The long-term trend of the market remains up, while the intermediate trend remains down, though the current rally is working to change that—and may well succeed. In any case, we’re seeing growing numbers of strong stocks, and today’s recommendation is one of them.
It’s a little-known technology stock providing a valuable public service, with a high rate of recurring income. I think you’ll like it.
Cabot Stock of the Week 193
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The long-term trend of the market remains up, while the intermediate-trend remains down (or sideways-to-down, if you prefer), notwithstanding the current two-week bounce. Still, there are attractive stocks out there, and today’s recommendation is of the sort that I like a lot. Unlike giants like Facebook and Amazon that are known by everybody, owned by everybody, and thus ripe for selling when the market turns down, this company is unknown by the vast majority, which to me means that there are far more possible buyers than sellers!
The stock was originally recommended by Tyler Laundon in Cabot Small Cap Confidential, and here are Tyler’s latest thoughts.
Everbridge (EVBG)
Most people in the developed world go about their days in relative peace. But sometimes life is disrupted by severe weather, natural disasters, active shooter situations, terrorist attacks or some other dangerous event.
Thankfully, technology can play a positive role during these troubled times by improving response times and reducing injuries, anxiety, and property damage. One of the companies leading the charge is Everbridge (EVBG), a $1 billion market cap company with cloud-based solutions that help keep people safe and businesses running during critical events. Given their rising frequency, this is (unfortunately) a growth market. Everbridge says its addressable market tops $40 billion.
The company’s apps quickly collect, aggregate and analyze data to help customers asses threat levels, locate people at risk, deploy resources to help and execute pre-defined communications processes.
The platform delivers contextual messages via voice, text and email to residents, businesses and visitors, in near real-time, in over 15 languages, and on virtually any type of device. To help with response efforts, the platform can also prompt receivers to reply to questions like “Are you safe?” or “Do you need medical help?”
Everbridge’s platform is used by a growing number of cities, including New York City, and states, including Connecticut, Florida, New York, Vermont and Tennessee. It was relied on during Hurricanes Mathew, Sandy, Harvey, Irma and Maria. It’s been used in Super Bowls, live music events, and during marathons, including Monday’s Boston Marathon.
It was used to great effect on September 17, 2016 when a pipe bomb exploded in New Jersey, then another one went off in the New York City neighborhood of Chelsea, injuring 29 people. Before authorities even had a suspect, community members began using Everbridge’s Community Engagement notification system to share details of the incidents, a suspect’s appearance, and his potential role in the bombing. Less than two hours after the first alert went out, the suspect was arrested.
Everbridge has 3,711 clients, including nine of the U.S.’s biggest cities, all 25 of North America’s busiest airports, and nine of the 10 largest investment banks. Half of its customers are businesses, 35% are government agencies, and the remaining 15% are health care institutions.
With the recent $34 million acquisition of Unified Messaging Systems (UMS)—a Norwegian company with mobile solutions used by national and municipal alert systems throughout northern Europe, Greece, India, Cambodia, and Colombia—Everbridge is now the world’s largest global critical event management organization. Prior to the UMS acquisition, international sales represented just 10% of the firm’s total, so expect international expansion to be a big part of the story going forward.
Everbridge was founded in 2002, shortly after the 9/11 attacks, when it unveiled its Mass Notification solution. The company now has eight solutions spanning Mass Notification, Incident Management, IT Alerting, and Safety and Security. With the help of its expanding product suite, Everbridge has been landing bigger, multi-product deals.
Revenue has grown at an average annual rate of 33% over the last three years, and should rise another 31% this year, to $137 million. The company is not yet profitable, and with 2018 likely to be a year of product development and investment, the EPS loss will likely dip to $-0.59 before improving to $-0.37 in 2019.
But investors are looking ahead! As you can see, shares have held above their 50-day line since early-December. That little dip followed a $100 million convertible debt offering in November, which helped fund the UMS acquisition and resulted in very little shareholder dilution. With the growth story gaining momentum (revenue was up 37% in Q4 2017) I see potential for a breakout above 39. One catalyst to keep an eye on is the Q1 2018 earnings release, which is due out on May 7. BUY.
