Not Perfect but Pretty Good
Current Market Outlook
Three weeks ago, the major indexes were on their knees and very few stocks were in good shape. But there’s been a steady improvement in the overall evidence since then, and while it’s not 1999 out there, the picture looks pretty good—the intermediate-term trend has returned to the bullish side of the fence, while many individual stocks (growth and otherwise) show constructive action. We’ve even seen a big pickup in the number of names hitting new highs (multi-month high in NYSE new highs on Friday)! Short-term, the steady up-move in the market and many stocks could easily bring a pullback or some hesitation, but there’s no question the rubber-meets-the-road evidence has improved greatly, which is what counts most to us. We’re nudging our Market Monitor up to a level 7 in today’s issue.
This week’s list has a bunch of good-looking charts from a variety of sectors. Our Top Pick is Marvell Technology (MRVL), which is helping to lead the recent charge in chip stocks.
| Stock Name | Price | ||
|---|---|---|---|
| Abercrombie & Fitch (ANF) | 16.55 | ||
| Fastly (FSLY) | 126.61 | ||
| Marvell Technology Group (MRVL) | 43.51 | ||
| Paylocity (PCTY) | 188.72 | ||
| Penn National Gaming (PENN) | 64.89 | ||
| Roku, Inc. (ROKU) | 221.62 | ||
| Synnex Corp. (SNX) | 150.56 | ||
| Tesla, Inc. (TSLA) | 441.83 | ||
| TG Therapeutics, Inc. (TGTX) | 30.49 | ||
| United Rentals, Inc. (URI) | 198.89 |
Abercrombie & Fitch (ANF)
Why the Strength
Despite the pandemic, holiday retail sales are forecast to rise by nearly 2%. Of course, that’s down from the 4% growth retailers saw in 2019, but still pretty amazing. As you might expect, much of that growth is from e-commerce, which is expected to soar by 25% to 35%, coming in around $190 billion (which compares favorably to last year’s 15% rise in online sales). And that’s welcome news for retailers like Abercrombie & Fitch. The company recently delivered a great quarter, earning 23 cents per share and turning back into the black after a dismal 48-cent per share loss last year (easily beating the forecast for negative 89 cents). And revenues hit $698 million, also beating the estimate of $671 million (though they did drop by 17% from last year). The 850-store chain that owns both Hollister and Abercrombie said that 89% of its stores are now open and that its digital sales are booming—up 56% last quarter to $386 million. The bottom line has flourished, as the company has focused on “rightsizing” its stores, improving its digital and omni-channel capabilities, enhancing its loyalty programs, using data and analytics to increase the efficiencies of its supply chain and refining its marketing efforts. This focus on the bottom line has affected shareholders, however, as Abercrombie suspended its share repurchase program and dividend payouts due to COVID-19. Third quarter sales are expected to decline by around 18%, and analysts expect a loss of 10 cents per share for the period. That said, estimates have been moving higher recently and the Street expects the company to produce 18% annual growth over the next five years as the post-pandemic recovery gains traction.
Technical Analysis
Abercrombie’s share price was fairly flat until March, when it fell by half. It has since recovered, as investors—including the big guns on Wall Street—have returned to the company in the wake of the latest earnings report. Hedge fund interest has hit an all-time high for the shares, with 34 funds currently investing in the company. If you want in, you could take a stab here.
