November 19, 2020: Software Stocks Today: Buy, Sell, or Hold? - Cabot Wealth Network

November 19, 2020: Software Stocks Today: Buy, Sell, or Hold?

SaaS stock

The webinar was recorded November 19, 2020

You can find the slides here.

Chris Preston [00:00:05] Hello and welcome to today’s Cabot Wealth webinar, Software Stocks Today: Buy, Sell or Hold? I’m your host, Chris Preston, Chief Analyst of the Cabot Wealth Daily advisory and managing editor here at Cabot Wealth Network. With me today is Tyler London, Chief Analyst of our Cabot Small-Cap Confidential and Cabot Early Opportunities investment advisories. Today, Tyler is going to talk about the rise of cloud computing in recent years, its acceleration this year with so many people at home amid the pandemic and what cloud software trends you can invest in today for the long term, along with a couple of stock picks that he’ll have towards the end. This is an interactive webinar, which means we’ll be fielding your questions after Tyler’s presentation concludes. So if you have a question, feel free to ask it at any time. We’ll try to get to as many of them this time allows once Tyler wraps up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio.

Chris Preston [00:01:01] First, let me introduce Tyler. Tyler spent his entire career managing, consulting and analyzing startup and small cap companies. His hands on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends and addressable markets and achievement of major developmental milestones. Tyler’s small cap portfolios favor a high allocation to stable, high growth companies upon which he layers strategic purchases of higher risk event driven investments. Prior to joining Cabot, Taylor founded and operated a small business for 15 years. He then worked as a consultant for startup technology companies, as well as Vermont’s largest health care institution. From 2009 to 2015, he was the Chief Analyst of growth stocks of Wyatt Investment Research, where his research spanned the full spectrum of the growth stock universe from micro-cap start-ups to multinational mega-caps. He joined Cabot in late 2015, taking over Cabot Small-Cap Confidential, where he boasts an average return of one hundred and seventy four percent on his current stock positions. A little over a year ago, Tyler launched another advisory Cabot Early Opportunities, where he has an average return of seventy six percent across twenty eight positions. And again, that’s only been up for just over a year. Tyler holds BS and MBA from the University of Vermont, where he graduated valedictorian. He’s been a long time contributor to the Wall Street’s Best Investments, has been quoted by US News and World Report, has presented investing ideas and strategies for the Money Show and Bloomberg Markets Live Insights. Bottom line, Tyler knows what he’s talking about when it comes to small cap, high growth investment opportunities. So I’ll let him tell you about a successful approach. Tyler, take it away.

Tyler Laundon [00:02:50] All right. Thanks, Chris, and thanks everybody for taking a little bit of time out of your day today to join us. So software stocks today. Well, there there’s been a lot of talk lately about high valuations in the market and over the last two weeks have been even more talk about a potential rotation out of growth stocks and into value stocks as vaccinations start to roll out, hopefully toward the end of this year and into 2021. And I think a lot of those topics of debate are directly related to software stocks as software is such a massive part of the economy now and there’s so many, you know, software stocks in the growth stock universe. So I think this is a pretty timely topic.

Tyler Laundon [00:03:35] What I want to do today is start out by looking a little bit about where we’ve been. I think that in in order to understand where we’re going to be going with software stocks, we need to understand where we are now relative to where we’ve been. Nothing happens in a vacuum. So we’re going to do a little trip down memory lane here with software. Before we get to that, a quick look at software valuations, because this obviously sets up sets the table for where we are now and the whole conversation. So this chart is courtesy of Morgan Stanley. Software stocks are undeniably expensive on sales multiples. So enterprise value to next 12 months sales. This is for the entire software group. Today valuations that multiple is at around 11 relative to the dotcom era, which isn’t on this chart. At that point, this multiple got up to around fourteen. So we are still below like dotcom era craziness. But absolutely, with the multiple of eleven, we are much higher than the five year average. There are some reasons for that that we’ll get into a little bit later. But just wanted to put that out there, because this is a chart or a topic that you are likely hearing a lot about in the media. What’s not talked about as much are multiples on a free cash flow basis. So one of the real attractions of software businesses, especially as they mature, is their ability to generate and throw off a ton of cash. They’re generating monthly or quarterly subscription revenue, and that cash is terrific. So on a enterprise value to the next 12 months, free cash flow basis, that’s a mouthful, multiple today is just below twenty eight. That’s not that elevated compared to the five year average of twenty four. And this speaks to the high quality of a lot of software stocks as its business model is maturing.

