Weight of the Evidence Remains Positive
Last week brought some renewed chop and crosscurrents, with broader indexes finding some sellers and a few stocks hitting potholes before or after earnings. Moreover, we’re seeing indications that complacency has made a quick comeback, and with many good-looking stocks set to report earnings over the next two weeks, some near-term selling wouldn’t surprise us. Even so, all of this looks normal in the context of where the market has come from: The prior three weeks were excellent, the intermediate-term trend is pointed up and the vast majority of stocks are acting well. Could we see another change in character, with the market falling back into its spin-cycle ways of 2021? It’s always possible, but we go with the weight of the evidence, which today remains mostly positive. We’ll leave our Market Monitor at a level 7 today.
This week’s list is another well-rounded one, with some recent earnings winners and stocks from a variety of industries. Our Top Pick is Enphase Energy (ENPH), which appears to be getting going from a deep base after earnings. We prefer entering on a bit of weakness if possible.
| Stock Name | Price | ||
|---|---|---|---|
| Albemarle Corporation (ALB) | 256 | ||
| Bonanza Creek Energy (BCEI) | 56 | ||
| Coinbase (COIN) | 331 | ||
| Dexcom (DXCM) | 627 | ||
| Enphase Energy (ENPH) | 240 | ||
| J.B. Hunt (JBHT) | 196 | ||
| Medpace (MEDP) | 226 | ||
| Marvell Technology Group (MRVL) | 69 | ||
| SLAB (SLAB) | 193 | ||
| WOLF (WOLF) | 131 |
Albemarle Corporation (ALB)
Why the Strength
The lithium market is heating up as tight supplies and rising demand from the electric vehicle (EV) market (lithium is a key input into EV batteries) push prices to record highs. Specialty chemicals maker Albemarle makes additives and intermediates for several industries, but lithium has been the firm’s focus of late. Albemarle just agreed to invest in two new lithium conversion facilities in China that will each have a production capacity of 50,000 metric tons per year of lithium hydroxide, used in EV batteries. The investment underscores the company’s increasing push toward mining and processing the metal; at a recent investor event, management said it expects lithium segment sales to increase by an average of 26% annually between now and 2026. (If realized, this would more than triple the current size of Albemarle’s lithium division.) Moreover, Albemarle expects a four-fold EBITDA increase for the segment by 2025 (from this year’s expected $445 million) and believes rising prices will continue well into 2022, as supplies remain tight and new lithium deposit discoveries remain largely inaccessible (due to environmental regulations). Big picture, industry forecasts call for EVs to account for nearly 20% of all new car sales by 2025, which is why the firm is putting more of its eggs in the lithium basket. Plus, the stock just got an upgrade from a major Wall Street institution (a reason for the strength). Looking ahead, management expects full-year 2022 EBITDA to be up around 30% from this year due to higher pricing and volumes for lithium and stronger performance for catalysts, while analysts see earnings catapulting 49%. The Q3 report is due Wednesday morning.
Technical Analysis
After peaking at 185 in January, ALB spent five months rounding out a base before getting back in gear on upside in July and August, with a string of eight weeks up in a row, including five on big volume. Shares again ran into resistance near 250, with the last two months bringing a normal cup-shaped base, with shares beginning to pick up steam last Friday. We’re OK nibbling ahead of earnings and adding if the reaction is positive.
