Why Unprofitable Stocks Make The IBD 50; Here's How 4 Earn Their Place
Comment of the Day

February 27 2023

Commentary by Eoin Treacy

Why Unprofitable Stocks Make The IBD 50; Here's How 4 Earn Their Place

This article from Investor’s Business Daily may be of interest. Here is a section: 

Outstanding sales growth is a sign of a market leader, even in cases when companies are unprofitable. Other factors contribute to the selection criteria for IBD 50, including past stock performance. For example, many stocks with a weak bottom-line outlook have high Relative Strength Ratings.

Monday.com posted two profitable quarters of EPS in Q3 and Q4 after a string of losses. The profitable quarters helped the company post a positive 2022 with 73 cent EPS, but analysts are expecting losses of 36 cents in 2023 and 9 cents in 2024.

"We finished FY '22 with strong revenue growth, improving efficiency and positive free cash flow for the second consecutive year," said co-CEO Roy Mann. "Despite macro uncertainties, we believe we are well positioned for the road ahead."

The Israel-based software applications and workload management firm gave a full-year 2023 revenue range of $688 million to $693 million, exceeding analysts expectations.

Eoin Treacy's view

Over the last couple of years as my daughters have grown up and the number of activities they pursue has increased, I find myself using several different apps for keeping in contact with clubs and communicating with other parents.

We use KakaoTalk for fencing, Groupme for rowing, TeamSnap for tennis, my siblings recently began connecting on a WhatsApp group, meetings take place on Microsoft Teams, RingCentral or Zoom. Paying people takes place on Venmo or Zelle.

A decade ago almost all of this would have taken place on different Facebook pages so there is no doubt competition within the social media sector has increased. Moreover, Meta Platforms missed the opportunity to create a single social media/payments app in the mode of Tencent’s WeChat.
The share rebounded impressively from the November low to close the overextension relative to the 1000-day MA. It now has ample room to consolidate. Ideally, the share will find support above $150, which coincides with the region of the 200-day MA.

There is also a war going on in an effort to remake email. I personally feel comfortable using Microsoft’s Outlook but I have had occasion to use both Saleforce’s Slack and Monday.com over the last couple of years.

In my view at least Monday is a superior service. It groups items in an intuitive manner which makes keeping control of conversations relatively easy. Slack on the other hand is at times unwieldy.
Salesforce rallied from early January to break its downtrend. The share is currently pausing in the region of the 200-day MA and will need to hold the current level if recovery is to be given the benefit of the doubt.
Monday was listed in June 2021. Following a brief rally, the share collapsed and has been forming a base for the last year. It broke successfully higher two weeks ago and the benefit of the doubt can be given to the upside provided it holds the $142 area.
Both Zoom and RingCentral continues to trend lower.    

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