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Earnings Seasonzzzzzzzzzz (Cestrian Stocks Bulletin - #27)

Earnings Seasonzzzzzzzzzz (Cestrian Stocks Bulletin - #27)
By Cestrian Capital Research, Inc • Issue #27 • View online
You there! At the back! Stay awake!!

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
That Friday Feeling
Earnings calls. Terrible things. Half an hour of bluster (“prepared remarks”) and half an hour of mainly timid sellside analyst questions. But if you post blarney about stocks for a living, as we do, you have to tune into the things. Mainline a little caffeine. Chug a little sugar. Prop eyes open with matchsticks. And listen. Really listen. Because in between the conference-call-hero machismo, in the interstitial silences between analyst “hey guys great quarter and all but maybe you could answer just this one teeny tiny point I had, you know, recognizing it was a great quarter, it’s just, you know” questions … you can hear stuff. Stuff that sheds just a little light on the numbers. The very dimmest of lights. But light nonetheless.
Bunch of earnings for us this week. They informed our Ideas Of The Day as posted in our ‘Elements’ service. Allow us to walk you through the week.
Tuesday 1 Jun - Idea Of The Day - we said, “buy DOCU”, because the market thinks it’s a Covid stock, and it isn’t a Covid stock, it’s a digital transformation stock. The evidence being that as Covid lockdowns have abated, DOCU revenue growth has accelerated. So it can’t be a Covid stock. Right? Right. Nobody told the market, it seems. Stock opened that day at $202, closed at $200. Earnings was Thursday. Revenue growth accelerated again this quarter, and margins were up too. Market started to think maybe it isn’t a Covid stock. Stock closed today at $233, a tidy 15% gain since we posted our Idea of The Day Tuesday. We think there’s plenty more to come from DOCU since, you know, it’s not a Covid stock. Did we mention it’s not a Covid stock?
Wednesday 2 Jun - Idea Of The Day - we said, “buy MAXR”, because the stock is all beaten up at $33, there are a bunch of institutional bagholders at $40 who every day thank Goldman Sachs and Morgan Stanley for the privileged, because-you-are-special opportunity to buy into the placement at that price a couple months back, and save for the teeny-tiny matter of, will the new satellites work and get placed on the correct orbit at the correct time, it’s plain sailing ahead for this one. The wolf was at the door a while back, but has long since been banished, skulking away back into the woods since the management team kung-fu’d the balance sheet problems. As everybody knows, stock charts don’t lie and this stock chart was saying MAXR might be moving up sooner rather than later. Stock closed the week about 4% higher and we think it’s going to keep moving up too.
Thursday 3 Jun - Idea Of The Day - we said, “buy FEYE but go easy”; sharpening our Crayolas we noted that the stock could easily drop to the 0.382 Fibonacci retracement level of $18.65 before finding support. Which it did. Find support. Tough call this, buying a dip after the sale of a big big division - we asked yesterday, who’s the patsy here? Is it us?. So far it looks like the stock could hold at this level and move up, but ask us in a month or two how this one worked out. In staff personal accounts, we bought on Wednesday during the initial drop then on Thursday and again on Friday. Baby steps as always in febrile times. We’re bullish on the name from here. The CEO never saw a TV camera he didn’t like and this stock is a lightning rod for news of cybersecurity events which as you may have noticed are trending.
Friday 4 Jun - Idea Of The Day - we said, “take some profits on CRWD if you have them” (which we did and do in staff personal accounts - it’s been one of our biggest allocations). Earnings on Thursday was good not great and in particular, revenue growth decelerated, again, and guidance indicated it would continue to do so. Back to that earnings call Opposite Day thing. You know when a company has a little concern about the numbers - you can tell from how much bravado you get in the prepared remarks. Check always for neurolinguistic programming cues. If you are being told words like strong, sustainable, superb, blah blah, then, you are being programmed not to look at the deceleration. So, make like the mathematician Carl Jacobi and invert, always invert. Or make like SNL and assume it’s Opposite Day. Same thing. Hard sell? Worry about the numbers. Fake-humble earnings call? Numbers prolly a blowout. On the CRWD call, everything was wonderful except Microsoft, as always. We assume George Kurtz has been shunned in some way by Satya Nadella because the Microsoft trash talk appears to be personal. Anyhoo. Market said “meh” to the numbers after hours, and as the sun rose over Manhattan Friday we said “consider taking some profits”. Stock closed down a little over 4%. In staff personal accounts we halved our holdings at the open.
Well, long week. We’ll leave you with an idea for the future. In addition to our various “pay lol” services, we post a ton of free stuff all over the artist formerly known as Arpanet. We love all our platforms equally but there is a special place in our hearts for StockTwits, where totalitarianism is the order of the day. Stock board stasi roam free. You be a bull, you be a bear. You YOLO or you nolo. Here’s our thoughts on Fastly (FSLY) right now (you can find the relevant StockTwits board at this link).
Bullish.  But Not Totally Bullish.  Bad Cestrian.
Bullish. But Not Totally Bullish. Bad Cestrian.
So far we have been told that we are not true believers (we aren’t) and how dare we say the fundamentals aren’t very good (they aren’t) and aren’t we just pumping NET (we’re not) and are we really short FSLY even though we say we are long?
But this is why we love stock boards even more than we love stock charts. It’s a whole lot more fun than actual work!
In Marketing Theory This Next Part Is Known As A "Call To Action"
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Cestrian Capital Research, Inc - 4 Jun 2021.
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long positions in CRWD, DOCU, FEYE, FSLY, MAXR, NET.
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