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Last night was a watershed with five of our recommendations reporting their 3Q19 performance. Not all were rewarded, but on the whole we're happy with the numbers . . . even though Wall Street's mood clearly leaves a little to be desired.

 

Let's start with the most obvious disconnect of the day. Roku (ROKU: $141, down 4% early in the week and then dropping $20 after earnings) hit all our targets and more. Our expectations weren't especially low, either. We looked around and Wall Street was collectively looking for $257 million in revenue and a $0.28 per-share loss. That's nominally what supported the stock at $141 (up 300% for BMR subscribers over the last 18 months).

 

For one thing, the trailing quarter shows that reality at Roku was better than any of us suspected, with $261 million in revenue generating a loss of $0.22 per share. Guidance was strong. Management says revenue in the current quarter is coming in between $380 million and $396 million. Wall Street previously signaled around $386 million would be fine, so the midpoint there is again a little better than what people publicly said they wanted.

 

Where's the disconnect? We suspect the sellers are simply reacting to the stock's performance (up 120% in the last six months) instead of the fundamentals. They're looking to take a little profit before the end of the year and are using this as their excuse. Our logic is very different. Take another look at that revenue outlook. Roku is still growing the top line 40% a year. When profit comes around, the numbers will stack up fast.

 

TPI Composites (TPIC: $22, up 4% but then down after hours) and Expedia (EXPE: $135, down 2%) were more straightforward misses. In both cases the numbers weren't what we wanted, but the speed bumps have all the earmarks of being temporary. For now, we're willing to give both companies time to recover their equilibrium. TPI Composites, after all, is an Aggressive choice and right now it's facing the downside of its small size and inherent volatility.

 

Sales are still a little low ($384 million versus the $400 million we hoped to see) and as a result a return to profit is elusive so far. Hang in there. We didn't quit on this company at $17 a few months ago and we aren't leaving now.

 

Negativity on Expedia looks similarly overdone. Remember, this was a $115 stock back in June so it's had a nice run. As a result, we aren't shocked to see a tiny revenue miss ($3.56 billion, a bit below our $3.58 billion target) and a significant profit hiccup ($3.38 per share when we wanted $3.80) take the wind out of that rally. Read the fine print: it's an accounting change due to the way the company classifies the fees it pays air travel sales partners. We'll see an artificial drag while that decision works through the year-over-year numbers.

 

However, the night brought us its share of cheers. CyberArk (CYBR: $115, up 8%) was already soaring during the day, then reported a huge profit beat and raised guidance." We only needed $0.47 per share. The company gave us $0.65 and told us to expect at least $0.78 three months from now. That's a game changer. Big banks like JP Morgan have already raised their targets on the stock beyond $160. We suspect we'll need to lift our sights (currently at a relatively modest $137) soon as well.

 

Then there's Square (SQ: $61, down 2% but bouncing overnight), who's stock has had a hard couple of months despite the company's vibrant business. This time around, $602 million in revenue beat our $596 million target, reflecting healthy 40% growth and turning into $0.25 per share in profit. We would have settled for $0.20. Guidance is right where we wanted it to be. Expect a little applause today.