| Market Cap | $26.8B | EPS $ Annual (Dec) | |
| Forward P/E | 67 | FY 2019 | 6.04 |
| Current P/E | 58 | FY 2020 | 4.12 |
| Annual Revenue | $3.23B | FY 2021e | 3.66 |
| Profit Margin | 13.5% | FY 2022e | 5.46 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 774 | 1% | 0.89 | 3% |
| One qtr ago | 829 | 12% | 1.10 | 10% |
| Two qtrs ago | 879 | -11% | 1.17 | -32% |
| Three qtrs ago | 747 | -15% | 1.09 | -29% |
ALB Weekly Chart
ALB Daily Chart
Bonanza Creek Energy (BCEI)
Why the Strength
Like many of its peers, Bonanza Creek is being helped by cost controls and elevated energy prices, but this story is more about a series of transformative moves the company is embarking on: Bonanza Creek bought a firm called HighPoint Resources earlier this year, and is merging with Extraction Oil & Gas and another outfit named Crestone Partners, resulting in a new entity (to be called Civitas) that will be the leading pure play operation in the DJ Basin (525,000 net acres, 1,300 drilling locations). But this combination is about much more than just getting bigger—when things get tied up in the weeks ahead, Civitas will have one of the lowest leverage ratios in the energy sector (0.3x debt to EBITDAX), one of the lowest cost structures in the industry and a balanced output (40% oil, 35% gas, 25% liquids); indeed, even at $55 oil and $2.75 gas, the firm should have around 150 drilling sites with return rates of at least 100%! To be fair, Colorado (where much of the DJ Basin is located) has become less welcoming of drilling, but even so, there appears to be huge upside here—Bonanza already pays a solid dividend (2.5% annual yield), is likely to hike that further once the mergers are wrapped up (rising to a 3.3% yield) and will still likely be spinning off another 10%-plus of its market cap in free cash flow each year. As far as small caps go, we like it.
Technical Analysis
Given its small size, BCEI can have some big moves in both directions, and after finally hitting a wall in June near 50, the stock did suffer an outsized correction, fading 37% until it found support at its 200-day line in August. But after that, shares not only rallied, but did so persistently, with the wobbles since earnings looking normal. We’ll set our buy range down a bit from here.
| Market Cap | $1.65B | EPS $ Annual (Dec) | |
| Forward P/E | 9 | FY 2019 | 5.70 |
| Current P/E | 7 | FY 2020 | 6.10 |
| Annual Revenue | $483M | FY 2021e | 5.77 |
| Profit Margin | 29.4% | FY 2022e | 9.67 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 190 | 223% | 1.79 | 258% |
| One qtr ago | 156 | 331% | 1.19 | 999% |
| Two qtrs ago | 74.2 | 23% | 0.88 | -48% |
| Three qtrs ago | 62.6 | -21% | 3.89 | 337% |
BCEI Weekly Chart
BCEI Daily Chart
Coinbase (COIN)
Why the Strength
If you’re looking for an in-depth write-up about the various cryptocurrencies, look elsewhere—we don’t pretend to be experts on all the different machinations of crypto. But whether this movement leads to a new, open financial system or not, it’s clear that perception continues to move in the sector’s favor, with these currencies becoming more accepted by various people and payment firms out there. There are an increasing number of ways to play the group (including many ETFs), but Coinbase is the one that intrigues us most: It certainly looks like the NYSE or Nasdaq of the crypto world, with the leading platform for both individuals (8.8 million users in Q2) and institutions (9,000 total have signed on, including 10% of the largest 100 hedge funds!) to buy, sell and store bitcoin and other products thanks to its deep liquidity and some proprietary order execution algorithms. And while transaction volume is the real driver right now (making up 95%-plus of revenue), and bringing more products to the platform is a key growth initiative (bitcoin now makes up “just” 47% of assets on the platform; Ethereum is 24% and all others are 30%), Coinbase is also expanding into adjacent offerings (both by itself and through partners), even including a debit card to allow users to pay using their Coinbase crypto holdings at millions of merchants around the world. The risk here is that a sustained downtrend in bitcoin and other crypto assets could lead to a huge decline in trading volume (indeed, analysts see a big retrenchment in earnings next year), but right now, there’s no doubt growth has been amazing, not just in sales and earnings (see table below), but via trading volume ($462 billion in Q2, up 38% from the prior quarter!) and users (up 44% sequentially). The next report is coming November 9.
