long rest periods. Our Top Pick is Spotify (SPOT), which has always had a good story, but now has decisively broken out following a meaningful catalyst.
| Stock Name | Price | ||
|---|---|---|---|
| Allogene Therapeutics (ALLO) | 48.94 | ||
| Big Lots (BIG) | 43.12 | ||
| BJs Wholesale (BJ) | 36.69 | ||
| Guardant Health (GH) | 88.34 | ||
| Horizon Therapeutics (HZNP) | 49.89 | ||
| Neurocrine Biosciences (NBIX) | 123.40 | ||
| 1Life Healthcare (ONEM) | 34.01 | ||
| Spotify (SPOT) | 272.82 | ||
| Wayfair (W) | 167.03 | ||
| Wix.com (WIX) | 302.53 |
Allogene Therapeutics (ALLO)
Why the Strength
Allogene has joined the parade of biotech outfits being rewarded for good news. The company is a clinical pioneer in the development of allogeneic chimeric antigen receptor T cell (AlloCAR T™) therapies for cancer. Essentially, that means it’s working with genetically engineered cells to develop readily available, “off the shelf” cancer therapies. Allogene just published good results for its phase 1 clinical trial of cell therapy drug candidate ALLO-501 and monoclonal antibody drug candidate ALLO-647 to treat advanced non-Hodgkin lymphoma. The company has been invited to present the results at the American Society of Clinical Oncology (ASCO) meeting at the end of this month. The study involved a dose escalation and showed that some of the nine patients got good results at lower doses, which is a big deal. But the bigger deal is that these therapies come from donors or cell lines, which allows them to be manufactured at significantly lower cost and on a larger scale than current therapies. Of course, this is all very early stage: Next up is ALPHA2, a Phase 1 trial with abbreviated dose escalation of ALLO-501A, the next generation version of ALLO-501. And there’s nothing to speak of when it comes to numbers; Allogene recently maintained its 2020 guidance for a loss of $270 million. That said, analysts are raising their price targets for the company, Allogene’s $500 million-plus cash position gives it plenty of flexibility and many see it as a potential takeover candidate by a larger pharmaceutical firm if further data proves fruitful.
Technical Analysis
While ALLO is obviously speculative, the chart is intriguing. The company came public in October 2018 and was range bound for more than a year after that. Then it broke down with everything else during the market’s crash, further discourating investors. But the positive phase 1 clinical data has created a powerful breakout—ALLO not only soared on the news in mid May but has continued higher since, representing a complete change in character. We suggest aiming for dips if you want in.
| Market Cap | $6.77B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.87 |
| Current P/E | N/A | FY 2019 | -1.83 |
| Annual Revenue | N/M | FY 2020e | -2.29 |
| Profit Margin | N/A | FY 2021e | -2.67 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | N/M | N/M | -0.50 | N/M |
| One qtr ago | N/M | N/M | -0.58 | N/M |
| Two qtrs ago | N/M | N/M | -0.50 | N/M |
| Three qtrs ago | N/M | N/M | -0.41 | N/M |
ALLO Weekly Chart
ALLO Daily Chart
Big Lots (BIG)
Why the Strength
Discount retailers have done quite well lately as consumers are increasingly frugal in an uncertain economy; last week, Ollie’s made Top Ten, and this week, both Big Lots and BJ’s Wholesale made the cut. Big Lots operates a nationwide chain of closeout retail stores and is widely known for deep discounts on a wide array of consumer goods, including clothing, food, electronics and furniture. It’s kept all its stores open during the pandemic and recently reported strong online business and higher comparable store sales in April and the quarter-to-date. Even before the virus hit, the company’s burgeoning e-commerce segment was doing a good business and its buy online, pickup in store (BOPIS) offering helped it capitalize on strong online traffic growth. None of this is to say growth is going gangbusters—the quarterly report is due out this Thursday (May 29), and sales are expected to be flat while earnings will be down from a year ago. But a big part of the stock’s strength is company specific—Big Lots is undergoing a strategic transformation, a big part of which involved a recent sale-leaseback transaction that resulted in the company getting $550 million in cash. Once finalized this quarter, the firm will use the money to fully pay down its credit line and likely do some share repurchases, too; indeed, the stock was priced for ruin a few months ago, and even today, shares trade at less than 10 times next year’s expected earnings while offering a dividend yield of around 3.6%. Combine that with the aforementioned industry tailwinds, and we think buyers will remain interested.
