Stockchase Insights

EPS was -35c, vs estimates of -63c. Sales were $881M vs $850M estimates. The stock is down as management noted it expects EBITDA to moderate in the second half of the year. Average revenue per user could decline. Sales did rise 19% in Q1. Though 2Q guidance was in line with consensus, it may be premature to assume pressures have eased. Tough comparisons will create 2Q headwinds and higher marketing spending will likely weigh on 2H Ebitda. Average revenue per user in 1Q improved sequentially, but there is growing competition in the connected-TV ad space, especially with the launch of Amazon Prime video ads. Comparisons are tough in part due to a cooldown in the streaming wars and a lapping of price hikes, which may crimp platform revenue gains to high-single-digits. While platform gains should accelerate in 2025, pressures may build after the Walmart-Vizio deal closes, especially in active account growth. The outlook is certainly 'less great' but with the stock decline we think this is reflected in the new valuation.
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EPS of 89c beat estimates of 62c. Revenue of $1.18B beat estimates by 8%. EBITDA was strong at $339M vs $229M expected. Atlassian could keep winning share as enterprises consolidate providers amid a tough IT-spending environment. The company's broad solutions and investment in artificial intelligence may keep powering double-digit growth momentum. Client softness in net additions might not see a reversal in short order, yet early adoption of Atlassian Intelligence -- 10% of its client base is already on the service -- may keep driving upselling. An overall improvement in the economy might boost customer additions and seat expansion gains, though this might happen more toward the end of the calendar year. Atlassian's May 1 investor day will likely emphasize upselling opportunities from AI-based capabilities and potential margin expansion. Investors post-release have focused on slower-than-expected user growth, and of course the resignation of the co-CEO. Both are a bit concerning, but likely reflected in the valuation now. We still think it is a decent company overall, with a good niche. It is expensive, and momentum may take it a bit lower. But we would still see it as worth holding. 
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GOOG reported strong growth in its Q1 earnings, particularly in the cloud division. It is proving that companies can spend money on AI and still see net gains. It also announced its first-ever dividend and a large stock buyback. Results in most metrics were well above expectations. 
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April Market Update:

The US treasury yields advanced strongly due to the escalation in Middle East tensions between Israel and Iran, putting pressure on the global equities market. On the other hand, the US economy grew at a 2.5% annualized rate, a slowdown from 3.4% last quarter, falling below the Fed’s estimate for the first time in two years, posing a dilemma of slow growth and high inflation. The Canadian dollar was 72.95 cents USD. The U.S. S&P500 ended the week flat, while the TSX was up 0.2%.

It was a mixed week of greens and reds. Consumer staples rose 2.9%, while energy and consumer discretionary gained 2.0% each. Financials added 0.6% while real estate edged up by 0.5%. Industrials slid by 0.8%, while materials gave up 0.3%. Technology ended the week flat. The most heavily traded shares by volume were Bank of Nova Scotia, Royal Bank of Canada and Kinross Gold Corporation.
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Short-term moves are quite hard to predict, but on the monthly, momentum is currently negative. This means over the next month or more we might expect the probabilities of lower prices to be a bit higher than higher prices. On a weekly basis, momentum is bouncing back, and we might see a slight bounce over the next week or two, but there is resistance at $13. We expect there to be fairly strong support at $12.3, and if that is broken, then $11.5 may be up next. If it can break $13, then $14 is the next area of resistance. Overall, it's been in a downtrend for over a year, but we continue to like its fundamentals, and it pays a strong distribution yield.
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We think BDT is very interesting at current levels. The focus on electrification projects and recent acquisition of NorCan plays very well into current green trends and BDT wants to become the partner of choice in this space.  BDT does not primarily benefit from the residential housing shortage because its focus is more on the infrastructure and institutional side of things. It has some exposure in multifamily residential and high rises, but not houses. Financials are strong with the factors listed in addition to a  nice yield and cheap valuation. We think there is a lot to like in BDT coming off a strong 2023. The bear case would be that growth slows, and BDT becomes an income name.
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The stock is 'bouncy' certainly. We think it is a decent company but we did not like the decline in sales in the last quarter, especially in a period where inflation is still present. Yes, some of its weakness was clearly related to the weather. But at 22X earnings, we think the valuation could be adjusted to reflect the current lack of growth. Thus, we would fairly reluctant to start an aggressive buy program on the stock today. 
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ETF Highlight

