Excellent Action
This year has been about as choppy and tricky as we can remember, so nothing the market would throw at us from here would come as a surprise. That said, there’s no question the snapback of the past couple of weeks has been very encouraging—the major indexes have rebounded beautifully, with many regaining their 50-day lines, and individual stocks (especially growth stocks) have done great, with more and more moving back to (or out above) their prior highs. We also like that the bounce has been broad, with the on-again, off-again, rotational action taking a backseat to outright buying. Obviously, the market isn’t totally out of the woods, as most indexes are still range-bound and earnings season is upon us, which will often change the trajectory of things. But we always go with what we see, and the odds are increasing that the September/early October correction is over. We’re moving our Market Monitor back up to a level 7, and could go higher than that if the good vibes continues.
This week’s list represents the broad advance of late, with stocks of all different spots and stripes making the cut. Our Top Pick is Zscaler (ZS), which has lifted to new price and relative performance highs after a six-week pullback.
| Stock Name | Price | ||
|---|---|---|---|
| Atlassian (TEAM) | 415 | ||
| Cameco Corporation (CCJ) | 26 | ||
| Continental Resources (CLR) | 52 | ||
| Datadog (DDOG) | 157 | ||
| MGM Resorts (MGM) | 48 | ||
| Range Resources (RRC) | 24 | ||
| Snowflake (SNOW) | 338 | ||
| Tesla, Inc. (TSLA) | 870 | ||
| XENE (XENE) | 31 | ||
| Zscaler (ZS) | 301 |
Atlassian (TEAM)
Why the Strength
With many businesses transitioning to a permanent work-from-home environment, workflow management platform Atlassian (covered in the August 2 report) is seeing continued strong demand for its cloud-based offerings. Atlassian operates a so-called “freemium” model and is reporting solid success in attracting sign-ups for its free and standard services, then converting them into paying customers for its premium products (customer migration to the firm’s cloud-only installations was up 70% from a year ago in the most recent report!). Subscriptions account for roughly 70% of Atlassian’s revenues, and fiscal Q4 was called an “inflection quarter” for Atlassian’s cloud business, which saw the company deliver 50% subscription revenue growth while adding 23,000 net new customers—its biggest-ever customer addition total. Churn rate improvement in recent quarters (basically customers who left but come back) has increased drastically, while existing enterprise users have been adding more users within their organizations. What’s more, the company called for fiscal 2022 (runs through next June) subscription revenue growth in the low-to-mid 40% range and above estimates. On a recent analyst call, management said it believes office-driven culture has permanently changed to favor more home-based work and that a “once-in-a-lifetime technology investment boom” will provide a massive opportunity for Atlassian’s IT service management and work management for teams businesses. Wall Street concurs and is calling for revenue growth in the low-to-mid 20% range for the next three years, while expecting per-share earnings to increase 16% and 30%, respectively, in the coming two years. Earnings are due October 28.
Technical Analysis
We rode TEAM to solid gains in August, but decided to sell it when the market correction got underway; given its big run, the odds favored more downside. But instead, the stock has held very firm—the stock’s correction only lasted two days and it’s crawled back toward its old highs. Thus, we’re OK getting back in: There hasn’t been much volume on the bounce, so with earnings coming out soon, we’ll set our buy range down a bit, thinking any pullback from here should find support near the recent lows.