Everbridge (EVBG)
25 Corporate Drive, Suite 400
Burlington, MA 01803
818-230-9700
http://www.everbridge.com
CURRENT RECOMMENDATIONS
As technological advances conspire to make increasing amounts of information (and opinion) available to us with increasingly rapid frequency, it makes sense—from time to time—to remember what type of investor you are working to be.
If you are happy being a frequent trader—perhaps you enjoy some daily options activity—then keeping your attention on the market for hours at a time can be rewarding. But if you are by nature a long-term investor, and you can happily go weeks without making a trade, there’s no good reason to shackle yourself to technology that will only distract you from other things you care about. In other words, you don’t need to pay close attention to the market to be a successful investor.
If you enjoy frequent checking and trading, and it makes you happy, then by all means have at it. But for some people, just looking at the closing prices every Friday can be enough; all the rest can be considered noise.
By nature, I’m a patient person, and thus inclined to be more of a holder than a trader. But with this portfolio, which I’ve chosen to limit to 20 stocks, the fact that I buy a new stock every week means that I must sell one, on average, every week. Happily, this week I’m selling none; the market is strengthening, and we are benefiting.
AllianceBernstein (AB), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her High Yield Tier, remains in a long-term uptrend, trading above both its 25-day and 50-day moving averages and very close to its January closing high of 27.25. Investors seeking high income can buy here. But remember—particularly since today is tax day—that AB’s distributions vary based on cash flow and don’t qualify for the lower dividend tax rate; the partnership issues a K-1 at tax time. BUY.
Alphabet (GOOGL), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor, surged higher today (with peer Netflix) and is now above both its 25-and 50-day moving averages. In her latest update Crista wrote, “Alphabet is expected to report first quarter EPS of $9.31, within a range of $8.24 to $10.07, on the afternoon of April 23. I will consider GOOGL to be fairly valued when it retraces its January high near 1,190, at which point I plan to sell so as to make room for a more undervalued stock to join the portfolio.” I’ll stick with hold. HOLD.
Autohome (ATHM), originally recommended by Paul Goodwin of Cabot Emerging Markets Investor, hit more new highs yesterday and today! There’s no real fundamental news to explain the advance, and that’s the way I like it; it means that people in the know are buying now and the good news will come later, perhaps when earnings are reported. As China’s biggest source of car-buying information, the company has a bright future, though clearly there will be bumps in the road along the way. Paul says analysts are looking for 20% earnings growth this year and 24% next year, though both numbers are likely conservative. BUY.
Axon Enterprise (AAXN), originally recommended by Mike Cintolo of Cabot Growth Investor and featured here last week, hit a record high on Friday and can be bought on this little pullback. In his latest update, Mike wrote, “AAXN remains in good shape, holding its move into new-high ground from a couple of weeks ago. It’s a bit thinly traded but the firm’s body cameras and digital evidence management platform should drive big growth going forward.” There’s clearly a big trend in the U.S. toward video evidence-gathering, and Axon is the one company at the center of the law enforcement industry’s adoption of the trend. I think it could go far. BUY.
Azul S.A. (AZUL), originally recommended by Paul Goodwin of Cabot Emerging Markets Investor, has pulled back to its 50-day moving average in what looks like normal action; volume has not been particularly elevated. In Paul’s latest update, he wrote, “The release of the company’s preliminary traffic results for March showed a 10% year-over-year increase in consolidated passenger traffic, which resulted in an 80.6% load factor, up 0.4% from 2017 levels. The company is also continuing its program of replacing older aircraft with next-generation replacements. This pullback looks normal, and we will keep AZUL rated Buy.” BUY.
