The Bull Thesis Underlying Tech Stocks Continues to Strengthen  | | Luke Lango | As we end the week and head into a long weekend, we’d like to highlight a few things. First, a congratulations is in order. As we have been telling you would happen, the tech sector is rebounding with vigor, and our portfolio is performing exceptionally well. To all subscribers who are enjoying this rising tide: It’s a good feeling – and it’s going to continue. Congrats! Second, there’s the earnings picture. We are very impressed by the numbers we’ve seen out of technology companies this quarter. That continued this week when a plethora of enterprise software companies reported amazing numbers.
In the past two days alone: 1) Salesforce reported a double-beat-and-raise quarter with 20%-plus revenue growth.
2) Okta reported a double-beat-and-raise quarter with 37% revenue growth.
3) Snowflake reported a huge sales beat with 110% revenue growth.
4) Autodesk reported a double-beat-and-raise quarter with 12% revenue growth.
5) Box, Domo, Yext, VMWare, and more all reported double beat quarters. That’s impressive. These are companies that are building the digital workplace of the future. If they are performing that well right now – amid this big shift back to in-office work – then that is a very healthy sign that the enterprise digital transformation is robust and secular. It’s not going anywhere anytime soon, and if you’re serious about making money in the market, you need to be invested alongside this megatrend. Same goes the consumer digital transformation. Those companies – Roku, Shopify, Snap, etc. – reported numbers earlier this quarter. Same story. The numbers were great, and uniquely impressive because they came against the backdrop of the “great reopening”. The bottom line: You have to be invested in tech. If you’re not, you will lose out long-term. Third, let’s talk inflation. Personal Consumption Expenditure numbers came out today, and they were hot. Red hot. Core PCE rose 3.1% year-over-year, more than the 2.9% gain expected, and 0.7% month-over-month, also more than the 0.6% gain expected. But the reaction in markets was muted. In fact, it was the opposite of what you would expect. The 10-year Treasury yield dropped and tech stocks rose. Why? Because the PCE data is backward facing. Those are April numbers. And back in April, the economy was red-hot. The high-frequency data was consistently coming in ahead of expectations. But economic momentum slowed in May, and that’s when you started to see economic data miss after economic data miss. Basically, then, the PCE numbers released today are old news – and that’s why the market is shrugging them off. Fourth, we need to talk cryptos and meme stocks. I’m sure you’ve noticed this week. Cryptos have continued to struggle – particularly trendy altcoins – but meme stocks like GameStop, AMC, and Koss have roared back to life. This is no coincidence. There is a bunch of retail momentum money out there that is just hopping from trend to trend. A few weeks ago, all that money was chasing cryptos as they were powering higher. Now, all that money has left the crypto market, and it’s chasing meme stocks. We aren’t terribly sure how long this newfound dynamic will last. Social momentum trading – while very real – is still very new and very difficult to understand fully. But we do suspect that altcoins will remain “dead money” in the near-term – for a few weeks – while meme stocks will continue to outperform. This does not impact our portfolio. We don’t own altcoins or meme stocks. But it will, in the future, as we do plan to add altcoins – but are waiting for the perfect time to buy. All in all, we believe the bull thesis underlying tech stocks, growth stocks, and our portfolio continues to strengthen by the day. The “big rebound” has arrived – and it’s here to stay. From all us at Innovation Investor and Exponential Growth Report, we hope you have a very fun and relaxing Memorial Day weekend. But, before you go, have a look at today’s Daily Notes:
Innovation Investor - Palantir (PLTR) wins another big government contract – we like this stock more and more every day. Earlier this week, Palantir announced a new $33 million contract with Space Force Today, Palantir announced an even bigger government contract with the U.S. Special Ops for $111 million. Clearly, Palantir is well on its way to being a military and defense operations ubiquity. The scale achieved in that business will allow the company to lower costs for its commercial product, which will finally enable Palantir to successfully and widely sell its product to businesses everywhere. The bull thesis on Palantir stock has never looked so good. This really is the real-life Wayne Enterprises, and we couldn’t be more enthused to own this stock at such a great price.
- Beyond Meat (BYND), Virgin Galactic (SPCE), and fuboTV (FUBO) get swept up in the “Reddit trade” – the fundamentals here are great, too. The “Reddit trade” has come back to life over the past week, and while Reddit favorites GameStop, AMC, and Koss are leading the charge, some of our stocks like Beyond Meat, Virgin Galactic, and fuboTV have been beneficiaries, as they are stocks that are also frequently mentioned on social media forums. We know this newfound Reddit-driven momentum won’t last. But when it fades, we think the strength in these stocks will last, because the fundamentals underlying each are improving rapidly. Beyond Meat is starting to emerge as a great “reopening” play on increased restaurant sales. Virgin Galactic just successfully completed a landmark test flight, and looks ready to sprint into hypergrowth mode over the coming months. fuboTV reported fabulous numbers recently, and is launching a whole bunch of original programming. These stocks are long-term winners. Don’t let their Reddit attachments fool you – they are stocks which will power way higher over the next few years.