| Market Cap | $103B | EPS $ Annual (Jun) | |
| Forward P/E | 193 | FY 2020 | 1.15 |
| Current P/E | 293 | FY 2021 | 1.40 |
| Annual Revenue | $2.09B | FY 2022e | 1.62 |
| Profit Margin | 11.1% | FY 2023e | 2.11 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 560 | 30% | 0.24 | -4% |
| One qtr ago | 569 | 38% | 0.48 | 92% |
| Two qtrs ago | 501 | 23% | 0.37 | 0% |
| Three qtrs ago | 460 | 26% | 0.30 | 7% |
TEAM Weekly Chart
TEAM Daily Chart
Cameco Corporation (CCJ)
Why the Strength
As governments around the world push ahead with decarbonization plans, and as power shortages worsen, uranium-based nuclear power is becoming increasingly embraced as a key fuel source. At the forefront of the renewed push toward nuclear energy is Cameco, one of the world’s largest uranium producers, accounting for roughly 20% of global output. Cameco’s two main properties are the Canada-based Cigar Lake mine, home to the world’s highest-grade uranium (and also Canada’s top producing mine), and the McArthur River mine (the former top producer). After shutting down Cigar Lake in the wake of last year’s pandemic—and again due to Canada’s wildfires this summer—Cameco has restarted operations at the mine and recently guided for production of up to 12 million pounds of U3O8 (triuranium octoxide) uranium on a 100% basis this year, a 33% improvement from comparable pre-pandemic output in 2019. And while the company reported a larger-than-expected Q2 per-share loss and a 31% revenue decline (due to suspended production), the top line beat estimates by 15%. Cameco also added seven million pounds of U3O8 in long-term sales contracts during the quarter, bringing the year-to-date total to 16 million pounds. For Q3, analysts expect sales and per-share earnings increases of 15% and 80%, respectively. As uranium miners go, they aren’t the sexiest growth stories out there, but the recent decision of the world’s largest uranium producer (Kazatomprom) to limit production in 2022 and 2023 is boosting prices in what is already a tight spot market. Add to that a recent string of Wall Street upgrades for Cameco, and we think the company still has room to grow. Earnings are due out October 29.
Technical Analysis
CCJ was in the doghouse for more than a decade, but the stock entered 2021 on a positive note at 14 and rode the 50-day line higher into mid-year, touching it on several occasions and bouncing to a new high each time. Shares hit a high of 22 in June, then broke the trend line and slid to around 16 by August. From there, CCJ exploded to multi-year highs on the back of soaring uranium prices and, while there was a pullback late last month, the buyers showed up again last week. We’re OK with a small position around here and a loose stop.
| Market Cap | $9.94B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2019 | 0.10 |
| Current P/E | N/A | FY 2020 | -0.17 |
| Annual Revenue | $1.58B | FY 2021e | -0.18 |
| Profit Margin | N/A | FY 2022e | 0.14 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 359 | -32% | -0.10 | N/A |
| One qtr ago | 290 | -16% | -0.07 | N/A |
| Two qtrs ago | 550 | -37% | 0.12 | -50% |
| Three qtrs ago | 379 | 25% | -0.20 | N/A |
CCJ Weekly Chart
CCJ Daily Chart
Continental Resources (CLR)
Why the Strength
When oil stocks began to take off a few weeks ago, there were two names that were the first to hit new highs—one was Devon Energy (DVN), which we’ve featured here recently, and the other was Continental Resources, which is 30% smaller (market cap-wise) but, like all of the best names in the group, is beginning to spin off huge amounts of cash flow. The company is the largest leaseholder in the Bakken and also has a big position in the Scoop and Stack plays in Oklahoma, and one of the unique aspects of the company is that its oil production is unhedged, so Continental doesn’t have any money-losing hedges to deal with. (The firm’s realized oil price in Q2 was north of $65, which was the highest in the industry.) Throw in some rising productivity among new wells across all of its acreage and the bottom line is improving at a rapid rate: At the start of the year, Continental thought it would produce $1 billion of free cash flow, but that estimate rose to $2.4 billion as of the end of July (12.5% of the current market cap)—and energy prices today are up another 10% or so since then! With all that cash, the company is paying down a ton of debt (from $5.5 billion in January to $3.7 billion by year-end), has hiked its base dividend a couple of times (1.0% annual yield) and has restarted a share buyback plan—there was $683 million on that plan as of July, which makes up a whopping 20% of the stock’s current float. Going forward, the sky’s the limit if energy prices remain elevated. Earnings are due November 1.
Technical Analysis
CLR has been showing leadership traits all year despite some ups and downs with the sector this year. Shares did get hit with the group in March but quickly found support and pushed to new highs a few weeks later, and the retreat in July found support after just three weeks. And since late August, CLR has been a superb performer, rising seven weeks in a row before finally pulling in a bit last week. Further weakness to the 50 area or below should be buyable.