Hamilton Enhanced U.S. Covered Call ETF (HYLD): HYLD is designed for long-term investors seeking to meet monthly income needs. The fund aims to provide attractive monthly income and long-term capital appreciation from a diversified portfolio of primarily US holdings. HYLD’s holdings are strictly other Hamilton ETF products. This can be characterized as a ‘Fund of Funds’ since its holdings are all other ETFs. HYLD is available in two options being CAD-hedged (HYLD) or USD-unhedged (HYLD.U) to help investors meet their income needs in either currency. HYLD’s top five holdings are SMAX (64.7%), QMAX (27.4%), LMAX (12.3%), FMAX (8.1%), and AMAX (5.5%). HYLD uses 25% cash leverage to boost yield and growth potential.
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Executive departures always cause investor stress, but they are not automatically bad. In VEEV's case, the company indicated the departure is amicable and it also reconfirmed guidance. Based on its prior solid history, we would have no reason to doubt its statement. While growth has been volatile, we certainly would consider it a high quality company, with a strong niche in its specific health/tech/sales area. 
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HUTs valuation is close to its bitcoin holdings, and we feel this effectively means the market is either pricing in bitcoins price to decline or its operations to be worth near-zero. We think it looks interesting here as a value play. Overall, we would prefer GLXY due to its strong leadership, diverse operations, and history of success across crypto 'bull markets'.
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We would have preferred a positive pre-announcement over 'nothing' of course, but the lack of announcement in and of itself does not mean anything concrete. It may be bad news, or may not be. SMCI has lots of new shareholders from its issue, and lots of investors with huge embedded profits. In a panic sell off it can still be easy to sell a stock up 564% in the past year. Fundamentally wise, it would be very hard for SMCI to see a massively negative shift in revenue and earnings momentum in three months. But sentiment of course can shift much more quickly and dramatically. The move was likely hugely overdone, looking at its prospects. But as noted sentiment is more important in the short term, and the market is in a risk-off mood right now. 
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ETF Highlight

Hamilton Canadian Financials Yield Maximizer ETF (HMAX): HMAX is designed to provide high monthly income from Canada’s 10 largest financial services companies. The ETF uses an active covered call strategy to enhance monthly distribution income and reduce volatility. HMAX generates higher monthly income by writing at-the-money covered call options. Approximately 70% of the fund is weighted toward the ‘Big 5 banks’ (RBC, TD, CIBC, BNS, BMO). HMAX’s strategy seeks to benefit from income while also allowing for capital appreciation and protection against downside risk by only writing calls on 30-50% of holdings.
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In two years we think the AI momentum will continue to fuel NVDA. In particular, we think AI spend should continue over this timeframe and NVDA should keep growing at a high rate. In five years, it is of course hard to predict: NVDA will likely continue to grow but the semiconductor industry is cyclical so from a demand perspective there could be a bit of a slowdown. When a company's growth 'decelerates' the stock can take a big hit. Over this timeframe it will depend how NVDA innovates as a company, as well as how the industry evolves. We would expect a higher price over two and five years, skewed though towards two. 
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PNG reported a slight EPS beat, coming in at 1.24c, beating estimates of 1c. Revenue more than tripled on a year-over-year basis, but did miss estimates coming in at $28.01M versus forecasts of $$28.35M. Guidance for 2024 was maintained, expecting evenue between $90M to $100M and Adjusted EBITDA in the $18M to $24M range. Management mentioned that it made improvements to improve its technical and commercial depth in 2023 and made significant investments in headcount and infrastructure. PNG also subsequently reported that it received an order for more than $6M for subsea batteries that will be delivered in 2024 and 2025. Momentum continues to be strong and while this quarter was slightly below expectations on a revenue basis, PNG continues to grow at a high rate and win contracts.
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SMCI is inherently volatile and will be moreso as it approaches its earnings release on May 2 (estimated). It rose 10% on Tuesday and is up on the week (prior to Friday's open). Markets have been very weak in April and we would not necessarily attribute anything to the company itself. LOOP this week raised its target price to $1,500, and there has been no material company news. We have no reason to expect a weak quarter. To get to the prior high it needs to rise 30% or so, which we think is doable under the right conditions. A war in the Middle East would not help. We like its growth prospects and potential, but it is also a stock that could decline 30% or more if there is bad news. We are comfortable with it, but would size a position size to one's risk levels. 
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