Tyler Laundon [00:05:33] OK, let’s go back in time a little bit. So one of the big things on investors minds when they’re the market is getting a little bit crazy. Growth stocks are selling off. They’re wondering, OK, is this going to be a repeat of what happened back then? So 1996 to 2002, of course, that was when the dotcom era took off. Back in 96, we had the Fed chairman, Alan Greenspan, pondering irrational exuberance. Nobody really listened to him. Stocks continued to crank higher. By 1999 valuations had doubled. Stocks are trading at insane valuations fifty to one hundred times sales. A lot of these companies didn’t really have a business model. They didn’t have revenue. They certainly didn’t have earnings. Behind that, there was this environment of really excessive telecom capital spending over a trillion dollars in debt to build out the infrastructure of this huge rush to get online businesses, get on the Internet, get software, get all these things going. There was also fraudulent accounting from WorldCom. Obviously, everything just kind of imploded and down we went. Very different from where we are now in a lot of ways. But it’s set up what we can call almost a lost decade plus from 2000 to 2016. If we go to this chart, this is the Nasdaq. You can see the line here. That peak on the lower left was the peak of the dotcom era. And then you can see that line going horizontally across to around 2014, 2015, that sort of timeframe. That’s how long it took for the Nasdaq to get back to where it was at the peak of the dotcom bubble. Now, there was that lost decade plus for the index. Obviously, a lot of stocks did different things over that time frame. I mean, Microsoft took a decade plus to get back to where it was. Amazon and Apple, it took them less than a decade. And during this time frame, especially the latter half of it, we saw other companies come public that helped get the index back to where it was, including big names like Netflix and Tesla. So after that, we have this period that to me kind of stands out as the rise of the cloud from 2010 to 2015, notable things that happened during that time frame. You have Mark Andriessen, a very well known investor in 2011, talking about software eating the world. We have Microsoft, led by Nadella in 2014, makes a huge strategic shift in their business to focus on cloud. They do commercial cloud, as you were. They released Office 365, which basically took the license business from the office productivity suite and turned that into a subscription business. We also saw Facebook and Shopify come public, as well as many other companies based on sort of this, you know, evolving subscription pricing model, that businesses are more and more embracing. We also saw during this time evidence that even these old economy companies need a digital strategy, I think, within the inner workings of the corporate environment this stuff was better known, but this is the period when those of us that are sort of on the outside analyzing the market and even just your general kind of consumer, you know, Main Street investors are starting to hear about these types of things. We also see valuations creeping higher based on the improving fundamentals. And really, if you step back, you think about this, these new business models emerging based on what I can call the DICE trends. So digital, Internet, cloud and e-commerce and a rise in investor interest in getting exposure to those, those trends with companies.

Tyler Laundon [00:09:28] So going back to the vault of companies that I was looking at back at this time, the small and the midcaps, here’s a list of just six of them. So we had Textura, which was at one point they were acquired by I think it was Oracle. And then the rest of these companies are still out there. Manhattan associates, Tyler Tech, Splunk, LogMeIn and Nuance. But there weren’t a ton of companies. I mean, there was a decent amount, but especially in the small and mid-cap space, we had somewhat limited options. As soon as a new company would come public, I would jump on it, study it, try to figure out if it was going to be a worthwhile investment or not. As we move into 2015 to 2020, we get into this stage of call it Cloud Power, so the power of the Internet is really being realized. We had this integration of those dice trends, so digital Internet cloud e-commerce integration of those into many more business models. We have a lot more companies that were built on an on premise software business model changing to the subscription software business model. Essentially, that means instead of buying software that you would, you know, put on a CD loaded onto your computer and then you would update that three years later or five years later or whatever, you would just pay for that on a monthly or annual subscription. We have a lot of new companies being built in the cloud based on that subscription model, the SaaS model, and in the public companies that we’re able to follow, we see very, very solid evidence of improving fundamentals based on recurring revenue, earnings per share, higher profit margins and cash flow. We also see out there the broad based software adoption, the SaaS adoption in the enterprise, small business, government and consumer areas. And so that helps to keep pushing valuations higher based on improving fundamentals.

