Ticker Notes

On Digital Ocean

2022-12-20T08:47:00.003-08:00

Like The Trade Desk, DigitalOcean (NYSE:DOCN) is one growth stock to keep an eye on. Also like The Trade Desk, this company is profitable, even on a GAAP basis. It’s also free cash flow positive.

While the company’s underlying business continues to do well, investors just aren’t buying it — literally.

Shares of DOCN stock are down nearly 80% from their high, and continue to struggle. By looking at the price action with this stock, most wouldn’t think DigitalOcean delivered a top- and bottom-line beat with strong guidance back in early November.

Most investors also wouldn’t expect estimates to call for 34% revenue growth this year, 29% growth next year and strong growth in out-years. If these expectations actually come to fruition, DigitalOcean will surpass an annual revenue run rate of more than $1 billion sometime in 2024.

It may take a while, but this sort of growth and free cash flow leverage will be rewarded by Wall Street. It’s a question of “when,” not “if.”

Neeham has a $36 price target.

On Cloudflare

2022-12-12T14:52:00.001-08:00

The Fool is bullish on Cloudflare and makes the case here.

You Found a Great Stock, Now What

2022-12-08T10:25:00.003-08:00

This article at The Street looks at InMode and XAir.

On Masimo

2022-11-21T13:57:00.002-08:00

A recent insider purchase at Masimo resulted in this article from the Fool.

"In the second quarter, the company reported revenue of $565.3 million, up 85.3%, year over year, with net income of $18.1 million, or $0.33 in earnings per share, down 63.9% and 62.5%, respectively, thanks to the expense of the purchase of Sound United.

Over the past 10 years, the company increased quarterly revenue by $327.7% and quarterly EPS by 26.92%.

The company has also rewarded shareholders with regular stock buybacks. It spent $401 million on a stock repurchase in the quarter and committed to repurchase an additional 5 million shares over the next five years."

On Confluent

2022-11-07T16:45:00.002-08:00

Confluent had a great earnings report. The company is not profitable, but they may be well on their way.

InMode looks set to soar

2022-09-21T14:54:00.002-07:00

How cheap is InMode stock right now? The stock has a price-to-sales ratio of 7, and a price-to-earnings ratio of 16. A year ago, those multiples were 23 and 53, respectively. When we emerge from this bear market, the multiples of growth stocks will expand back to norms, and I expect the market will again pay a premium for InMode's amazing numbers.

InMode has introduced radio frequency (RF) devices to the world of cosmetic surgery. These procedures are noninvasive, like lasers, except they have applications to the entire spectrum of "body contouring." (Lasers are largely limited to superficial tasks like hair removal.) InMode's devices direct RF waves into the body. For its "body contouring services," InMode says the "treatments use radiofrequency energy to coagulate fat, tone muscles, remodel skin and address cellulite and imperfections such as vascular lesions, spider veins, port wine stains, and leg veins." The upshot is that InMode's devices open the door to noninvasive body sculpting without the dangers of surgery.

This tech breakthrough has made InMode highly profitable, with a 42% profit margin. And the company is still growing fast, with sales soaring 30% in its most recent quarter.What's beautiful about this business is that InMode has over 14,000 installed devices around the world and every device is a platform creating continuing revenue streams for the company as the device is used. In the most recent quarter, InMode reported $15 million in revenue from consumables and service, a 59% year-over-year jump. While that's a small portion of the $113 million in total revenue, the number will grow.

The noninvasive aesthetic market was valued at $53 billion last year and InMode management is optimistic about the opportunity to convert those using lasers to its RF machines. InMode is already on the way to becoming the dominant medical device maker in cosmetic surgery. The shares are dramatically on sale now, even though the company has seen nothing but good news. Over the next several years, I expect the stock to surpass its highs and go a lot higher. At $33, this stock is a steal right now.

3 Small Caps that could Soar 10X by 2027

2022-09-02T16:53:00.004-07:00

The list is here.

Buffet Keeps on Buyin

2022-08-26T13:56:00.005-07:00

Berkshire, the conglomerate owned by billionaire Warren Buffett, now holds a stake worth $125 billion in Apple. The tech giant accounts for about 40% of Berkshire’s total stock portfolio. In addition to the Apple shares, Berkshire also bought 22 million shares of Occidental and 2.3 million shares of Chevron, putting a larger stake on its bet on U.S. oil this year. The company also enhanced its stakes in Ally Financial and Paramount Global, the article details. On the flip side, Berkshire sold off the last of its holdings in Verizon and Royalty Pharma PLC. It also reduced its stakes in General Motors, U.S. Bancorp, and the grocery chain Kroger. And the company did not open any new positions in the second quarter.