Technical Analysis
BIG isn’t typical of the stocks we normally cover as it doesn’t have a lot of long-term momentum behind it, but (a) it’s been struggling for years, which has knocked out all the weak hands, and (b) the rebound from the March lows has been abnormally strong, with BIG up moves seven of eight weeks and moving out to one-year highs. We’re not opposed to nibbling ahead of earnings, though we’re more interested in seeing if BIG can shake out a bit after the report.
| Market Cap | $1.27B | EPS $ Annual (Jan) | |
| Forward P/E | 12 | FY 2018 | 4.04 |
| Current P/E | 9 | FY 2019 | 3.67 |
| Annual Revenue | $5.32B | FY 2020e | 2.81 |
| Profit Margin | 5.8% | FY 2021e | 3.48 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.61 | 1% | 2.39 | -11% |
| One qtr ago | 1.17 | 2% | -0.18 | N/A |
| Two qtrs ago | 1.25 | 2% | 0.53 | -10% |
| Three qtrs ago | 1.3 | 2% | 0.92 | -3% |
BIG Weekly Chart
BIG Daily Chart
BJs Wholesale (BJ)
Why the Strength
BJ’s Wholesale is an easy story to tell, with 218 warehouse-style clubs and 146 gas stations (mostly in the eastern U.S.) that, like many peers (Costco, Sam’s Club), give members (around 5.5 million of them) access to big discounts for buying all sorts of goods (especially grocery goods, which make up 85% of BJ’s sales) in bulk. It’s been a fine company for years, but nothing for growth investors to get too excited about, with sales growth hovering just above zero for many years. But the virus has changed everything—the stock has turned strong thanks to a jaw-dropping Q1 report that not only crushed estimates but bodes well for the quarters ahead. Total sales grew 21%, comparable club sales excluding gasoline increased by a whopping 27% and digital sales more than tripled while profits (EBITDA up 56%) and free cash flow (around $3 per share in Q1 despite higher compensation!) went bananas. And it wasn’t just a one-time bump, either. April (the third month of its quarter) brought comparable store growth of 23%, BJ signed up 40% more new members in Q1 than they did a year ago, and management expects elevated levels of new member growth in Q2 as well; these are strong leading indicators for business both in terms of membership income and, of course, merchandise sales. Of course, none of this means BJ’s is set for years of rapid growth, but there is a long-term opportunity here; the company has around 25,000 members per store, compared to 60,000 for Costco, so if it’s beginning to improve that metric (not to mention a few new stores here and there), the upside is big. As it stands, it looks like this year’s step-function increase in business will stick—analysts see the bottom line leaping 52% this year and remaining elevated in 2021.
Technical Analysis
BJ came public in June 2018, had a good first couple of months and then went dead; it traded mostly between 20 and 30 for the next 18 months. The stock did show some life in March, but it was still sitting south of its 2018 highs last week when the Q1 report changed everything—BJ exploded higher Thursday and Friday on massive volume (heaviest weekly volume ever) as big investors piled in. If you want in, we’re fine taking a stab at it here or on further weakness.