- BTIG starts coverage on Plug Power (PLUG) with a Buy rating – this stock is in the first few innings of a big rebound. Today, BTIG initiated coverage on Plug Power stock with a Buy rating and a $40 price target, saying the company is a well-capitalized first-mover in the potentially enormous green hydrogen space that is using its big balance sheet to secure game-changing partnerships. BTIF hit the nail on the head here. The hydrogen market will be enormous one day, and Plug Power is in the tentpole position to dominate that market. The stock went through a rough patch for a few months, but is now rebounding with vigor, and we expect this rebound to persist for the next few quarters and few years. When all is said and done, this is a multi-bagger from current levels.
- As Tesla (TSLA) ditches radar, its cars are losing their safety ratings – we have grown incredibly cautious on Tesla stock. In a move that flabbergasted self-driving engineers everywhere, Tesla announced that it would ditch radar sensors on its cars and rely exclusively on cameras. That’s not a smart move. As a result, Tesla cars will become less safe, and farther away from achieving true full autonomy. Not surprisingly, both Consumer Reports and the Insurance Institute for Highway Safety “downgraded” their safety ratings on Tesla cars. We are not big fans of what is going on at Tesla right now. This is still a great company, sure, but some recent decisions have been more questionable than strategic, and we think competition in EVs and AVs is heating up very quickly – see the recent Ford EV announcements, or Lucid Motor’s DreamDrive reveal with high-resolution LiDAR. We are keeping our two-thirds position in Tesla stock because we think shares have a good opportunity to pop back to all time highs throughout the summer on big international sales numbers – but we will likely sell that rally.
- UBS starts Twilio (TWLO) at a Buy rating – Covid-19 was a game-changer for this company. UBS launched coverage on the whole cloud communications space yesterday, which included a Buy rating on Twilio stock, with the analyst team saying that Covid-19 provided a secular impetus for companies to migrate all of their communications to the cloud. We couldn’t agree more with that. As stated above, recent earnings broadly underscore the enterprise digital transformation is secular. The workplace of the future will be entirely digitized. Twilio is the core communications platform of that digital workplace. The upside here comes from that fact that cloud communications penetration rates among enterprises remain in the single-digits, and Twilio continues to rapidly innovate and expand its product offering and addressable market. That’s a powerful combination which implies durable hypergrowth for many years to come – and that will set the stage for continued strong performance in Twilio stock.
Exponential Growth Report - Eos Energy Systems (EOSE) has doubled in a week – this is what can and will happen to all of our stocks. Over the past week, Eos Energy Systems has doubled, going from $10 to $20 in a hurry as the “Green Energy” trade has re-emerged as Wall Street favorite. Let this be a valuable lesson in how quickly our stocks can become winners once again. In our portfolio, we own small-cap, early-stage growth stocks that have world-changing potential. These stocks can – at the snap of a finger – turn into triple-digit winners. More than “can”, they will do that, because the tide is turning back in favor of growth stocks and because we own the highest quality early-stage growth stocks in the market. What Eos Energy Systems did this week will be replicated by all of our stocks over the next few months. We firmly believe that.
- IZEA Worldwide (IZEA) launched significant upgrades to IZEAx Unity Suite – these updates could prove to be game-changers. Yesterday, IZEA unveiled a suite of upgrades to its SaaS offerings. We were broadly impressed by the upgrades, and were particularly intrigued by the inclusion of TikTok content and data, the buildout of BrandGraph insights to improve influencer discovery, and a new AI-powered audience prediction engine. We have yet to fully test these updates. Once we do, we will provide an update. But, if they work as promised, then these updates could be a game-changer for IZEA, as the SaaS platform will finally be compelling enough to attract widespread commercial interest. And, as we’ve stated multiple times before, the key to the long-term success of IZEA is the company’s ability to scale its SaaS offering.
Sincerely, 
Luke Lango
Editor, Innovation Investor & Exponential Growth Report New to Innovation Investor? Click here to access Innovation Investor's Special Report archive. Get more from your subscription by reading our owner's manual and watching our introductory video. Exponential Growth Report Disclaimer: Small-cap stocks that can rise 10X over the long run are often volatile. If you are interested in these stocks, understand the risks and buy them like a professional. Learn more about the risks of nano- to small-cap stocks and how to buy them here. |
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