Tyler Laundon [00:11:27] During this time, 2015 to 2020, we see the rise of the Titans, right? We have Amazon, Microsoft, Google and Apple just going crazy. We also see the second tier tech, which are still very large companies, but Facebook, Shopify, Salesforce, Workday service. Now, companies like that also continuing to execute and do very, very well. But then we have the space that I really was able to focus on this huge wave of new entrants. I’m not going to go through all of these companies, but we have, what, 15 or 20 here? So many of these companies we still talk about now and we’re adding to the list, of course, all the time, but these are a lot of the companies that you see us writing about here at Cabot: Black Line, Data Dog to I mean, there’s a lot of really, really good companies here.

Tyler Laundon [00:12:20] So that brings us forward to the pandemic, right? So the spring of 2020, what happens? So market crashes, the Fed and the Treasury pull out that great financial crisis playbook that they put together back during the financial crisis. Thankfully, they rescue the market. They rescue the economy. We think, and a new economic cycle begins. There was obviously a huge correction and all sorts of stocks, including software stocks, rose very, very quick. This promise of low interest rates for the foreseeable future helped drive a V shaped recovery in software stocks, which have continued to do very well because in many ways they offer the perfect mix of defense and growth. So one thing that kept coming back to me as we were going through that recovery is that if Covid-19 has taught the world one thing, it’s that we can handle a pandemic now so long as we have Internet access and functioning software, that’s what we all need if we’re stuck at home to do our jobs, educate the kids, order things that we need, whatever has some fun. That would be so much more difficult to do in an era where we did not have software.

Tyler Laundon [00:13:35] OK, so here we are now in November of 2020. We’re moving toward hopefully the vaccine stage of the pandemic, but the pandemic is gathering momentum, it’s getting worse. What do we want as growth investors? Is it any different than what we normally want? I mean, not that much. We still want nimble digital businesses that can adapt quickly to whatever environment that we’re in. That’s much more important now, obviously, because it’s such a crazy world. But I think that’s going to continue to be high on the list of things that growth investors want. A lot of these things still point towards software, but of course, of course, not all software is created equal.

Tyler Laundon [00:14:21] I think that we are still very early in a long term digital innovation cycle, these secular DICE trends, digital Internet, cloud, e-commerce, many of those have accelerated due to the Covid-19 pandemic. And that pandemic has also accelerated innovation in many ways, much as it did during the great financial crisis. Exactly how those things are not going to emerge, you know, all at one time we’re going to see the fruits of what people have been working on for many years to come. I think during this time also, there have been many companies that, you know, were on the fence moving from on premise toward cloud and embracing digital in their businesses maybe before the pandemic, they’re like, yeah, we know that this is the way things are going, but it’s not a huge priority. Now, I think it is a bigger priority. And as people come out of this, business leaders are going to be thinking, OK, how do we future proof our business for whatever comes next? Also. We’re starting to think more and more about Gen-X and Gen-Z, these younger generations that are coming up, that were born with smartphones, born with smartphones, prefer to do most things online in which they’re going to be playing a bigger role in the workforce and being a bigger share of consumer spending.

Tyler Laundon [00:15:45] So again, here and now, the winners are going to likely enjoy a sustained bump in sales and market share gains because of the pandemic, when I talk about winners, I’m talking about businesses. For some of these software companies, growth expectations are valid and should support relatively high valuations. For others, the covid-19 crisis will probably have pulled forward some revenue that they would have just had spread over a longer time frame and they might hit an air pocket afterwards. So, as always, not all software is created equal. As investors, we still have to consider individual stocks when we’re looking at opportunities in the software space.