| Market Cap | $1.04B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2019 | 1.15 |
| Current P/E | N/A | FY 2020 | 0.73 |
| Annual Revenue | $3.23B | FY 2021e | -1.82 |
| Profit Margin | 2.1% | FY 2022e | 0.82 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 698 | -17% | 0.23 | 148% |
| One qtr ago | 485 | -34% | -1.83 | N/A |
| Two qtrs ago | 1185 | 3% | 1.31 | -3% |
| Three qtrs ago | 863 | 0% | 0.23 | -30% |
ANF Weekly Chart
ANF Daily Chart
Fastly (FSLY)
Why the Strength
The trend to push smaller data centers closer to end users who receive online content is gaining traction, leading to speed and efficiency improvements in cloud networks and allowing for heavier traffic loads (while forming the basis of “edge” cloud computing). Fastly (covered in the May 18 issue) is a top edge cloud provider offering content delivery, internet security, load balancing and video and streaming services. Its platform supports thousands of websites, including Shopify, Pinterest, Slack and many other big names. Many investors wondered if Fastly could maintain its strong momentum from this spring once the economy started reopening; the answer to that question has been an emphatic “yes!”. After posting a top-line increase of 38% in Q1, Fastly delivered even more impressive 62% revenue growth in Q2, crushing estimates and driven by further adoption of its modern edge platform. Total customer count rose 6% sequentially to 1,951—the largest quarterly increase since going public. Its enterprise customer count grew to 304 (up 2% sequentially), with the average enterprise customer spend increasing to an average of $679,000 from the previous quarter. Retention rates show that Fastly’s broader customer base is sticking with the firm while spending more money with the company. Looking ahead, analysts predict 50% top-line growth in Q3 and a shrinking net loss, possibly hitting breakeven. Management, meanwhile, believes its hyper-fast Compute@Edge serverless computing service will be a major growth engine and continues to invest in network and security-related offerings. Earnings are due out November 5.
Technical Analysis
After falling as low as 11 during the market’s crash earlier this year, FSLY rebounded nicely in quick fashion. It exploded to new highs before earnings in August, hitting a peak at 116 before retreating to 75, which has proven to be a solid support with accumulation evident around this level. The latest blastoff began last week and has been backed by solid-looking volume. You could nibble here or start on any retreat.
| Market Cap | $12.4B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.28 |
| Current P/E | N/A | FY 2019 | -0.38 |
| Annual Revenue | $246M | FY 2020e | -0.03 |
| Profit Margin | 2.4% | FY 2021e | 0.06 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 74.7 | 62% | 0.02 | N/A |
| One qtr ago | 62.9 | 38% | -0.06 | N/A |
| Two qtrs ago | 58.9 | 44% | -0.10 | N/A |
| Three qtrs ago | 49.8 | 35% | -0.09 | N/A |
FSLY Weekly Chart
FSLY Daily Chart
Marvell Technology Group (MRVL)
Why the Strength
The stay-at-home paradigm has revolutionized the workforce, accelerating demands on the cloud and in telecommunications – including the rollout of next generation 5G wireless networks. Companies like Marvell are powering this digital transformation, and while the firm is already a top player in fabless semiconductor design, it’s quickly becoming a leader in cloud computing while benefiting from China’s 5G buildout (with two of its customers receiving around half of recently announced projects). Marvell reported strong results in Q2, including better gross margins, lower expenses and revenue that grew 5% sequentially and 11% year over year. While storage revenue grew a modest 6% in the quarter, its networking business revenues were solidly higher (+23%), thanks to ongoing 5G deployments in China. The company also received approval for several key programs, including an ASIC-based cloud, a 5G baseband processor for Nokia and processors customized for “massive” multiple transmitter applications to Samsung (both expected to ramp up later this year). Along with 5G, the company sees the cloud data center market as a major early-stage growth opportunity. Management also guided for Q3 revenue to be around $750 million (up 13% and in line with expectations). Marvell’s expanding presence in the red-hot 5G and cloud markets – as well as its exposure to the emerging connected auto market (automotive ethernet products will soon start shipping into model-year 2021 vehicles which are starting production now) – is expected to drive continued growth for many years to come. Analysts see earnings up 40% this year and 50% next as business gains momentum. We agree and see a bright future ahead.
Technical Analysis
Following the March panic low, MRVL lifted off from a solid base in May and quickly reached a record high by June. A 3-month period of volatility followed which saw shares whip around, with the stock temporarily falling under the 50-day line. But this proved to be a classic “head fake” as MRVL recovered its stride and is once again in liftoff mode. You could take a stab here or nibble on the dips.
