Back in the Soup
Current Market Outlook
The market had been under some pressure since early October, but last week was a different animal, with the sellers coming out of the woodwork and cracking numerous leading stocks and major indexes. Longer-term, this is still a bull market, with the past two months being a (very) tedious up-and-down consolidation period following the huge March-August advance; we still think the next major move is up. Near-term, though, stocks are back in the soup, and while the headlines will be coming fast and furiously this week (earnings and the election), the onus is on the buyers to step up. Until that happens, we advise a cautious stance—holding a good chunk of cash makes sense, while keeping new positions on the small side and honoring your stops and loss limits. We’re pulling down our Market Monitor another notch to a level 5.
Meanwhile, it’s easiest to spot strength in a down market, so the next couple of weeks should be telling. This week’s list has a broad array of stocks and sectors on it, and our Top Pick is Pinduoduo (PDD), one of many resilient Chinese names that’s actually picking up steam while the market sags.
| Stock Name | Price | ||
|---|---|---|---|
| Bunge Ltd (BG) | 57.98 | ||
| Cloudflare (NET) | 51.96 | ||
| Five9 (FIVN) | 144.12 | ||
| Martin Marietta Materials (MLM) | 270.94 | ||
| Mattel, Inc. (MAT) | 13.95 | ||
| Novocure (NVCR) | 112.15 | ||
| Pinduoduo (PDD) | 91.62 | ||
| Pinterest (PINS) | 58.56 | ||
| Quanta Services (PWR) | 66.45 | ||
| Ultragenyx Pharmaceutical Inc. (RARE) | 95.53 |
Bunge Ltd (BG)
Why the Strength
Tech and cloud stocks garner most of the headlines, but there’s been a raging bull market in agricultural commodities that’s gone all but unnoticed by investors. Prices for commodities like corn, soybeans and sugarcane have been on the rise, and Bunge, which is leveraged to each of these, is having a blowout year as a result. Besides being a top global grain trader and oilseed processor, Bunge is also the world’s number one seller of bottled vegetable oil and the largest fertilizer supplier to growers in South America. The diversified agribusiness giant reported an exceptional third quarter, as the demand for oils and biofuels (which the company also produces) improved in a big way. Revenue dipped a touch due to virus- and currency-related factors, but at nearly $10.2 billion, the top line was up 7% from the prior quarter and topped estimates. Even better, Bunge delivered eye-popping EPS of $2.47 (up 93% from a year ago) thanks to big demand from China and record performance from Bunge’s oilseeds trading and distribution operations, which achieved record crush utilization and benefited from soaring soybean and canola prices. Solid results in its grains segment were driven by strong execution in farmer selling in South America, while better performance in Brazil and Asia also helped. Looking ahead, management guided for annual per-share earnings in the $6.50 range (up 40% or so from a year ago) and expects global demand for vegetable oil to increase due to growth of biofuels. It’s a cyclical story, of course, but with the economic arrow pointing up, with Bunge executing well and with a solid dividend (3.5% annual yield) to keep investors interested, we think the stock can continue to do well.
Technical Analysis
BG was on the skids during 2018 and 2019 in sympathy with the major ag commodities, hitting bottom in March of this year. Since then, shares have undergone a dramatic U-turn as the fortunes of farmers around the globe have improved. The rise was slow and steady through September, and some tight base-building was evident. Then BG went bonkers in October, reaching a near two-year high at 60 last week before hesitating a bit. Given the company-specific (commodity) story, we’re OK picking up a few shares here or on further weakness.
