My Top Play and Largest Holding as We Look Ahead to Q3 Earnings
Here's what's most impressive about this company, with my primary focus on names that will react well to third-quarter results.
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Market breadth is running slightly negative Monday morning, with around 46% of stocks in positive territory. The Magnificent Seven (MAGS) names are leading with a 1% gain, and the Russell 2000 (IWM) is also slightly positive.
There remains a considerable amount of speculative interest. The cannabis sector (MSOS) is leading the way after some positive comments from President Trump, and the data center names have also bounced back. After a rough week, Bitcoin (BTC) and Ethereum (ETH) also appear to be improving. I'm looking to add to my two Ethereum plays, SharpLink Gaming (SBET) and Bitmine Immersion Technologies (BMNR).
My primary focus is currently on names that will react well to third-quarter earnings reports. My top play is Harrow, Inc. (HROW). As I mentioned on September 23, it is my largest position and still is at this point.
Harrow is an eyecare pharmaceutical company focused on ophthalmic products in North America. It operates through two main segments: Pharmaceutical Compounding (via its ImprimisRx business) and Pharmaceutical Drug Development (covering branded therapies).
The company offers a range of eyecare solutions, including IHEEZO, a chloroprocaine hydrochloride ophthalmic gel for ocular anesthesia; ophthalmic solutions such as IOPIDINE (for glaucoma), VEVYE (for dry eye), and ZERVIATE (for allergic conjunctivitis); anti-inflammatory and antibiotic eye drops including MAXITROL, ILEVRO, NEVANAC (for post-cataract surgery pain and inflammation), VIGAMOX (for bacterial conjunctivitis), TOBRADEX ST, and VERKAZIA (cyclosporine emulsion for dry eye); and lubricant drops such as FRESHKOTE preservative-free for dry eye relief.
The company held its first Investor and Analyst Day on September 26. The entire presentation can be found here. Harrow's goal is to become the next great U.S. ophthalmic company and is positioning itself as "the Amazon (AMZN) of ophthalmology." What is most impressive is that the company has a current run rate of about $250 million in annual revenues and is aiming for $1 billion run rate in 2027.
One piece of surprising news on Friday was an announcement to acquire Melt Pharmaceuticals. Melt is developing a convenient, non-opioid alternative for procedural sedation that is delivered sublingually rather than IV. Currently, most cataract and many ophthalmic surgeries require IVs. The Melt product will eliminate the need for IVs. There is a substantial market for this product in other areas such as dental procedures, colonoscopy, upper GI endoscopy, and biopsies. The goal is to have the product on the market in 2027.
Harrow has an easy third-quarter comparison coming up, and I expect a solid beat after the upbeat presentation last week. The company is expecting to see EPS jump from $0.36 in calendar year 2025 to $1.83 in 2026. If Harrow performs as hoped, it is a likely an IBD 50 candidate.
Several analysts have positive comments on Harrow, with Lake Street increasing its price target to $70 from $42. The report states: "The company's investor day on Friday reinforced the firm's confidence in the company's ability to scale its business to $250M-plus in quarterly revenue by Q4 of 2027... It is hard to bet against success and Harrow has had plenty of it."
Technically, the stock has made a good run recently in anticipation of the investor day presentation and is slightly overbought, but longer term, it is developing a powerful cup-with-handle pattern. A move through the $50 area should attract breakout and momentum buyers.
We are trading the stock aggressively and plan on building a substantial longer-term position by taking advantage of short-term volatility.
At the time of publication, Rev Shark was long SBET, BMRN and HROW.