Tyler Laundon [00:16:33] So to bring this back around to the original question, Software, is it a buy sell or a hold right now? I think it’s time to buy the best, though, as always, but expect normal corrections. This chart here shows a software ETF, the IGV going back to, let’s call it March of 2016. As you can see. I mean, there are sustained runs where the ETF is just cranking higher. But you’re going to have these significant pullbacks of 15, 20 percent, maybe a little bit deeper, translated to individual stocks, even very high quality stocks. You know, a normal correction of 20 to 30 percent in a smaller and mid-cap stock is not all that concerning to many of us who have confidence in those businesses, even during, of course, these like crazy market crashes like the one we had this past March. You’ll see stocks, even the large and mega cap stocks go down that much or more. But I think ultimately, as investors in software and growth stocks, you need to be prepared for these normal corrections and just build up your your confidence as we work through those and be adding to those stocks during those corrections that you have confidence in. And maybe that means you step back, take some smaller losses on lesser confident positions.

Tyler Laundon [00:18:06] So. Of course, we all want to know what are the best ways. So let’s talk a little bit about software opportunities in the post Covid-19 world. So for trends here that I want to go through. The first one is digital payments, so we still see that around 36 percent of payments are still being made with cash in check that’s coming down. The long term trend is absolutely accelerating because of Covid-19 towards digital towards digital payments. So that’s going to mean Visa, MasterCard, Apple, of course, has Apple Pay, and PayPal, these stocks have all been recovering pretty nicely, and when you see news come out, that vaccine might be on its way. You see Visa and MasterCard, you know, jumping back up obviously somewhat economically sensitive companies, but also lesser known companies Repay ticker symbol, RPAY, Q2 Holdings, QTWO, and a recent IPO, nCino, NCNO, and those last three are digital payment companies. Repay and then,nCino and Q2 Holdings are sort of virtual banking stocks. I’m going have a chart of QTWO for you in a second.

Tyler Laundon [00:19:34] Another big trend that I think has accelerated due to the pandemic and should be stronger moving forward is software automation platform uses and efficiency tools. So, of course, you have the big companies, Microsoft, CRM is Salesforce, DocuSign, but we also have, BlackLine, ticker symbol BL, Avalara, AVLR, and Appian, APPN. We can highlight of Avalara as a stock that’s been doing very well recently, its sales tax tools, enjoying some growth due to the pandemic and the rise in e-commerce over over the course of it. But also it should do well afterwards as other areas of the economy, like retail and travel, come back. So here’s a chart of Q2 Holdings, so as I said, virtual bank software, the pandemic has driven a higher usage by consumers for online banking software. So consumers being you and I, but it has presented a challenges for Q2’s management team just in terms of getting implementations out there. They’re signing banks and stuff, but it is hard to get their teams out and do the implementations on site during a pandemic for obvious reasons. So a more robust economic recovery with a better environment for banks, especially if we see interest rates going up. Financials have been one of the big movers over the last two weeks. As you know, we’ve heard good news on the vaccine front. So we’ve seen Q2 Holdings hold up pretty well throughout the pandemic. But lately, especially since its earnings came out and since the good news on the vaccine front, the stock has come up to a new high. So I do think this is a stock that investors can be buying now and which should treat them pretty well over the coming months and through 2021 and into 2022. We should see revenue up around twenty seven percent this year. The current consensus is for revenue growth of around twenty three percent in 2021. That number could be a little bit lower, but analysts aren’t going to be throwing out huge numbers right now, you want to be a little bit conservative, also, Q2 Holdings is profitable right now.

Tyler Laundon [00:22:02] Couple more trends here. So on the entertainment front, of course, we’ve all needed some entertainment since March, whether that’s streaming videos and movies or gaming, watching things on our mobile phones or betting or whatever. So we have, of course, the big players like Disney and Activision. But then also we have these newer companies, Unity, ticker symbol is U, and then Draft Kings, DKNG. Draft Kings gets a lot of press. I won’t I won’t go into that one, but unity is an interesting stock, it’s it just came public a little while ago. It reported a couple of days ago, had a great quarter. It is software that developers use for all sorts of things, mobile, gaming, video, everything. It’d be an interesting company to look up. It’s a sort of a it’s a larger mid-cap and has a market cap now of over 30 billion. But it’s one that not that many people are aware of being a recent IPO. And the stock has been doing extremely well since it came public. Want to be a little bit careful there, but I think it’s in an interesting space and it’s worth keeping an eye on.