| Market Cap | $19.2B | EPS $ Annual (Dec) | |
| Forward P/E | 13 | FY 2019 | 2.25 |
| Current P/E | 41 | FY 2020 | -1.17 |
| Annual Revenue | $3.98B | FY 2021e | 4.11 |
| Profit Margin | 26.9% | FY 2022e | 4.30 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1235 | 603% | 0.91 | N/A |
| One qtr ago | 1216 | 38% | 0.77 | N/A |
| Two qtrs ago | 838 | -30% | -0.23 | N/A |
| Three qtrs ago | 692 | -37% | -0.16 | N/A |
CLR Weekly Chart
CLR Daily Chart
Datadog (DDOG)
Why the Strength
Datadog is a leading SaaS-based application performance management (APM) provider, whose real-time monitoring and analytics platform helps app developers solve problems faster while boosting customer service by helping firms make sense of increasingly complex data. While SaaS companies have generally outperformed post-pandemic, Datadog has had an especially strong 2021 replete with revenue run rates in excess of $1 billion, plus cash flow that’s growing in the triple digits (all the more impressive when compared to most cash-burn intensive SaaS businesses). The company has also been working to expand its addressable market, recently launching a cloud security service with partner Arctic Wolf. Indeed, the top brass believes that cybersecurity can be a much bigger part of its overall analytics platform and told analysts on a recent call that it sees a “very large market” for adding security to the platform’s development and operations functions. On the financial front, Datadog significantly increased Q3 and full-year guidance and expects revenue of around $247 million along with per-share earnings between 5 and 6 cents. For full-year 2021, the top line is expected to be $941 million at the midpoint (up 6% from prior guidance) with the bottom line around 27 cents (up 93%). Additionally, a recent share price upgrade from a big firm has contributed to the strength (based on projected re-acceleration in software and IT spending during economic reopening). Going forward, the total market for global cloud and workload security is expected to exceed $30 billion annually this year, and analysts see the top and bottom lines surging in 40% range next year.
Technical Analysis
After a lengthy upside run last year, DDOG peaked at 120 in February before entering a Chinese water torture-type decline that shook out most of the weak hands over many months. Shares finally bottomed out at 70 in May, and DDOG has been steadily pushing higher ever since, with the Q2 report in August providing the juice for a breakout. The latest price highs were confirmed by new highs in the RP line, so we’re OK with taking a swing here or on dips.
| Market Cap | $48.0B | EPS $ Annual (Dec) | |
| Forward P/E | 552 | FY 2019 | -0.01 |
| Current P/E | 590 | FY 2020 | 0.22 |
| Annual Revenue | $766M | FY 2021e | 0.28 |
| Profit Margin | 13.8% | FY 2022e | 0.40 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 234 | 67% | 0.09 | 80% |
| One qtr ago | 199 | 51% | 0.06 | 0% |
| Two qtrs ago | 178 | 56% | 0.06 | 100% |
| Three qtrs ago | 155 | 61% | 0.05 | 400% |
DDOG Weekly Chart
DDOG Daily Chart
MGM Resorts (MGM)
Why the Strength
The White House will lift travel restrictions next month for vaccinated foreigners wishing to visit the U.S. Along with pent-up casino gambling demand, the move is expected to boost the Las Vegas-based leisure industry, with MGM Resorts positioned to benefit from an anticipated rebound. Additionally, the company is undergoing a major transformation which includes the sale of a 42% interest in its real estate investment trust, MGM Growth Properties, a move designed to reduce the firm’s debt and increase cash. It’s also part of the company’s strategy to streamline operations by divesting cumbersome real estate holdings while increasing ownership of attractive Las Vegas resorts. As part of this strategy, MGM recently acquired the business operations of Cosmopolitan Resort on the Vegas Strip for $1.6 billion. The Cosmopolitan has been described as a “millennial-oriented” resort which caters to a much younger demographic than the typical Vegas hotel and casino, and that should bring better long-term growth potential. The deal is further expected to complement MGM’s other major resorts, including the famed Bellagio and the Aria, both of which appeal mainly to the 40-and-older crowd. In the wake of the Cosmopolitan deal, MGM got a boost from one analyst who hinted that, after some recent deals, the company could have $9 billion in cash that could be used for investments, share buybacks and more. As for the numbers, Q2 saw a major rebound for MGM’s Las Vegas resorts, with occupancy averaging 77% versus 43% a year ago. Revenue was up 683% for the quarter (due to soft comparisons), with revenue per available room (RevPAR) jumping to $115 (from $66 a year ago). Wall Street sees the growth continuing in Q3, with revenue expected to rise 114% and earnings nearly coming in breakeven. Earnings are due out November 3, with a lot of attention to be paid to travel trends and bookings for Q4 and beyond.