| Market Cap | $29.4B | EPS $ Annual (Jan) | |
| Forward P/E | 47 | FY 2019 | 1.19 |
| Current P/E | 59 | FY 2020 | 0.66 |
| Annual Revenue | $2.80B | FY 2021e | 0.92 |
| Profit Margin | 19.3% | FY 2022e | 1.37 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 727 | 11% | 0.21 | 31% |
| One qtr ago | 694 | 5% | 0.18 | 12% |
| Two qtrs ago | 718 | -4% | 0.17 | -32% |
| Three qtrs ago | 663 | -22% | 0.17 | -48% |
MRVL Weekly Chart
MRVL Daily Chart
Paylocity (PCTY)
Why the Strength
As more and more people work from home, human capital management (HCM) has become a daunting task for many companies. Paylocity makes this burden easier by providing a variety of cloud-based services for enterprises, including payroll and expense management, tax services and employee management software. The company targets firms with 20 to 1,000 employees, and its products are geared for all aspects of the HCM process; its mobile responsive, customizable software automatically integrates all employee-related info into a company’s HCM solution. The firm strengthened its video communication capability with its acquisition of VidGrid, an e-learning and employee engagement solution, and also just launched new premium video messaging features on its platform (a recent share price driver). To further drive productivity, Paylocity is investing in training initiatives and channel programs while upping marketing efforts. COVID-related shutdowns have impacted revenue growth (due to higher unemployment), but they’ve also accelerated cloud adoption, and Paylocity reported top-line growth of 9% in fiscal Q4 and a 20% full-year revenue increase. Moreover, management guided for a top-line range of $132 million to $136 million in Q1 2021 (up 6% at the midpoint), in-line with estimates. Analysts see continued single-digit revenue growth in the next two quarters, with low-20 percent growth expected by Q4 2021 and into 2023 as cloud adoption and the work-from-home trend accelerates. The next quarterly report is due out October 29.
Technical Analysis
PTCY fell from its pre-pandemic high of 150 in February to 75 in April before launching a recovery rally and climbing back to its old peak by early July. The stock spent most of the summer consolidating before breaking out and going bananas in the last couple of weeks. It’s a bit extended, so we suggest aiming for dips if you’re game.
| Market Cap | $9.87B | EPS $ Annual (Jun) | |
| Forward P/E | 124 | FY 2019 | 1.38 |
| Current P/E | 96 | FY 2020 | 1.87 |
| Annual Revenue | $561M | FY 2021e | 1.45 |
| Profit Margin | 13.6% | FY 2022e | 2.07 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 131 | 8% | 0.32 | -6% |
| One qtr ago | 172 | 23% | 0.83 | 80% |
| Two qtrs ago | 132 | 23% | 0.36 | 57% |
| Three qtrs ago | 127 | 26% | 0.36 | 80% |
PCTY Weekly Chart
PCTY Daily Chart
Penn National Gaming (PENN)
Why the Strength
Gambling never goes out of style, and today the new growth wave centers around the U.S., as many states are coming around to legalizing online gambling (called iGaming) and sports betting. Thanks to its deal with Barstool Sports (Penn paid $163 million to buy a 36% stake in that outfit, with another $62 million commitment coming in three years), Penn is launching a Barstool-branded sports betting app. It was launched in Pennsylvania (it was the top downloaded sports app in the U.S. in the week after it launched!) and has posted solid early usage, and with the cash from a recent share offering, Penn National is aiming to launch in many new markets (Colorado, Illinois, Indiana, Michigan, New Jersey, Virginia) in the months ahead, increase the app’s functionality (including live streaming) and expand its iGaming offerings, too. (More than 60% of Barstool’s 66 million users gamble on sports, so the potential is obvious.) And Penn isn’t just about the online realm—the company has more than 40 brick-and-mortar casinos (which themselves are recovering nicely as shut-ins ease around the U.S.), giving it what looks like a best-in-class omni-channel platform (also has 20 million loyalty members) to cross-sell to, in part by launching and rebranding new Barstool sportsbooks. As for the upside, converting just four million of Barstool’s users and five million of Penn’s loyalty members to its online platforms could capture 13% market share—and nearly double Penn’s cash flow. Earnings are due on October 29, though Penn already upped guidance two weeks ago.
