Still Constructive
Current Market Outlook
We like to go with the evidence that’s in front of us at any given time, and if you do that today, you’ll see that most of the key evidence continues to look solid—the intermediate-term trend of the major indexes is tilted higher (though there’s still some resistance at the early-September highs to chew through), while more and more leading stocks are acting constructively; most have pulled back reasonably (so far) after heady runs during the prior three-plus weeks. Of course, we’re not leaving our brains at the door either, as earnings season (which ramps up this week in a big way) and the upcoming U.S. elections certainly have the potential to carve out a few potholes, while sentiment has picked back up after the August/September dip. Thus, we remain flexible and think picking buy points is vital, but overall, we remain mostly bullish.
This week’s list has a ton of potential pullback buys, though you have to be aware of earnings dates. Our Top Pick is Beyond Meat (BYND), which is enjoying a normal breather and looks to be approaching a good risk-reward entry point.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 153.44 | ||
| Beyond Meat (BYND) | 183.98 | ||
| Bill.com Holdings (BILL) | 116.15 | ||
| Carvana (CVNA) | 213.52 | ||
| Deckers Outdoor Corp. (DECK) | 253.08 | ||
| Invitae (NVTA) | 48.38 | ||
| Monolithic Power (MPWR) | 312.85 | ||
| Paycom Software (PAYC) | 383.11 | ||
| Plug Power (PLUG) | 16.39 | ||
| SunPower (SPWR) | 17.62 |
Avalara (AVLR)
Why the Strength
Avalara helps companies that do cross-border and interstate business navigate tax codes that are becoming more complex. Its cloud-based platform automates sales and use tax rate and return filing calculations for clients, greatly simplifying the regulatory process and easing the burden. It should come as no surprise that shutdowns had no discernible impact on Avalara’s earnings in the June quarter, with the top line growing 28% while the firm posted its best ever non-December total bookings month in June. The company also posted positive non-GAAP per-share earnings of 4 cents (crushing estimates by 14 cents), a big improvement from previous quarters. Revenue from subscription and returns, as well as professional services, was up around 28%. The firm ended the quarter with nearly 13,300 core customers (also up 28%), with a same-customer revenue growth rate of 7% (that figure has averaged a good-not-great 10% during the past year). The attraction here is that Avalara has the best platform in its space and is constantly boosting capabilities (it recently added more than a dozen new features, including some that specifically help art businesses, some for Shopify users, one for multichannel retail merchants and a bunch that aid with facility management, analytics and accounting) that should attract thousands more customers over time. (It also purchased a tax specialist firm this month that serves 30% of the Fortune 500.) All in, Avalara estimates its addressable market at about $8 billion, giving the firm a lengthy runway for future growth. Earnings are due out November 5.
Technical Analysis
After a three-month consolidation, we’re seeing more enterprise software stocks perk up, and if the group gets going, AVLR looks likely to be one of the leaders. Shares motored to all-time highs in early May (a sign of leadership) and bolted as high as 145 in early July. The stock then bobbed and weaved for three months, falling as low as 115 a few times before the sellers left the building—allowing the buyers to drive the stock to new highs in recent days. We’re open to entering a small position on the next pullback.
| Market Cap | $12.4B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.68 |
| Current P/E | N/A | FY 2019 | -0.12 |
| Annual Revenue | $434M | FY 2020e | -0.17 |
| Profit Margin | 3.2% | FY 2021e | -0.08 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 117 | 28% | 0.04 | N/A |
| One qtr ago | 111 | 31% | -0.05 | N/A |
| Two qtrs ago | 108 | 40% | -0.03 | N/A |
| Three qtrs ago | 98.5 | 41% | -0.02 | N/A |
AVLR Weekly Chart
AVLR Daily Chart
Beyond Meat (BYND)
Why the Strength
Beyond Meat is one of (if not the) leading player in the alternative meat industry, where it uses science (it actually spends 7% of revenues on R&D) and a bunch of natural ingredients (including beans, brown rice, coconut oil and cocoa butter) to develop products (burgers, ground beef, meatballs, sausage patties, etc.) that look and even taste a lot like real meat; in other words, this isn’t your old veggie burger. We’ve tried them, and think they’re pretty solid, but even if you’re not getting on the veggie bandwagon, the potential is enormous because the market is gigantic: Meat sales in the U.S. alone total $270 billion annually (both direct sales and via restaurants), so capturing just a fraction of that (similar to how alternative milks captured 10%-plus of that industry) could be huge. As for Beyond itself, it’s been busy expanding its product line (breakfast sausage links) and distribution (tripling the number of Walmart locations its burgers will be sold at, as well as moving into China), and growth has remained rapid in spite of the pandemic’s hiccups—while foodservice sales dipped nearly 60% in Q2, retail sales boomed 190% or so, allowing the overall top line to rise 69%, and earnings are expected to boom in the quarters to come. Yes, there’s competition out there, but the market is large enough for many players, and there’s no question that Beyond Meat is gaining market share in a big way. Analysts see revenues up 55% next year while earnings surge, and both of those could prove conservative depending on how fast foodservice sales return to normal. There’s no set date for earnings yet, but they’re likely to be released in early November.