| Market Cap | $7.92B | EPS $ Annual (Dec) | |
| Forward P/E | 11 | FY 2018 | 2.71 |
| Current P/E | 9 | FY 2019 | 4.43 |
| Annual Revenue | $39.6B | FY 2020e | 6.22 |
| Profit Margin | 3.6% | FY 2021e | 5.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 10.2 | -2% | 2.47 | 93% |
| One qtr ago | 9.46 | -6% | 3.88 | 155% |
| Two qtrs ago | 9.17 | -8% | -1.34 | N/A |
| Three qtrs ago | 10.7 | -7% | 1.27 | 2000% |
BG Weekly Chart
BG Daily Chart
Cloudflare (NET)
Why the Strength
Big investors have to put on good-sized positions, and thus they look for companies that sport the 3 Rs—growth that’s both rapid and reliable, with a long runway of potential ahead of it. Cloudflare has all of that in spades, which is a big reason we think the stock will help lead the next sustained market advance (assuming it gets through earnings in decent shape). The details of the firm’s offerings can make you cross-eyed, but the big-picture story is easy to understand: Cloudflare has a global network that’s built from the ground up for the cloud age, effectively replacing the need for a bunch of old, one-off, on-premise hardware patches (VPNs, firewall, routing, etc.) with a scalable, all-in-one product that delivers better performance (in more than 200 cities in 100 countries; 99% of Internet users are within 100 milliseconds of the firm’s network), security (blocks 72 billion cyber threats per day!) and reliability. Between all those functions, the market potential is enormous (possibly north of $40 billion by 2022), and Cloudflare is steadily taking share—it ended June with more than 96,000 customers (up 24%), including 16% of the Fortune 1000, and those customers are buying more (same-customer revenue growth north of 15% for nine straight quarters), all of which has led to consistent 50%-ish revenue growth. That pace is expected to slow a bit, but (a) Cloudflare has been topping estimates regularly, and (b) longer-term, there’s little doubt this firm is going to get much bigger as everything moves online. The next update will come on Thursday (November 5) when Q3 results will be released.
Technical Analysis
Most growth stocks have cracked their uptrends, but not NET! The stock rose nicely during the spring and summer before stalling out and breaking down in early September when the market got hit. But that was the low, and the stock staged a massive-volume breakout three weeks ago on news of some new product enhancements. The pullback since then has been sharp, but NET hasn’t broken any support and volume has sloughed off, indicating tame selling. If you’re aggressive, you could nibble ahead of this week’s report, or just keep it near the top of your watch list.
| Market Cap | $15.6B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.29 |
| Current P/E | N/A | FY 2019 | -0.51 |
| Annual Revenue | $349M | FY 2020e | 0.17 |
| Profit Margin | N/A | FY 2021e | 0.13 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 99.7 | 48% | -0.03 | N/A |
| One qtr ago | 91.3 | 48% | -0.04 | N/A |
| Two qtrs ago | 83.9 | 51% | -0.10 | N/A |
| Three qtrs ago | 73.9 | 48% | -0.14 | N/A |
NET Weekly Chart
NET Daily Chart
Five9 (FIVN)
Why the Strength
Five9 provides cloud-based software for contact centers, helping clients cut costs and improve the customer support experience. Its AI software (based on the premise that it’s easier to keep existing customers happy than gain new ones) analyzes real-time calls and provides live assistance to customer agents. Five9 has been growing steadily for years, and the attraction here is that this industry has a ton of room for growth, with just a small fraction of contact centers having converted to the cloud thus far. And last week’s Q3 report backed up the growth story—the company reported record revenue of $112 million (up 34% from a year ago and up 12% sequentially; growth has actually picked up a bit this year), driven by a 35% bump in enterprise subscription revenue. Meanwhile, earnings of 27 cents per share beat the consensus by 9 cents. Other metrics were equally solid, including system integrator (SI, or consulting partners) bookings, which more than doubled compared to last year; the firm anticipates SI bookings to finish 2020 at more than triple what they were in 2019. Five9 also acquired Inference Solutions, a leading provider of intelligent virtual agents (which Five9 believes will drive further AI-based automation for contact centers going forward). Looking ahead, Five9 is focused on increasing average revenue per user by continually expanding its product portfolio. Management is guiding for a 25% top-line increase in Q4 (way ahead of prior estimates of 13%), as the environment continues to play into the company’s hands. With cloud migration and AI-driven digitization among call centers continuing at a breakneck pace, Five9 is one of the more consistent growth stories out there.
