Bear's Q3 earnings thoughts: Vol3

Well I’m back. This will be volume three, after my first two summaries:…

This week took earnings season to a whole 'nother level. Read on, dear reader:

Oct 30
Instructure (INST) - Here’s my write up:… I also enjoyed Brian Stoffel’s take:…

Oct 31
Shopify (SHOP) - Here’s my write up:… Also Bert announced he’s going to try to get back in. Shopify’s daily volume has been interesting to watch. It appears to have settled down, and right now the shares look…well, as close as they ever get to “cheap.” Let’s just say, a lot less expensive than usual.

Paycom (PAYC) - One I haven’t followed as closely lately but still keep one eye on. Looked like a solid quarter. Stock is pulling back a bit…my thinking is that it had simply gotten ahead of itself. It’s only growing around 30%. My sell thesis is still in place.

Nov 1
Facebook (FB) - Just a tremendous quarter from FB. Revenues now over 10B. Operating margin is roughly 50%. What? Wow. But they’re going to hire 10,000 people or something to try to keep Russians from advertising on their site. Something like that. Anyway, this company prints money, and their ~40B annual revenues are chump change compared to the Apple’s, Amazon’s, and Google’s of the world. Plenty of room to run. I say the (slight) pullback is a buying opp.

HubSpot (HUBS) - Further evidence of high expectations across the board going into earnings: even as Hubspot utterly crushed it this quarter, the market basically yawned. This looks really compelling and still relatively inexpensive. With another quarter of positive (though tiny) EPS, they’re now guiding for 7 cents in Q4. Expect them to beat that.

TelaDoc (TDOC) - Revenue was up 112%. Organically, 45%. Not bad. It’s just a question of how much leverage will be possible. I don’t know. Haven’t bought back in.

Nov 2
Arista Networks (ANET) - Arista won me over after their June quarter, which was a total smash. Well guess what? The Septermber quarter might be even MORE impressive. Growth: They maintained 51% revenue growth, which just shows how much they’re dominating, as others in the space aren’t growing much, or some at all. Profitability: You want earnings? Operating leverage? Look no further than ANET. EPS basically doubled YoY. OpEx actually came DOWN! sequentially, and was only up 13% YoY vs Gross Profit which was up 51%. Net Margin soared to over 30%. Arista is crushing it all around.

Hortonworks (HDP) - And lest you think that Arista was the best performance possible, see HDP. Revenues accelerated from 42% to 45% YoY. More importantly, Subscripton Revenue was up 64% – a HUGE acceleration. Gross Profit was up 72% YoY! Then, they actually reduced OpEx YoY. Yes, you read that right. Arista reduced theirs sequentially, which is impressive when you also grow revenue like they do. But HDP did them one better. In short, the “expand” part of their land & expand model is gangbusters right now.

Mercadolibre (MELI) - I actually got nervous about constricting margins (due to all they’ve bitten off with shipping) and sold my shares before they reported. I guess I was half right: EPS was actually down 28% YoY. But, to mix a metaphor, the revenue train keeps rolling to the sky: up 61% YoY. That is incredible. In the last 7 quarters, revenue has risen sequentially every quarter, starting at 158M and this quarter reaching 371M. The only word that comes to mind is WOW.

Concluding thoughts

As I said above for Hubspot, based on market reactions to great company results, I must conclude that expectations were high. Another way to say it would be that the market was expecting companies to announce that their CEOs suddenly had gold coins growing out of their fingertips. I’m not going to say stocks weren’t expensive going into earnings: they were. But the opinion of this Fool is that there has thus far been insignificant market reaction to some really incredible results. Hence, there are some bargains out there, even now.