Technical Analysis
PENN broke out in early August after earnings and enjoyed a great run, lifting from 40 to 76 in just a few weeks. Since that time shares have chopped around, partly to catch their breath, but also due to a good-sized share offering late last month. Usually, the first test of the 10-week line after a strong breakout is buyable, and PENN is getting close, with a low-volume pullback last week getting it within range. We’re OK picking up shares here or on further weakness.
| Market Cap | $9.39B | EPS $ Annual (Dec) | |
| Forward P/E | 53 | FY 2018 | 0.93 |
| Current P/E | N/A | FY 2019 | 0.37 |
| Annual Revenue | $4.12B | FY 2020e | -5.38 |
| Profit Margin | N/A | FY 2021e | 1.24 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 0.31 | -77% | -1.69 | N/A |
| One qtr ago | 1.12 | -13% | -5.26 | N/A |
| Two qtrs ago | 1.34 | 16% | -0.80 | N/A |
| Three qtrs ago | 1.35 | 72% | 0.38 | 0% |
PENN Weekly Chart
PENN Daily Chart
Roku, Inc. (ROKU)
Why the Strength
The “streaming services” category used to include just a couple of major players (Netflix, Amazon), but today there are many big players, with more joining the battle (and rapidly expanding content) every couple of months. All of that is great news for Roku, whose platform is the go-to neutral gateway for millions of consumers. There were 43 million active accounts at the end of Q2 (up 41% from a year ago), which probably touch two or three times that many people to access streaming content, thanks to its ease of use and partnerships with many top TV brands (which integrate Roku’s platform into their smart TVs). And that has set up a beautiful network effect—more users mean the big streaming players need to be on Roku’s platform, which in turn attracts more users. That has been playing out of late, which is one reason the stock is strong; a couple of weeks ago, NBC reached a deal with Roku to include its Peacock streaming service on the firm’s platform, and last week it was revealed that Roku’s ad-supported streaming channel is now available to Amazon Fire TV users. Revenue growth and key sub-metrics (streaming hours up 65% in Q2 to a whopping 14.6 billion—easily tops in the industry) have been strong for a while, and the pandemic is expected to accelerate that growth, with advertisers more willing to spend on streaming channels and consumers more willing to cut the cord. We like it.
Technical Analysis
ROKU has shown excellent action in recent months, with numerous big-volume up weeks since the March low, which is a sure sign that big investors are picking up shares. More recently, the stock tightened up in July and early August, but began to come to life after that (although the market’s correction kept it under wraps for a bit longer). The NBC deal three weeks ago kicked off a new advance, and ROKU has accelerated higher since then as investors pile in. The stock looks like a leading glamour name to us; the next pullback or shakeout should provide a great opportunity.
| Market Cap | $27.8B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.08 |
| Current P/E | N/A | FY 2019 | -0.52 |
| Annual Revenue | $1.35B | FY 2020e | -1.40 |
| Profit Margin | N/A | FY 2021e | -1.00 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 356 | 42% | -0.35 | N/A |
| One qtr ago | 321 | 55% | -0.45 | N/A |
| Two qtrs ago | 411 | 49% | -0.13 | N/A |
| Three qtrs ago | 261 | 50% | -0.22 | N/A |
ROKU Weekly Chart
ROKU Daily Chart
Synnex Corp. (SNX)
Why the Strength
SYNNEX is a business processing outsourcing (BPO) company operating in the Americas, Asia-Pacific, Europe, and Africa. It provides distribution, logistics and integration services for the technology industry and outsourced services to several sectors, including financial services, energy, healthcare, retail and technology, as well as transportation. For its third quarter, SYNNEX earned $3.33 per share, walloping estimates of $2.31. Revenues also beat the consensus, coming in at $6.5 billion, up 4% and beating the consensus by 14%, and the firm generated positive free cash flow. Sometime in the next three months, the company will split into two publicly-traded businesses—SYNNEX Technology Solutions and Concentrix, its current subsidiary. Concentrix operates in the fragmented $85 billion customer relationship management (CRM) market, with the top ten players owning only 35% (and presenting some attractive M&A opportunities for the firm). As well, Concentrix has its eye on expanding into other marketplaces beyond BPO and CRM. Both businesses are benefiting from the current work-at-home environment, with Technology Solutions seeing rising demand boost revenues by 19% and Concentrix’s CRM market seeing a 10% improvement in operating margins, driven by reduced operating costs. Looking ahead, management is forecasting revenue for Q4 to be in a range between $6.45 and $6.65 billion (up 2% at the midpoint), with more sequential top-line growth expected compared to last year, resulting from strong new business signings in the third quarter (in additional to seasonal increases). It also sees plenty of opportunities for both organic growth and growth through acquisitions going forward.