Technical Analysis
FIVN has been a huge winner over the years, so we’re not in the first inning of the overall advance, but there are no signs the sellers are putting up much of a fight. The stock rebounded quickly from the March bottom and, while there have been a couple of hiccups, the bulls have pushed the stock steadily higher, including seven of the past eight weeks. The stock was a bit sloppy today, which is par for the course given the environment. If you want in, aim for further weakness.
| Market Cap | $9.91B | EPS $ Annual (Dec) | |
| Forward P/E | 160 | FY 2018 | 0.60 |
| Current P/E | 165 | FY 2019 | 0.82 |
| Annual Revenue | $399M | FY 2020e | 0.87 |
| Profit Margin | 16.5% | FY 2021e | 0.84 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 112 | 34% | 0.27 | 35% |
| One qtr ago | 99.8 | 29% | 0.21 | 5% |
| Two qtrs ago | 95.1 | 28% | 0.17 | 6% |
| Three qtrs ago | 92.3 | 28% | 0.27 | 17% |
FIVN Weekly Chart
FIVN Daily Chart
Martin Marietta Materials (MLM)
Why the Strength
The overall construction market is holding up well despite the pandemic, and Martin Marietta is a direct play on that—but it doesn’t do any actual building itself. Instead, the company is one the largest suppliers of construction aggregates and heavy building materials (crushed stone, sand, gravel, concrete, asphalt and paving products) to the construction, industrial, agricultural, steel and mining industries. Although revenues declined by 7%, to $1.32 million, in the third quarter, the company’s cost management and improved pricing strategies resulted in a 130 basis points improvement in gross margin, and earnings of $4.71 per share beat estimates of $3.76 and were up 19% from a year ago. Sales of building materials fell 7%, its magnesia specialties’ revenues dropped 6%, and freight revenues were down 18% due to the pandemic. However, the future is looking up—pricing for aggregates was up 4% in the quarter, and management is bullish on both pricing and shipments (“we are confident favorable pricing trends will continue … and that the attractive underlying fundamentals and long-term growth trends across our three primary end markets will remain intact.”) Looking ahead, growth isn’t expected to be fantastic, but cash flow should remain buoyant and we’re guessing Martin Marietta will surpass forecasts as the economic rebound stays on track.
Technical Analysis
MLM was in the midst of a smooth uptrend when the pandemic wrecked the chart, and the bounce after that was uneven (and uninspiring) for a few months. But shares ended up etching a three-month base from June through August and now the buyers are in control—MLM broke out in September, stretched higher for a few weeks and then eased normally with the market for much of October. But last week’s Q3 report brought out the buyers, with shares approaching their old highs on good volume. If you want in, you can start a position here.