| Market Cap | $5.04B | EPS $ Annual (Jan) | |
| Forward P/E | 18 | FY 2019 | 1.37 |
| Current P/E | 19 | FY 2020 | 1.46 |
| Annual Revenue | $13.9B | FY 2021e | 1.93 |
| Profit Margin | 2.5% | FY 2022e | 1.91 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.8 | 21% | 0.69 | 165% |
| One qtr ago | 3.47 | 2% | 0.40 | -9% |
| Two qtrs ago | 3.23 | 0% | 0.41 | 5% |
| Three qtrs ago | 3.35 | 1% | 0.39 | 18% |
BJ Weekly Chart
BJ Daily Chart
Guardant Health (GH)
Why the Strength
Guardant’s story is so big and futuristic it’s almost hard to believe—instead of having to do invasive tissue biopsies, Guardant’s platform (dubbed the 360) can take a blood sample and, through a proprietary and patented combination of chemistry, sequencing and bioinformatics, can produce results similar (often better and more complete) than tissue samples, with much quicker turnaround times, too. The 360 serves the advanced cancer patient market today (700,000 people; lung and colorectal cancer are two areas of focus), which is itself is very underserved; far less than half of patients get the recommended genetic testing, but as that changes, it will be a boon for the industry’s growth. Guardant also has its Omni genetic profiling platform for biopharmaceutical companies, which helps them accelerate drug development (test volume up 40% in Q1). Thanks to a growing market, better insurance coverage and a boatload of studies proving these platforms work, Guardant is expanding quickly—despite some deceleration, revenues are still growing rapidly, and while that is likely to slow this year (fewer doctor visits due to the virus), there’s little doubt the firm has a long runway of growth ahead of it even in the core advanced cancer area. And the future could be much larger than that—the company has begun testing thousands of early-stage colorectal cancer patients (started last October), and if those results are positive, it could allow Guardant to enter the massive market for early-stage cancer testing, which is two and a half times as large as the advanced cancer market. Like we said, it’s a very big idea that should have a long runway of growth ahead of it.
Technical Analysis
GH came public in October 2018 and had a huge run to near 110 in March 2019, but then the sellers showed up—after retesting the high in August of last year, it was nearly cut in half, and then it look another sharp slide during the market’s crash this year. Frankly, the initial bounce from its lows near 60 wasn’t impressive, but the buyers showed up in early May, driving GH up nearly 30 points in just a few days, so today’s dip is acceptable. We’re OK snagging some shares here, albeit with a loose stop in the lower 80s.
| Market Cap | $9.17B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.00 |
| Current P/E | N/A | FY 2019 | -0.84 |
| Annual Revenue | $245M | FY 2020e | -1.45 |
| Profit Margin | N/A | FY 2021e | -1.15 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 67.5 | 84% | -0.29 | N/A |
| One qtr ago | 62.9 | 91% | -0.27 | N/A |
| Two qtrs ago | 60.9 | 181% | -0.14 | N/A |
| Three qtrs ago | 54 | 179% | -0.13 | N/A |
GH Weekly Chart
GH Daily Chart
Horizon Therapeutics (HZNP)
Why the Strength
Companies working on COVID treatments are getting most of the attention in the medical field, but lost in the shuffle are those helping patients with underserved diseases. Horizon falls in this category, and a blowout first quarter has helped the stock catch fire. This biopharmaceutical firm acquires, rebrands and reprices drugs for sale in the U.S., with many that treat inflammatory conditions, including a few that take aim at rare diseases. One of the firm’s big growth drivers is Tepezza, which is the first and only FDA-approved treatment for thyroid eye disease; management earlier guided for net sales of $30 to $40 million for the drug in 2020, yet it delivered sales of $23.5 million in Q1 alone! Full-year sales estimates were subsequently increased to more than $200 million, easily offsetting COVID’s expected impact on sales for the rest of Horizon’s drug portfolio. All told, first quarter sales were $356 million (+27%), led by its rapidly growing orphan drug segment, which cranked out $245 million of revenue (up 47%). Even better, earnings of 44 cents per share nearly doubled estimates. All of that good news caused Horizon to hike full-year net sales guidance to $1.4 to $1.45 billion, and analysts expect earnings to increase for the next three quarters and really take off in 2021. Seeing as how growth comes via acquisitions, Horizon will never be looked upon as favorably as a biotech that develops its own patented blockbuster treatments, but there’s no doubt business is picking up much faster than expected.
Technical Analysis
HZNP has been in a solid uptrend since bottoming near 10 back in 2017, though shares have had lots of pullbacks and rest periods along the way. The decline earlier this year was sharp, but it immediately began bouncing back with the market and hasn’t stopped since—the Q1 report caused a gap to new highs and HZNP has followed through nicely on the upside. Given the extended run in recent weeks, we suggest aiming to enter on pullbacks.