Technical Analysis
SNX took a big hit during the panic earlier this year, falling from 150 all the way to 60. But the recovery from the March bottom has been steady and impressive. After reaching 120 in July, the stock spent three months consolidating its gains in a narrow range. It then twice tested the 50-day line before rocketing to fresh highs on above-average volume after the latest earnings report. Shares are a bit extended, so aim for the dips if you want in.
| Market Cap | $7.80B | EPS $ Annual (Nov) | |
| Forward P/E | 11 | FY 2018 | 8.86 |
| Current P/E | 12 | FY 2019 | 10.92 |
| Annual Revenue | $23.8B | FY 2020e | 12.60 |
| Profit Margin | 2.7% | FY 2021e | 13.19 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 6.46 | 4% | 3.33 | 1% |
| One qtr ago | 5.53 | -3% | 1.83 | -36% |
| Two qtrs ago | 5.26 | 0% | 3.26 | 15% |
| Three qtrs ago | 6.58 | 19% | 4.26 | 15% |
SNX Weekly Chart
SNX Daily Chart
Tesla, Inc. (TSLA)
Why the Strength
Tesla needs no introduction, as it’s probably one of the most news- (and rumor-) generating stocks out there ... which isn’t our favorite situation. But there’s no question the stock is one of the real leaders of this advance, thanks to two main drivers. The most powerful is that perception of the future of electric vehicles has increased dramatically (one analyst sees the sector growing 20% annually for more than a decade). And with Tesla’s new additions to its lineup, it targets a market of eight million units annually, rapidly taking share as the upper class moves to EVs. The other big reason for the firm’s success is its own operations; after years of tripping over themselves, Tesla’s production efforts have been a big plus, meeting the big demand that’s out there. (Many think the firm should be in the ballpark of its 500,000 annual production goal going forward.) And, finally, also helping is optimism about its other operations, with solar demand expected to rise and Tesla’s latest Battery Day highlighting many advances that could eventually drive prices down meaningfully going forward. As for the numbers, after years of on-and-off performance, earnings have kicked into gear, and that should continue in 2021, with sales (up 39%) and earnings (up 70%) expected to soar. The next big event comes October 21, when Q3 results are due—analysts see sales up 31% and earnings of 56 cents per share, but just as important will be any outlook in demand and reservations.
Technical Analysis
TSLA has had an amazing run that really began late last year—the pandemic caused a big crash—but the stock broke out again above 205 and has been in 5th gear since then, rallying as high as 502 before correcting with growth stocks. It definitely took a big hit, but has held its 50-day line twice and, in the past couple of weeks, has tightened up nicely. Buying so soon ahead of earnings is a risk, but we’re OK starting with a small position here and buying more if the quarterly report is well received.
| Market Cap | $403B | EPS $ Annual (Dec) | |
| Forward P/E | 235 | FY 2018 | -0.27 |
| Current P/E | 288 | FY 2019 | 0.04 |
| Annual Revenue | $25.7B | FY 2020e | 1.82 |
| Profit Margin | 7.5% | FY 2021e | 3.08 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 6.03 | -5% | 0.44 | 300% |
| One qtr ago | 5.98 | 32% | 0.23 | 140% |
| Two qtrs ago | 7.38 | 2% | 0.43 | 10% |
| Three qtrs ago | 6.3 | -8% | 0.38 | -34% |
TSLA Weekly Chart
TSLA Daily Chart
TG Therapeutics, Inc. (TGTX)
Why the Strength
TG Therapeutics (covered in the May 11 issue) is making waves for its progress in two therapies it’s developing for B-cell malignancies and autoimmune diseases. One is ublituximab (TG-1101), a novel, glycoengineered monoclonal antibody that targets a specific and unique epitope on the CD20 antigen found on mature B-lymphocytes. The other is umbralisib (TGR-1202), an oral, once-daily inhibitor of PI3K-delta (an immune disease). Umbralisib uniquely inhibits CK1-epsilon, which may allow it to overcome certain tolerability issues associated with first generation PI3K-delta inhibitors. Both drugs together (called U2) have entered a Phase 3 clinical development for patients with hematologic malignancies, while ublituximab is in a Phase 3 clinical development for Multiple Sclerosis. In August, the FDA accepted the company’s new drug application for umbralisib as a treatment for patients with previously treated marginal zone lymphoma (MZL) who have received at least one prior anti-CD20 based regimen, as well as for follicular lymphoma (FL) patients who have received at least two prior systemic therapies. The MZL application has received a special designation from FDA and has been accepted for priority review and has a prescription drug (and anticipates a commercial launch early next year). Meanwhile, the FL indication has been accepted for standard review with an approval goal date of next June. It also expects topline data from the Phase 3 studies of ublituximab for Multiple Sclerosis later this year. With five medicines under development and four potential approvals in 2020-21, things look bright for TG. Earnings are expected November 4.