| Market Cap | $16.6B | EPS $ Annual (Dec) | |
| Forward P/E | 27 | FY 2018 | 7.81 |
| Current P/E | 25 | FY 2019 | 9.93 |
| Annual Revenue | $4.65B | FY 2020e | 10.13 |
| Profit Margin | 22.3% | FY 2021e | 10.17 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.32 | -7% | 4.71 | 19% |
| One qtr ago | 1.27 | -1% | 3.49 | 9% |
| Two qtrs ago | 0.96 | 2% | 0.41 | -40% |
| Three qtrs ago | 1.1 | 8% | 2.09 | 27% |
MLM Weekly Chart
MLM Daily Chart
Mattel, Inc. (MAT)
Why the Strength
What happens when you have a house full of bored kids during nationwide quarantines? For Mattel, the answer is massive sales of its perennially popular Barbie dolls and other toys. Mattel’s top line grew in Q3 for the first time in a year, driven by a substantial sales increase in North America as customers splurged on games, action figures and building sets. (As with so many retail outfits, a lot of the surge came online, with e-commerce sales increasing 50%.) But it was the company’s doll category that really stole the show (up 22%), with Barbie sales rising 30% in the September quarter. The iconic doll was also the number one toy in the U.S. through most of Q3, as well as the top toy property globally. Mattel has been a slow-moving turnaround situation for a couple of years, and the first half still showed lackluster results, but Q3 shows that things are on track—profitability for Mattel is surging, with per-share earnings of 95 cents easily beating the consensus estimate of 57 cents. Total revenue meanwhile was $1.6 billion, up 122% sequentially and 10% year over year. Management reports seeing “tremendous demand” for the company’s products and sees the momentum continuing into the critical fourth quarter (typically make-or-break for toy makers). Retail inventories remain low, and the firm believes it will achieve sales growth in Q4—thanks partly to an early start to the holiday shopping season. Analysts predict a 6% top-line increase and a 109% bottom-line bump for Q4, and see additional growth in the next two quarters. Longer term, Mattel is committed to a strategy of growing its own intellectual property across the gaming and entertainment segments, with a focus on e-commerce and films (Mattel Films has 10 features in development, including titles based on Barbie, Hot Wheels and Thomas & Friends). For a “boring” old company, it’s a pretty solid story that has the wind at its back.
Technical Analysis
MAT took a big hit in the first quarter and shares were slow to reverse after hitting bottom in March. However, after getting back to 12 in July, shares tightened up, with a nice 10-week consolidation leading to a breakout in October and, two weeks ago, a nice pop above 14 after Q3 results were released. We wouldn’t chase it, but a dip of a few dimes toward the 25-day line (now nearing 13) would be tempting.
| Market Cap | $4.78B | EPS $ Annual (Dec) | |
| Forward P/E | 28 | FY 2018 | -1.16 |
| Current P/E | 57 | FY 2019 | -0.30 |
| Annual Revenue | $4.43B | FY 2020e | 0.33 |
| Profit Margin | 20.3% | FY 2021e | 0.50 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1632 | 10% | 0.95 | 265% |
| One qtr ago | 732 | -15% | -0.26 | N/A |
| Two qtrs ago | 594 | -14% | -0.56 | N/A |
| Three qtrs ago | 1474 | -3% | 0.11 | 175% |
MAT Weekly Chart
MAT Daily Chart
Novocure (NVCR)
Why the Strength
Novocure has the look and feel of a new leader, at least once the market comes out of its funk. As we’ve written before, the firm’s claim to fame is its Optune system, which represents a different way to attack cancer—Optune uses low doses of radiation (called tumor treating fields) administered over long periods of time to disrupt reproduction of and eventually kill cancer cells. The product is portable so patients can use it at home, and when used in concert with other therapies, studies have shown great results (prolonging life, etc.). To this point, the target market is relatively small; Optune is in use for treating glioblastoma (a bad brain tumor) and for mesothelioma (it was the first approved treatment in 15 years for this cancer commonly associated with asbestos exposure), and that’s been good enough to produce the solid growth seen in the table below. (The firm had north of 3,100 active patients at the end of Q3, the 23rd straight quarter of patient growth.) But the real payoff could come in a couple of years, as Novocure has a huge clinical program underway that’s testing Optune’s effectiveness in a variety of cancers, with five data readouts likely out next year (including three Phase III trials for lung, pancreatic and ovarian cancers). If all goes well, Novocure’s target market will expand manyfold within a couple of years, which should keep the solid growth humming for a long time to come. This story is a nice mix of current sales and earnings growth and the potential for huge upside down the road.
