Below are analyst updates on our thirteen current high-conviction long and short ideas. Please note we removed Avalara (AVLR), Surgery Partners (SGRY) and Wayfair (W) from the short side and Toll Brothers (TOL) from the long side of Investing Ideas this week. We also added Waitr Holdings (WTRH) to the long side and Texas Roadhouse (TXRH) to the short side. We will send a separate email with Hedgeye CEO Keith McCullough's refreshed levels for each ticker.
IDEAS UPDATES
GTBIF
Click here to read our analyst's original report.
Green Thumb's (GTBIF) Ben Kovler, Founder & CEO, is a visionary in the space, with great leadership capabilities and brand creativity, but let’s not underestimate the bench this company has procured over the last couple of years to put them in a great position to lead the U.S. MSO space. Anthony, Jennifer, Kate and Andy are all deep in the weeds, and bring a ton of knowledge and experience to the company, but there are others below the c-suite that are very impressive as well. We think one of their secret weapons is Laura Brown (and her team), who runs their Maryland processing operations.
Green Thumb has a solid management team and corporate structure, which matters a lot in a rapidly growing industry like Cannabis.
AMN
Click here to read our analyst's original report.
We updated the underlying macro data for our AMN Healthcare (AMN) Nurse and Allied volume forecast recently. As we continue to review, Health Care Employment continues to accelerate, likely driven by underlying demand. As it relates to AMN, continued accelerating demand coupled with labor market tightness particularly for Registered Nurses (CPS data), supports the forecast here for accelerating Nurse and Allied volume.
CNQ
Click here to read the long Canadian Natural Resources (CNQ) stock report Energy analyst Alec Richards sent Investing Ideas subscribers earlier this week.
ITHUF
Click here to read the long iAnthus Capital (ITHUF) stock report Cannabis analysts Howard Penney and Shayne Laidlaw sent Investing Ideas subscribers earlier this week.
WTRH
Below is a note written by CEO Keith McCullough on why we added Waitr Holdings (WTRH) to the long side of Investing Ideas earlier this week:
|
In days like today (very red unless you're long Treasuries and Utilities!) you should cover-some on the short side and look to add to longs that A) are down on #decelerating volume towards B) the low-end of the @Hedgeye Risk Range. WTRH fits that profile. WTRH (Waitr Holdings) is one of Howard Penney's latest Best Ideas (Institutional Research product) and here's an excerpt from his recent notes that introduces the idea: “We believe the growth of delivery globally in the restaurant industry will be significant, and there are going to be several ways to play the space. Internationally, we like Just Eat and Takeaway.com, while in the USA, GRUB has a significant advantage over its rivals. Today, we are adding Waitr Holdings to the Best Ideas List as a LONG. WTRH has about 2.0 million active diners across Waitr and the newly acquired Bite Squad. WTRH has an EV of $800 million and revenue estimates of $250 million for 2019.” Buy on red (don't chase with the crowd on green), KM |
CCL
Click here to read our analyst's original report.
Buy side sentiment for Carnival (CCL) seems still geared to the negative, certainly on a relative basis, so despite our short recommendation, we’re not sure the quarterly announcement (CCL reports results Tuesday 3/26) will necessarily be a negative catalyst for the stock. We’re more concerned with the cash flow picture. We expect CapEx to exceed current expectations and contribute to even more negative free cash flow over the next two years, which could disappoint a shareholder base accustomed to free cash flow growth, low leverage and lots of stock buyback.
TGT
Click here to read our analyst's original report.
This week Shopko announced that it is closing 370 stores as opposed to the original plan to close 250 in its reorganization. The main reason given is that “WMT and TGT are causing severe price pressure on smaller city locations.” Target (TGT) has about $0.30 a share per year in wage pressure built in with its plan to get to a $15 min wage. That is about 2% in SG&A growth, which makes for a high bar in revenue to be able to leverage SG&A and hit earnings. We think a 4-5% comp is required to see EBIT growth, and we don’t think TGT can comp that in 2019 with a weakening consumer, and very difficult comparisons.
TSLA
Click here to read our analyst's original report.
Manufacturing is hard and selling cars is competitive, particularly in the narrow high-end segment. The Model 3’s corpulent big brother, the Model Y, debuted with a clank. That was possibly the last, best hope for Tesla (TSLA) to repeat past successes… except perhaps for a pick-up truck. Even if either proves plausible products, Tesla has yet to deploy capital or allocate manufacturing space for new platforms, likely ensuring anything new is well over a year away.
ROL
Click here to read our analyst's original report.
Rollins (ROL) shares have strengthened back to near all-time highs following some favorable competitor earnings reports. Our work continues to show signs that the tailwinds behind the pest control industry are fading. Pricing trends in the industry suggests rates have been stretched and may now be facing competitive pressures based on our work. Customer counts have stalled, while revenue per customer has ramped significantly over the past five years following ROL’s pricing study. Combined with other growth and competitive headwinds, we expect market recognition of pricing and ancillary service limitations to drive a revaluation in ROL shares. We see Rollins shares offering >50% downside.
DVA
Click here to read the short DaVita (DVA) stock report Healthcare analyst Tom Tobin sent Investing Ideas subscribers earlier this week.
MCD
Click here to read our analyst's original report.
Chris Kempczinski is the President of McDonald's (MCD) USA. As the President of MCD USA he has two jobs:
- Grow same-store sales
- Keep the franchisees motivated but also "under control."
Chris K gets a failing grade at both of his jobs. He has earned zero respect from the franchisees and their contempt via the National Owners Association (NOA) is clear. If SSS turn negative in 1H19 he will be gone...
AMZN
Click here to read our analyst's original report.
This week Amazon (AMZN) launched MLB.TV on Amazon. That comes a couple weeks after the company led a group acquiring the YES network from Disney.
Amazon keeps adding new capabilities and features to its Prime platform and keeps growing the value proposition of being a Prime member. It is doing this because it has to, it is already in a majority of US households and needs to draw in customers it doesn’t already have. With the untapped addressable market shrinking, we think Amazon is past peak on revenue growth in the US and that means growth will slow, and will come with greater competition. That is a big risk to the big multiple for Amazon in 2019.
TXRH
Below is a note written by CEO Keith McCullough on why we added Texas Roadhouse (TXRH) to the short side of Investing Ideas earlier this week:
|
With the US stock market "off the lows" of the day, we get a short-selling opportunity in names we don't like. With Powell inflating the cost of living for Americans (inflating gas prices in particular), I like casual dining shorts that are on Howard Penney's list like Texas Roadhouse (TXRH). Here's an interesting economic point from Penney on recent US Restaurant traffic trends (not good): "The eight-month run of positive same-store sales ended in February with a (0.6%) decline. Weather may be a reason, but I suspect there is more to the decline than just weather. First, one of the biggest issues the industry is facing is aggressive pricing, with guest check up 40bps sequentially to 3.1%. Given the aggressive pricing across the industry, we saw a (3.7%) decline in same-store traffic." Sell the bounce to lower-highs, KM |