Buffet's Favorite REIT

2022-08-04T14:50:00.004-07:00

STORE Capital is Buffet's favorite REIT.

On Blue Owl

2022-07-29T15:21:00.005-07:00

In May, OWL held its annual Investor Day. Three things stand out about its presentation.

The first is how much growth is on the table. In 2021, Blue Owl had $900 million in fee-related revenues. By 2023, it expects to double that to $1.8 billion. In terms of after-tax distributable earnings, it plans to double them as well, to $1.0 billion in 2023 from $523 million in 2021. Lastly, it wants to boost its annualized dividend by 40 cents per share (where it was in Q4 2021) to $1 per share in 2023.

The second highlight is how much of an impact fee-related revenues have on its profitability. These revenues have 60% margins. In other words, Blue Owl's distributable earnings are completely driven by fee-related revenues.

Lastly, with just 23% of its investor base outside North America, its global expansion is in the early stages with much growth to come in the years ahead.

With its goal to raise more than $50 billion in fee-related AUM over the next 18 months, there's no question growth is on the table for the foreseeable future. That's what makes OWL one of the best mid-cap stocks for the rest of 2022 and beyond.

Glenn Schorr, an Evercore ISI analyst, reiterated his positive view of Blue Owl’s all fee-related earnings and all permanent capital model. “We continue to like OWL’s quality of earnings/stability of results, a growing yield & best-in-class FRE margins, while also getting exposure to the fast-growing alts space,” Schorr said in a July 20 note. He has an Outperform rating for the stock and a $13 target price.

Three Stocks that Could Run Up to 1,000%

2022-06-27T15:25:00.003-07:00

The Fool has three ideas that could potentially return 1,000%

Intellia Therapeutics
Doximity
Transmedics

The 26 Stocks I Own Personally and for Clients

2022-06-13T14:17:00.001-07:00

John Dorfman discloses the 26 stocks that he owns personally and for clients.

XPO Logistics

2022-05-12T15:16:00.001-07:00

From the Fool:

XPO hiked its full-year EPS guidance from $5.00-$5.45 to $5.20-$5.60, meaning that the stock trades at a P/E ratio of less than 10 based on those expectations. If the truck brokerage spin-off delivers similar results to GXO, now looks like a great time to buy XPO stock.

Array Technologies

2022-04-23T20:45:00.005-07:00

The company’s revenues are showing growth recently. The company reported a top line of $219.9 million in 4Q21, up 22% year-over-year – and the second-highest quarterly revenue result since the company went public in October of 2020. Looking at earnings, Array posted net losses in Q3 and Q4 – but for 2021 as a whole, it recorded a net EPS profit of 7 cents. But while that’s still a profit, it compares poorly to the 93 cents per share in the 2020 report.

To this end, Strouse rates ARRY an Overweight (i.e. Buy) along with a $33 price target that points toward a robust 238% upside for the coming year.

This News Just Put Fulgent at the Top of My Buy List

2022-04-22T13:52:00.002-07:00

An acquisition and raised guidance have reinforced the bull case for the stock.

Fulgent was in the right place at the right time to respond to the need for COVID-19 testing, and has used that unexpected revenue windfall to strengthen its core business and position itself for continued success long after COVID-19 is behind us. Yet, the market seems to be pricing Fulgent shares based solely on the decreasing COVID testing revenues. Currently, the company trades for only two times sales and four times free cash flow.

On Pubmatic

2022-03-30T09:14:00.005-07:00

The first stock that I believe offers incredible upside potential is cloud-based advertising technology company PubMatic ( PUBM -1.83% ). PubMatic is a new addition to my portfolio, with three separate purchases between March 7 and March 14. With a cost basis of $19.72, I'm effectively expecting this to become a $200 a share stock at some point in the future.

The key growth catalyst is the steady shift of advertising dollars from print to digital formats. PubMatic is a sell-side provider within the programmatic ad space. In English, this just means it sells display space for publishers. Interestingly, though, PubMatic doesn't always fill display space with the highest-priced ad. Rather, the company's machine-learning algorithms look to place the most relevant content in front of users. This way advertisers stay happy and publishers are afforded more pricing power over time.

