Cabot Stock of the Week Issue: February 24, 2025

The dam finally broke.

After weeks of withstanding a geyser of negative headlines – higher inflation, tariffs, slower interest rate cuts, the DeepSeek impact on AI, etc. – the market finally took on water last Thursday and Friday and succumbed. Whether that’s the start of a deeper correction – I said on my Street Check podcast last Friday that I thought a pullback of 5% or more was coming – we’ll know in the next few days. Even if it is, it’s nothing abnormal. After all, the S&P just touched new all-time highs three trading days ago. A pullback was probably inevitable.

Out of respect for the about-face in U.S. stocks in recent days, however, today we’ll turn our attention to Europe, where stocks have been outperforming their U.S. counterparts by more than 2-to-1 so far this year. Our new addition comes from Spain and is a company that’s been in Carl Delfeld’s Cabot Explorer portfolio for several months. Now is a good time to add it to Stock of the Week.

Here it is, with Carl’s latest thoughts.

Banco Santander (SAN)

I did not realize that the second-largest manufacturer in Europe after Germany is Spain, which exported 87% of its auto production last year.

Spain is aggressively reaching out to China for more trade and investment, but Spain’s economic ties with the United States are much larger than between Spain and China so the country must tread carefully. The risk is that cars produced with Chinese partners or technology could be shut out of the American market.

Still, Spain has emerged as the star of the European Union with its highest economic growth rate as Germany and France have struggled a bit.

One of the best conservative ways to capture growth in a country or region is through top-quality banks due to their tentacles at home and overseas. First, you need to sort out the laggards from the quality banks that have upside potential and strong track records.

You may have never heard of Santander Bank (SAN), founded in Spain in 1857.

The bank’s U.S. headquarters is in Boston, but its strength lies in Latin America and Europe, where it has more than 8,000 branches with 171 million customers as well as 58 million digital accounts. In the fourth quarter of 2024, it welcomed over 8 million new customers compared to the previous year. About 55% of deposits and loans are in Europe with the balance in Latin America – Santander’s chair, Ana Botin, announced plans to invest over $2 billion in Mexico during the next three years.

Also in its most recent quarter, reported in early February, Santander’s revenue and net profits were both up 10%. Earnings per share of 21 cents topped the 19-cent estimate.

Santander now also oversees 500 billion euros of assets for wealth management clients and has 105 million credit cards issued.

The stock is up 33% already this year – with the majority of the gains coming since the earnings report – but still trades at just 7.5 times trailing and forward earnings as well as only at about 87% of book value.

It also sports a healthy 3.6% dividend.

The bank has a strong commitment to returning value to shareholders, announcing an interim cash dividend increase of 23% compared to the previous year’s dividend.

This is a quality international bank that offers us exposure to two regions – one developed and one emerging. BUY

Current Recommendations

Changes Since Last Week:
American Airlines (AAL) Moves from Buy to Sell
Blackstone (BX) Moves from Buy to Sell

Most of our stocks were down last week along with the market. But in most cases, they’re up considerably year to date. AAL and BX are two exceptions. Both have been trending downward for weeks. BX has been a good stock for us for the past 18 months, living up to its “Bull Market Stock” billing. AAL just hasn’t worked out, though we’re admittedly giving it a short leash.

Fortunately, most of our stocks had been running up for weeks, so a couple bad days only put a modest dent in them. Some of our stocks held up quite well – and even made gains – during last week’s selloff.

Here’s what’s happening with all of them.

Updates

AbbVie (ABBV), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, is up 3.5% since our last issue and 14% year to date. In his latest update, Tom wrote, “The biotech company surged after a strong earnings report last month. ABBV has moved over 15% higher since January 22^nd. The company beat earnings forecasts, but the main driver was the performance of its immunology drugs Skyrizi and Rinvoq, which collectively delivered $5.61 billion in revenue for the quarter. Those drugs alone have replaced the Humira revenue which peaked at a little over $20 billion annually. The company also raised revenue forecasts on the two drugs by $4 billion to $31 billion a year by 2027. The earnings report showed Abbvie has replaced the Humira revenue. The patent cliff had been holding the stock back but that’s gone now.” BUY

