Quick Takes: Vertex (VERX), Rivian (RIVN), Apple (AAPL) and Modine (MOD)
Vertex (VERX)
Shares of tax software specialist Vertex (VERX) are trading slightly lower this morning after the company delivered a Q2 beat and announced an acquisition. Revenue rose 15.3% to $161 million and beat by 1.5% while EPS of $0.15 grew by 88% and beat by a penny. Full-year revenue guidance was increased by $4 million at the low end of the range, to $654 - $660 million (versus consensus of $657 million), while Adjusted EBITDA was increased by $9.5 million to a range of $139 - $145 million. The company will acquire ecosio, an integrations specialist focused on electronic data interchange and e-invoicing. The deal should add $15 million in revenue in the first 12 months and close by the end of September. I hired VERX because of its steady growth and solid performance relative to other software players, with expectations that it could get an additional lift if/as investors begin to swoop up software stock “deals.” That thesis is being challenged lately (partially due to broad market volatility), and I’m surprised to see VERX shares trade down on this report, especially given that the rest of the market is up. Will give it a little rope, especially since shares should find ample support around 33.5. That said, will move to hold quickly if shares don’t hold up. BUY
Rivian (RIVN)
Rivian (RIVN) reported Q2 results after the close yesterday that featured a slight beat with revenue of $1.16 billion (+3%) and Adjusted EBITDA of -$860 million (a $41 million beat). The company continues to focus on operational efficiency, but not at the cost of producing a sub-par product. Much of the conference call was dedicated to themes about supplier relationships/cost reductions/production efficiencies (helped by the VW partnership), developing vehicles with improved features and performance, and expanding globally (also with the help of VW) in the midsize SUV and crossover markets. The VW JV is set to close by the end of the year. Management is sticking with production volume guidance of 57,000 units for the year, with low-single-digit delivery growth. Cost reductions for the R1 should be significant over the next two quarters. Not expecting this quarter to change the narrative. Still expecting the VW cash to help the balance sheet and get Rivian to cash flow positive while looking forward to the launch of the R2 (manufactured in the Normal facility) in early 2026. Long-term buy for those that like the story. BUY
Apple (AAPL)
Apple (AAPL) stock has been a subject of debate after news broke that Warren Buffet reduced his stake in the company by half in Q2, probably because his Buffett ratio (market cap of all U.S. stocks divided by nominal GDP) showed the market was overvalued given its reading over 2.0. We are not as conservative (or as smart!) as Warren Buffet, but it’s worth putting this sale in context. Buffett still owns $84 billion in Apple stock, and it remains Berkshire Hathaway’s (BRK.A) largest position. With Q2 under its belt (expectations largely met) the focus here should be returning to the upcoming iPhone 16 and iOS 18 (mid-September) and Apple Intelligence (pushed to October with release of iOS 18.1) launches, which are expected to drive a multi-year refresh cycle starting in the late-September – October timeframe. BUY
Modine (MOD)
Shares of Modine (MOD) seem to be stabilizing just above the 100 level after a bit of a wild ride following the Q2 earnings beat last Tuesday and the Friday-Monday stock market rout. Recall that Modine grew company-wide revenue by a seemingly modest 6.3% to $662 million but that adjusted EPS grew over 22% to $1.04 due to management’s intense focus on efficiency gains and portfolio rationalization. The company is growing very quickly in the data center area (+40% to 50% growth expected in that area this year) and is developing a direct-to-chip cooling technology that should launch with a strategic customer in Europe later in the year. We’ll learn more at the company’s Investor Day in September. Management also sees 30% annual growth (or more) in the EV Systems business in the coming years. There are still a lot of moving parts with Modine as it works to streamline things, but the bottom line is that management is executing and analysts are raising price targets (most in the 130 to 140 range). BUY
What’s Next?
After the close today we hear the Q2 report from Soleno (SLNO), rated hold half.
Tomorrow we hear from SharkNinja (SN) and Nova (NVMI), both rated buy half.
Lastly, shares of AST SpaceMobile (ASTS) continue to defy gravity. The speculative stock is rated buy half.
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