| Market Cap | $9.45B | EPS $ Annual (Dec) | |
| Forward P/E | 28 | FY 2018 | 1.89 |
| Current P/E | 23 | FY 2019 | 1.90 |
| Annual Revenue | $1.38B | FY 2020e | 1.80 |
| Profit Margin | 23.4% | FY 2021e | 2.60 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 356 | 27% | 0.44 | 42% |
| One qtr ago | 364 | 2% | 0.56 | -16% |
| Two qtrs ago | 336 | 3% | 0.64 | -2% |
| Three qtrs ago | 321 | 6% | 0.49 | 2% |
HZNP Weekly Chart
HZNP Daily Chart
Neurocrine Biosciences (NBIX)
Why the Strength
Another biotech in the news is Neurocrine, which develops treatments for endocrine-related diseases and disorders, including diabetes, osteoporosis, thyroid cancer, Addison’s disease and Parkinson’s disease. Its biggest hit is Ingrezza, which is the only single-dose drug approved to treat Tardive Dyskinesia (TD), the involuntary jerky movements of the face and body (a side effect of anti-psychotic drugs) that affect half a million people in the U.S. Investors sent up a cheer when the firm released first quarter earnings, which showed a doubling of patients using Ingrezza in Q1. That drug’s sales lifted 69%, and along with royalty payments for Orilissa (in partnership with AbbVie; it treats endometriosis, which can cause infertility in women), led to a big 72% gain in Neurocrine’s revenue. Earnings of $0.82 per share handily topped Wall Street’s estimates of $0.56 and nearly tripled from a year ago. Beyond those two drugs, the FDA recently accepted Neurocrine’s Investigational New Drug application for ACT-709478, a channel blocker for the treatment of a rare form of pediatric epilepsy; the company inked a partnership with Swiss pharma Idorsia to develop and commercialize a drug for a rare pediatric epilepsy drug; and the FDA approved Ongentys, a Parkinson’s treatment, which came from Neurocrine’s collaboration with Portuguese pharmaceutical company Bial (that drug is expected to start bringing in earnings this year). All in all, this is a de-risked biotech story with real sales and earnings, as well as plenty of expansion potential going forward.
Technical Analysis
NBIX had a big run to 127 in late 2018, but since then has built one giant consolidation—and it may be getting going now. Shares dipped as low as 65 in late 2018 and 72 in March of this year, but it’s really turned a corner this month, spiking all the way back toward its old highs on three straight weeks of accelerating buying volume before and after the Q1 report. If you want to nibble here, you can, but we’re going to set our range lower, thinking a shakeout is possible.
| Market Cap | $11.5B | EPS $ Annual (Dec) | |
| Forward P/E | 39 | FY 2018 | 1.89 |
| Current P/E | 35 | FY 2019 | 1.90 |
| Annual Revenue | $887M | FY 2020e | 1.80 |
| Profit Margin | 33.4% | FY 2021e | 2.60 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 237 | 71% | 0.82 | 183% |
| One qtr ago | 244 | 86% | 1.05 | 162% |
| Two qtrs ago | 222 | 46% | 0.90 | 200% |
| Three qtrs ago | 184 | 89% | 0.71 | 545% |
NBIX Weekly Chart
NBIX Daily Chart
1Life Healthcare (ONEM)
Why the Strength
The shutdown has accelerated the growth of the do-it-from-home paradigm, and even medical treatments are now part of that trend. One Medical (also called 1Life, but it’s all the same operation) operates a chain of more than 85 primary healthcare clinics based on a subscription model, charging $199 per year in exchange for allowing access to in-person primary care, online resources and remote doctor visits. It partners with over 7,000 employers, accepts most health insurance and has 455,000 members, which is up 25% from a year ago. All in all, it proves to be a win-win for everyone, with greater access for consumers and cost savings for the healthcare system and employers. For big investors, the attraction here is the rapid and reliable growth the firm has produced and should continue to crank out—Q1 revenues grew at the same rate as subscriptions (up 25%), and given its historical retention rate of nearly 90% for members and 97% for corporate clients, it’s a good bet One Medical will grow ever-larger going forward. Indeed, management meaningfully hiked membership growth expectations following its quarterly report (it expects to end the year with 510,000 or so, up more than 20% year-on-year). Earnings are deep in the red as One Medical focuses on expansion, but the EBITDA loss is much smaller, and partially thanks to the recent IPO, the company has a ton of cash ($375 million) and just $2 million of debt. Given the trends in healthcare, it’s likely One Medical will grow much larger in the years to come.