Technical Analysis
MGM’s comeback from last year’s crash has been fantastic, with the stock actually pushing to new multi-year highs in February. And, while there wasn’t much progress during the past few months, there wasn’t much selling, either, with a maximum correction of 21% and the 40-week line offering support a couple of times. And now the buyers are back, with MGM perking up in late September and zooming on big volume last Tuesday. We’re OK starting small here and seeing what earnings bring.
| Market Cap | $23.1B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2019 | 0.76 |
| Current P/E | N/A | FY 2020 | -3.94 |
| Annual Revenue | $6.54B | FY 2021e | -0.90 |
| Profit Margin | N/A | FY 2022e | 0.46 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.27 | 683% | -0.13 | N/A |
| One qtr ago | 1.65 | -27% | -0.68 | N/A |
| Two qtrs ago | 1.49 | -53% | -0.90 | N/A |
| Three qtrs ago | 1.13 | -66% | -1.08 | N/A |
MGM Weekly Chart
MGM Daily Chart
Range Resources (RRC)
Why the Strength
Range Resources isn’t a household name, but it’s a big player in U.S. gas—the company is a top 10 producer of both natural gas and natural gas liquids (NGLs), including being the top NGL exporter among independent producers. Range’s operations are mostly focused in Appalachia, and one of its claims to fame is a super-efficient operation; the firm’s breakeven price for natural gas is around $2.30, the lowest of its peers, and it can maintain production with just $425 million of annual CapEx (which is the goal for the foreseeable future). The result is a ton of free cash flow that Range has been using to pay down debt (debt to EBITDA should decline to less than 2.5x by year-end), and its projections from just three months ago now look ridiculously conservative—the company had seen a total of $1 billion of free cash flow in 2021 and 2022 combined (16% of the current market cap), but that was based on natural gas prices of $3.25 and oil prices around $63, both of which are miles below where the market currently sits. (Updated projections for current prices should be part of the earnings call, which is due on October 27.) Larger than just the current price bump is history: Natural gas has generally been in the doghouse for years, and with many weak producers wiped out and big players like Range keeping production flat, it’s possible that natural gas (and NGL) prices will remain elevated for longer than most expect. Like most energy plays, there’s a lot to like about Range Resources.
Technical Analysis
RRC has been very strong this year, but not without some good-sized potholes along the way, including a 27% dip in April and a 29% correction in July and August. But as natural gas prices have surged, the stock has come to life in a big way—RRC pushed to new highs in early September and is up eight weeks in a row (including five that came on well above-average volume). The 25 level has offered a little near-term resistance, so we’ll set our buy range down a bit, aiming to sharpshoot an entry on weakness.
| Market Cap | $6.09B | EPS $ Annual (Dec) | |
| Forward P/E | 12 | FY 2019 | 0.40 |
| Current P/E | 47 | FY 2020 | -0.09 |
| Annual Revenue | $1.96B | FY 2021e | 1.91 |
| Profit Margin | 13.5% | FY 2022e | 3.17 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 435 | 15% | 0.24 | N/A |
| One qtr ago | 626 | -10% | 0.30 | 650% |
| Two qtrs ago | 599 | -1% | 0.02 | -75% |
| Three qtrs ago | 299 | -52% | -0.05 | N/A |
RRC Weekly Chart
RRC Daily Chart
Snowflake (SNOW)
Why the Strength
Snowflake is a fast-growing (and very highly valued) cloud enterprise data warehouse services provider. Large businesses are moving toward data cloud services to make it easier for their various departments to share information and draw upon the same set of data for business applications. Snowflake sees the segment evolving very rapidly and is focused on acquiring customers in the Fortune 500 as they shift their IT plans. While the company has 212 of the largest companies as clients, overall customers spending $1 million or more with Snowflake is 116. Clearly, there’s room to expand business with existing Fortune 500 clients, as well as find other large-spending customers in the future. Snowflake pitches two value propositions to customers: Apps and services to use with its data cloud to generate new products, and a modified consumption pricing model; customers sign contracts for a level of services and the revenue isn’t recognized by Snowflake until it’s used (even if customers prepay). Unused services are rolled over if clients sign a new, larger contract. That means unused services, called remaining performance obligations (RPOs), are a way to forecast Snowflake’s coming business: That figure hit $1.5 billion last quarter, nearly three times 2021 sales. With its focus on gaining customers, Snowflake does lose money, but the expectation is grabbing market share now (especially among giant outfits) will equal big profits down the line. Management says FY 2022 revenue (ending Jan. 31, 2022) will grow 92% to $1.14 billion, while revenues next year are expected to lift another 64%.