Technical Analysis
BYND can be very volatile on a day-to-day basis, but looking at the overall action, it’s clear the buyers are in control. After a huge off-the-bottom rally, shares built a good-looking 14-week launching pad that including some tightness near the bottom (a good sign). And the action since early September has been excellent, with a lot of good-volume buying driving BYND to new highs. Now it’s begun to rest a bit—we’re OK nibbling here or (preferably) on further dips and seeing how the quarterly report goes.
| Market Cap | $11.5B | EPS $ Annual (Dec) | |
| Forward P/E | N/M | FY 2018 | -0.49 |
| Current P/E | N/M | FY 2019 | 0.04 |
| Annual Revenue | $401M | FY 2020e | 0.07 |
| Profit Margin | N/A | FY 2021e | 0.59 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 113 | 69% | -0.02 | N/A |
| One qtr ago | 97.1 | 141% | 0.05 | N/A |
| Two qtrs ago | 98.5 | 213% | -0.01 | N/A |
| Three qtrs ago | 92 | 250% | 0.10 | N/A |
BYND Weekly Chart
BYND Daily Chart
Bill.com Holdings (BILL)
Why the Strength
We’ve been stalking Bill.com for months, and after a choppy rest period, the stock has changed character for the better. As opposed to some of the cloud- and technology-centric firms out there, this company’s story is easy to understand—90% of small businesses out there that aren’t sole proprietorships (between 2 and 500 employees—six million of them in all in the U.S.) are still using paper-based methods for back-office stuff like invoicing, contracts, bill paying and more. Bill.com is increasingly fixing that, as it has one of the leading platforms built specifically for small fries to take them into the digital age, allowing them to digitally connect to their suppliers and customers, pay bills and send/receive payments online and sync to most big accounting and banking systems. In other words, they make small businesses far more efficient and flexible, and the platform has been a hit: Bill.com serves 98,000 customers (up 28% from a year ago), while core revenue (which includes subscription and transaction-related revenue) has been kiting higher for a while (up 54% in the June quarter), and clients are paying more as their usage increases (same-customer revenue growth of 21% over the past year; transactions rose 20% during the same time). We also like that new customers pay back Bill.com’s initial sales/marketing/setup costs in just five quarters, leading to a surge in cash flow over time. To be fair, the company also earns money on the float, and that’s declining due to 0% interest rates, but big investors are more focused on the underlying business. With economic risks dissipating (fewer fears that Bill’s small clients will go under), both the short- and long-term future looks very bright. Earnings are due out November 5.
Technical Analysis
BILL went bananas on earnings in early May, but while it made some progress after that, it never really was a leader—the relative performance line was mostly flat from that point through late September. But the stock has turned the corner during the past month, with a very smooth, persistent advance to new peaks, including some big volume buying the latter part of last month. We’re OK starting a small position on further dips and then seeing how earnings are received.
