In case you missed it, earnings last night from Palantir were fuego 🔥. We got the goods from Uber and Spotify this morning, also hot🔥.

🔴So… why the red tape?📉

Valuations are back… half way… sort of… for now…

Here’s what I mean: Valuation is setting a ceiling.

When valuation concerns make a comeback, upside price action – by nature – is limited, and you need something to break through it. You need a catalyst. Until then, keep your expectations in check. Unfortunately, I don’t really see a catalyst on the horizon, which adds a layer of complexity to the situation.

Maybe an end to the government shutdown? Actually, that could do it. Nevertheless…

In lieu of a clear catalyst, my opinion is that it makes the most sense to rely on the technicals and increase your burden of proof/barrier of entry for long-trades (buying common/buying calls).

What does this mean for stocks at the valuation ceiling?

While this doesn’t mean stocks at that ceiling need to have a 10-20% correction, it would be unwise to ignore we’re seeing a plethora of individual names enter their own bear markets (20%+ declines). It brings us to a place of cognitive dissonance:

I do not believe these stocks deserve a bear market based on their earnings; but, I know it is very well possible it happens anway.

• Meta: banger numbers… but we’re worried about capex spending🔻
• Netflix: banger numbers… but we didn’t like the [diminishing] Brazilian tax issue🔻
• Microsoft: banger numbers… but Azure only grew 39%, we wanted 40% 🔻
• Uber: beat and raise… but we don’t like industrials🔻 (more on this in a moment)
• Palantir: on the short-list of best numbers from a software company ever… but… I don’t know, valuation? Sell🔻

Personally, I think the market is getting this all of these stocks wrong, but when PLTR is getting slammed after arguably the best quarter anyone has ever seen from any software company on Earth… no stock is safe.

Cards on the table, I don’t know how long this malaise lasts. We’re well overdue for a S&P 500 correction. If we get there, it would be healthy. This is what durable bull markets do: when speculation overflows, it trims some fat off the top. Let’s not overreact.

“Nothing But The Hits” Playbook

Stepping away from my crystal ball, I can focus on what I do know with a higher degree of certainty:

• The companies I like the most have reported, and the earnings are good.
• Quick check on the macro: the economy is fine.

Put this all together for the names on my list, my names are getting discounted on both ends: price going down, earnings going up.

This is the time to get excited. Look to add to your greatest hits once the situation stabilizes or take a look at the one that got away. It isn’t the time to fold; it is the time to prepare.

Uber (UBER)

If you have made this far, here is your reward: actionable intel on Uber.

First things first: quarter was phenomenal. Underlying metrics (bookings) and the top and bottom lines beat.

• EPS – $3.11 actual v $0.68 prior; however, it is unclear if these metrics are comparable.
• Revenue – $13.47 billion actual vs. $13.28 billion expected by LSEG.
• Mobility (gross bookings): $25.11 billion, up 20% year over year.
• Delivery (gross bookings): $23.32 billion, up 25% year over year.

And, I shouldn’t forget to mention the beat on guidance:

“For the fourth quarter, Uber forecast gross bookings between $52.25 billion and $53.75 billion, versus a StreetAccount estimate of $52.10 billion. The company expects adjusted EBITDA to range between $2.41 billion and $2.51 billion, versus $2.47 billion expected by StreetAccount.“

I am a long-time Uber shareholder, and when the market wants to hand me a ~6% discount (at time of publishing) after a number like this… I need to take a little action. But, true to my point earlier, I need some technical confirmation before doing so:

And, I’ll be looking for that confirmation at the 100d SMA. If Uber is above that level at 3:59PM, I will put more money to work here. If not, I’ll leave it on the watch list and wait for stock to give me permission to buy it.

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