Airbus (EADSF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was down more than 5% on Friday despite a mostly decent earnings report on Thursday. Revenues improved 6% in full-year 2024 and the company delivered 766 commercial aircraft last year, up 4% from last year, and expects to deliver 820 aircraft (a 7% improvement) this year; however, operating income declined 8% and 2025 guidance came in light, hence the downturn in the stock price on Friday. Still, considering shares were trading at 11-month highs prior to the report, this mini-retreat isn’t all that surprising. Let’s see how the stock responds in the coming week and if there’s some bounce-back as Wall Street has more time to digest the results. BUY

American Airlines (AAL) declined to a three-month low and has been falling for a solid month since reporting lukewarm earnings results, so it’s time to say goodbye. We already have exposure to the fast-rising airline industry in the aforementioned Airbus, making AAL expendable in light of its underperformance since we added it to the portfolio in early January. MOVE FROM BUY TO SELL

AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, gave back most of its gains from the previous week, including an 8.5% pullback on Friday, on no news. Still, shares of the upstart company are up 37% year to date, and earnings are up on March 3. That will be an important window into how quickly this mostly pre-revenue company is getting its straight-to-smartphone, space-based internet service up and running. Stay tuned. BUY

Aviva plc (AVVIY), originally recommended by Bruce Kaser in Cabot Value Investor, has seen its share price rise since the U.K.-based life insurance and investment management firm since late November when the company finalized its agreement to buy Direct Line Insurance Group for 3.7 billion pounds ($4.65 billion), creating the largest motor insurance company in the United Kingdom. The deal is expected to be completed by mid-2025. In the meantime, second-half 2024 earnings are due out this Thursday, February 27. BUY

Axsome Therapeutics, Inc. (AXSM), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, is up more than 8% since we last wrote after two more Wall Street firms – Needham and MC Wainwright – raised their price targets on the stock, becoming the fourth and fifth to do so in the past month. That comes on the heels of a very promising earnings report. Last Tuesday, the mid-cap biotech reported fourth-quarter and full-year 2024 results that were quite strong. Net product revenue growth came in at 66% for the quarter and 88% for the year. Auvelity led the charge, with net product sales of $92.6 million in Q4 and $291.4 million for the full year, respectively, representing 89% and 124% year-over-year growth. Auvelity accounts for three-quarters of the company’s total sales, which is why the Teva patent dispute was such a big deal to investors.

Furthermore, Axsome is on the cusp of gaining FDA approval for its AXS-05 drug to treat agitation among Alzheimer’s patients. It’s expected to submit an NDA (New Drug Approval) application in the second half of this year. The company also gained approval last month for Symbravo, which treats migraines. So, there could be further upside ahead if either one of those drugs turns into even half the revenue generator that Auvelity has become. BUY

Blackstone Inc. (BX), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was off more than 5% last week as the market pulled back. It’s now down 8.5% year to date and more than 20% from its November highs. This “Bull Market Stock” (Mike’s term) has been very good to us, outpacing the bull market since we added it to the portfolio in August 2023. And while the bull market remains very much intact, confidence in U.S. stocks has deteriorated of late, and BX is now trading well below its 50-day moving average. Let’s pocket the profits we’ve made over the last 18 months (more than 50%!) and open up another spot for a stock that has a bit more upside in both the short and long term. MOVE FROM BUY TO SELL

Broadcom Inc. (AVGO), originally recommended by Tom Hutchinson in Cabot Dividend Investor, was down more than 4% last week, with most of the losses coming during Friday’s market bloodbath. Prior to that, shares had fallen a bit on news of its interest in buying a piece of Intel. As Tom noted in his update last week, that’s not a bad thing: “Breaking news is temporarily interrupting AVGO’s recovery from last month’s selloff. The stock is down in Tuesday trading following reports that Broadcom and TSMC (TSM) are exploring the idea of buying chip maker Intel (INTC) and splitting it up. Broadcom is allegedly considering making a bid for Intel’s product business that designs semiconductors. We’ll see if this actually comes to fruition. But bear in mind that Broadcom has become the company it is primarily through acquisitions that it seems to know how to make work.” We sold half our AVGO shares after it popped more than 40% in a day in late 2024. The stock has fallen a bit of late but is well north of its January lows. Let’s continue to hold our remaining half. HOLD HALF

BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, keeps climbing to new all-time highs, topping 100 a share for the first time and advancing more than 8.5% last week. There wasn’t much company-specific news, but the stock is clearly still drawing strength from its autonomous driving announcement from a couple weeks ago. In case you missed it, the Chinese electric vehicle maker announced that it has started offering advanced autonomous driving features, dubbed “God’s Eye,” on most of its models, including its low-priced ($9,555) ones. Additionally, BYD has said it plans to invest about $14 billion in AI and automotive intelligence technology spearheaded by an army of more than 5,000 engineers. New breakthrough technologies for BYD’s cars could give it an even tighter stranglehold on the Chinese EV market, where Tesla’s sales have been slumping as more people gravitate to BYD’s lower-priced car options. The new God’s Eye feature could also make BYD more appealing to the many new markets it’s trying to conquer, including Europe and Southeast Asia. BYDDY shares are now up more than 47% year to date. BUY

Capital One Financial Group (COF), originally recommended by yours truly in the Growth/Income portfolio of my Cabot Value Investor advisory, mostly held firm last week despite some ups and downs. The big needle-moving event is (supposedly) just months away, as company executives said they expect the $35.3 billion merger with Discover Financial (DFS) to close on May 19, three months later than initially anticipated. The Discover deal would create the largest credit card issuer in the U.S. and the sixth-largest bank by assets. BUY

Centuri Holdings Inc. (CTRI), originally recommended by Clif Droke in his Cabot Turnaround Letter, was down 6% this week on no news. The company reports earnings this Wednesday, February 26, so perhaps a quick turnaround is in order. Analysts are expecting $675 million in revenue with 19 cents in EPS. The company has fallen short of bottom-line estimates in each of the last two quarters. Hopefully this time around will bring a better result for this small-cap utility. BUY

Constellation Energy Corporation (CEG), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, came crashing back to Earth after a strong start to the year, falling more than 12% in the wake of the previous week’s earnings beat. The only news was good: Citigroup raised its price target from 284 to 334. Seems like the selloff was market-driven, as investors came for stocks with meat on the bone on Thursday and Friday. Coming off such a strong quarter, chances are it will bounce back. The nuclear energy utility delivered Q4 EPS of $2.71, up from an 11-cent loss the year before and well ahead of analyst estimates. For full-year 2024, adjusted earnings came in at $8.67 a share, ahead of $8.00-$8.40 guidance. The company affirmed its $8.90-$9.60 guidance for the current year. Additionally, Constellation announced the signing of a 20-year power purchase agreement with Microsoft to support the launch of its Crane Clear Energy Center – a mega-data center that supports Microsoft’s ambitious AI efforts. Lastly, after increasing its dividend payment by 25% last year, it plans to up the payout by another 10% this year. Despite the bad week, CEG shares are still up 27% year to date. This dip could be a buying opportunity. BUY

DexCom, Inc. (DXCM), originally recommended by Clif Droke in his Cabot Turnaround Letter, dipped from 91 to 89 but remains well above its pre-earnings prices in the 83-84 range. The earnings weren’t great, but Wall Street liked them anyway. Adjusted EPS of 40 cents fell well shy of the 50-cent estimate and the 50 cents it earned in the same quarter a year ago. Revenues improved 7.6% year over year, though that was in line with estimates. Margins slipped from 64% to 59% year over year. On the positive side, revenue guidance for 2025 came in strong (14% growth – accelerating revenues is a very bullish tell), margins are supposed to bump back up to 64%, and the company did expand its customer base by 25% last year. For a stock that’s down 21% in the last year, it was enough good news to convince investors that better times are ahead. Indeed, Clif recommended DXCM for its potential as a turnaround stock. So far so good – shares are up more than 20% in just over two months since we added it to the Stock of the Week portfolio. BUY

DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, gave back most, but not all, of its 10% earnings gain from the previous week. In his latest update, Mike wrote, “DoorDash certainly has the qualities of a liquid leader in this market, and why shouldn’t it? The firm has a long runway of rapid and reliable growth, which is what most big investors are looking for, with its top-notch logistics and back-end technology (along with the network effect, which favors the leader in the group) attracting about half of new merchant entrants in both restaurants and in its newer categories, such as grocery, convenience, alcohol and more. (All in all, 94 of the top 100 U.S. restaurants and 44 of the top 100 retailers as a whole use DoorDash at least in part for delivery.) And its clients are broadening their purchases, with about one-quarter of its monthly users buying from a non-restaurant client in December. Growth here remains solid (Q4 orders up 19%, order volume was up 21%, revenues lifted 25% and EBITDA boomed 56%, with very healthy free cash flow, too), and while today’s action was ugly, it wasn’t abnormal—the stock had a very modest, tight rest during December and January followed by a fresh move to new highs and a positive reaction to earnings. Obviously, if growth stocks go up in smoke, all bets are off, but while there could be some short-term follow-on weakness after today, the odds still favor higher prices ahead.” Amen. BUY