Technical Analysis
NVCR spent a year correcting and consolidating, started to come alive in July and exploded to new all-time highs in September, reaching 140 before the buyers ran out of steam. Like everything else, the stock has retreated during the past three weeks, but, while sharp, the dip looks normal; even today’s dip (on news of a convertible share offering) was reasonable. If you want in, you could start small here, or just keep NVCR on your watch list.
| Market Cap | $12.3B | EPS $ Annual (Dec) | |
| Forward P/E | 313 | FY 2018 | -0.69 |
| Current P/E | 643 | FY 2019 | -0.07 |
| Annual Revenue | $450M | FY 2020e | 0.21 |
| Profit Margin | 7.0% | FY 2021e | 0.39 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 133 | 44% | 0.09 | 350% |
| One qtr ago | 116 | 34% | 0.02 | 300% |
| Two qtrs ago | 102 | 39% | 0.04 | 131% |
| Three qtrs ago | 99.2 | 42% | 0.04 | 124% |
NVCR Weekly Chart
NVCR Daily Chart
Pinduoduo (PDD)
Why the Strength
Pinduoduo had its initial public offering just two years ago, in July 2018, pricing its shares at 19. Since then, this company that combines social networking with group shopping via an e-commerce virtual bazaar has firmed up its target audience and has managed to grow its revenues more than 300% annually. Pinduoduo promotes “team” shopping, offering discounts through bulk purchasing; its name means “together, more savings, more fun.” The firm’s site offers a wide variety of merchandise, including apparel, shoes, furniture, household goods, electronics, food and beverages; it’s now the third-largest e-commerce platform in China by gross merchandise volume, behind Alibaba and JD.com. In the second quarter, Pinduoduo saw sales rise 63% to $1.73 billion (a bit below estimates) thanks to a 79% jump in gross merchandise volume and a 55% rise in monthly active users, to 569 million. The company did lose $0.01 per share, but that was a lot better than the $0.21 loss that analysts had forecast. Next up for Pinduoduo is a move into the under-digitalized agriculture business in China; the company believes this is a $1 trillion opportunity (gross merchandise volume) over the next five years. Right now, the online agriculture business is just 7% of overall digital sales, compared to 23% penetration for physical goods. Pinduoduo has already entered the market and expects to continue expanding its market share. The company has some pretty strong backers, with 29.4% of its shares owned by mobile giant Tencent Holdings. The next update will come on November 18, when Pinduoduo is expected to report earnings, with EPS forecasted -$0.21 and revenues of $1.83 billion.
Technical Analysis
Unlike most stocks, PDD didn’t collapse in March, and it embarked on a great run after the bottom, breaking out in the mid 40s in April and getting to 100 by July. Since then shares have had two tough downdrafts, including a dip to 70 in early October, but it’s actually been picking up steam of late while the overall market has sagged—PDD is up four weeks in a row and approaching its old highs. If you’re game, you could nibble here and see what comes on earnings later this month.
| Market Cap | $106B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.44 |
| Current P/E | N/A | FY 2019 | -0.55 |
| Annual Revenue | $5.25B | FY 2020e | -0.79 |
| Profit Margin | N/A | FY 2021e | 0.26 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.73 | 63% | -0.01 | N/A |
| One qtr ago | 0.92 | 37% | -0.39 | N/A |
| Two qtrs ago | 1.55 | 88% | -0.12 | N/A |
| Three qtrs ago | 1.05 | 115% | -0.20 | N/A |
PDD Weekly Chart
PDD Daily Chart
Pinterest (PINS)
Why the Strength
If you’ve ever searched for instructions for tackling do-it-yourself tasks, there’s a good chance you’ve turned to Pinterest for ideas. The social media site features a series of “pins” on virtual “boards” on an unlimited range of topics that are often accompanied by web links (increasingly to prompt purchases), pictures, animated gifs and instructional videos. Pinterest saw record levels of user engagement during COVID lockdowns, as users turned to the site for home-based projects to help adjust to the new realities, and the stock is strong today because that momentum has continued, if not accelerated. In Q3, the firm’s top line lifted 58%, per-share earnings of 13 cents were up from a penny a year ago and revenue per user came in at $1.03 (up a whopping 47% sequentially and 14% from a year ago). Sales growth was driven by a strong increase in global ad spend following the Q2 hiccup, and there was also an eye-popping 37% growth in monthly active users to 442 million. Management guided for revenues to rise 60% in Q4—drastically above consensus expectations of 32%—and cited investments in technology and ad tools, as well as macroeconomic improvement, as reasons for the growth. Specifically, auto bid for advertising on the site was a big contributor in Q3, particularly for small- and mid-sized businesses (making it easier for advertisers to meet their goals). Meanwhile, the firm’s international business grew 145% and made up 16% of total revenue (up from 10%). Big picture, Pinterest has a long runway of growth as it becomes a fresh location for advertisers to get buyers’ attention at a different step of the buying process—users come to Pinterest often to find out what they want, as opposed to shopping for something they already have in mind.