Baker Hughes, a GE Company (BHGE), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Buy-Low Opportunities Portfolio, has just completed six consecutive up days, though volume on the advance has been shrinking, which suggests to me that if you bought when I did, you might consider taking some profits now; the stock has had a good run in just seven weeks and its earnings report is on the horizon. In her latest update, Crista wrote, “Baker Hughes offers products, services and digital solutions to the international oil and gas community. The number of U.S. rigs drilling for crude oil and natural gas rose by five last week to a total of 1,008, up 161 vs. a year ago. Baker Hughes is expected to report first quarter EPS of $0.06, within a range of $0.02 to $0.12, on the morning of April 20. Wall Street expects full-year EPS to grow 79% and 102% in 2018 and 2019. The stock has been racing upward this month, and will likely rest a bit when it reaches 34.” I’m downgrading it to hold. HOLD.
BB&T Corp. (BBT), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her Dividend Growth Tier, and subsequently recommend by Crista Huff, has bounced anemically since the market bottom and now both its 25-and 50-day moving averages are trending down. In her latest update, Chloe wrote, “Financials remain under pressure due to the flattening yield curve, and BBT is trading in line with the sector. On the plus side, analyst estimates are moving up and the consensus estimate now predicts 41% EPS growth this year (that’s including a nice tailwind from the tax break). BB&T bought Regions Financial’s insurance business last week, expanding their reach in retail insurance. I’ll keep BBT on Hold.” And just this morning, Crista wrote, “BB&T is a 145-year-old financial holding company with $222 billion in assets and 2,100 financial centers that serves businesses and individuals. BB&T is expected to report first quarter EPS of $0.92, within a range of $0.87 to $0.96, on the morning of April 19. Three investment firms raised their ratings and/or price targets on BBT last week, including Wedbush with a price target of 111. Analysts expect full-year EPS to grow 41.2% and 8.1% in 2018 and 2019. I will sell BBT near its January high of 56 if the 2019 earnings growth rate does not improve further. The stock is still a good investment, but I have stocks with stronger 2019 earnings growth projections waiting in the wings.” HOLD.
Broadridge Financial Solutions (BR), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her Dividend Growth Tier, surged on big volume yesterday and broke out to a new high today. It’s tempting to upgrade the stock to buy on this breakout, but there’s still a chance that the breakout will fail, so I’ll continue to follow the cautious guidance of Chloe, who recently wrote, “BR continues to consolidate just under 110, while its 50-day line, currently at 103, starts to catch up. BR is a solid Hold for dividend growth.” HOLD.
China Lodging Group (HTHT), originally recommended by Paul Goodwin of Cabot Emerging Markets Investor, is one of our Heritage Stocks, meaning that the company’s long-term growth prospects are so good—and our profit cushion so ample—that I can afford to sit through market gyrations in pursuit of major long-term profits. The stock remains in a long-term uptrend, but short term, it’s taking a breather, sitting a bit above its uptrending 200-day moving average. Meanwhile, the fundamental situation continues to improve, as revealed by yesterday’s release of the firm’s hotel operations in the first quarter. At the end of the quarter, the company had 5,284 hotels in operation, up from 2,813 a year ago. And in those 2,813 hotels that were in operation a year ago, occupancy rates improved 0.3%, average daily room rates grew 6.1% and revenue per average room grew 6.5%. Additionally, the company has 744 hotels in the pipeline. HOLD.
Insulet (PODD), originally recommended by Mike Cintolo in Cabot Growth Investor, is the world leader in tubeless insulin delivery technology and its stock continues to look great. If you don’t own it, you can buy it here as it sets up for a breakout. This base looks a lot like the base of November-December that was followed by a 10% breakout spike. BUY.
