!-- Global site tag (gtag.js) - Google Analytics -->
Select Page

Yesterday brought good things from our Real Estate recommendations while Shutterstock gave us a good omen for small and specialized Technology. Let's see if tonight's reports follow through on the trend. 

 

Shutterstock (SSTK: $44, up 5% this week) did everything right. $159 million in revenue was right what we needed to see; it's good to get confirmation that the business is expanding 5% a year. That's enough to prove that management's investment in new media libraries and the technology to license them is working. Earnings of $0.29 per share were well above our target and guidance for the current quarter is right on target. This company has turned the corner. With the stock up 30% in the last week and a half, Wall Street is paying attention.

 

Then last night JBG Smith (JBGS: $40, down 1%) thrilled us with a surprise $0.06 per-share profit when we anticipated a slight loss. Funds From Operations came in at $0.34 per share, well above the $0.30 we expected and a lot better than the $0.22 required to support the dividend. The yield here is secure, justifying patience while we all wait for Amazon to move into its sprawling JPBG built 500,000 square-foot Washington headquarters and start paying a lot of rent. That will be a transformative moment. We're happy to have gotten into position early.

 

Omega Healthcare Investors (OHI: $42, down 4%) was another Real Estate win. Revenue was higher than expected at $233 million while profit of $0.63 per share trounced our $0.40 target. Guidance was good. This proves that any weakness at Ventas was limited to that company and not a factor of a wider Senior Housing slump. This particular Senior REIT is doing extraordinarily well. We love this company.

 

Remember we have numbers from CBRE Group to digest this morning. Refer back to our previous Earnings Preview for our thoughts.  Then tonight, five companies will report at once.

 

-----------------------------------------------------------------------------

 

Earnings Preview: Square (SQ: $61, down 2%)

Earnings Date: Wednesday, 5:00 PM ET 

Expectations: 3Q19
Revenue: $596 million
Net Profit: $90 million
EPS: $0.20

 

Year Ago Quarter Results
Revenue: $431 million

Net Profit: $66 million
EPS: $0.13

 

 

Implied Revenue Growth: 38%
Implied EPS Growth: 53%

 

Target: $105
Sell Price: $84 (temporarily suspended)
Date Added: March 20, 2017
BMR Performance: 254%

 

Key Things To Watch For in the Quarter

 

Pure growth. Square continues to scale up fast and is at the sweet spot where revenue is still expanding aggressively even though the the core business is now mature enough to support healthy margins. You know the venture capitalist "rule of 40" that defines an attractive start-up: When the profit margin plus the growth rate add up to 40 or more, the company is a winner. Square moves 15% of sales to the bottom line and is growing that sales pool 38% as well. 

 

We don't see why people have soured on this stock, but know that the mood will change sooner or later. All Square needs is to keep the numbers powering ahead. Three months ago, investors were happy to pay 85X earnings for a piece of that growth story. The earnings trend hasn't softened. Only the multiple has dropped, making this stock a bargain in historical terms.

 

From our perspective, the only number Square really needs to hit is on the guidance side. The 4Q19 revenue forecast needs to be at least $620 million to quell any doubt about how well the company continues to surf the economic environment. Even if other investors balk at what they hear, that's their problem . . . not ours.

 

-----------------------------------------------------------------------------

 

Earnings Preview: Roku (ROKU: $140, down 5%)

Earnings Date: Wednesday, 5:00 p.m. ET

Expectations: 3Q19
Revenue: $257 million

Net Loss: $32 million
EPS: -($0.28)

 

Year Ago Quarter Results
Revenue: $173 million

Net Loss: $9 million
EPS: -($0.09)

 

Implied Revenue Growth: 48%
Implied EPS Decline: widening loss

 

Target: $205
Sell Price: $130
Date Added: May 24, 2018
BMR Performance: 299%

 

Key Things To Watch For in the Quarter

 

Roku was on the edge of $170 only two months ago and at the rate it's performed for us in the last 18 months there's no reason to suspect it won't hit that mark again soon. The story here is as simple as it gets. Management is pouring profit back into their Streaming TV advertising platform, which then generates plenty of revenue to redeploy. Watch the "platform" comparisons very closely. They're the heart of this company. 