On PubMatic

2022-03-17T14:16:00.002-07:00

It ended 2021 with $160 million in cash, cash equivalents, and marketable securities coupled with zero debt. The company has the enviable financial flexibility to absorb whatever the world throws at it in the coming years.

And I'd be remiss not to mention the stock's attractive valuation. PubMatic is a highly profitable company, so investors can evaluate the stock on an earnings basis. Its trailing price-to-earnings (P/E) ratio is just 19 right now. According to Yardeni Research, the current P/E average for the S&P 500 is 22. Therefore, with PubMatic, you're getting a high-quality stock at a below-average valuation.

Oppenheimer on Digital Turbine

2022-03-03T13:15:00.001-08:00

This first Oppenheimer pick is Digital Turbine, a digital advertising specialist that provides end-to-end products and solutions to facilitate the monetization of mobile content for mobile operators, original equipment manufacturers (OEMs), and third parties. In short, the company brings together publishers, mobile operators and OEMs with app developers and advertisers.

In the past, the company mostly concentrated on preinstalled apps on Android handsets. Now, though, it is a force to be reckoned with in the digital advertising space following several acquisitions which have meaningfully grown its total addressable market (TAM).

The growth was on evidence in the company’s latest quarterly report, for F3Q22. Revenue increased by 323.7% year-over-year to reach $375.4 million, in turn beating the Street’s call of 353.21 million. There was a beat on the bottom-line too, as adj. EPS of $0.49 came in ahead of the $0.43 consensus estimate. And in contrast to many recently, the company’s outlook was sound as well. The FY22 guidance called for revenue in the $1.225 billion and $1.240 billion range, above the Street’s forecast of $1.22 billion.

While the shares got a post-earnings boost, as has befallen the fate of many growth stocks over the past year, shares have taken a real hammering and are down 27% year-to-date.

What this means, according to Oppenheimer’s Timothy Horan is that investors have the opportunity to pick up shares on the cheap.

“Despite current challenging investor sentiment for growth stocks and undeniably dynamic environment for adtech, APPS remains one of our top 2022 picks at 3.0x FY23E FV/revenue and 16.5x EBITDA vs. 30-40% CAGR,” the 5-star analyst said. “Potential growth should be underpinned by highly differentiated, independent, end-to-end ad/media tech ecosystem, directly embedded into more than 1.5B devices by handset OEM and carrier partners.”

Accordingly, Horan rates APPS an Outperform (i.e. Buy), while his $117 price target indicates room for 162% growth over the coming year.

Three other analysts have weighed in on APPS’s prospects over the past 3 months and like Horan they all get behind this name; with 3 additional Buys, the stock boasts a Strong Buy consensus rating. There are plenty of gains projected here too; going by the $94.5 average target, shares will rise by 101% over the one-year timeframe.

Monday, Monday

2022-02-04T14:53:00.001-08:00

The Fool owns shares of Monday.com and note that with the recent tech sell off, shares are starting to look attractive

Good RX

2022-02-03T14:40:00.004-08:00

GoodRx (NASDAQ:GDRX) helps consumers cut down on their prescription costs by finding coupons for the lowest local prices for their medicines and negotiating with manufacturers, pharmacies, and other providers on their behalf. Then, when pharmacy-benefit managers take their administrative fee from the pharmacy once the prescription is filled, GoodRx pockets a portion of it. Consumers can also subscribe for a monthly fee to get access to even more discounts. Between subscription income and fees, GoodRx generated $685.7 million in trailing-12-month revenue, and it's just getting started.

The magic of this company's business model is that all of the incentives align perfectly. Patients can afford medications more easily, thereby helping them to experience better health. As a result, manufacturers lose fewer potential sales to price sensitivity among consumers. And healthcare providers don't need to worry about their patients having worse health outcomes from putting off spending on expensive but critical drugs.

While it isn't profitable yet, its quarterly revenue has increased by 72.3% since January 2020. More importantly, the number of monthly active consumers using its service has increased by 31% year over year, reaching more than 6.4 million people as of 2021's third quarter. And its quarterly adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) have grown by 16%, reaching $61.8 million.