Tyler Laundon [00:23:16] In terms of the final trend, we have the monitoring and security trend. So obviously software for monitoring an environment, securing everything under the sun that can be secured, especially when everybody is working from home and we have a distributed workforce and learning world in a post covid world. So we have, of course, Microsoft, DataDog ticker symbol DDOG, DynaTrace (DT) and then CrowdStrike (CRWD), and my final slide will be here on CrowdStrike. So CrowdStrike, market cap of almost thirty two billion. So it’s again a lot of these companies that a lot of these software companies, they’re not coming public with a two billion market cap, they’re a little bit bigger. CrowdStrike certainly is, but it’s a cloud based cybersecurity and endpoint protection company, provides solutions that secure and protect client end point. So of course, we’re talking about things like laptops, desktops, Internet of Things devices. It’s an interesting company. It was born in the cloud. So it is the business model is one hundred percent developed for this delivery model. That’s very, very different from a lot of security companies that were originally built to deliver on-premise software and have had to convert their businesses to the cloud based model. Examples there would be like a Rapid7, ticker symbol, RPD, which has done relatively well, but they had to convert that business to the SaaS model. Crowd strike was born in the cloud and it’s really helped the business, especially when it comes to sort of the nuance things like developing and rolling out new solutions. In terms of growth, revenue should be up around 70 percent this year. Analysts are currently looking for around thirty five percent growth in 2021. I do think that’s going to be proved to be a little conservative. But again, as I said, with Q2 Holdings, we’re not exactly looking to, you know look for a best case scenario in 2021 just yet. CrowdStrike is also profitable right now. And as you can see on this chart. The stock did pretty well coming out of the pandemic and then did very well since then, it hit a high of one hundred and fifty three ninety just about a month ago. And then, you know, this that peak was right around the time when there was really a lot more media attention on, OK, are we in the software bubble? So you see this this example of CrowdStrike pulling back. I don’t know exactly how deep that is, but it’s you know, it’s a significant pullback and then a little volatile and whatnot, but then coming back strong. So I think that is a typical type of pullback that you’re going to have to expect in this type of stock. Ideally, what we’re looking to do is get investors into something like this and then get an early profit in the area of 20 to 30 percent at least, so that when these corrections do happen, they don’t take you deep into the red, you’re still flat or slightly above, and you have the confidence to hold onto the stock for what should be a bright future. All right, guys. So that’s it, Chris. I’m going to hand it back over to you.

Chris Preston [00:26:40] Yeah, thanks, Tyler. I’ll give you a minute to catch your breath before we get to questions that people have. In the meantime, a bit of housekeeping, if you like you’ve heard from Tyler so far today and are interested in signing up for his Cabot Small-Cap Confidential advisory, we have a special $1 introductory offer reserved exclusively for listeners of today’s webinar. That’s one dollar for the first month, first 30 days. And what you get in return is monthly issues featuring new small-cap investing ideas and stock recommendations. Again, Tyler’s average return on his Cabot Small-Cap Confidential positions is one hundred and seventy four percent. You can also get weekly updates with special bulletins about marketing changes, economic reports, earnings and trade alerts, personalized investor relations staff to answer your questions every day the stock market is open. 24/7 on online access to our exclusive Cabot Small-Cap Confidential website and analyst archives and direct private access to Chief Analyst Tyler Laundon for answers to any of your investing questions. Sign up now again, just $1 for the first 30 days. Go to the website on your screen. That’s special.

Chris Preston [00:28:03] All right. Now let’s get to your questions. Let’s see what we have here. Let’s see a question from Krish. Let’s see, “How – the potential do you see comparing liberated syndication ticker symbol, LSYN, with CrowdStrike as they’re the same industry. Are you familiar with LSYN basically, and do you compare it to CrowdStrike?” I know that’s something that Rich Howe, our Micro-Cap Insider advisor has in his portfolio. Tyler do you have an opinion on LSYN.

Tyler Laundon [00:28:49] I don’t have a strong opinion on it. I was just trying to pull it up. And I know that it trades OTC. So the platform that I have in front of me doesn’t have that available.

Chris Preston [00:29:04] Rich has had it as a at in his microcap portfolio for six months and has kept it is a BUY.