Technical Analysis
Shares of TGTX have been on a steady climb since the March doldrums, almost quadrupling their value. However, the momentum continues to build for this stock. Institutional investors have shown keen interest and have pushed the stock to highs it hasn’t seen since 2010. You could do some nibbling here, but aiming for the dips is preferable.
| Market Cap | $3.92B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -2.30 |
| Current P/E | N/A | FY 2019 | -1.96 |
| Annual Revenue | N/M | FY 2020e | -1.80 |
| Profit Margin | N/A | FY 2021e | -1.56 |
| 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 | -0.47 | N/M |
| One qtr ago | N/M | N/M | -0.48 | N/M |
| Two qtrs ago | N/M | N/M | -0.44 | N/M |
| Three qtrs ago | N/M | N/M | -0.69 | N/M |
TGTX Weekly Chart
TGTX Daily Chart
United Rentals, Inc. (URI)
Why the Strength
If you’re looking for a direct play on the economy, United Rentals is about as good as it gets. The company is the leading player in the North American equipment rental market (13% market share, though the sector is very fragmented, with just 36% controlled by the top 10 players). With a $14 billion fleet (640,000 units!), the business is split nearly evenly between industrial and non-residential construction end uses. Long-term, the business has tailwinds, as it’s usually far easier and less expensive to rent instead of buy, and the company itself has done a great job boosting efficiencies, making select acquisitions and developing new solutions (its Specialty segment offers services like trench safety, rental fleet management, power/HVAC, fluid solutions and more) that are boosting growth. Of course, the pandemic is going to put a dent in results this year—sales and earnings should continue to slide for the rest of this year—but the damage looks relatively limited (earnings should still be around $15 per share), free cash flow should be nearly twice that figure and everyone is thinking 2021 should show a nice rebound. As with many cyclical stocks, the bet here is that next year’s forecast (earnings up just 9%) will prove conservative as the world turns right side up and United continues to pull the right levers. Earnings are likely out near month-end.
Technical Analysis
URI was on the verge of leaping out of a multi-year base before the virus hit, and many months later, it has finally accomplished the feat. The stock’s rebound from its March low was solid, but the past four months have seen a base-on-base formation (one from 140 to 160, the next from 160 to 180), and after a shakeout in late September, URI has surged to new highs on solid volume. There could be round number resistance near 200, and earnings are a risk, but we think the path of least resistance is up. You can enter here.
