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Earnings have taken a back seat to trade policy for much of the season, but tonight's final quarterly filing of our 1Q19 cycle prompts a little analysis of how strong BMR stocks have actually been. 

Yesterday was a nice reminder of the power the bulls still have when tariff tension recedes for even a single day. Thanks to that thrilling rally, BMR stocks are now collectively a little higher than they were at the end of last week, erasing all of the losses from Monday and Tuesday. Every single one of our portfolios contributed to that nudge to the upside, including the once-battered Technology, Aggressive and Stocks for Success lists.

Admittedly, several of our stocks need to do some heavy lifting before they fully recover, but we'd like to single out Stocks for Success as an example of how fast the mood turns. On Tuesday, this Big Tech heavy portfolio was under serious pressure as the FAAAM reeled. Suddenly Apple (AAPL: $180, up 3% this week) is rallying again and the other Silicon Valley giants are clawing back lost ground. We'll take it.

And these moves reveal just how constructive the 1Q19 earnings season really was, even if headlines from Washington and Beijing got in the way. Salesforce.com (CRM: $151, flat before earnings but up 3% overnight) extends that narrative. Like so many of our recommendations, the numbers were fine, even better than expected.

Revenue came in at $3.73 billion when all we really needed to see was $3.68 billion, raising the growth rate to 24%. Earnings jumped a surprising 32% to $0.93 per share. We were ready to absorb a significant decline on that front, but once again guidance was artfully low enough to engineer a surprise due to strategic investments contributing to the bottom line after all.

This time around management was willing to embrace the upside. They raised guidance on both revenue and profit for the full year. That's over 100% earnings growth this year. Prepare for the cheering.

And this is really nothing extraordinary in the quarter that our stocks have reported. They've done well. The market as a whole has delivered numbers significantly better than anyone expected and BMR recommendations are collectively ahead of the curve. Granted, the past month was a trade-induced whipsaw, but before the China walls started going up our stocks were rallying. Overall, BMR stocks have beaten the market this season by about 2%. Later today, the season officially ends for us.

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Earnings Preview: Cloudera (CLDR: $9.11, down 1%)

Earnings Date: Wednesday, 5:00 PM ET

Expectations: 1Q19
Revenue: $188 million
Net Loss: $61 million
EPS: -($0.23)

Year Ago Quarter Results
Revenue: $102 million
Net Loss: $25 million
EPS: -($0.17)

Implied Revenue Growth: N/A due to merger
Implied EPS Decline: larger post-merger loss

Target: $28
Sell Price: $18 (but temporarily relaxed)
Date Added: June 7, 2017
BMR Performance: -60%

Key Things To Watch For in the Quarter

Tonight's numbers are more likely to produce an explosive reevaluation of this stock’s untarnished prospects than leave it floundering for investor support. If the numbers are bad and management fumbles the conference call, it's probably time to go.

But we’ve been saying that for months and the market has yet to acknowledge the great story we see unfolding here. Cloudera has always been a key player in the Big Data industry, but for a long time people fretted over whether the opportunity was big enough for this company as well as its rivals. No problem: Management deployed part of its $400 million cash hoard last year to buy Hortonworks, taking out its biggest competitive threat.

Then the fretting shifted tone. Suddenly the combined companies weren’t unlocking enough operational synergies to accelerate growth beyond what they had forecast before the merger. Admittedly, guidance was a little confusing, but that’s what happens when you push two $1 billion companies together out of the blue and need to resolve two different accounting systems the minute the deal closes.

And you’ve also got two sales teams who essentially need to rethink everything they do in terms of process and priorities. Some legacy Hortonworks products need to be integrated into the larger subscription-based ecosystem. Others need to be phased out, while others actually become more important than ever. It takes more than a few months to make that happen. We’ve been willing to give Cloudera those months, but as negative as other investors have been, even our patience can fade.

This is the first quarter the combined companies report together. There's a chance the historical comparisons will be revised, distorting our baseline expectations. But $188 million in revenue is not only reasonable, it's what management has told us to expect. Nothing else really matters here. Profitability will ultimately come, possibly as early as the end of this year. All the all-new Cloudera needs to do is squeeze a little synergy out of this merger and keep the growth wheels turning on their current course. The company needs to produce strong revenues. Then we hope the market gives us a reason to watch that process play out. Two very big asks.