Duolingo (DUOL), originally recommended by Mike Cintolo in Cabot Growth Investor, had a tough day Friday, falling more than 8% (along with so many other growth stocks) to close out a down first week for the stock in our portfolio. There was no news, which means the selling was likely overdone. In his update last Thursday (prior to Friday’s market meltdown), Mike wrote, “These days, there aren’t many stocks out there that have the growth story and numbers we lust for, while also featuring a strong (but not very late-stage) chart—but Duolingo is one of them, and the strength it’s shown during the past couple of weeks is just what we like to see (today’s dip looks very normal given the growth stock maelstrom). Fundamentally, the firm has the most popular educational app in the world, mostly used for language learning right now, though the potential for subjects like music and math lessons (which are live, though it’s still early there) very big. The secret sauce here looks to be a fun, engaging format that keeps people coming back, along with a freemium business model (free to use with ads; paid subscribers get more features and no ads) that’s also a plus. Moreover, recent AI integrations (premium subs can live call an AI bot and have a conversation in whatever language they’re learning and get feedback) are only helping. Now, to be fair, DUOL is a very volatile name, and it does have earnings next week (February 27), so we do have a loose loss limit (down near 350, give or take) given the tricky growth stock environment—but we’re obviously optimistic, as the stock’s humungous correction last year cleared out many weak hands and the story, numbers and chart today are all aligned on the upside. We averaged up some last week and will take it as it comes from here.” Friday was the first real down day for DUOL in months, and I’m sure Mike isn’t deterred by one bad day on no news. Neither are we. If you missed the boat last week, you can now get in DUOL at an even better price. BUY

Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was off more than 10% last, with most of the losses coming during Friday’s market implosion. This is no surprise given the stock’s relentless run of late, including a 29% post-earnings bump the previous week. Still, shares of the fast-growing drive-through coffee company are up more than 45% year to date, and the latest quarter again demonstrated its impressive growth: 38% sales growth, including 6.9% same-store growth vs. a mere 1.5% expected; 75% EPS growth, with 7 cents a share coming in well ahead of the 2-cent estimate; and 32 new store openings, bringing the drive-through coffee store’s count to 982 after adding 151 new locations last year. A pullback was inevitable (as I wrote in this space last week), and now you can get one of the best stocks on the market for a more reasonable price. BUY

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, shrugged off all the late-week market turmoil and just kept rising, adding another 2% to get back near its post-earnings high from earlier this month. News that the supply shortage in the weight-loss drug space is over, according to the Food and Drug Administration, surely helped, though that more directly impacted rival Novo Nordisk. The recent quarter is also likely still acting as a tailwind. As Tom wrote last week, “Although sales of weight-loss drugs were less than previously anticipated, Zepbound and Mounjaro generated a whopping $5.4 billion in the fourth quarter alone. The company reported revenue growth of 45% for the quarter and EPS growth of 102%. For the full year, revenue grew 32% and earnings grew 101%. Lilly had warned in January of lower-than-expected weight-loss drug sales and the stock fell to a six-month low. The market liked the earnings report, and the stock is up 20% from last month’s low. The company also raised guidance and anticipates 30% revenue growth and 90% earnings growth for 2025.” HOLD

Flutter Entertainment (FLUT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, gave back most of its gains from the previous week but is still up more than 5% year to date. In his update last Thursday, Mike wrote, “It hasn’t been easy with FLUT, which since our entry in the fall has had two sharp dips followed by weeks-long consolidation periods—but the stock never did anything ‘wrong’ and now it’s acting better, breaking out nicely on the upside last week before today’s dip. The rally was partly due to some good tidings around the Super Bowl (looks like another big growth year in terms of bets and handles) and thanks to a solid outlook from peer DraftKings (DKNG) last week. Of course, Flutter has its own report in a couple of weeks (March 4), which will be key, but it’s looking more and more like Q4’s crummy results (because of good luck by bettors) were a one-off, the underlying business is strong and 2025 should be a great year.” BUY