Technical Analysis
PINS gapped up on Q2 earnings in August, then went dead for a few weeks just south of its old highs, putting the finishing touches on a yearlong post-IPO consolidation. The breakout came in September, and the stock has acted well since then, including last week’s big-volume gain after Q3 earnings. PINS definitely looks like a fresh leader that should head higher over time, but given the run and the market environment, try to start positions on dips of a few points.
| Market Cap | $35.4B | EPS $ Annual (Dec) | |
| Forward P/E | 125 | FY 2018 | -0.09 |
| Current P/E | 737 | FY 2019 | 0.01 |
| Annual Revenue | $1.39B | FY 2020e | 0.20 |
| Profit Margin | 19.7% | FY 2021e | 0.51 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 443 | 58% | 0.13 | 1200% |
| One qtr ago | 273 | 4% | -0.07 | N/A |
| Two qtrs ago | 272 | 35% | -0.10 | N/A |
| Three qtrs ago | 400 | 46% | 0.12 | 33% |
PINS Weekly Chart
PINS Daily Chart
Quanta Services (PWR)
Why the Strength
Quanta builds, installs, and repairs electric power transmission and distribution infrastructure and substation facilities in the U.S., Canada, Australia and other countries. And, as its third quarter earnings illustrated, its services are in growing demand. Quanta beat analyst estimates by a mile, posting EPS of $1.40, up 23% from a year ago. While revenues also beat— $3.02 billion—they were down around 10% from a year ago due to decreased sales in the company’s Pipeline and Industrial Infrastructure Services. However, its Electric Power Infrastructure Services division saw sales grow 12.3%, to $2.10 billion, and its Puerto Rico investments are providing a nice contribution to earnings. The future looks bright, as the company’s 12-month backlog is $8.14 billion and total backlog is $15.1 billion. The results prompted the company to increase its forward guidance. It now expects 2020 revenues of $11.2 billion and EPS of $3.52-$3.64, compared to the $3.18-$3.48 it estimated earlier. During the quarter, Quanta picked up a hydropower contract for the New England Clean Energy Connect Transmission Project and acquired three companies: a Chicago engineering firm, a Southeastern and Mid-Atlantic utility contractor; and a western U.S. communications contractor that deploys short- and long-haul fiber optic cable and utilities. Overall, business looks very healthy as power needs grow due to 5G, electric vehicles and renewable energy growth, as well as the age of our current power infrastructure that requires critical updates. All told, Quanta looks like one of the top infrastructure plays in the market today.