Technical Analysis
After IPO’ing in February, ONEM spent its first three months building a base between the 15 (its lows during the March crash) and 28 (which was repeated resistance over many months). The blastoff happened in early May, and the stock raced ahead to 40 within just a few days before finally deflating some over the past three trading days. Expect big volatility, but if you want in, we think today’s drop is buyable.
| Market Cap | $4.81B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.36 |
| Current P/E | N/A | FY 2019 | -0.42 |
| Annual Revenue | $292M | FY 2020e | -0.88 |
| Profit Margin | N/A | FY 2021e | -0.50 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 78.8 | 25% | -0.40 | N/A |
| One qtr ago | 77.4 | 33% | -0.16 | N/A |
| Two qtrs ago | 69.6 | 40% | -0.12 | N/A |
| Three qtrs ago | 66.2 | 28% | -0.09 | N/A |
ONEM Weekly Chart
ONEM Daily Chart
Spotify (SPOT)
Why the Strength
Spotify is the leader in the streaming music space, becoming the go-to place for licensed music from artists in all genres, offering both free, ad-supported content as well as subscription services. At the end of March, the firm had 286 million total active subscribers, 130 million of which paid for premium subscriptions (both figures were up 31% from a year ago) both in the U.S. and overseas. But Spotify has it eyes on much more than music, dipping its toes into the podcast business during the past year; it’s even gone so far as to invest in podcast studios to create original content. Some 37% of the U.S. population (104 million folks, up 16% from a year ago) now listens to a podcast at least once a month. And what has investors so enthusiastic right now is the company’s recent announcement that it had landed Joe Rogan’s popular podcast, The Joe Rogan Experience, for the price of $100 million. Rogan is a former comedian, mixed martial arts commentator and host of Fear Factor. Rather than left- or right-minded, Rogan has interviewed folks from each side of that spectrum, keeping his conversations civil, and most important for investors, he was the #1 podcaster last year, earning $30 million and reaching an estimated 190 million downloads per month (his figures). Wall Street sees it as a game changer, with the addition of new and younger subscribers and the ability to attract big-time advertisers when the switch officially happens on September 1. (Rogan’s sponsors currently include 23andme, Blue Apron, Square’s Cash App, Casper, Dollar Shave Club, Postmates and Quibi.) All told, Spotify has always had a good, growing music business, and it now appears that the firm’s podcasting division will provide another big growth opportunity.
Technical Analysis
SPOT came public in 2018, got hit during the market decline later that year and has been range-bound since, flopping around in a wide range between 110 and 160. Interestingly, the stock held its prior lows during the market crash in March and quickly raced back to its highs in late April. It needed to digest that move for a bit, but last week’s Joe Rogan news caused a breakout, with SPOT ripping higher on three days in a row of big volume. We’re OK snagging some shares here or (preferably) on further weakness.
| Market Cap | $35.0B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -3.07 |
| Current P/E | N/A | FY 2019 | -1.15 |
| Annual Revenue | $7.90B | FY 2020e | -1.14 |
| Profit Margin | N/A | FY 2021e | -0.15 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($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
Wayfair (W)
Why the Strength
The market for home-related purchases has been surprisingly strong this spring, with some major retailers reporting outsized sales during the pandemic. Wayfair, which sells furniture and home goods online, was among the big winners as consumers moved increasingly to online buying. In the first quarter, the company’s sales momentum grew across all major product categories and in all regions of the U.S., Canada, the U.K. and Germany as it attracted bunches of new customers. The firm delivered solid numbers in the latest quarter, with total revenue up 20% to $2.3 billion, repeat customers accounting for nearly 70% of total orders and total active customers reaching 21 million (up 29% from a year ago). However, as with many stocks this earnings season, the real sizzle is what management said on the conference call; during the first five weeks of the new (current) second quarter, Wayfair’s revenue was up a whopping 90% from a year ago, representing a dramatic acceleration from recent quarters. To be clear, the top brass said it was impossible to know how long such a pickup would last, but they sounded optimistic a permanent sea change toward online furniture buying was taking place due to the virus. Wayfair’s bottom line remains deep in the red, but cash flow is starting to turn the corner, with Q2 expected to see a positive EBITDA figure, and that’s mostly due to company-specific cost cuts taken of late—the virus-induced revenue surge will only help that situation. Of course, this remains a stock that’s often bet against by shorts (17.7 million shares short = 29% of the float), but there’s little doubt that the wind is at Wayfair’s back today.