Technical Analysis
COIN came public in April and promptly splattered all over the floor, falling from an IPO day high of 460 to a low of 208 in May. But then the stock improved its standing, not by going up but by spending five months building a solid bottom in the 210 to 225 area. And now, for the first time, we’re seeing legitimate bullish action in COIN, with a five-day buying volume cluster two weeks ago, and follow-on buying since. A shakeout ahead of earnings could be an opportunity for a small stake.
| Market Cap | $68.0B | EPS $ Annual (Dec) | |
| Forward P/E | 26 | FY 2019 | -0.15 |
| Current P/E | 24 | FY 2020 | 1.64 |
| Annual Revenue | $4.93B | FY 2021e | 12.39 |
| Profit Margin | 72.1% | FY 2022e | 7.01 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2228 | 999% | 8.16 | 999% |
| One qtr ago | 1801 | 845% | 3.92 | 999% |
| Two qtrs ago | 585 | 495% | 0.90 | N/A |
| Three qtrs ago | 315 | 99% | 0.41 | 925% |
COIN Weekly Chart
COIN Daily Chart
Dexcom (DXCM)
Why the Strength
Dexcom isn’t a household name, but it has one of the best, most straightforward and lucrative long-term growth stories out there. The firm is one of (if not the) leader in continuous glucose monitors (CGMs), an industry that’s in the middle of a massive growth wave as it offers far better results for diabetics, keeping glucose levels within recommended ranges far more often than intermittent monitoring. According to estimates from earlier this year, “only” 40% of Type 1 U.S. diabetics and 50% of intensive Type 2 diabetics use a CGM, and the percentage is far lower in the massive non-intensive Type 2 market and overseas, so the sector has plenty of upside left. As for Dexcom itself, the firm’s latest G6 CGM was a step-function improvement over other players in the sector (it was the first to eliminate finger sticks, for one) and is integrated into some top insulin pumps (including Insulet’s and Tandem’s), and the G6 continues to sell very well—sales have been cranking ahead at 25% to 30% rates in recent quarters. But the company isn’t standing pat, with some recent approvals in the digital realm (its Dexcom ONE solution consists of a sensor, transmitter and the firm’s new app, providing glucose readings every five minutes), and the big catalyst could be its G7 CGM (launch in Europe likely in Q4; submitted for approval in the U.S. within a few weeks), which is much smaller, has a quicker warm-up time, a longer wear time and is fully disposable. After a flat-ish earnings year in 2021 (due to heavier investments in sales and marketing), analysts see the bottom line resuming its solid growth path next year.
Technical Analysis
DXCM’s began to re-emerge from a year-long rest in May, with what became a run of 12 weeks up in a row, including a gap to new price highs. There were some ups and downs after that, though net-net, shares made no progress for the next 10 weeks. But now the bulls are back at it—shares broke out nicely on very solid (2.5x average) volume last Friday after earnings. Some volatility is possible, even likely, but we think DXCM is headed higher.
