Search

ONTF, CRNC and EVBG Report.

The quarter was just what we wanted see. Revenue grew by 87.9% to $29.5 million, slightly ahead of consensus for $29.1 million (which was based on S-1 filling guidance). Operating margin was roughly a percentage point above expectations (-6.8%). Full-year 2021 guidance of $103.5 - $104.3 million is ahead of consensus of $100 million and implies growth of 51% to 52% versus the 46% rate embedded in prior consensus. Given the trends, wise management team and status as a new IPO we should view this guidance as conservative.

The only news anybody seems to care about is the coronavirus. While that’s clearly a concern and not something to take lightly, I don’t think it changes the bigger picture trend that stocks are the place to be over the coming years.

Cardlytics (CDLX) reported last night that Q1 revenue grew by 17% to $53.2 million (beating by $2 million) and that adjusted EPS came in at -$0.34, a drop from -$0.26 in the year ago quarter (and $0.03 shy of expectations). Overall, the quarter showed continued improvement in the business as revenue, Q1 billings ($76.3 million) and adjusted contribution ($24.3 million) were all either at or slightly ahead of consensus estimates.

With the weakness in growth stocks persisting into this week, we’re going to offer up a couple of sacrificial positions to the market Gods. Beyond the rather obvious benefits of reducing exposure when the market is falling and having that capital available when things turn around, both these companies have near-term growth challenges that held shares back recently.

Cerence (CRNC) reported this morning that Q1 revenue was up 22.6% to $95 million (beating by $7.1 million) while adjusted EPS of $0.59 was up 103% (beating by $0.08). There are a lot of initiatives at Cerence and management had a lot to say, but I’ll just mention a few things that jumped out at me.

With so much going on in the market I wanted to share some of what’s running through my head today, then keep tomorrow’s Weekly Update focused mostly on stock updates.

Goosehead Insurance (GSHD) reported after the close yesterday that Q1 revenue rose by 53% to $31.2 million (beating by $2.5 million) and adjusted EPS rose to $0.03 from $0.01 in the year-ago quarter (missing by $0.03). That pace of revenue growth was up from 48% in the quarter ended December 31, and well above the 13% revenue growth rate reported in the year-ago quarter.

Avalara (AVLR) reported results after the close yesterday that handily beat expectations on virtually all metrics. Q4 revenue was up 35% to $144.8 million (beating by $11.4 million) while adjusted EPS of $0.09 beat by $0.15. Billings of $167 million were up 38%. Adjusted gross margin increased from 71% to 74% and free cash flow increased from $14.2 million to $28.6 million.

Today is something of a battleground day for Accolade (ACCD) given that the stock slid into yesterday’s earnings call near the low end of its 2020 trading range amidst concerns that the Delta variant would challenge the critical selling season, which is underway right now.

After yesterday’s bloodbath in growth stocks, today feels pretty good. We may be able to thank a downright terrible April jobs number this morning (266,000 added versus expectation of 1 million), which may have temporarily quelled concerns over rising rates.

The market continues to be extremely challenging for growth-oriented stocks and many of our names are trading near support levels. It’s one of those environments where, with many stocks down 20% to 40% from their highs, it’s an entirely “normal,” albeit significant, correction. In other words, we expect these environments to come along every now and then, pass, and on we go. Maybe not to new highs straight away, but eventually.

Revolve (RVLV) beat expectations in Q2 but concerns that the story has been “as good as it can get” and that things will slow down in the coming quarters, in part due to Delta variant circulation curbing going-out activities, are hammering shares today (-20% at the worst, better now). All things considered the selling appears overdone and I expect a bounce in the coming days. How RVLV acts in the near future will determine its standing in our portfolio, but at the moment aggressive investors may want to step in to buy. Formally, we are maintaining at hold to see how this earnings report is digested over the coming days.

EVBG, KRNT and CRNC Report. Sell GSHD and CDLX

In JOANN’s second quarter as a public company, management has dealt with the Delta variant complicating social sewing events and supply chain challenges driving up costs. The net effect in Q2 was that revenue of $496.9 million missed by almost $36 million and adjusted EPS of -$0.20 missed by $0.06.

Personalis (PSNL) released preliminary Q4 results on January 11 and the official release after the close yesterday offered no surprises. Personalis (PSNL) Moves To SELL

Arena Pharmaceuticals (ARNA) yesterday announced that olorinab failed to meet the primary endpoint in the Phase 2 CAPTIVATE study in IBS abdominal pain. This is disappointing but not remotely the reason to own (or sell) the stock. IBS is a difficult to treat condition and when we got into Arena the programs with olorinab didn’t even exist.

Today’s note includes ratings changes, the podcast and the Catalyst Report. We publish the Catalyst Report on the Friday after each monthly issue of the Cabot Turnaround Letter.

We do think many of this week’s pullbacks could develop into nice early-stage entries, though we’d prefer some of these names settle down for a few days.

This was a quiet week, with no earnings reports or ratings changes.