| Market Cap | $9.38B | EPS $ Annual (Jun) | |
| Forward P/E | N/A | FY 2018 | -0.04 |
| Current P/E | N/A | FY 2019 | -0.15 |
| Annual Revenue | $158M | FY 2020e | -0.28 |
| Profit Margin | N/A | FY 2021e | -0.23 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 42.1 | 33% | -0.02 | N/A |
| One qtr ago | 41.2 | 46% | -0.04 | N/A |
| Two qtrs ago | 39.1 | 50% | -0.05 | N/A |
| Three qtrs ago | 35.2 | 57% | -0.04 | N/A |
BILL Weekly Chart
BILL Daily Chart
Carvana (CVNA)
Why the Strength
You’ve likely seen Carvana’s iconic, multi-story car vending machines, which are easily visible from highways near major cities. Central to the firm’s success is a unique peer-to-peer e-commerce platform that has allowed it to outperform most of its competitors in the retail automotive space during the pandemic. Customers can shop Carvana’s website for a used vehicle and have it delivered right to their door (just like a pizza!), eliminating the dealer, thanks in large part to Carvana making it as easy as possible for buyers (including a seven-day test drive period and guarantees that none of its cars have been in reported accidents). While traditional auto dealers lost business during the shut-ins due to heavy reliance on foot traffic, Carvana was already positioned to take advantage of the shop-from-home trend and gained considerable market share. Of course, Carvana wasn’t immune to the effects of the pandemic; sales grew just 13% in Q2, though there were some bullish tidbits in that report (units sold still rose 25% from a year ago; sales growth accelerated to 40% later on in Q2). And Q3 looks like a barnburner, with management announcing that it expects record unit sales, revenue and gross profit per unit, and also believes it should be EBITDA breakeven, achieving that way ahead of expectations. Like many online plays, the upside here is that the pandemic caused a permanent step-function increase in the number of people willing to buy a car online, which would be a boon to Carvana both near- and long-term. When Q3 results are released on October 29, analysts see sales growth accelerating to 40% (probably conservative), and big investors will be listening to see if EBITDA will pick up meaningfully going forward.
Technical Analysis
CVNA had a huge, huge recovery from the market’s crash in March, but after some choppy movements, the stock appears to be setting up a solid entry point. The stock blew off on the upside a bit in early August, but after correcting for a few weeks, the buyers returned when the company upped Q3 guidance—and since then, CVNA has settled down in a wide range (200 to 240) as earnings approach. If you’re game, you can start a position around here and use a loose stop heading into the report.
| Market Cap | $37.5B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -2.03 |
| Current P/E | N/A | FY 2019e | -2.45 |
| Annual Revenue | $4.41B | FY 2020e | -2.44 |
| Profit Margin | N/A | FY 2021e | -1.33 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.12 | 13% | -0.62 | N/A |
| One qtr ago | 1.1 | 45% | -1.19 | N/A |
| Two qtrs ago | 1.1 | 89% | -0.82 | N/A |
| Three qtrs ago | 1.09 | 105% | -0.60 | N/A |
CVNA Weekly Chart
CVNA Daily Chart
Deckers Outdoor Corp. (DECK)
Why the Strength
In the six years before COVID, Deckers Outdoor grew its earnings per share by 18% annually, thanks to a great selection of top quality footwear, including UGG boots, Teva sandals, Sanuk comfy shoes and HOKA athletic shoes. The pandemic has suppressed the company’s current earnings (Q2 saw the loss grow and Q3 is also expected to show some bottom line shrinkage), but the stock is strong as investors are betting on a return to normalcy in the months ahead. Revenues, for instance, likely inched up in Q3, Deckers has beat consensus estimates each of the past four quarters, and its earnings estimates have been rising lately (analysts actually see the bottom line flat with last year, which is a win given the pandemic’s effects), so maybe we can expect another surprise when the company reports on Thursday (October 22). Moreover, Deckers has several interesting catalysts. The first is its HOKA line, which is debuting the $250 TenNine Hike GTX next month; it’s a premium hiking boot whose technology is said to be groundbreaking. It was tested for 1,300 miles and more than one thousand hiking hours, and is expected to vastly improve comfort for day hikers as well as backpackers. The company has also made great strides with its e-commerce portal, where 49% of its sales are now coming from; online sales for UGG and HOKA ONE brands have jumped 74% during the pandemic! It’s not changing the world, but Deckers is a well-managed outfit that should see accelerating growth going forward.
