COVID19 Can’t Wipe Out Clorox
Yesterday, Clorox cleaned out the competition with its earnings report.
While many businesses have felt the brunt end of the pandemic’s impact, a handful of companies have felt a boost. And one of those companies happens to be Clorox. Now, it’s no surprise seeing that, even now, nine months since the beginning of the global health crisis, we still see shelves cleared of all cleaning products. But Clorox, in particular, has become the sought-after product American’s are chasing to keep their families safe.
Overall sales are up 27% from a year ago, and the company reported double-digit increases in eight of its ten business units. And Clorox’s success isn’t limited to disinfectants. The company also owns a plastic bag brand, Glad, as well as the Kingsford charcoal line. These two products are a part of Clorox’s household division, which saw a jaw-dropping 39% increase in sales during the economic shutdown.
Where’s the money?
These profits are spilling over to shareholders as well.
Immediately following its earnings report, Clorox (CLX) stock jumped up 4%. Not to mention, throughout 2020, CLX shares have risen by 40%. Compare that to the S&P 500, which is only up 1.2%. This unprecedented increase in profits is a testament to the Clorox brand. It is hands-down, the most dominant player in its industry. And “Clorox” is a namesake product that everyone knows.
And Clorox doesn’t expect the growth to slow down anytime soon either. Following this blowout earnings report, Clorox announced that it expects sales to grow by 9% in 2021, meaning that we could be looking at some easy profits if we play it right.
How do I get some?
With the recent earnings report and the current outlook for Clorox – one thing is for sure – this company still has a lot of upside in the future. And truthfully, their business model is solid as well because people will continue to use and buy disinfectant wipes and cleaning products even after the pandemic is over.
And that’s giving me the green light to add this powerful name to my portfolio. So, how do you play it? Cashing in on Clorox is actually pretty simple – keep an eye on the stock and buy it on any pullback.
By waiting for a pullback, you ensure you get the position at the best price, leaving you more room for profits and helping you stick to your risk tolerance as well.
In the spotlight: Cloudflare shows us how to interpret pandemic profits…
Tomorrow, Cloudflare will report earnings. IPOing last September, the company has over 3 million free and paying customers. But while their customer base is impressive, Cloudflare has significant exposure to small and medium businesses, which have been hit the hardest by the pandemic.
The company and the stock have seen immense growth over the past year, but this prolonged pandemic threatens to cut off many customers. When a small business shuts down, it has no need for a website. And the growing number of failed companies does not bode well for Cloudflare’s continued profits.
All in all, the majority of Cloudflare’s customers are free account customers and small businesses. Digging through the numbers, they currently only have 637 large customers (annual billing of $100,000+), meaning the rest of their remaining customer base is small names that could be struggling to simply keep their doors open. And when push comes to shove, companies cut luxuries like Cloudflare first.
And this could put the company in a hard spot. That’s why when it comes to Cloudflare’s earnings report, I won’t be making any moves on this web-infrastructure company. Because I believe in the months to come, it will see a massive reduction in customer retention. So, I’ll be watching from the sidelines on this one, and I think you should too.
A Tale of Two Forecasts…
The current situations of Cloudflare and Clorox show a perfect contrast between business models – one that’s not equipped to continue growth in the face of continued small business closings, and one that’s fortunate enough to actually benefit from a worldwide pandemic!
Most of the time, world events and industry trends tell a bigger story than just the standard metrics of the company…
That’s why I use the S.C.A.N. trading algorithm to quickly take into account every aspect of a stock I might have my eye on, to give me the best idea of the kind of profits I can expect to deliver to my Project 303 readers.
I’ve run a few new plays through my S.C.A.N. algorithm recently, and I want to share them with you right here.