PayPal (PYPL), originally recommended by Mike Cintolo of Cabot Growth Investor, found support at 72 in February and during the latest selling wave, and has rallied back above its 25-and 50-day moving averages—which are sort of trending sideways. In his latest update, Mike wrote, “Competition worries popped up again for PayPal late last week, when reports said that Amazon would add a person-to-person payment feature to its Alexa digital assistant. While I’d never underestimate what Amazon can accomplish, the competition fears for PayPal have regularly been overblown. The firm’s various deals with payment operators and banks, as well as its huge (227 million accounts) and active (33.6 transactions per account in Q4; total payment volume of $451 billion in 2017) customer base give it plenty of momentum as payments go digital…The next big move could come down to earnings, which are due out April 25.” Then today, PayPal announced that its Venmo person-to-person payment service is now available for users of GrubHub. The stock climbed sharply after the announcement, but volume was less than impressive. HOLD.
Planet Fitness (PLNT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is working hard to break out to a new high—the old closing high of March was 39.52—and you can buy here. The cookie-cutter growth story is unfolding impressively. BUY.
Stag Industrial (STAG), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her High Yield Tier, surged higher on big volume yesterday and followed through today, climbing above its March highs. The likely reason: increased optimism about the industrial and internet businesses that use the firm’s warehouses. In her latest update (before the surge higher) Chloe wrote, “STAG has been below its 50-day line all year, but its sideways (slightly up) move in recent weeks has allowed it to nudge above that line in recent days. This REIT continues to benefit from money flows toward income investments and counter-cyclical options, which are being driven by rising market volatility. STAG is an industrial REIT that mostly owns warehouses and has increased funds from operations (or FFO, a widely-used measure of REIT cash flow) every year since coming public in 2011. Distributions are paid monthly and payments are steady (though they don’t qualify for the lower dividend tax rate); the company just reaffirmed its payout levels for the second quarter. Investors with a high risk tolerance looking for high monthly income can Buy some STAG here.” BUY.
TD Ameritrade (AMTD), originally recommended by Mike Cintolo in Cabot Top Ten Trader, looks pretty good! The stock has climbed back above its 25-day moving average, and is now targeting its old March high of 63, If you haven’t bought yet, and a brokerage firm would look good in your portfolio, you can buy here. Earnings are due out on April 24. BUY.
Teladoc (TDOC), originally recommended by Mike Cintolo in Cabot Growth Investor, also looks good, heading back to its March high of 44. The young firm is a fast-growing leader in the telehealth movement, which enables patients to access board-certified doctors 24/7/365. BUY.
Tesla (TSLA), originally recommended in Cabot Top Ten Trader, is the second Heritage Stock in the portfolio; we have a fat profit, and I have confidence in the firm’s long-term growth prospects as it leads the automotive revolution for both electric and autonomous cars. But the firm’s inability to meet its production goals for Model 3 vehicles continues to weigh on the stock, which last week rallied from a deeply oversold 250 back to 310. On the bright side, the Chinese government, just today, announced that it would lift restrictions on foreign ownership of automobile manufacturers. Limits on electric vehicle makers will be lifted this year (which should help Tesla), to be followed by repeals for commercial vehicles in 2020 and passenger vehicles in 2022. If you haven’t bought yet, you can buy now, while the bad news remains dominant. BUY.
WestRock (WRK), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Growth & Income Portfolio, has climbed back above both its 25-and 50-day moving averages. In Crista’s latest update, she wrote, “WestRock is a global packaging and container company. WestRock is expected to report second quarter EPS of $0.79, within a range of $0.83 to $0.87, on the morning of April 27. Full-year consensus earnings estimates have been consistently rising all year. Analysts now expect EPS to increase 53.8% and 14.4% in 2018 and 2019. The 2018 P/E is just 16.1. WRK is gradually rising toward its January high at 70.” HOLD.
Wingstop (WING), originally recommended by Mike Cintolo in Cabot Top Ten Trader, broke out strongly to new highs yesterday on triple average volume and held on to those gains today—an impressive performance. There was no particular news to account for the breakout and thus we must assume that first-quarter results, which will be released May 3, will be very good. If you haven’t bought, you can buy here. BUY.
THE NEXT CABOT STOCK OF THE WEEK WILL BE PUBLISHED APRIL 24, 2018
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