Technical Analysis
PWR busted loose from a multi-year base in early August (it was our Top Pick back then) and it’s been acting excellently ever since—in fact, it’s had just two down weeks from that point, which is very impressive given the market’s action the past two months. After a shakeout to the 10-week line in September, PWR is up five weeks in a row, including last week’s good-volume bounce after earnings. A dip of a couple of points should mark a decent entry point.
| Market Cap | $8.62B | EPS $ Annual (Dec) | |
| Forward P/E | 15 | FY 2018 | 2.81 |
| Current P/E | 18 | FY 2019 | 3.33 |
| Annual Revenue | $11.4B | FY 2020e | 3.53 |
| Profit Margin | 6.7% | FY 2021e | 4.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 3.02 | -10% | 1.40 | 23% |
| One qtr ago | 2.5 | -12% | 0.74 | 139% |
| Two qtrs ago | 2.76 | -2% | 0.47 | -51% |
| Three qtrs ago | 3.11 | 0% | 0.93 | -3% |
PWR Weekly Chart
PWR Daily Chart
Ultragenyx Pharmaceutical Inc. (RARE)
Why the Strength
The market for rare diseases is underserved, with diagnoses of rarely seen medical conditions taking up to 10 years while available treatments often don’t exist. Ultragenyx is focused on filling this void by developing products for treating ultra-rare, debilitating genetic diseases. The company has a diverse drug candidate portfolio that addresses diseases where the unmet medical need is high and biology for treatment is clear. Its recent successes include Mepsevii, which was approved in 2017 for the treatment of an inherited condition known as Sly syndrome. Then there’s the firm’s Crysvita therapy for treating patients with tumor-induced osteomalacia (TIO), which causes weakened and softened bones; that was approved by the FDA in June. And there’s also Dojolvi, which treats adult patients with long-chain fatty acid oxidation disorder. In terms of the pipeline, Ultragenyx has two gene therapy candidates in Phase 2 trials (expectations are that Phase 3 will soon begin), including DTX301 (for treating ornithine transcarbamylase (OTC) deficiency) and DTX401 (a potential treatment for Glycogen Storage Disease Type 1a (GSDIa). On the financial front, Ultragenyx is storming out of the development stage—in Q3, revenues leapt 216%, while total revenue for the first nine months of 2020 was $180 million (up 163%). Analysts foresee continued revenue increases of between 90% and 100% in the coming two quarters as Ultragenyx remains active (including its recent collaboration with Solid Biosciences to develop and commercialize new gene therapies for Duchenne muscular dystrophy). For next year as a whole, Wall Street sees the top line expanding 33% next year as a whole, which could prove conservative. Encouragingly, a share offering last week was gobbled up with no trouble despite the market’s plunge. Overall, it’s a compelling story in an underserved market.
Technical Analysis
RARE has been up and down for years, but as the company has started to deliver real results, the stock has changed character. The immediate rally off the March lows was excellent (new multi-month highs in April!) and the stock motored up to 90 in July before taking a breather. The consolidation that followed was reasonable (the shakeout in September was a good one) and RARE has pushed to new highs in recent weeks. If you’re game, dips of a point or two should set up a decent entry point.
