This Week on Breakout Investors (week ending 4/11/2025)

With the VIX at elevated levels and stress showing up beyond equity markets in treasuries and currencies, the S&P rallied close to 10%, particularly thanks to a massive gain following the news the tariffs would be delayed 90 days. This is playing out on top of elevated (relative to historical norms) P/E levels in the largest companies that many expect to revisit and likely reduce earnings outlooks as they continue to report quarterly results.

The extraordinary rally this week was the largest since the GFC. Historically, the market tends to go lower after such events and fundamentals don't necessarily favor a higher market given current tariff headwinds. It appears investors were also more selective in which stocks joined in the rally. As expected, much of the buying was short covering, so there was probably a large swath of highly shorted stocks bouncing...but more importantly, less speculative stocks, those already profitable, with predictable revenue streams and strong balance sheets were more likely to increase.

Looking to stocks followed closely by Breakout Investors, AEHR Test Systems (AEHR) reported earnings and Snipp Interactive (SNIPF) notch its 3rd win just this month. AEHR was able to pull guidance under the guise of tariffs. In all likelihood, they would have missed guidance again, but very marginally, particularly given the healthy backlog. Their inventory numbers are up, showing they were likely expecting to ship orders sooner. The silicon carbide market has continued to take longer to recover. The commentary regarding progress with their leading memory customer is bullish as Gayn is hoping for revenues beginning in FY27. A massive opportunity is in front of them, but still well over a year in front.

An elevated vix has the effect of compressing time, market crashes and rallies happen quicker...price action accelerates. This theory is discussed in The (Mis)behavior of Markets and can be seen in these violent swings. This makes a 1-2 year wait for memory revenues feel like an eternity, or 2 quarters to achieve profitability in a recession-resistant sector, or 2 months to data for a consumer spending averse biotech (INMB).

SNIPF has been EBITDA positive and intends to remain that way as its core business grows 20%+ per year. Q4 will be the last quarter showing declining YOY revenue comps as the unattractive Gambit contract finished in Q4 2023. The margins should continue to exceed 60% (an exceptional YOY comp) and EBITDA positive is likely too. This will be reported in 2 weeks...which with the vix just below 40, still feels like an eternity.