| Market Cap | $59.7B | EPS $ Annual (Dec) | |
| Forward P/E | 249 | FY 2019 | 1.84 |
| Current P/E | 197 | FY 2020 | 3.10 |
| Annual Revenue | $2.32B | FY 2021e | 2.48 |
| Profit Margin | 13.8% | FY 2022e | 3.48 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 650 | 30% | 0.89 | -5% |
| One qtr ago | 595 | 32% | 0.76 | -4% |
| Two qtrs ago | 505 | 25% | 0.33 | -25% |
| Three qtrs ago | 569 | 23% | 0.91 | -21% |
DXCM Weekly Chart
DXCM Daily Chart
Enphase Energy (ENPH)
Why the Strength
Enphase is the U.S. leader in the sale of microinverters with about 43% of the market. Microinverters convert the raw DC current from solar panels into AC that homes and businesses use. The devices solve two problems with the older, single inverter photovoltaic (PV) systems have traditionally used. There, every panel feeds into one inverter, so if it fails, no electricity flows. Even when the inverter doesn’t fail, the output of every solar panel is only converted at the level of the worst performing-panel – so if leaves cover one panel, for instance, electricity generation is reduced for all. Each Enphase microinverter serves a small group of solar panels, with a typical home having 20 microinverters on the roof, eliminating outages and reductions. They’re nearly double the cost of single inverters up front – at $2,000 it’s about 15% of the typical home solar setup – but are increasingly popular for their robustness. Enphase shipped 2.6 million microinverters last quarter generating record sales of $351 million despite having logistical constraints that held back some shipments. The results sent the stock spiking last week, especially as supply chain issues are expected to be resolved during the next couple of months. Longer term, Enphase sees its core product as its entryway to selling whole-home energy management systems, which offer predictive analytics, battery storage and manage EVs and other renewable systems. That can turn microinverter buyers from one-off customers into repeat buyers. Enphase says it can return to existing customers to sell another $6,000 of equipment, adding a big market opportunity besides the already swiftly growing PV market. Analysts see earnings up 31% in 2022.
Technical Analysis
ENPH has been volatile this year, retreating from the solar sector’s peak at the start of the year and losing almost half its value by the time it bottomed at 114 in May. After struggling through a trading range at 145-190 in recent months, shares popped more than 20% on earnings last week and followed through to a new all-time high on Friday. Federal energy policy and expectations for an infrastructure bill will keep shares volatile, but modest dips should be buyable.
| Market Cap | $31.0B | EPS $ Annual (Jan) | |
| Forward P/E | 100 | FY 2019 | 0.95 |
| Current P/E | 102 | FY 2020 | 1.37 |
| Annual Revenue | $1.24B | FY 2021e | 2.29 |
| Profit Margin | 23.9% | FY 2022e | 3.01 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 352 | 97% | 0.60 | 100% |
| One qtr ago | 316 | 152% | 0.53 | 212% |
| Two qtrs ago | 302 | 47% | 0.56 | 47% |
| Three qtrs ago | 265 | 26% | 0.51 | 31% |
ENPH Weekly Chart
ENPH Daily Chart
J.B. Hunt (JBHT)
Why the Strength
Trucking companies are facing serious challenges this year, ranging from driver shortages to higher fuel costs and cargo backlogs. But these issues didn’t prevent J.B. Hunt, one of North America’s largest multi-modal transport and logistics providers, from having a stellar third quarter. In spite of a widely publicized nationwide truck driver shortage, J.B. managed to grow revenue 27% in Q3, to $3.1 billion, while per-share earnings jumped 59% to $1.88, with growth seen in all segments. J.B.’s truckload segment sales soared 87% from a year ago to $204 million—the first time since 2007 the segment generated over $200 million in revenue (and achieved with 60% fewer trucks compared to that period!)—plus a 65% jump in revenue per load. Its biggest segment, intermodal (rail and truck), saw sales rise 52%, with revenue per load increasing 24%. But not everything was rosy in Q3, as the company reported overall volumes declining 6%. It also reached record highs in the need for drivers in all segments, with “ample room for improvement” for inventory flows in its Final Mile logistics service. But even with these problems, management is “generally pleased” with the performance and, more important, investors see this capacity shortage as something that will be resolved over time—if J.B. Hunt can make this much money when volumes are down, earnings could really take off once things improve. Earnings have been trending up for many years, but are taking a step-function leap higher this year (up 45%) with another 20%-ish gain forecast for 2022. As far as transport names go, we like it.