Technical Analysis
DECK snapped back to new highs by late May, which was a great sign after crashing with everything else in March. However, like many retail stocks, shares then went dead, making no net progress for three months as the buyers and sellers fought it out. But the uptrend is back on, with DECK surging to higher highs in recent weeks on a lot of bullish volume. With earnings coming up, we advise starting small and entering on dips.
| Market Cap | $7.40B | EPS $ Annual (Mar) | |
| Forward P/E | 28 | FY 2019 | 8.71 |
| Current P/E | 26 | FY 2020 | 9.62 |
| Annual Revenue | $2.14B | FY 2021e | 9.59 |
| Profit Margin | N/A | FY 2022e | 11.62 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 283 | 2% | -0.28 | N/A |
| One qtr ago | 375 | -5% | 0.57 | -33% |
| Two qtrs ago | 939 | 7% | 7.14 | 8% |
| Three qtrs ago | 542 | 8% | 2.71 | 14% |
DECK Weekly Chart
DECK Daily Chart
Invitae (NVTA)
Why the Strength
InVitae offers testing that gathers genetic info across every stage of a patient’s lifespan and consolidates it into a single low-cost, rapid turnaround service. Indeed, through a spate of advancements, the firm helped drastically lower genetic testing costs from thousands of dollars to just $250 today! A big driver of the stock’s strength has come from M&A—recently, InVitae completed its transaction with ArcherDX, a leading genomics analysis company that’s expected to help the combined firm crank out 50%-plus top-line growth for the next three to five years. The acquisition is also expected to boost InVitae’s diagnostic capabilities and offerings for disease risk, therapy optimization and personalized cancer monitoring (the firm eventually sees the potential for its genetic tests to play a key role in cancer treatment), while increasing its ability to ink partnerships with other genomics firms. While revenue was lower in Q2 due to virus-related headwinds (down 15%), management has reported a solid recovery in testing volumes since April, with notable improvement in its operating leverage and revenue generation ability. The company also added 16 new biopharma partnerships in the quarter, bringing the total number of partnership programs to more than 105, while also acquiring YouScript and Genelex to bring best-in-class pharmacogenetic testing and clinical decision support. Analysts estimate the top line will increase 7% in Q3 as pandemic-related disruptions are alleviated, and 32% growth is anticipated for Q4 (followed by a hefty 57% bump in next year’s Q1). With a huge untapped addressable market (predicted to reach $17 billion by 2025), the sky’s the limit for Invitae. Earnings are due out November 9.
Technical Analysis
NVTA blasted off in a big way after the ArcherDX acquisition in June, though after three good weeks, shares entered a nine-week consolidation that featured a shakeout with the market in September. But NVTA broke to new highs soon after and accelerated to as high as 55 before profit-taking set in. So far, the selling has been normal, with the stock holding north of its 25-day line. It looks like a solid risk-reward entry point.
| Market Cap | $6.28B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -1.98 |
| Current P/E | N/A | FY 2019 | -2.33 |
| Annual Revenue | $233M | FY 2020e | -2.90 |
| Profit Margin | N/A | FY 2021e | -1.54 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 46.2 | -14% | -0.77 | N/A |
| One qtr ago | 64.2 | 58% | -0.80 | N/A |
| Two qtrs ago | 66.3 | 46% | -0.66 | N/A |
| Three qtrs ago | 56.5 | 51% | -0.69 | N/A |
NVTA Weekly Chart
NVTA Daily Chart
Monolithic Power (MPWR)
Why the Strength
The microchip industry is integral to the success of the digital economy, so it’s unsurprising that business is booming for chip makers despite (or maybe because of?) the pandemic. One of the fastest-growing semiconductor companies is Monolithic Power, which provides power circuits used in cloud computing, telecom, automotive and industrial applications, delivering billions of parts annually to some of the world’s largest tech firms. By integrating all necessary components into a single packet, the company’s ultra-compact, space-saving modules boast exceptional power density and high efficiency, as well as some of the lowest failure rates in the chip industry. The acceleration of the work-from-home trend delivered a broad-based boost (excepting the automotive segment) to Monolithic’s top line in Q2. Revenue grew 12% sequentially and 23% year over year, with storage showing the biggest gains (and accounting for 34% of total revenue), while notebook- and gaming console-related demand also contributed. And though automotive revenue fell 24% in the quarter, management expects a rebound in the coming quarters. Per-share earnings grew 17% in Q2 and have grown at an eye-popping 25% compound clip over the last three years, though analysts expect that pace to slow in 2021. Still, those forecasts are likely conservative, as management released significantly higher Q3 guidance, seeing revenues around $258 million (up 53% and in-line with estimates). It won’t be a lightning-fast grower, but Monolithic offers a steady, reliable story. Earnings are due out this Thursday, October 22.