| Market Cap | $6.13B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -3.97 |
| Current P/E | N/A | FY 2019 | -7.12 |
| Annual Revenue | $215M | FY 2020e | -3.79 |
| Profit Margin | N/A | FY 2021e | -4.14 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 81.5 | 216% | -1.13 | N/A |
| One qtr ago | 61.7 | 156% | 0.41 | N/A |
| Two qtrs ago | 36.3 | 100% | -2.05 | N/A |
| Three qtrs ago | 35.6 | 119% | -1.62 | N/A |
RARE Weekly Chart
RARE 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 | |||||
| 10/12/20 | Abercrombie | ANF | 15.5-16.5 | 14 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 311 |
| 10/26/20 | Align Tech | ALGN | ? | 420-440 | 458 |
| 10/19/20 | Avalara | AVLR | 147-152 | 143 | |
| 10/26/20 | Axon Enterprises | AAXN | 99.5-102.5 | 98 | |
| 10/19/20 | Bill.com | BILL | 110-114 | 97 | |
| 9/21/20 | Brinker Int’l | EAT | 42-44.5 | 44 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 35 | |
| 10/5/20 | Datadog | DDOG | 103-107 | 88 | |
| 10/19/20 | Deckers Outdoor | DECK | 238-246 | 255 | |
| 10/26/20 | Exact Sciences | EXAS | 103-107 | 122 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 132 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 18 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 119 | |
| 9/14/20 | Gap Inc. | GPS | 16.5-17.5 | 21 | |
| 10/26/20 | General Motors | GM | 34-36 | 35 | |
| 10/26/20 | GrowGeneration | GRWG | 16.5-18 | 19 | |
| 10/19/20 | Invitae | NVTA | 47-49.5 | 39 | |
| 10/26/20 | MercadoLibre | MELI | 1180-1240 | 1216 | |
| 10/19/20 | Monolithic Power | MPWR | 300-310 | 315 | |
| 8/24/20 | Natera | NTRA | 60-63 | 68 | |
| 9/21/20 | NIO Inc. | NIO | 17-18 | 33 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 112 |
| 10/19/20 | Paycom Software | PAYC | 360-375 | 361 | |
| 10/12/20 | Paylocity | PCTY | 178-188 | 181 | |
| 4/6/20 | Peloton | PTON | 27-29 | 113 | |
| 8/3/20 | PINS | 33.5-37 | 58 | ||
| 8/3/20 | Qualcomm | QCOM | 106-110 | 124 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 66 |
| 7/13/20 | Roku | ROKU | 147-154 | 207 | |
| 7/27/20 | Sea Ltd | SE | 110-116 | 160 | |
| 9/21/20 | Seattle Genetics | SGEN | ? | 175-180 | 169 |
| 10/5/20 | SeresTherapeutics | MCRB | 27.5-29.5 | 30 | |
| 10/26/20 | Shift4 Payments | FOUR | 51.5-54 | 48 | |
| 9/28/20 | Square | SQ | 157-162 | 155 | |
| 10/5/20 | ST Microelectronics | STM | 32-33.5 | 31 | |
| 10/19/20 | SunPower | SPWR | 16.5-17.5 | 17 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 86 | |
| 9/14/20 | Target | TGT | 145-149 | 154 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 273 | |
| 10/5/20 | Zendesk | ZEN | 101-105 | 110 | |
| WAIT | |||||
| None this week | |||||
| SELL RECOMMENDATIONS | |||||
| 8/10/20 | Agnico Eagle Mines | AEM | 79.5-82.5 | 81 | |
| 10/19/20 | Beyond Meat | BYND | 178-185 | 144 | |
| 10/19/20 | Carvana | CVNA | 207-220 | 185 | |
| 9/8/20 | Chipotle Mex Grill | CMG | 1230-1270 | 1189 | |
| 9/28/20 | CrowdStrike | CRWD | 133-138 | 124 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 312 | |
| 8/10/20 | Digital Turbine | APPS | 21.5-24 | 31 | |
| 7/27/20 | Floor & Décor | FND | 69-72 | 75 | |
| 10/12/20 | Marvell Technology | MRVL | ? | 42-45 | 37 |
| 3/30/20 | Nvidia | NVDA | 250-270 | 503 | |
| 8/3/20 | Penn Nat’l Gaming | PENN | 34-36.5 | 53 | |
| 10/12/20 | Synnex Corp. | SNX | 145-152 | 137 | |
| 10/5/20 | Teck Resources | TECK | 13-14.2 | 14 | |
| 10/12/20 | TG Therapeutics | TGTX | 29-31 | 26 | |
| 10/12/20 | Tesla | TSLA | 435-448 | 401 | |
| 9/21/20 | TopBuild | BLD | 149-154 | 160 | |
| 10/5/20 | TWTR | 44-46 | 39 | ||
| 10/12/20 | United Rentals | URI | 194-202 | 193 | |
| DROPPED | |||||
| None this week | |||||
The next Cabot Top Ten Trader issue will be published on November 9, 2020.