Technical Analysis
SNOW got ahead of themselves at 390 and the stock imploded to a nadir of 191 in May. But then we saw something interesting—three straight big-volume up weeks, a pattern that, believe it or not, has forecasted good things for many recent IPOs. Indeed, the stock has pushed higher since then, and we like the action during the market correction, with support at the 50-day line and bouncing to new highs. If you’re game you can grab some on dips.
| Market Cap | $98.8B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2020 | 5.97 |
| Current P/E | N/A | FY 2021 | 5.25 |
| Annual Revenue | $852M | FY 2022e | 10.97 |
| Profit Margin | N/A | FY 2023e | 13.35 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 272 | 104% | -0.64 | N/A |
| One qtr ago | 229 | 110% | -0.70 | N/A |
| Two qtrs ago | 191 | 117% | -0.70 | N/A |
| Three qtrs ago | 160 | 119% | -0.61 | N/A |
SNOW Weekly Chart
SNOW Daily Chart
Tesla, Inc. (TSLA)
Why the Strength
Tesla is no stranger to investors, 99% of whom seem to either love or hate the stock. But when you strip away all the noise and arguments, the fact is that Tesla remains the hands-down leader in a huge growth industry and, as opposed to a few years ago, is executing its own business beautifully. The company, of course, is the top dog in electric vehicles—while the firm’s S and X models are still popular, it’s the Model 3 (sedan) and Model Y (mid-size SUV) that are driving business these days; in Q2, Model 3 and Y deliveries were up a whopping 169% from a year ago, and despite their somewhat lower price tag, are driving profit margins (automotive gross margin in Q2 was 28%!) to lofty levels for an automaker. Throw in the fact that sales growth is rapid and accelerating while earnings are soaring and crushing expectations (analyst estimates have risen by more than a dollar per share during the past three months) and it’s clear management has everything running smoothly. But the future looks even brighter: Confirming the growth of the industry, Tesla has a stated goal of increasing production capacity by 50% annually (some years a bit more, some a bit less) for many years as it anticipates growing demand not just for the four models it has now, but also for its Cybertruck (set to be released next year; has more than 500,000 non-binding offers), Semi (also supposed to start production next year, though it’s been delayed repeatedly) and possibly a new Roadster (at $200,000 a pop!). And none of this says anything about its growing solar and power storage business (deployments of both tripled in Q2). To be fair, competition is picking up, but there’s no doubt Tesla is the leader and isn’t resting on its laurels. Analysts see earnings up 136% this year and another 39% next, but that could change come Wednesday (October 20), when the Q3 report is due.
Technical Analysis
TSLA had a massive, massive run from late 2019 through early 2021, so it’s possible the stock needs more time to rest. But it’s already built a big launching pad—from its February top, the stock has been consolidating for 38 weeks and had a maximum correction of 40%—and it’s showing signs of getting going, with 11 of 12 weeks up and the stock pushing above resistance near 800 last week. Given the move of the past two days, we’ll set our range down a bit if you want to nibble ahead of the report.
| Market Cap | $835B | EPS $ Annual (Dec) | |
| Forward P/E | 160 | FY 2019 | 0.03 |
| Current P/E | 208 | FY 2020 | 2.24 |
| Annual Revenue | $41.9B | FY 2021e | 5.28 |
| Profit Margin | 13.5% | FY 2022e | 7.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 12 | 98% | 1.45 | 230% |
| One qtr ago | 10.4 | 74% | 0.93 | 304% |
| Two qtrs ago | 10.7 | 46% | 0.80 | 95% |
| Three qtrs ago | 8.77 | 39% | 0.76 | 105% |
TSLA Weekly Chart
TSLA Daily Chart
Xenon Pharmaceuticals Inc. (XENE)
Why the Strength
More than 65 million people globally suffer from some form of epilepsy, yet this market is woefully underserved as available drugs are ineffective for most patients. Xenon, a clinical-stage biotech specializing in neurological disorder treatments, recently took a big step toward filling this gap. Xenon just announced positive Phase 2b trial results for XEN1101 as a supplemental treatment for adult patients with focal epilepsy, with the treatment successfully reducing the monthly frequency of seizures with minimal side effects. The drug is part of a group of epilepsy treatments close to commercial release, with XEN007 (for pediatric absence epilepsy) in Phase II testing and Kv7 potassium channel modulator XEN496 (for orphan pediatric epilepsy) in Phase III. The positive results for XEN1101 is driving the latest strength and has given the company reason to expect that its drug candidates could increase its anti-epileptic drug market in a big way. Xenon is further seeking to expand the market for XEN1101 by collaborating with the Icahn School of Medicine in a Phase II clinical trial of the drug to investigate the treatment of major depressive disorder (MDD) and anhedonia. As for the numbers, there aren’t many, with the stock effectively having no sales or earnings. However, Xenon just received $10 million from Neurocrine to begin a Phase II clinical trial for the treatment of focal-onset seizures and is eligible to receive $5 million more upon FDA acceptance. Earnings are expected out November 4 but most of the attention will be paid to how quickly XEN1101 can affect results down the road.