 

We're also interested in the metrics around the size and engagement of Roku's audience. More people watching more hours of Roku TV per month translate directly into more ad dollars. Remember, this stock transcends worrying over Apple or Netflix or Disney winning the Streaming wars. No matter which channel they watch via the Roku device, shareholders win.

 

-----------------------------------------------------------------------------

 

Earnings Preview: CyberArk (CYBR: $107, flat)

Earnings Date: Wednesday, 5:00 p.m. ET

Expectations: 3Q19
Revenue: $103 million

Net Profit: $18 million
EPS: $0.47

 

Year Ago Quarter Results
Revenue: $85 million

Net Profit: $18 million
EPS: $0.48

 

Implied Revenue Growth: 20%
Implied EPS Growth: flat

 

Target: $137
Sell Price: $101
Date Added: December 22, 2018
BMR Performance: 53%

 

Key Things To Watch For in the Quarter

 

A tiny 1% uptick in the amount of CyberArk stock on the market depresses the per-share numbers a little but for us the miracle of this tiny Cybersecurity company is that it remains profitable in a fiercely competitive industry. CyberArk is expanding at larger rivals' expense. And at this scale, it only takes the sales team signing $3 million a quarter in new accounts to keep the growth curve steep. 

 

However, as with many Tech companies at this level, the outlook is absolutely critical. A lot is riding on the 4Q19 results due three months from now, when we're looking for CyberArk to finalize $15 million in new accounts . . . half of its YTD top-line improvement, all at once. Management has got to show us some confidence that negotiations are progressing as well as we expect. Otherwise, shareholders will have to brace for short-term volatility.

 

-----------------------------------------------------------------------------

 

Earnings Preview: Expedia (EXPE: $135, down 2%)

Earnings Date: Wednesday, 5:00 PM ET 

Expectations: 3Q19
Revenue: $3.5 billion
Net Profit: $582 million
EPS: $3.80

 

Year Ago Quarter Results
Revenue: $3.2 billion

Net Profit: $567 million
EPS: $3.65

 

Implied Revenue Growth: 9%
Implied EPS Growth: 4%

 

Target: $138
Sell Price: $112
Date Added: February 23, 2018
BMR Performance: 33%

 

Key Things To Watch For in the Quarter

 

This is another of our companies sacrificing margins this quarter in order to boost the underlying business and get the revenue flowing faster. Since 3Q is the peak season for Expedia, we're looking for relatively tough year-over-year comparisons to be a drag on the percentage gains.

 

Management's guidance for 4Q19 will give investors the numbers we all really want to scrutinize. As long as the outlook is open to $2.8 billion in revenue, we'll have proof that Expedia is evolving in the right direction. In that scenario, grudging earnings growth this quarter will turn into a 25% uptick three months from now. That's enough to keep the stock climbing. We might need to raise our $138 Target here soon.

 

-----------------------------------------------------------------------------

 

Earnings Preview: TPI Composites (TPIC: $22, up 4%)

Earnings Date: Wednesday, 5:00 p.m. ET

Expectations: 3Q19
Revenue: $400 million

Net Profit: $0.0 million
EPS: $0.00

 

Year Ago Quarter Results
Revenue: $255 million

Net Profit: $9.5 million
EPS: $0.26

 

Implied Revenue Growth: 56%
Implied EPS Decline: drop to breakeven

 

Target: $35
Sell Price: $25 (temporarily suspended)
Date Added: March 9, 2018
BMR Performance: 6%

 

Key Things To Watch For in the Quarter

 

Only a few months ago TPI Composites was roiled by the bankruptcy of a major customer and labor problems at a few factories. Those challenges set the bottom line back a year but here we are now looking for record revenue. Look at that sales trend again. This company didn't even book 40% growth in the previous quarter, but even 39% was a big step up from 34% back in 1Q19. For 3Q19, we suspect TPI Composites can give us a full 56% as pent-up demand for its Wind Turbines finally translates into massive orders.

 

If so, this stock has what it takes to come back stronger than ever. And if management managed to squeeze even a little unexpected profit out of the business, we'll cheer.