Technical Analysis
After trending higher for several years, MPWR spent most of 2018 and 2019 consolidating its gains in preparation for this year’s rocket ride. Shares blasted off from a March low of 130 and reached 280 by August, then pulled back for five weeks (it got hit during the bout of growth stock weakness) before launching to new highs two weeks ago. We’ll set our buy range down a bit if you want to nibble ahead of earnings.
| Market Cap | $14.3B | EPS $ Annual (Dec) | |
| Forward P/E | 66 | FY 2018 | 3.74 |
| Current P/E | 77 | FY 2019 | 3.88 |
| Annual Revenue | $688M | FY 2020e | 4.84 |
| Profit Margin | 27.2% | FY 2021e | 5.25 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 186 | 23% | 1.08 | 17% |
| One qtr ago | 166 | 17% | 0.95 | 13% |
| Two qtrs ago | 167 | 9% | 1.04 | 5% |
| Three qtrs ago | 169 | 6% | 1.08 | 2% |
MPWR Weekly Chart
MPWR Daily Chart
Paycom Software (PAYC)
Why the Strength
As more companies embrace digital payroll management to cut accounting costs, simplify compliance and reduce human error, the field of leading players is narrowing. Near the top of the list is Paycom, a pioneer in online human resource tech (it was one of the very first online payroll providers) that has software offerings geared toward small and mid-sized companies, helping them manage the entire employment life cycle, including HR management and talent acquisition; it’s a long-term growth industry that continues to play out. Despite pandemic-related headcount reductions at clients in Q1, Paycom saw solid lead volume and positive revenue growth in the second quarter. Paycom said layoffs at clients peaked in April and have since stabilized; moreover, it was the firm’s best quarter ever from a new client sales perspective by a wide margin (solidly ahead of pre-COVID sales), telling us the shut-ins may have actually boosted demand. So strongly has the digital transformation increased the firm’s business that Paycom spent more on advertising in Q2 than it normally does in a single quarter—and planned for even more aggressive ad spend in Q3 and Q4. While per-share earnings were lower in Q3, total revenues rose 7%, and management expects growth to gradually reaccelerate going forward. (Analysts see the top line rising 21% next year while earnings expand 26%.) Encouragingly, Paycom has also been buying back shares and actually upped its buyback program. And, longer-term, Paycom believes it has captured less than 5% of its total addressable market, while its highly profitable recurring business model should produce the reliable growth that big investors yearn for. Earnings are due out November 4.
Technical Analysis
PAYC has been a huge winner over time, but it began to slow down a bit in the second half of last year and then crashed with everything else in March. The rebound was solid, but that preceded another tedious slide; all in all, shares spent nearly eight months correcting and consolidating. But now the buyers are back, with PAYC acting like a homesick angel during the past three weeks. A modest retreat should offer a decent entry point.
| Market Cap | $22.4B | EPS $ Annual (Dec) | |
| Forward P/E | 114 | FY 2018 | 2.67 |
| Current P/E | 107 | FY 2019 | 3.50 |
| Annual Revenue | $792M | FY 2020e | 3.29 |
| Profit Margin | 19.8% | FY 2021e | 4.16 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 182 | 7% | 0.62 | -17% |
| One qtr ago | 242 | 21% | 1.33 | 12% |
| Two qtrs ago | 193 | 29% | 0.86 | 41% |
| Three qtrs ago | 175 | 31% | 0.70 | 35% |
PAYC Weekly Chart
PAYC Daily Chart
Plug Power (PLUG)
Why the Strength
The fuel cell market is expected to grow at a compound annual rate of more than 15% from 2020 through 2025 as the number of hydrogen refueling stations and fuel cell-powered vehicles (mostly commercial) are expanding worldwide. The industry is thriving, and we can expect new companies to enter the fray. (Just recently, special purpose acquisition company, AMCI, announced that it is buying Advent Technologies and bring it public in the fourth quarter of 2020 or early 2021.) While some industry observers think new competition might dampen Plug Power’s prospects, the company has been on fire this year and management sees only bigger and better things over the next few years. Plug Power is the industry’s pioneer, helping to commercialize hydrogen fuel-cell technology when it began substituting fuel cells for lead-acid batteries in its lift trucks in the company’s distribution centers in the late 1990s. That innovation has led to powering buses and delivery vehicles—its products are being used by BMW, Amazon, Sysco and Walmart among others, and there’s huge potential in many areas (including forklifts). Plus, the firm’s buyout of United Hydrogen gives it a major opportunity in the distribution of hydrogen, demand for which should expand in a big way as fuel cells become more commonplace. Investors have pushed Plug higher since the company announced its four-year growth targets: By 2024, the firm expects $1.2 billion in sales (up from $260 million now), $200 million in operating income and $250 million in EBITDA. The next earnings report is due on November 5, Plug Power is expected to lose $0.07 per share on revenues of $103.9 million (up more than 85% since last year).