Intuitive Surgical (ISRG), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, mostly held serve last week, an impressive feat for a growth stock. Perhaps last month’s strong earnings are still acting as a tailwind. EPS and revenues easily topped estimates, and the company installed 493 new platform placements – 174 of which were the new da Vinci 5 robot surgical systems. 2025 guidance for gross margins came in a bit light at 67-68% (Wall Street expected 69%), but there was way more good than bad, and shares have risen accordingly in the month since the report. BUY

Klaviyo, Inc. (KVYO), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, reported earnings last Wednesday that beat on both the top and bottom lines, and three Wall Street firms raised their price targets on the stock in response. And yet … shares were down more than 11%. That’s the type of week it was for growth stocks. As for the earnings, EPS of 7 cents topped the 6-cent estimate, though it did fall short of the 9 cents from a year ago. Revenues were much better, exceeding $270 million compared to $201 million a year ago. Share price pullbacks on earnings beats have been a frequent occurrence among growth stocks the last couple years; typically, the selling is overdone and the stock bounces back in relatively short order. If the market cooperates in the coming days and weeks, I think KVYO will do the same. This could be a nice entry point. BUY

Kyndryl Holdings, Inc. (KD), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, pulled back from 42 to 39 but remains above its pre-earnings price in the 37-38 range from a couple weeks ago. Earnings per share of 92 cents blew away estimates and marked a massive improvement from the 5 cents a share result in the same quarter (fiscal third quarter) a year ago. Profit margins swung from a net loss to a 5.7% positive margin this year. Revenues declined 5% and missed estimates by 1.8%, which was the only sour note. In reaction to the report, two Wall Street firms raised their price targets on KD: Oppenheimer from 37 to 43 and Susquehanna from 40 to 46. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, was an oasis in a desert last week, advancing to new all-time highs above 63 before pulling back slightly on Friday. The business development company that pays a monthly dividend with a 6.6% yield is the perfect life raft for our portfolio, and the returns have been quite good – more than 30% – since we added it 11 months ago. The company reports earnings on this Thursday, February 27. BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, pulled back modestly, down about 3% last week, after more than a month of going nowhere but up. The streamer announced that it plans to spend $1 billion in Mexico over the next several years on the production of original films and series. It’s Netflix’s latest flex of financial might, as the company attempts to further distance itself from the rest of the streaming field. NFLX is a long-term buy for any portfolio. BUY

Peloton Interactive (PTON), originally recommended by yours truly in my Cabot Value Investor advisory, gave back most of its gains from the previous week but remains well above its pre-earnings price in the mid-7s. Peloton reported second-quarter fiscal 2025 earnings on February 6 and the results were quite encouraging. Losses were more than slashed in half, from 54 cents a share a year ago to 24 cents this year. That was shy of the 18-cent loss analysts were expecting, but sales came in stronger at $673.9 million, ahead of the $654 million estimate but down 9% year over year. Furthermore, its new Strength+ feature topped the 220,000 monthly active users mark; gross margin reached 47.2%, topping estimates; operating expenses were down; and EBITDA came in way higher ($58.4 million) than analysts were anticipating ($26.7 million).

In light of the strong quarter, this market-fueled pullback looks like a buying opportunity. BUY

Reddit (RDDT), originally recommended by Tyler Laundon in Cabot Early Opportunities, kept falling after last week’s post-earnings downturn and is now more than 26% below its highs of just two weeks ago. That’s not normal selling for a company that just reported 71% revenue growth and 227% EPS growth. I think it’s overdone, and the stock is back to where it was to start the year. I think a bounce-back is coming, if the market can shake off last week’s cobwebs. Keeping at Buy. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, tumbled more than 7% but is still higher by more than 18% year to date. There was no news. The Singapore-based conglomerate will report earnings on March 4. This remains a great way to play Southeast Asian growth and is one of my favorite stocks in the portfolio. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was off another 4.5% last week, as the momentum from after the election has fizzled and been replaced by the reality of another disappointing quarter. While TSLA is below its 50-day moving average, the stock is still well north of its 200-day line and has risen more than 50% in the last six months. Let’s see how it behaves in a week when the market isn’t imploding. BUY

If you have any questions, don’t hesitate to email me at chris@cabotwealth.com.

Here, too, is the latest episode of Cabot Street Check, the weekly podcast I host with my colleague Brad Simmerman.

The next Cabot Stock of the Week issue will be published on March 3, 2025.

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