• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

This Cloud Software Name Is My Top (Long) Stock Pick for 2019

The idea here is to buy something before everyone else wants to.
By STEPHEN GUILFOYLE
Jan 05, 2019 | 08:00 AM EST
Stocks quotes in this article: LRCX, KLAC, ZUO

Oh, how I really hate doing these. The public doesn't seem to mind, though.

There will be some comments, good and bad for a couple of months. Folks have their own problems. After a while they forget.

For 2017, my top pick was Lam Research (LRCX) , a bona-fide home run (+76%). Why do I even bring up my top pick from two years ago? Well, maybe because last December, I stuck with the semi-conductor equipment industry and went with KLA-Tencor (KLAC) for 2018. That one looked like a pretty good pick into mid-March, and even hung in there OK into September. We all know what happened after that, though, even if one is not familiar with that name specifically.

All I can tell the readers is that picking a name to outperform over the course of a full year is both difficult and fun. While one cannot see the future as far as politics, geopolitics, weather-related scarcities, and even cultural changes are concerned, one can make an educated selection based on trends and instinct.

Oh, and my promise to the reader is that I will always play my annual selection from the long side, and through my columns, keep the public informed should I manipulate, or exit the position.

For the record, I no longer have any position in LRCX, or KLAC, having exited both names this year, the last increment of LRCX as recently as this past autumn.

Drumroll, Please

My top (long) pick for 2019 is Zuora (ZUO) .

Zuora? Are you nuts, Sarge? Probably, but that's a completely separate matter and I wish you wouldn't bring it up in public.

Hear me out gang. Yes, I've written on Zuora before, and yes, I am still long the name. A growth name in a slow-growth world? Yes, but a growth name in a slow growth world that retail traders can afford to get behind.

So, refresher... just who is Zuora?

What this company does in the end is through their multi-tenant cloud platform, aid business clients in the launch, scale, and the monetization of its recurring, or subscription services. That simple.

Zuora does this through several portals that not only configures subscription deals, but runs billing, and finance platforms as well. The company has also leveraged price strategies in order to maximize customer lifetime value, as well as meet and automate revenue management in accordance with compliance standards.

About Zuora

Zuora is not expected to report fourth-quarter results for a few months. Expectations are for loss of $0.15 per share on revenue of $61.6 million. The company only went public in April, so we don't have comparable statistics from last year. Projections are for fiscal year 2019 (January) revenue of $228 million to be followed by FY 2020 revenues of $289 million.

The company is not yet ready for prime time, as operating cash flow and margins are still negative numbers. Hey, the idea here is to buy something before everyone else wants to.

Zuora has plenty of cash on hand to weather the storm, and very little total debt in comparison. As of the end of November, 23% of the float was held short. I see that as a positive.

The company has also caught the attention of some highly rated analysts. On the very last day of November, Jefferies' five-star analyst John DiFucci raised 2019 estimates for this name across all metrics. DiFucci believes that the company's net retention has improved to "enterprise class." DiFucci has a "buy" rating on Zuora and an industry high $35 price target. He is not alone in his positive opinion.

Just last week, Scott Berg, a four-star analyst out of Needham upgraded the name to "strong buy," from "buy" naming ZUO as his top pick for 2019. Guess I'm not alone there either. Berg, who has a $27 price target on Zuora called the stock the "proverbial baby in the bath water" in reference to tech space weakness experienced across the past quarter.

About ZUO

Yes, this is speculation, but hopefully it's educated speculation. The stock's 50-day simple moving average now stands at $19.10 and has acted as a firm line of resistance over four months. That is our first target. After we see one successful hold on a retest from the upside, we'll look for...

Price Target: $28

Panic Point: $15, but it's likely an add, not a subtract.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Guilfoyle was long ZUO.

TAGS: Fundamental Analysis | Investing | Small Cap | Stocks | Trading | Software & Services | Technology | U.S. Equity

More from Stocks

Don't Let the Rotation Deceive You: It Was Worse Than It Looked

James "Rev Shark" DePorre
Mar 3, 2021 4:48 PM EST

So-called reopening stocks hid some of the damage on the market, but here's what a deeper look tells me.

Compared to the Rest of the Market, International Game Tech Looks Pretty Good

Timothy Collins
Mar 3, 2021 3:12 PM EST

This isn't an aggressive trade in my view but I'm not sure I want to be aggressive here.

Jim Cramer: When Do We Go Back to Buying the Winners and Stop Buying the Losers?

Jim Cramer
Mar 3, 2021 2:35 PM EST

One of the most continual themes in this market is that anything that was liked last year is hated this year.

For Great Trading, There Are Times to Act and Times to Sit and Wait

James "Rev Shark" DePorre
Mar 3, 2021 2:00 PM EST

'It was never my thinking that made big money for me. It was always my sitting.'

SPACs' Slide Starting to Sting

Timothy Collins
Mar 3, 2021 1:54 PM EST

Here's my take on these blank check companies as the froth flattens -- and their post-merger vote floors fall out from under them.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:50 AM EST PAUL PRICE

    Michaels: Close to a Deal?

    It appears that a deal could be announced soon. ...
  • 08:34 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 3/3/2021

    SPX (Long-Term View) The 20 DMA @ 3889 with the ...
  • 06:05 PM EST PAUL PRICE

    Michael's (MIK) Up on Takeover Rumors

    The NYT says talks are underway regarding a buyout...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login