Technical Analysis
PLUG has had a big move in recent months, so it’s not in the first inning of its advance, but the price and volume action continue to tell us the stock is under accumulation. The latest rally off the 50-day line was excellent, with shares zooming as high as 19 on massive volume before pulling in. And that pullback to this point has been completely normal—if anything, it could go on a bit further and still be in good shape. We’re OK starting a position here.
| Market Cap | $6.04B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.30 |
| Current P/E | N/A | FY 2019 | -0.36 |
| Annual Revenue | $259M | FY 2020e | -0.34 |
| Profit Margin | N/A | FY 2021e | -0.23 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 68.1 | 18% | -0.03 | N/A |
| One qtr ago | 40.8 | 89% | -0.12 | N/A |
| Two qtrs ago | 91.7 | 53% | -0.06 | N/A |
| Three qtrs ago | 58.5 | 10% | -0.08 | N/A |
PLUG Weekly Chart
PLUG Daily Chart
SunPower (SPWR)
Why the Strength
Intending to increase the cost effectiveness of U.S.-produced solar panels, President Trump temporarily ‘dimmed’ the solar industry last week when he implemented tariffs on previously exempted bifacial solar panel imports, and also discussed increasing tariffs on imports from a planned 15% next year to 18%. That knocked the sector down a bit, but industry experts predict that the effects will be temporary, as few panels are manufactured in the U.S., so most of the tariff increases will probably just add to the cost of solar installation, tightening margins. (Indeed, when tariffs were put on in 2017, they did little to reduce demand.) Thus, the net effect should be small, as solar is booming due to 1) efficiency increases which have gone from 8% in 1957 to 33.3% today, which has played into 2) reduced costs, from 28 cents per kilowatt hour in 2010 to about 6 cents today. That has greatly expanded the U.S. solar industry, which is predicted to reach $22.9 billion by 2025, up from $18.7 billion right now. It’s really a group surge right now, and SunPower is one of the biggest players in the U.S. Its shares got a big lift last month when the company announced that, following the spinoff of its manufacturing business, it expects fourth-quarter revenue of $350 million and EBITDA of $25 million, and full year revenue of $1.07 billion, and EBITDA of $35 million. The company’s shares got another shot in the arm with Piper Sandler initiated coverage with an ‘overweight’ rating, based on rising residential demand. But SunPower is also the #1 commercial solar provider in the U.S., where the company has a $3.5 billion pipeline and $400 million of contracted backlog. One more bump for SunPower will come if Biden is elected, as industry experts predict a stimulus package with solar incentives. The next quarterly report is due out next Wednesday, October 28.
Technical Analysis
SPWR has been up and down for years, but something is going on now, with big investors thinking business is likely to roar ahead. The stock’s initial bounce off the crash lows was just OK, but it went nuts in July and August and, after a four-week pullback, shares exploded to new highs on even heavier volume! SPWR didn’t give up much of those gains before tagging higher highs today. If you want in, aim for dips.