Tyler Laundon [00:29:13] OK, but I would think to answer the question from sort of a high level without getting into the specifics of the companies. So obviously, Rich is running a micro-cap portfolio and most of his picks are going to be under two hundred million market cap from the day he recommends them. That’s a completely different scale size business than CrowdStrike, which has a market cap of, you know, almost thirty two billion. So a company like CrowdStrike could buy the one that Rich is covering and basically it wouldn’t do anything. They could do it in cash. It would wouldn’t move the needle for CrowdStrike, so two completely different businesses. I think that with a company like Crowd Strike, you’re going to get a little bit more stability, a little bit lower risk, a little bit easier access to information on the company. With the one that Rich is following, you will really want to rely on Rich to keep you informed as to exactly what’s going on inside that company, because they’ll be virtually impossible to get research on that other than through somebody who’s who’s really specialized in that area of the market like him. I think for those of us that like to speculate with a lot of smaller companies, it’s nice to be invested in companies with similar business models across this size spectrum. So I might be interested personally in like, you know, holding shares of like a CrowdStrike, holding shares of a software company and security with a market cap of like two or three billion and then one like Rich as well. And just adjusting my position size in each one of those companies to kind of match up with my my risk tolerance.

Chris Preston [00:31:02] OK, question from Dylan. Dylan asks “With the growth of software stocks over the last few years with quite a few in a clear uptrend, would there be a scope to buy an ETF instead, for example, WCLD?”

Tyler Laundon [00:31:22] Yeah, good question, I think for investors that want that type of diversification and don’t want the individual company risk, absolutely. There’s nothing wrong with that. And, you know, we don’t I don’t personally cover ETFs in the services that I manage because we are stock focused. But, you know, if you want to just participate in a broad based trend. Yeah, absolutely. An ETF like this one from from WisdomTree could be very good. I think that what we tend to see happen a lot of times is that if somebody is interested in a trend like this, they buy the ETF. Then if it’s continuing to work, then they start to look for the individual stocks as well. So just to throw out random numbers, I’d say, you know, you have a portfolio you want to allocate, say whatever, ten thousand dollars to soft cloud software stocks. Maybe you do five thousand in the ETF, then you allocate one thousand each to to five individual stocks. That way you can kind of play both sides of the ball a little bit and adjust your position sizing based on what’s working.

Chris Preston [00:32:36] OK, good question. A question from Craig. “What are your three favorite positions from those that you’ve mentioned in today’s seminar so far?”

Tyler Laundon [00:32:46] Yeah, well, as you might expect, the two stocks that I talked about that have put the charts up for CrowdStrike, which should be in front of you right now, is definitely one of my favorites and I think timely as well. Just because we have gone through this little pullback and it’s getting strong and then Q2 holdings for slightly different reasons. But for you know, as far as looking at the chart, the breakout to fresh highs here is definitely compelling. The other reasons that I discussed support that in terms of other ones that are on the list here, I’d still like DataDog quite a bit. Ticker symbol there is DDOG. So DataDog it is involved in monitoring. It’s a it’s basically a platform for monitoring, monitoring cloud applications that are used by big companies. So just making sure that all of their applications are working properly. Of course, there’s a ton of analytics and everything that goes along with that. But it’s another one of these companies. It was really just perfectly built for cloud and for helping large companies deal with all of the cloud solutions. So it’s almost just a play on the growth of broader cloud applications within the within the enterprise, market cap there is twenty seven billion. The stock is trading twenty four percent off of its recent high. And it’s sort of you can’t see my screen, but it’s you can pull up a chart. I think it could be a compelling entry point for that stock.

Chris Preston [00:34:27] OK, question from Julio. Julio asks, “What are the – sort of a more existential question – what are the top reasons why stocks go down even if they beat earnings?”