Technical Analysis
We’ve been around many decades, but it’s hard to find a replica for W’s chart today—shares topped at 174 in March of last year and trended lower for months and months, finally crashing to as low as 22 (!!) in March of this year. But since then, the snapback has been equally as jaw dropping, with shares exploding higher seven weeks in a row all the way to 197 before backing off. The volatility is clearly insane, but this first pullback is likely buyable—though if you enter, keep it small and use a loose stop.
| Market Cap | $15.6B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -4.09 |
| Current P/E | N/A | FY 2019 | -8.03 |
| Annual Revenue | $9.51B | FY 2020e | -4.11 |
| Profit Margin | N/A | FY 2021e | -3.10 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.33 | 20% | -2.30 | N/A |
| One qtr ago | 2.53 | 26% | -2.80 | N/A |
| Two qtrs ago | 2.31 | 35% | -2.23 | N/A |
| Three qtrs ago | 2.34 | 42% | -1.35 | N/A |
W Weekly Chart
W Daily Chart
Wix.com (WIX)
Why the Strength
Wix has always had a good growth story, and the stock has gotten going after a long rest as the virus is beginning to goose results. This Israeli firm has one of the leading website design/creation offerings out there, including products for payments, customer service, marketing and even app development, too. It’s used by millions of people, proprietorships and other small- and mid-sized businesses—most build a basic site for free (though Wix will run some of its ads on those sites), but many sign up for premium subscriptions to get some of the added value offerings mentioned above. Results have been solid for many years (especially free cash flow, which is much larger than earnings), and the virus-induced move online has accelerated demand for Wix’s platform in a big way—in Q1, revenues rose 24% and free cash flow was up 33% (to nearly $1 per share), but more importantly, April saw a huge spike in demand, with a 123% gain in merchants using its payment solution, a tripling in new premium member additions and many specific products (167% gain in Wix Restaurant subscriptions; 580% gain in Wix Stores subscriptions, etc.) going nuts. Most important, this isn’t just a one-time boost; based on how the firm’s business works, all of these sign-ups should lead to both a near-term pickup (collections should increase nearly 30% in the current quarter) and a longer-term rise in business, as Wix’s customers tend to spend much more money over time as they expand their usage of the firm’s offerings. If you believe the virus has permanently pushed more business online, then this company should be one of the big beneficiaries.
Technical Analysis
WIX has had a big run since 2016, but like so many stocks, it lost steam in the middle of last year and had two big drops after that—in this stock’s case, it fell from 156 to 112 last fall, and then from 156 to 77 during this year’s crash. Shares did snap back nicely after that second low, but the action since early May has been eye-opening, as the stock has soared nearly 100 points (!) before and after the Q1 report. We wouldn’t chase it here, but shakeouts of a few percent would be tempting.
| Market Cap | $11.1B | EPS $ Annual (Dec) | |
| Forward P/E | 211 | FY 2018 | 1.07 |
| Current P/E | 183 | FY 2019 | 1.17 |
| Annual Revenue | $803M | FY 2020e | 0.98 |