Technical Analysis
For the better part of the last two years, XENE was stuck in a range between 10 and 20, making minimal net progress. A breakout attempt above the high end of this range failed in March and shares eventually slipped to 15 by September. But that’s all changed now, with XENE mushrooming above 20 earlier this month after the release of its trial results. It’s a speculation, but we think today’s dip (or further weakness) is a chance to start a position.
| Market Cap | $1.67B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2019 | -1.54 |
| Current P/E | N/A | FY 2020 | -0.81 |
| Annual Revenue | $18.4M | FY 2021e | -1.67 |
| Profit Margin | N/A | FY 2022e | -2.17 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 2.2 | -83% | -0.51 | N/A |
| One qtr ago | 4.4 | -38% | -0.42 | N/A |
| Two qtrs ago | 5.2 | 55% | -0.35 | N/A |
| Three qtrs ago | 6.6 | 87% | -0.25 | N/A |
XENE Weekly Chart
XENE Daily Chart
Zscaler (ZS)
Why the Strength
Data security worked pretty well in the traditional office environment when employees worked together, giving IT a manageable footprint to control access to information and networks. As employees increasingly work remotely and data goes from in-house servers to the cloud, there are a host of fresh security issues to manage. Zscaler is a cloud security provider for corporations, selling its “Zero Trust Exchange” as a way to prevent hacks and limit unneeded access among authorized users. Zscaler separates security from the network, meaning that users access apps, not a network, which keeps them seeing only what they’re permitted to. Zscaler also denies proxies and other architectures that often hide data threats. The company also uses tech sleight of hand to hide client apps so hackers can’t easily find them. The company has 5,600 clients now with about 26 million seat licenses completing some 160 billion data transactions a day, which Zscaler says is ten times what Google does. The business has been a quick-growing one in recent years, but it appears to be gaining even more steam: Quarterly revenue growth has been well over 50% each of the past four quarters, reaching $673 million for fiscal 2021, which ended in July. Client deals are usually annual contracts, which management says allows it ample opportunity to upsell clients on new services. Right now, average revenue per user is near $26. Add-ons for tighter security protocols, data loss prevention and the like could raise that to $145, and management thinks the potential market for end users is many-fold where they are now. Sales for the new year are seen nearing $1 billion, though higher investments could keep earnings growth under wraps.
Technical Analysis
ZS slid in the broad tech retracement earlier this year, rebounding in late May on Q3 sales and earnings that handily beat estimates. After adding more than 100 points to 287 entering September, shares took a necessary step back, testing the 50-day moving average as the market weakened. But the action since the low has been great, with a strong push back to its highs on solid volume. You can enter here or (preferably) on minor weakness.
