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.
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.
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.
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.