Technical Analysis
From 120 a year ago, JBHT plowed ahead to reach 180 by May before topping out later that month. A grueling 18-week period of lateral consolidation followed which ended in early October when shares kissed the 40-week line and reversed, and earnings sparked a monster rally with JBHT hitting new highs. The round-number 200 level has provided a little resistance in recent days, but the path of least resistance is up. We’re fine nabbing some shares here or on a minor pullback.
| Market Cap | $20.8B | EPS $ Annual (Dec) | |
| Forward P/E | 29 | FY 2019 | 5.20 |
| Current P/E | 31 | FY 2020 | 4.74 |
| Annual Revenue | $11.4B | FY 2021e | 6.86 |
| Profit Margin | 6.4% | FY 2022e | 8.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.14 | 27% | 1.88 | 59% |
| One qtr ago | 2.91 | 36% | 1.61 | 41% |
| Two qtrs ago | 2.62 | 15% | 1.37 | 40% |
| Three qtrs ago | 2.74 | 12% | 1.44 | 7% |
JBHT Weekly Chart
JBHT Daily Chart
Medpace (MEDP)
Why the Strength
Contract research organizations (CROs) allow drug and medical device makers the flexibility of outsourcing research trials and related tasks, reducing their costs. Medpace is a leading CRO that provides clinical research (phases I through IV) for the development of drugs and medical devices across several major therapeutic areas, as well as providing regulatory and central lab services. The stock is strong today because Medpace reported blowout third-quarter results last week, thanks to a strong organic backlog and revenue growth from biotech firms. Total revenue of $296 million was 28% higher from a year ago, while per-share earnings of $1.29 were 18% higher and beat estimates by 22 cents. In terms of forward-looking indicators, the company’s backlog of $1.85 billion was improved 29% from last year’s Q3 and up 51% from the comparable quarter in 2019, with a backlog conversion rate of 17%. Moreover, Medpace says the book of future programs is “well diversified” with only a small amount (less than 1%) of new business awards related to Covid work, which bodes well for a sustained uptick in demand. Medpace boasted a strong balance sheet to end the quarter, with nearly $400 million in cash (up 44%) and no outstanding debt. The company also expects more share buybacks and has $190 million remaining under its current repurchase authorization. Add it all up and the company looks set for solid, reliable growth for a long time to come—management sees revenues up about 23% this year with an outlook for mid 20% sales growth in 2022 based on the strong order book, and there’s no reason to think those growth rates can’t continue for a long time after that, too. It’s a solid story.
Technical Analysis
Last year’s race to bring Covid vaccines to the market was a boon for MEDP and the stock more than doubled between March and December. The uptrend continued into April when shares finally hit a wall at 196, and that kicked off what ended up being a relatively flat (20% correction at the lows), controlled, six-month rest period as the 40-week line caught up. But last week’s Q3 report caused the breakout, with MEDP gapping to new highs and following through nicely in the ensuing days. We suggest entering on weakness.
| Market Cap | $8.07B | EPS $ Annual (Dec) | |
| Forward P/E | 47 | FY 2019 | 3.02 |
| Current P/E | 45 | FY 2020 | 3.84 |
| Annual Revenue | $1.09B | FY 2021e | 4.75 |
| Profit Margin | 16.4% | FY 2022e | 5.48 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 296 | 28% | 1.29 | 18% |
| One qtr ago | 278 | 36% | 1.06 | 66% |
| Two qtrs ago | 260 | 13% | 1.14 | 50% |
| Three qtrs ago | 260 | 13% | 1.35 | 59% |
MEDP Weekly Chart
MEDP Daily Chart
Marvell Technology Group (MRVL)
Why the Strength
Marvell (covered in the July 19 report) is a leading fabless chip designer, specializing in data processing semiconductors. The stock is strong today following a series of analyst upgrades after the company’s latest investor day presentation in which management guided for significant revenue and earnings growth. Marvell increased its long-term annual growth rate forecast to between 15% and 20%—one of the highest rates among large-cap chip companies—and also expects higher gross margins and slightly lower operating expenses over the long term. The company has been on an acquisition spree of late, including two purchases this year; cloud networking company Innovium and semiconductor component maker Inphi. Both acquisitions are expected to allow Marvell to benefit from accelerating cloud adoption and data centers. On the cloud front, Marvell sees “significant” growth opportunities from cloud-optimized solutions and expects robust Q3 sequential sales growth from strong data center demand (which accounts for roughly 40% of its revenue and its second-biggest business), thanks to a sizable increase in the addressable market for data center switches. Meanwhile, Marvell anticipates an “incremental multi-billion-dollar opportunity” in the connected vehicle market. It also sees auto as its fastest-growing market opportunity and projects auto segment revenue to expand by seven times in fiscal 2022 (ending in January) versus two years prior. All in all, analysts see this year’s earnings up 57%, with another 34% gain next year, and the top brass’ long-term bullish outlook has big investors thinking more big gains are in store after that. Earnings are likely out in early December.