| Market Cap | $2.86B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2018 | -0.72 |
| Current P/E | N/A | FY 2019 | -0.29 |
| Annual Revenue | $1.88B | FY 2020e | -0.32 |
| Profit Margin | N/A | FY 2021e | 0.14 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 353 | -19% | -0.22 | N/A |
| One qtr ago | 449 | 29% | -0.10 | N/A |
| Two qtrs ago | 604 | 32% | 0.23 | N/A |
| Three qtrs ago | 476 | 11% | 0.07 | N/A |
SPWR Weekly Chart
SPWR 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 | 15 | |
| 8/10/20 | Agnico Eagle Mines | AEM | 79.5-82.5 | 80 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 305 |
| 8/31/20 | Anaplan | PLAN | 59.5-62.5 | 62 | |
| 9/21/20 | Brinker Int’l | EAT | 42-44.5 | 46 | |
| 8/17/20 | Builders FirstSource | BLDR | 28-29.5 | 33 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 32 | |
| 9/8/20 | Chipotle Mex Grill | CMG | 1230-1270 | 1336 | |
| 9/28/20 | CrowdStrike | CRWD | 133-138 | 145 | |
| 10/5/20 | Datadog | DDOG | 103-107 | 112 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 398 | |
| 8/10/20 | Digital Turbine | APPS | 21.5-24 | 36 | |
| 8/24/20 | Elastic | ESTC | 99-103 | 119 | |
| 9/8/20 | Five Below | FIVE | 120-124 | 136 | |
| 7/27/20 | Floor & Décor | FND | 69-72 | 82 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 17 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 124 | |
| 9/14/20 | Gap Inc. | GPS | 16.5-17.5 | 19 | |
| 8/17/20 | Innovative Ind. Prop. | IIPR | 116-121 | 129 | |
| 8/17/20 | iRhythm Technologies | IRTC | 168-174 | 231 | |
| 10/12/20 | Marvell Technology | MRVL | ? | 42-45 | 42 |
| 6/29/20 | Meritage Homes | MTH | 71.5-74 | 110 | |
| 9/14/20 | Mosaic | MOS | 17.2-18.2 | 19 | |
| 8/24/20 | Natera | NTRA | 60-63 | 73 | |
| 9/21/20 | NIO Inc. | NIO | 17-18 | 28 | |
| 9/14/20 | NovoCure | NVCR | ? | 93-98 | 132 |
| 3/30/20 | Nvidia | NVDA | 250-270 | 540 | |
| 10/12/20 | Paylocity | PCTY | 178-188 | 192 | |
| 4/6/20 | Peloton | PTON | 27-29 | 133 | |
| 8/3/20 | Penn Nat’l Gaming | PENN | 34-36.5 | 65 | |
| 8/3/20 | PINS | 33.5-37 | 46 | ||
| 7/20/20 | Plug Power | PLUG | ? | 8.0-8.7 | 16 |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 128 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 62 |
| 7/13/20 | Roku | ROKU | 147-154 | 222 | |
| 7/27/20 | Sea Ltd | SE | 110-116 | 163 | |
| 9/21/20 | Seattle Genetics | SGEN | ? | 175-180 | 198 |
| 10/5/20 | SeresTherapeutics | MCRB | 27.5-29.5 | 33 | |
| 9/28/20 | Square | SQ | 157-162 | 187 | |
| 10/5/20 | ST Microelectronics | STM | 32-33.5 | 34 | |
| 10/12/20 | Synnex Corp. | SNX | 145-152 | 149 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 88 | |
| 9/14/20 | Target | TGT | 145-149 | 164 | |
| 10/5/20 | Teck Resources | TECK | 13-14.2 | 14 | |
| 10/12/20 | Tesla | TSLA | 435-448 | 431 | |
| 10/12/20 | TG Therapeutics | TGTX | 29-31 | 29 | |
| 9/21/20 | Toll Brothers | TOL | 44.5-47 | 48 | |
| 9/21/20 | TopBuild | BLD | 149-154 | 182 | |
| 8/31/20 | Tupperware | TUP | 14.5-15.5 | 21 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 330 | |
| 10/5/20 | TWTR | 44-46 | 46 | ||
| 10/12/20 | United Rentals | URI | 194-202 | 187 | |
| 5/11/20 | Wingstop | WING | 116-122 | 128 | |
| 10/5/20 | Zendesk | ZEN | 101-105 | 112 | |
| WAIT | |||||
| None this week | |||||
| SELL RECOMMENDATIONS | |||||
| 9/21/20 | AGCO Corp. | AGCO | 68.5-71.5 | 81 | |
| 10/12/20 | Fastly | FSLY | 118-129 | 84 | |
| 9/14/20 | Guardant Health | GH | 98-102.5 | 103 | |
| 5/26/20 | Horizon Therapeutics | HZNP | ? | 45.5-48 | 78 |
| 8/24/20 | Whirlpool | WHR | 171-176 | 199 | |
| DROPPED | |||||
| 10/5/20 | Purple Innovations | PRPL | 23-24.5 | 32 | |
| 10/5/20 | SolarEdge | SEDG | 243-257 | 309 | |
The next Cabot Top Ten Trader issue will be published on October 26, 2020.