| Market Cap | $14.5B | EPS $ Annual (Dec) | |
| Forward P/E | 13 | FY 2018 | 16.27 |
| Current P/E | 11 | FY 2019 | 19.52 |
| Annual Revenue | $9.01B | FY 2020e | 14.90 |
| Profit Margin | 13.7% | FY 2021e | 16.26 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.94 | -15% | 3.68 | -22% |
| One qtr ago | 2.12 | 0% | 3.35 | 1% |
| Two qtrs ago | 2.45 | 7% | 5.60 | 15% |
| Three qtrs ago | 2.48 | 18% | 5.96 | 26% |
URI Weekly Chart
URI 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 | |||||
| 9/21/20 | AGCO Corp. | AGCO | 68.5-71.5 | 81 | |
| 8/10/20 | Agnico Eagle Mines | AEM | 79.5-82.5 | 83 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 306 |
| 8/31/20 | Anaplan | PLAN | 59.5-62.5 | 63 | |
| 9/21/20 | Brinker Int’l | EAT | 42-44.5 | 46 | |
| 8/17/20 | Builders FirstSource | BLDR | 28-29.5 | 35 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 33 | |
| 9/8/20 | Chipotle Mex Grill | CMG | 1230-1270 | 1279 | |
| 9/28/20 | CrowdStrike | CRWD | 133-138 | 146 | |
| 10/5/20 | Datadog | DDOG | ? | 103-107 | 112 |
| 11/11/19 | Dexcom | DXCM | 196-205 | 394 | |
| 8/10/20 | Digital Turbine | APPS | 21.5-24 | 38 | |
| 8/24/20 | Elastic | ESTC | 99-103 | 125 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 134 | |
| 7/27/20 | Floor & Décor | FND | 69-72 | 80 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 17 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 123 | |
| 9/14/20 | Gap Inc. | GPS | 16.5-17.5 | 19 | |
| 9/14/20 | Guardant Health | GH | 98-102.5 | 109 | |
| 5/26/20 | Horizon Therapeutics | HZNP | ? | 45.5-48 | 81 |
| 8/17/20 | Innovative Ind. Prop. | IIPR | 116-121 | 134 | |
| 8/17/20 | iRhythm Technologies | IRTC | 168-174 | 260 | |
| 6/29/20 | Meritage Homes | MTH | 71.5-74 | 115 | |
| 9/14/20 | Mosaic | MOS | 17.2-18.2 | 19 | |
| 8/24/20 | Natera | NTRA | 60-63 | 74 | |
| 9/21/20 | NIO Inc. | NIO | 17-18 | 22 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 135 |
| 3/30/20 | Nvidia | NVDA | 250-270 | 569 | |
| 4/6/20 | Peloton | PTON | 27-29 | 127 | |
| 8/3/20 | Penn Nat’l Gaming | PENN | 34-36.5 | 65 | |
| 8/3/20 | PINS | 33.5-37 | 44 | ||
| 7/20/20 | Plug Power | PLUG | ? | 8.0-8.7 | 18 |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 127 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 61 |
| 7/13/20 | Roku | ROKU | 147-154 | 222 | |
| 7/27/20 | Sea Ltd | SE | 110-116 | 167 | |
| 9/21/20 | Seattle Genetics | SGEN | ? | 175-180 | 206 |
| 10/5/20 | SeresTherapeutics | MCRB | 27.5-29.5 | 32 | |
| 9/28/20 | Square | SQ | 157-162 | 185 | |
| 10/5/20 | ST Microelectronics | STM | 32-33.5 | 35 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 91 | |
| 9/14/20 | Target | TGT | 145-149 | 165 | |
| 10/5/20 | Teck Resources | TECK | 13-14.2 | 13 | |
| 9/21/20 | Toll Brothers | TOL | 44.5-47 | 50 | |
| 9/21/20 | TopBuild | BLD | 149-154 | 191 | |
| 8/31/20 | Tupperware | TUP | 14.5-15.5 | 22 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 330 | |
| 10/5/20 | TWTR | 44-46 | 48 | ||
| 8/24/20 | Whirlpool | WHR | 171-176 | 201 | |
| 5/11/20 | Wingstop | WING | 116-122 | 132 | |
| 10/5/20 | Zendesk | ZEN | 101-105 | 112 | |
| WAIT | |||||
| 10/5/20 | Purple Innovations | PRPL | 23-24.5 | 29 | |
| 10/5/20 | SolarEdge | SEDG | 243-257 | 298 | |
| SELL RECOMMENDATIONS | |||||
| 9/14/20 | 10x Genomics | TXG | 116-120 | 157 | |
| 9/8/20 | Boston Beer | SAM | 765-795 | 947 | |
| 9/28/20 | DraftKings | DKNG | 54-58 | 51 | |
| 9/21/20 | Exelixis | EXEL | 24.5-26 | 24 | |
| 9/14/20 | Snap | SNAP | 22.5-24 | 27 | |
| DROPPED | |||||
| 9/28/20 | Blueprint Med | BPMC | 84.5-87.5 | 101 | |
| 9/28/20 | Generac | GNRC | 180-185 | 204 | |
| 9/28/20 | Jinkosolar | JKS | 34.5-36.5 | 59 | |
| 9/28/20 | Owens & Minor | OMI | 19.5-20.5 | 26 | |
The next Cabot Top Ten Trader issue will be published on October 19, 2020.