As long as people need to spend less on their medications, the business will keep growing. If GoodRx can keep onboarding more consumers every year, it'll increase its economies of scale when it comes to negotiating with drug manufacturers and pharmacy-benefit managers, and that'll likely support a higher profit margin and more earnings accordingly.

Therefore, it's definitely worth picking up a few shares while it's in a downtrend with the rest of the market if an investor's looking for a stock that has the potential to multiply in value.

Fulgent Genetics: A Smallcap That Got Flushed with the Market

2022-01-27T13:40:00.001-08:00

From Seeking Alpha:

The case for picking up Fulgent (FLGT) shares in this downdraft is pretty straightforward. Their core NGS (next-generation sequencing) business is growing at triple-digit rates (215% in Q3 guided to deliver $115M in 2021) despite the pandemic, and will likely exit 2022 on a run rate approaching $250M a year.

Even valuing the shares just on their NGS business makes already a pretty compelling case. Why? Well, by the end of Q4 2021 or certainly by the end of Q1 2022, the company will have $1B in cash.

If you subtract that from their market cap then the shares trade at roughly 3x EV/S on their core NGS business alone, a business growing at triple-digit rates.

The cash comes mostly from the company's massive Covid testing business, and with the Omicron variant, this is likely to have generated huge additional revenues in Q4 and Q1 and is still likely to produce significant revenues going forward.

Consensus revenues for 2022 is nearly $600M, which put the shares on a 1.1x EV/S multiple. While we acknowledge that their Covid testing business will wind down at some point, every quarter that they still generate significant revenue from this business adds large amounts of cash to an already overflowing balance sheet.

One might also appreciate that the point at which their massively profitable Covid testing business will wind down is progressively moved forward in time (there were many who expected this to happen last year already).

And all the way their core NGS business is growing at triple-digit rates while the share price keeps moving down. Something's got to give here and with valuations already this low, it's not hard to see what, in our opinion.

The Fool owns shares and noted in January that shares were cheap.

On Avid Technology

2022-01-20T14:11:00.001-08:00

Avid provides a range of subscription-based software solutions for TV broadcasts, music composition, live sound, and video editing. Many of the movies, music, and TV broadcasts consumers enjoy every day were created using Avid's software tools. Unlike Zoom and Logitech, Avid's share price has doubled over the last year following improved operating results in 2021, but it's just getting started.

One thing to like about Avid's business is that three-quarters of its revenue is recurring, based on long-term subscriptions with customers. This provides good visibility into future growth and warrants a high valuation, but the stock looks cheap right now.

The stock sells at just 21 times this year's earnings estimates, despite 35% year-over-year growth in the subscription count in the third quarter. For the full year, revenue is expected to increase by 11% for 2021 based on management's guidance. But Avid could see its top line accelerate over the next few years, considering the recent momentum with subscriptions and long-term trends benefiting the business.

SMART Global: A Small Cap with Innovator with Large Cap Ambitions

2022-01-07T07:52:00.001-08:00

Zacks has a good write up on Smart Global, a small cap chip manufacturer that is looking to grow exponentially. The Fool also owns shares.

Crossing Wall Street 2022 Buy List

2022-01-03T15:14:00.003-08:00

A good list of stocks from Crossing Wall Street for 2022.

On Accuray

2022-01-03T15:10:00.004-08:00

This off-the-radar gem spiked big-time in the fall but has come back in to offer a very solid entry point. Accuray Inc. (NASDAQ: ARAY) develops, manufactures and sells radiotherapy systems for alternative cancer treatments in the Americas, Europe, the Middle East, India, Japan, China and elsewhere.

The company offers the CyberKnife System, a robotic stereotactic radiosurgery and stereotactic body radiation therapy system used for the treatment of various types of cancer and tumors in the body, such as prostate, lung, brain, spine, liver, pancreas and kidney. Accuray also provides the TomoTherapy System, including the Radixact System, which consists of an integrated radiation therapy system designed for the treatment of a range of cancer types. In addition, it offers post-contract customer support, installation, training and other professional services.

The company primarily markets its products directly to customers, including hospitals and stand-alone treatment facilities through its sales organization, as well as to customers through sales agents and group purchasing organizations in the United States, as well as to customers directly and through distributors and sales agents internationally.

Loop Capital has a $7.50 target price for Accuray stock. The Wall Street consensus target is even higher at $8.30. The stock ended trading on Friday at $4.77 a share.