Technical Analysis
After a choppy rise for most of last year, MRVL ran into strong resistance at 56 in January, leading to a few months of sour action. The rally in May and June brought the stock back to its highs, but the chop factor returned, with shares bobbing and weaving after that, including a shakeout in late September. But since then, the buyers have returned, with a big-volume kickoff near the start of last month and steady action since. We’re OK buying MRVL here.
| Market Cap | $56.6B | EPS $ Annual (Jan) | |
| Forward P/E | 48 | FY 2020 | 0.66 |
| Current P/E | 59 | FY 2021 | 0.92 |
| Annual Revenue | $3.46B | FY 2022e | 1.44 |
| Profit Margin | 26.4% | FY 2023e | 1.93 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1075 | 48% | 0.34 | 62% |
| One qtr ago | 832 | 20% | 0.29 | 61% |
| Two qtrs ago | 798 | 11% | 0.29 | 71% |
| Three qtrs ago | 750 | 13% | 0.25 | 47% |
MRVL Weekly Chart
MRVL Daily Chart
Silicon Laboratories, Inc. (SLAB)
Why the Strength
Silicon Labs is a fabless designer and manufacturer of semiconductors and other silicon devices, also providing wireless Internet of Things (IoT) solutions. The latter is where much of the growth is coming from, as the company has turned its focus on IoT. The pandemic galvanized the IoT space by increasing demand for “smart” retail technology, wearable fitness and medical devices; consequently, the company’s IoT chips for home devices and industrial equipment are in high demand. This was reflected in third-quarter revenue that grew 39%, to over $185 million, and per-share earnings of 34 cents that beat estimates by a jaw-dropping 19 cents (the reason for the strength). The IoT demand was seen in both of Silicon Labs’ main end markets—industrial and home—with particular strength in home automation and security and smart retail. Wireless products (which account for about two-thirds of sales) delivered a “robust” 48% improvement from a year ago, with increases across all wireless IoT protocols, including Bluetooth and Wi-Fi. Additionally, Silicon completed the sale of its infrastructure and automotive business in Q3 to Skyworks Solutions, providing Silicon with $2.75 billion in cash. The company then gave over $1 billion of that cash back to shareholders through share repurchases (which retired 9% of its fully diluted share count), including a $400 million accelerated repurchase set for early 2022. Looking ahead, the company just announced a new custom parts manufacturing service designed to improve supply chains and product differentiation. Management further expects Q4 revenue to come in around $200 million (12% above consensus estimates at the midpoint), with per-share earnings forecast near 55 cents (in line with the consensus).
Technical Analysis
Following an impressive rally that began last November, SLAB hit the skids in March and fell from a then-record peak around 160 to 120—just under the 40-week line—in May. The stock rallied back to its highs by August, but underwent a second dip, again falling below the 40-week line, though etching a higher low near 135. But all of that looks like one big launching pad now, with SLAB exploding higher after earnings last week. We’re OK starting a position here or on dips.
