Post Number: 3334
Posted From: 220.127.116.11
Votes: 0 (Vote!)
|Posted on Wednesday, March 03, 2021 - 6:54 pm: ||
Stock are indicated lower following a soft February jobs report from ADP. Meanwhile, rates are back on the rise with the 10-Y Treasury back near 1.5%, pressuring growth stocks in the Nasdaq.
Rocket (RKT) -12% took off 71% to record highs yesterday. The stock broke out following blowout results and a special dividend announcement last Friday. Fourth quarter EBITDA grew over 300% to $3.1B while revenue grew 144% to $4.7B. The company guided for 90—99% closed loan volume growth in Q1. Nearly half of the float was sold short, so Reddit traders seemed to pile in for their latest short squeeze.
United Wholesale Mortgage (UWMC) +30% rose 20% yesterday, breaking out of its downtrend, so I got long in the afternoon. In February UWMC reported Q4 loan originations +71% to $54.7B and guided for a 23-34% increase in Q1 closed loan volume.
These two latest "Reddit" trades actually make sense beyond pressuring the short sellers because they are cheap/reasonably valued mortgage lenders while everyone wants to own cyclical stocks and the housing market remains on fire. RKT has caught a couple downgrades this morning after doubling since earnings late last week but UWMC remains attractive in my view. The stock was breaking out of its downtrend and still trades at ~6x EBITDA and 9x 2021 EPS estimates. I will look to take an initial partial profit this morning and then patiently see how much momentum this stock can generate short term.
Lyft (LYFT) +3% is flirting with a breakout to levels not seen since August 2019 after mgmt. improved EBITDA loss guidance and walked back their conservative outlook for demand in Q1. Last week, ride volume hit its highest volume since March of 2020. I believe it because it felt like summer in Chicago on Saturday when it was 50 degrees and sunny. I continue to like this stock as a relatively attractive cyclical recovery play with secular growth tailwinds. The transports (IYT) are near their highs. Lyft is a leader in the transportation as a service (TaaS) market, which is taking share. Lyft will be one of the best barometers for economic activity this year. Comps fall through a cliff in two weeks -- when lockdowns went into effect after Saint Patrick's Day last year. The company is also targeting positive EBITDA by Q4 this year and will be EBITDA/FCF positive in 2022. A guide up was not surprising given the company's conservative outlook so I'm not exactly sure if we will see the breakout above $60 today, but I continue to think this stock will be much higher later this year and further out when profit margins will be much better. Partnered with Motional (Hyundai + APTV JV), the company plans to launch a robotaxi service in select cities (like Phoenix and Vegas where roads are simple and weather is favorable) by 2023.
FuboTV (FUBO) -8% reported another really strong quarter. Revenue nearly doubled, above its upside preannouncement range, with subs +73%. The nascent advertising business grew 157% and the company plans to launch a free to play game by Q4 following recent acquisitions. The company sees revenue up nearly 80% in 2021. The low double digit multiple is not excessive for the bulls and there is plenty of short interest to get squeezed but this is not a good environment for rich growth stocks so I will continue to avoid.
Maravai (MRVI) +18% is trading at a record high following blowout beat-and-raise results. Guidance appears to be conservative calling for ~19% core revenue growth plus $370-400M in COVID-related CleanCap tailwinds, which supply mRNA vaccines. The stock is not egregiously valued with a mid teens sales multiple or ~40x EPS so I would view a pullback to retest prior resistance in the high-$30 area as a potential buying opportunity.
Berkeley Lights (BLI) has pulled back to levels where it seems worthy of accumulating. The stock nearly tripled on the day of its IPO and nearly doubled from there but has since pulled back some 40%. This seems similar to the opportunity we took advantage of in Schrodinger (SDGR) last fall when it was out of favor. BLI's $3.8B EV still represents ~40x sales for 2021, which is not cheap, but the stock seems worth accumulating for its disruptive digital biology technology for the long term from here and lower.