The Lovesac Company (LOVE) | April 26
Lovesac reported strong 4Q21 results, with 41% y/y total revenue growth and record profitability, capping off a year when the company’s omnichannel strategy enabled it to successfully navigate COVID. A record number of product demos were completed last year despite showroom closures and restrictions, and Lovesac grew total transactions 32% y/y and saw AOV expand 11% y/y, as reduced promotional activity and a mix shift to higher-value products fueled a gross margin recovery.
Management continues to execute on a variety of strategic initiatives, and we expect improving marketing efficiency, product innovation, and a focus on sustainability will drive market share gains over time.
We are raising our estimates and PT to $77 (from $65), based on 2.5x our fiscal 2023 revenue estimate (vs. 2.4x 2022 prior) and supported by DCF valuation.
Maria Ripps, CFA, Michael Graham, CFA, Jason Tilchen, CFA, Canaccord Genuity Research, canaccordgenuity.com, April 15, 2021
Coinbase Global, Inc. (COIN)| Daily Alert May 6
Coinbase Global, Inc. is the largest platform for buying, selling, and trading cryptocurrencies. It has a commanding lead over all other competitors in most every way that counts. Coinbase has more users, more volume, more value exchanged, and greater reach than any other platform out there.
Coinbase is already figuring out plenty of alternate profit centers, beyond transaction fees. You can take out loans against your cryptos with Coinbase. And holders of cryptos can benefit—as many cryptos now allow owners to get paid an interest rate, as compensation if and when cryptocurrencies are used as collateral for other loans.
Coinbase is about to release a crypto-backed debit card—so you can spend your crypto currencies anywhere Visa is accepted. And, of course, Coinbase offers generous rewards to help grow its user base and get consumers comfortable with trading cryptos.
Cryptocurrencies are a very volatile market. We want to slowly build our position up over time, on the theory that sometimes we’ll buy high, sometimes low, but they should average out to good value prices. Known as dollar-cost averaging, this is a solid strategy to use when investing in volatile markets.
Buy a small stake in Coinbase at market. Every month—or at a frequency you feel comfortable with—add to that stake, until you eventually grow your COIN holdings into a full position. You don’t want to start out investing more than 1% of your total portfolio ($1,000 out of a $100,000 portfolio, for instance), and you shouldn’t go higher than 5% of your overall portfolio once you’ve finished investing via dollar-cost averaging. Hold through the likely volatility.
Ian Wyatt and Ryan Cole, Ian Wyatt’s Million Dollar Portfolio, wyattresearch.com, April 30, 2021
Coinbase is the premier platform for the exchange of cryptocurrencies … and right now, it has an incredible advantage and lead in the race.
Coinbase is an extremely profitable business, making most of its profit from charging fees to customers to buy and sell cryptocurrencies, most notably Bitcoin and Ethereum (ETH).
The company is expected to have made $1.1 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) and around $750 million in net income in Q1 2021. Coinbase usually charges around 1.5% commission on trades for its retail-facing platform, but customers are able to get lower commissions (around 0.5%) for large amounts on Coinbase Pro.
It’s especially important to point out this net income number because it is more than the company earned in all of 2020.
Coinbase logged $1.14 billion in sales during 2020, up 139% year over year. Profits came in at $322 million versus a loss of $30 million. Gross income surged to $527 million, up 2,000%. And managers said two weeks ago that revenue during the first quarter was $1.8 billion, up 900% from a year ago. Profits are expected to be in the range of $730 million to $800 million. If you take the midpoint, that is a year-over-year increase of 2,300%.
The business looks a lot like Mastercard, Visa, Square, PayPal et al., and it is not by accident. Coinbase is operating a purely transaction-based platform where customers must pay to play. They pay a lot because Coinbase is the most trusted platform.
Overall, it looks like a good business, and the valuation really isn’t that crazy. The stock is more speculative than most, meaning more downside and upside, but there is a lot to like.
Savvy investors should strongly consider using recent weakness as a buying opportunity.
Jon Markman, Pivotal Point, firstname.lastname@example.org, 1-800-291-8545, April 30, 2021
Allegheny Technologies Incorporated (ATI)| Daily Alert May 14
ATI is a small cap ($3B) company that sells specialty titanium materials to the aviation business. The company has two Segments: high performance materials & advanced alloy solutions. The “customer” at ATI is the aviation business. The company lives or die on aviation business, and of course, last year was awful, and this year won’t be that good, But 2022 will be better and 2023 should be ‘back-to-normal’.
Allegheny makes titanium sponges—ingots, billets, bars, rods, wires, seamless tubes, precision components, and forgings. This is a dirty business, and while the company does find customers in other places, the focus at ATI is aviation orders.
So, for the next few years (it’s a trade) I am placing a bet at the table on RED 36 (ATI). It’s risky, but also could be big-time rewarding. Buy the stock up to $26; it’s plenty liquid as it trades 1.5 million shares a day.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, May 4, 2021
Royal Caribbean Group (RCL)| Daily Alert May 11
Shares of Royal Caribbean were crushed in the midst of pandemic-related shutdowns last year, but the rebound has been dramatic, as cruisers are a hearty bunch with bookings for future sailings surprisingly robust.
RCL disclosed that 80% of those with bookings told the company they are vaccinated or would be at the time of sailing, while crew members achieved a “mid-90s” percent vaccination rate for the flu shot (despite not being mandatory), leading management to expect similar rates of acceptance.
Although there remain questions about regulatory approvals in many locales for cruises to resume, we like that RCL has sufficient liquidity ($5.8 billion) to keep it afloat through 2023, even as we expect most ships to be sailing by 2022.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, May 4, 2021
Roblox Corporation (RBLX)| Daily Alert May 18
Gaming name Roblox Corp just posted its first earnings report since going public back in mid-March, and the results were mixed. The firm reported losses of 46 cents per share for its first quarter, which was wider than Wall Street’s forecasts. On the other hand, its revenue rose 140% from a year ago and topped expectations, coming in at $387 million. The company said its app, targeted towards children, had a successful debut a few month ago because of school shutdowns and stay-at-home orders.
All four analysts in coverage are optimistic on the Wall Street freshman, with “strong buy” ratings across the board. Adding to this, the 12-month consensus price target of $78.17 is a 23% premium to last night’s close.
Option traders appear to be in a similarly bullish boat. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RBLX sports a 50-day call/put ratio of 4.69. This means during the past 10 weeks the number of calls picked up has more than quadrupled the number of puts.
Bernie Schaeffer, Schaeffer’s Investment Research, SchaeffersResearch.com, 800-327-8833, May 11, 2021