| Market Cap | $7.63B | EPS $ Annual (Dec) | |
| Forward P/E | 96 | FY 2019 | 3.22 |
| Current P/E | 83 | FY 2020 | 0.06 |
| Annual Revenue | $756M | FY 2021e | 1.96 |
| Profit Margin | 8.3% | FY 2022e | 2.29 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 185 | 39% | 0.34 | -53% |
| One qtr ago | 170 | 48% | 0.16 | N/A |
| Two qtrs ago | 158 | 34% | 0.91 | N/A |
| Three qtrs ago | 243 | 11% | 0.84 | 0% |
SLAB Weekly Chart
SLAB Daily Chart
Wolfspeed, Inc. (WOLF)
Why the Strength
Wolfspeed is the company formerly known as Cree, which was mainly a maker of LED lights and, since LEDs are built off semiconductors, varieties of chips, too. Earlier this year management sold off the lower-margin LED lighting division, leaving Wolfspeed as a pure play semiconductor company poised to be in the vanguard of next-generation chips. The story revolves around the fact that silicon-based based semiconductors have maximized their theoretical potential for conductivity and heat tolerance, a problem as electrification trends and 5G phone networks demand better-performing chips. Wolfspeed makes primarily silicon-carbide semiconductors, as well as gallium nitride (GaN) chips, two varieties that are expected to be in high demand as renewable energy generation and EVs grow. Company research shows silicon carbide, which weaves carbon atoms with silicon, are 13 times more efficient at transferring electricity than silicon alone. The revamped business has a lower top line than the old Cree, with annual sales of $526 million in fiscal 2021 (ended June), but is faster growing, with sales seen nearly doubling through fiscal 2023 (ending in June). Fiscal Q1 results announced last week wowed the Street, as rapid expansion of silicon carbide demand led to another quarter of 30%-plus sales growth and a narrowing loss. Analysts actually see sales growth accelerating for the next couple of years. Wolfspeed is an intriguing “new” chip outfit that looks to have something unique.
Technical Analysis
WOLF peaked in February and had been chopping lower for many months, dipping as much as 42% and living under its 40-week line, which surely knocked out most weak hands. But last week could be a game changer, with a huge earnings gap bringing WOLF back near its highs. You can start small here and add if the stock heads higher.
| Market Cap | $14.4B | EPS $ Annual (Jun) | |
| Forward P/E | N/A | FY 2020 | -0.71 |
| Current P/E | N/A | FY 2021 | -0.93 |
| Annual Revenue | $567M | FY 2022e | -0.70 |
| Profit Margin | N/A | FY 2023e | 0.17 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 157 | 36% | -0.21 | N/A |
| One qtr ago | 146 | 35% | -0.23 | N/A |
| Two qtrs ago | 137 | 21% | -0.22 | N/A |
| Three qtrs ago | 127 | 5% | -0.24 | N/A |
WOLF Weekly Chart
WOLF 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 | |||||
| 10/11/21 | Acuity Brands | AYI | 203-210 | 208 | |
| 10/4/21 | Affirm Holdings | AFRM | 105-111 | 153 | |
| 9/7/21 | Ambarella | AMBA | ★ | 132-138 | 191 |