| Market Cap | $40.6B | EPS $ Annual (Jul) | |
| Forward P/E | 514 | FY 2020 | 0.30 |
| Current P/E | 554 | FY 2021 | 0.52 |
| Annual Revenue | $673M | FY 2022e | 0.57 |
| Profit Margin | 10.3% | FY 2023e | 0.96 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 197 | 57% | 0.14 | 75% |
| One qtr ago | 176 | 60% | 0.15 | 114% |
| Two qtrs ago | 157 | 55% | 0.10 | 0% |
| Three qtrs ago | 143 | 52% | 0.14 | 250% |
ZS Weekly Chart
ZS 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 | 211 | |
| 10/4/21 | Affirm Holdings | AFRM | 105-111 | 157 | |
| 9/7/21 | Ambarella | AMBA | ★ | 132-138 | 168 |
| 9/13/21 | Antero Res. | AR | ★ | 15.4-16.1 | 20 |
| 9/27/21 | APA Corp. | APA | 22-23.5 | 27 | |
| 7/6/21 | Asana | ASAN | 61-65 | 118 | |
| 8/16/21 | Avis Budget | CAR | 91-94 | 158 | |
| 10/4/21 | Beauty Health | SKIN | 24.5-25.5 | 27 | |
| 6/21/21 | Bill.com | BILL | 176-182 | 296 | |
| 9/27/21 | Brooks Automation | BRKS | 102-106 | 104 | |
| 8/23/21 | Builders FirstSource | BLDR | 49-51 | 58 | |
| 10/4/21 | Caesars Entertainment | CZR | 113-117 | 113 | |
| 9/13/21 | Celsius Holdings | CELH | 84-88 | 93 | |
| 10/4/21 | CF Industries | CF | ★ | 58-61 | 61 |
| 9/20/21 | Chesapeake Energy | CHK | 58-60 | 63 | |
| 6/14/21 | Cloudflare | NET | 90-93 | 181 | |
| 10/4/21 | ConocoPhillips | COP | 67-70 | 75 | |
| 8/30/21 | Continental Res. | CLR | 37-38.5 | 52 | |
| 8/9/21 | Datadog | DDOG | 124-128 | 157 | |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 41 |
| 7/19/21 | Dexcom | DXCM | 425-438 | 541 | |
| 9/27/21 | DoorDash | DASH | 206-212 | 215 | |
| 6/28/21 | Dynatrace | DT | ★ | 57-59 | 76 |
| 4/26/21 | Floor & Décor | FND | 109-113 | 125 | |
| 10/11/21 | Goodyear Tire | GT | 18-19 | 19 | |
| 10/11/21 | Hilton Worldwide | HLT | 139-142 | 144 | |
| 7/19/21 | Horizon Therapeutics | HZNP | 90-93 | 113 | |
| 9/13/21 | ICU Medical | ICUI | 233-243 | 225 | |
| 10/4/21 | Int’l Game Tech | IGT | 26-28 | 29 | |
| 9/20/21 | KKR & Co. | KKR | 63.5-65.5 | 67 | |
| 8/9/21 | LendingClub | LC | 25-27 | 34 | |
| 10/4/21 | Live Nation | LYV | 95.5-98.5 | 102 | |
| 10/11/21 | LPL Financial | LPLA | ★ | 165-169 | 172 |
| 9/7/21 | Macy’s | M | 21-22 | 28 | |
| 10/4/21 | Matador Resources | MTDR | 37-39 | 44 | |
| 10/11/21 | Mosaic | MOS | 39-41 | 42 | |
| 8/30/21 | Palo Alto Networks | PANW | 440-455 | 515 | |
| 8/9/21 | Paycom Software | PAYC | ★ | 448-462 | 521 |
| 8/16/21 | Paylocity | PCTY | ★ | 242-248 | 289 |
| 10/11/21 | Pioneer Nat. Resources | PXD | 187-192 | 190 | |
| 9/13/21 | Pure Storage | PSTG | 25-26 | 26 | |
| 9/27/21 | SeaWorld Entertainment | SEAS | 56.5-58.5 | 60 | |
| 9/27/21 | Signet Jewelers | SIG | 82-85 | 89 | |
| 9/27/21 | Snap Inc. | SNAP | 78-81 | 76 | |
| 9/27/21 | SVB Financial | SIVB | 655-675 | 696 | |
| 9/13/21 | Teck Resources | TECK | 23.5-24.5 | 30 | |
| WAIT | |||||
| 10/11/21 | Applovin | APP | 83-86 | 92 | |
| 10/11/21 | Upstart Holdings | UPST | 285-300 | 383 | |
| SELL RECOMMENDATIONS | |||||
| 8/30/21 | Alkermes | ALKS | 29-30.5 | 30 | |
| 9/27/21 | BioHaven Pharm. | BHVN | 130-134 | 129 | |
| 9/20/21 | Catalent | CTLT | 129-133 | 130 | |
| 8/23/21 | Chart Industries | GTLS | ★ | 173-178 | 182 |
| 9/20/21 | Lululemon | LULU | ★ | 407-420 | 417 |
| 7/12/21 | Synaptics | SYNA | 154-158 | 175 | |
| DROPPED | |||||
| None this week. | |||||
The next Cabot Top Ten Trader issue will be published on October 25, 2021.