Tyler Laundon [00:34:41] Yeah, Julio, that’s a great question. It’s almost always going to be stock specific unless you’re in a day and we’ve had some of these lately where there’s just some, like, huge news like. Who knows what, but some big piece of news like the vaccine has been approved, that just is going to be over, that news is going to overpower whatever sector the stock is in that you’re talking about. But usually when a stock goes down on earnings, it just has to do with, you know, what their earnings report was like relative to expectations and in particular expectations about the future. There’s so many details, but you could have a company that beats expectations for the quarter that is just reported. But then issues like guidance for the next quarter and or says, you know, due to market changing dynamics, blah, blah, blah, you know, we’re not as bullish on the next six months as we otherwise might have been. You really have to. The easiest thing to do is to pull up an earnings call transcript and just scroll through it. One of the best free sites to do that is Seeking Alpha. You can go on there and type in a ticker and get a transcript of the earnings call. And it can be an interesting read to go in and look at those earnings call transcripts and just see what management had to say.

Chris Preston [00:36:12] OK, question from George. George asks about your Cabot Early Opportunities advisory that we mentioned earlier. “Do you have some strong companies or stocks that you see significant growth in there that are below 50 dollars per share?”

Tyler Laundon [00:36:34] Yes, we do. I. Can’t get to that, I don’t have that portfolio open in front of me, but yes, the short answer is we do.

Chris Preston [00:36:43] OK. Another question from Krish, “As we are talking about entertainment and gaming, Zynga comes to mind in comparison to Activision Blizzard. Any thoughts on Zynga?”

Tyler Laundon [00:37:04] Yeah, so just looking at things for everybody else on the webinar, market cap is eight point nine billion. Ticker symbol is ZNGA, develop social games that are available via social networks and mobile platforms. You can play it on Facebook, Zynga. So it’s a high growth name. Revenue was up forty six percent last year. The chart isn’t so great. The stock peaked at around, but there was a couple of spikes to around 10 to 11 dollars back in June, July and August. And since then, it’s kind of come down. It’s trading at around eight twenty four now, the stock had a pretty good sell off after the November 4th earnings report. At that point, it was it had spiked up to almost 10, but then it fell back to eight twenty five. Zynga is one that I’ve looked at some, but I’ve never felt super interested in it, for whatever reason, I can’t remember what those reasons are at the moment, but I’ve always opted to go with with other stocks for one reason or another.

Chris Preston [00:38:20] OK, give time for. One more question, one or two. Stan asks what you think about Fiverr (FVRR).

Tyler Laundon [00:38:32] Ah, yeah, so Fiverr for everybody else has a market cap of five point nine billion. I like Fiverr a lot. It is – it operates a platform for people to match up. It’s basically like a freelance matching platform, so a company needs a freelancer to do a project, they go on to Fiverr, find somebody for that project. From the freelancers perspective, if you’re at home or wherever and you have services that you want to offer to the world, you can post them on Fiverr. And companies or individuals that are out there that need those services can can find you and it handles like payments and all that kind of stuff. I like the company a lot. It’s been a big winner from the pandemic. It’s trading at a high valuation and the stock price is, what, one hundred and ninety. One hundred and eighty right now. It was trading at thirty five, was its high prior to the pandemic. But I mean, this is one of those ones where if you’re an aggressive growth investor, I think you can start to buy it, but you don’t want to place a huge bet all on one day you want to average in space out your purchases. My guess is that the big run has already occurred. If we look at, eight months ago to a year and a half out, I don’t think the stock is going to do as well as it has, but the company is expanding overseas. I think just maybe even today or yesterday, it announced local language and payment sites are being opened up in Brazil and Mexico. It’s been doing that in Europe as well. So it’s it’s getting out there into the world. I think it’s great for, you know, the work from home trend for sure. It’s just it’s going to be interesting to see how well the company does after the pandemic passes, how much business sticks. I think it’s going to be it’s going to come out being a net winner. Just it’s a little hard to say, you know, how much better it will be in, say, 2022 than 2021.

Chris Preston [00:40:55] OK, good questions. Thanks, Tyler. Tyler, do you mind advancing to the next slide, I’m just going to wrap things up here. Thanks, everyone, for joining us today on these different wild times. We’ll be back next month on December 17th with a webinar from our Options Trading expert Jacob Mintz titled Two Basic Options Trades to Make Money on Growth Stocks. So come back next month for that presentation. Again, that’ll be Thursday, December 17th, at two o’clock Eastern. As today, that does it for us, for Tyler London and the entire Cabot Wealth Network team. I’m Chris Preston, and we’ll see you next time.


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