| 9/13/21 | Antero Res. | AR | ★ | 15.4-16.1 | 20 |
| 10/25/21 | Arch Coal | ARCH | 93-99 | 93 | |
| 7/6/21 | Asana | ASAN | 61-65 | 135 | |
| 10/4/21 | Beauty Health | SKIN | 24.5-25.5 | 28 | |
| 6/21/21 | Bill.com | BILL | 176-182 | 300 | |
| 8/23/21 | Builders FirstSource | BLDR | 49-51 | 59 | |
| 10/4/21 | Caesars Entertainment | CZR | 113-117 | 112 | |
| 10/18/21 | Cameco | CCJ | 25-27 | 25 | |
| 9/13/21 | Celsius Holdings | CELH | 84-88 | 101 | |
| 10/4/21 | CF Industries | CF | ★ | 58-61 | 58 |
| 6/14/21 | Cloudflare | NET | 90-93 | 194 | |
| 10/4/21 | ConocoPhillips | COP | 67-70 | 75 | |
| 8/30/21 | Continental Res. | CLR | 37-38.5 | 50 | |
| 8/9/21 | Datadog | DDOG | 124-128 | 165 | |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 42 |
| 7/19/21 | Dexcom | DXCM | 425-438 | 627 | |
| 6/28/21 | Dynatrace | DT | ★ | 57-59 | 74 |
| 4/26/21 | Floor & Décor | FND | 109-113 | 140 | |
| 10/25/21 | Ford Motor | F | 15.4-16.2 | 18 | |
| 10/11/21 | Goodyear Tire | GT | 18-19 | 21 | |
| 10/11/21 | Hilton Worldwide | HLT | 139-142 | 145 | |
| 7/19/21 | Horizon Therapeutics | HZNP | 90-93 | 118 | |
| 10/4/21 | Int’l Game Tech | IGT | 26-28 | 32 | |
| 9/20/21 | KKR & Co. | KKR | 63.5-65.5 | 78 | |
| 8/9/21 | LendingClub | LC | 25-27 | 48 | |
| 10/4/21 | Live Nation | LYV | 95.5-98.5 | 104 | |
| 10/11/21 | LPL Financial | LPLA | ★ | 165-169 | 167 |
| 10/25/21 | Marathon Oil | MRO | 16-16.8 | 17 | |
| 10/18/21 | MGM Resorts | MGM | 47-48.5 | 48 | |
| 10/25/21 | Monday.com | MNDY | 377-387 | 370 | |
| 10/25/21 | MongoDB | MDB | 500-520 | 498 | |
| 10/11/21 | Mosaic | MOS | 39-41 | 41 | |
| 8/30/21 | Palo Alto Networks | PANW | 440-455 | 508 | |
| 8/9/21 | Paycom Software | PAYC | ★ | 448-462 | 547 |
| 8/16/21 | Paylocity | PCTY | ★ | 242-248 | 306 |
| 10/11/21 | Pioneer Nat. Resources | PXD | 187-192 | 190 | |
| 9/13/21 | Pure Storage | PSTG | 25-26 | 27 | |
| 10/18/21 | Range Resources | RRC | 21.5-23 | 23 | |
| 9/27/21 | Signet Jewelers | SIG | 82-85 | 96 | |
| 10/18/21 | Snowflake | SNOW | 322-333 | 358 | |
| 9/27/21 | SVB Financial | SIVB | 655-675 | 728 | |
| 10/25/21 | Tandem Diabetes | TNDM | 125-131 | 137 | |
| 9/13/21 | Teck Resources | TECK | 23.5-24.5 | 29 | |
| 10/18/21 | Tesla | TSLA | 845-865 | 1209 | |
| 10/25/21 | United Rentals | URI | 358-370 | 383 | |
| 10/18/21 | Xenon Pharm. | XENE | 29.5-31.5 | 33 | |
| 10/18/21 | Zscaler | ZS | ★ | 292-302 | 319 |
| WAIT | |||||
| 10/25/21 | Netflix | NFLX | ★ | 630-650 | 681 |
| 10/25/21 | SiteOne Landscape | SITE | 213-223 | 240 | |
| SELL RECOMMENDATIONS | |||||
| 9/27/21 | APA Corp. | APA | 22-23.5 | 27 | |
| 9/27/21 | Brooks Automation | BRKS | 102-106 | 119 | |
| 9/27/21 | DoorDash | DASH | 206-212 | 198 | |
| 10/4/21 | Matador Resources | MTDR | 37-39 | 44 | |
| 9/27/21 | SeaWorld Entertainment | SEAS | 56.5-58.5 | 65 | |
| DROPPED | |||||
| 10/18/21 | Atlassian | TEAM | 392-405 | 450 | |
The next Cabot Top Ten Trader issue will be published on November 8, 2021.