Small-cap stocks continue to underperform their larger peers, though the S&P 600 Small-Cap Index ETF (IJR) has been inching higher toward resistance at 110. It’s possible that with expectations for the first rate cut being pushed out to June (currently, subject to change) that my expected small-cap rally has been similarly delayed. In the meantime, I like Enovix Corp. (ENVX) as a buy, writes Tyler Laundon, editor of Cabot Small-Cap Confidential.
We’ve also seen a pause in the uptrend for a lot of cloud software stocks, a group we have decent exposure to. Looking at the WisdomTree Cloud Computing ETF (WCLD), you can see this ETF has been mostly treading water around its flatlined 25- and 50-day moving average lines since mid-January.
With earnings season now behind us, the next big market event is the March FOMC meeting and Fed Chair Jerome Powell’s press conference, which is scheduled for Wed., March 20.
There’s virtually no chance of a rate cut next week. With market odds recently at 59% for a cut at the June 12 meeting, you can be sure the market will react to any commentary from Powell regarding his latest thoughts on the Fed’s next move.
Enovix Corp. (ENVX)
As for ENVX, it just presented at the JP Morgan Industrial Conference and part of the discussion revolved around the timing of getting batteries to market for different applications. The plan has been to first make batteries for IoT products (like watches) with revenue ramping in the back half of this year. Then it would go after the smartphone market next, with revenue to begin in 2025 and ramp into 2026.
This timing is a function of customers needing nine to 12 months to fully qualify high-production batteries once they begin to come off Enovix’s Malaysia production lines. After smartphones, we move on to personal computers (PCs) in 2026, then potentially to electric vehicles (EVs).
There seems to have been some expectation that smartphone revenue would have been sooner, and while I haven’t reviewed all my notes, I don’t recall the new management team saying they would be at the same time as IoT batteries.
Recommended Action: Buy ENVX.