| Profit Margin | N/A | FY 2021e | 1.60 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 216 | 24% | -0.02 | N/A |
| One qtr ago | 205 | 25% | 0.39 | -7% |
| Two qtrs ago | 197 | 26% | 0.42 | 5% |
| Three qtrs ago | 185 | 27% | 0.34 | c |
WIX Weekly Chart
WIX 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 | |||||
| 4/20/20 | Acadia Pharma | ACAD | 48-51 | 51 | |
| 2/18/20 | Acceleron Pharma | XLRN | 88-92 | 98 | |
| 4/20/20 | Advanced Micro Devices | AMD | 53-56 | 53 | |
| 4/27/20 | Alnylam Pharm | ALNY | 136-141 | 136 | |
| 3/16/20 | Apple | AAPL | 238-248 | 317 | |
| 4/20/20 | ASML Holdings | ASML | 285-295 | 320 | |
| 5/11/20 | Atlas Air Worldwide | AAWW | 36.5-38.5 | 39 | |
| 3/30/20 | Atlassian | TEAM | 139-144 | 173 | |
| 5/4/20 | Bandwidth | BAND | ? | 90-94 | 107 |
| 3/30/20 | Barrick Gold | GOLD | 18-19.5 | 25 | |
| 5/11/20 | Chegg | CHGG | ? | 58-62 | 62 |
| 3/23/20 | Chewy | CHWY | ? | 29-32 | 42 |
| 4/13/20 | Ciena | CIEN | 42.5-44 | 54 | |
| 3/23/20 | Cloudflare | NET | 19-21 | 28 | |
| 3/23/20 | Coupa Software | COUP | 124-132 | 218 | |
| 4/20/20 | CrowdStrike | CRWD | 65-67.5 | 79 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 382 | |
| 9/9/19 | DocuSign | DOCU | ? | 55-58 | 129 |
| 5/4/20 | DraftKings | DKNG | 19.5-21.5 | 33 | |
| 5/18/20 | Fastly | FSLY | 36-39 | 39 | |
| 4/6/20 | Five9 | FIVN | 74.5-78 | 96 | |
| 5/18/20 | Fortinet | FTNT | 137-143 | 138 | |
| 4/20/20 | Franco Nevada | FNV | 122-126 | 142 | |
| 4/27/20 | Freshpet | FRPT | 74-78 | 71 | |
| 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 | 121 |
| 4/27/20 | MarketAxess | MKTX | 420-440 | 471 | |
| 5/11/20 | MercadoLibre | MELI | 750-790 | 834 | |
| 3/23/20 | Moderna | MRNA | 25.5-28 | 58 | |
| 5/18/20 | MyoKardia | MYOK | 106-110 | 109 | |
| 3/9/20 | Newmont Corp | NEM | 46.5-48.5 | 59 | |
| 3/30/20 | Nvidia | NVDA | 250-270 | 349 | |
| 3/30/20 | Okta | OKTA | ? | 118-126 | 184 |
| 5/18/20 | Ollie’s Bargain Outlet | OLLI | 73-77 | 89 | |
| 4/27/20 | PayPal | PYPL | ? | 117-122 | 147 |
| 4/6/20 | Pelaton | PTON | 27-29 | 42 | |
| 4/27/20 | Pinduoduo | PDD | ? | 48-51.5 | 65 |
| 5/11/20 | Schrodinger | SDGR | 53-56 | 69 | |
| 5/18/20 | Scotts Miracle Gro | SMG | 139-145 | 135 | |
| 3/2/20 | Seattle Genetics | SGEN | ? | 107-111 | 152 |
| 4/20/20 | Shopify | SHOP | 575-615 | 768 | |
| 10/28/19 | Teladoc | TDOC | 69-72 | 164 | |
| 11/11/19 | Tesla | TSLA | 320-335 | 819 | |
| 5/11/20 | TG Therapeutics | TGTX | 17.5-19 | 20 | |
| 4/20/20 | Tradeweb Markets | TW | 50-52 | 63 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 196 | |
| 10/28/19 | Vertex Pharm. | VRTX | ? | 191-196 | 267 |
| 4/13/20 | Wheaton Precious Metals | WPM | 31-32.5 | 43 | |
| 5/11/20 | Wingstop | WING | 116-122 | 119 | |
| 2/24/20 | Zoom Video | ZM | ? | 96-104 | 164 |
| 4/6/20 | Zscaler | ZS | 61-64 | 77 | |
| WAIT | |||||
| 5/18/20 | Avalara | AVLR | 97-100 | 102 | |
| 5/18/20 | Beyond Meat | BYND | 122-128 | 133 | |
| SELL RECOMMENDATIONS | |||||
| 4/27/20 | Exelixis | EXEL | 25-26.5 | 24 | |
| 5/4/20 | Lattice Semi | LSCC | 20-21.5 | 25 | |
| 3/30/20 | Netflix | NFLX | 355-375 | 415 | |
| 4/6/20 | RingCentral | RNG | 213-225 | 251 | |
| 4/20/20 | Sea Ltd. | SE | 51-53 | 83 | |
| 4/27/20 | Snap | SNAP | 15.5-17 | 17 | |
| DROPPED | |||||
| None This Week | |||||
The next Cabot Top Ten Trader issue will be published on June 1, 2020.