COVID-19 Vaccine Update – The UK Wastes No Time as MHRA Approves Vaccine

The Latest

BioNTech and Pfizer Inc. became the first pharma to have their mRNA COVID-19 vaccine approved on Wednesday.

The UK’s Medical & Healthcare Products Regulatory Agency (“MHRA”) became the first agency to approve a COVID-19 vaccine.

With the UK suffering at the hands of the COVID-19 pandemic, the independent regulator wasted little time.

The UK Government has pre-ordered 145 million doses of COVID-19 vaccines from Pfizer Inc., Moderna Inc., and AstraZeneca. Of the 145 million doses, the government has pre-ordered 40 million from BioNTech/Pfizer Inc.

With an efficacy rate of 95% and effective across all age groups, the first doses of the vaccine are due to arrive in days.

The UK Government announced that a first batch of 800,000 doses forms part of an expected 10 million doses by the end of the year.

With the vaccine coming in 2 doses, 5 million patients will receive inoculation if BioNTech/Pfizer Inc. delivers the full quota.

The Government’s Joint Committee on Vaccination and Immunisation (“JCVI”) affirmed on Wednesday that the first priorities should be the prevention of COVID-19 mortality and the protection of health and social care staff and systems.

The JVIC has given older adult residents in care homes the highest priority for vaccination, followed by care home workers.

Secondary priorities could include vaccination of those at increased risk of hospitalization and at an increased risk of exposure.

Logistics will now need to be in place to transport the vaccine, at -70C, for administration across the UK.

How the Markets Reacted

The FTSE100 rose by 1.23% on Wednesday, with the upside coming off the back of the MHRA announcement.

For the European majors, while it was a mixed day, the DAX30 and CAC40 came off lows in response to the news.

BioNTech SE share price rose by 6.21% in response to the news. Pfizer Inc. ended the day up by a more modest 3.51%.

While trailing Pfizer Inc. in the race to deliver a global vaccine, there was also support for AstraZeneca and Moderna Inc., which rose by 1.26% and by 1.41% respectively.

What’s next?

With UK regulators beating the FDA and the EU’s European Medicines Agency (“EMA”) to the punch, BioNTech/Pfizer Inc. will now need to deliver the doses.

There’s no trial run for BioNTech/Pfizer Inc. in terms of delivering the doses in a timely manner.

Both BioNTech/Pfizer Inc. and the government will likely face logistical challenges and the markets and governments from overseas will likely watch closely.

Successful distribution and administration of the first batch are now key. For the FDA and the EMA, both will have the benefit of the UK government’s experiences in distribution and vaccination.

The FDA is set to review the BioNTech/Pfizer Inc. vaccine on 10th December. In the New Year, the EMA review is due on 12th January.

Key areas of focus in the coming weeks will be production and distribution and geographical allocation.

The EU has pre-ordered 300 million doses of the BioNTech/Pfizer Inc. vaccine, with the U.S pre-ordering 100 million and an option for an additional 500 million doses.

BioNTech/Pfizer Inc. has projected between 5 million to 50 million doses to be available by the end of the year.

The UK is due to receive 10 million doses, which leaves 40 million assuming that 50 million doses are produced.

With the EU review of the vaccine not due until mid-January, that leaves the U.S and Japan in focus. While the U.S has pre-ordered 100 million, Japan has pre-ordered 120 million of the BioNTech/Pfizer Inc. vaccine.

Pressure may mount on the likes of the EMA to bring forward vaccine reviews. BioNTech/Pfizer Inc. may also feel increased pressure to deliver on the higher side of production forecasts…

Veeva Systems Shares Plunge Despite Strong Q3 Earnings; Target Price $301

Veeva Systems, an American cloud-computing company focused on pharmaceutical and life sciences industry applications, reported better-than-expected earnings in the third quarter of the fiscal year 2021 and forecasts revenue between $1,446-$1,448 million for the next fiscal.

Despite that Veeva Systems’ shares plunged about 10% to $257.47 in pre-market trading on Wednesday. However, the stock is up over 100% so far this year.

The cloud-computing company reported revenues of $377.5 million in the third quarter, beating the Wall Street consensus of $362 million, up from $280.9 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the third quarter were $302.9 million, up from $226.8 million one year ago, an increase of 34% year-over-year.

For the third quarter, fully diluted net income per share was $0.60, compared to $0.52 one year ago, while non-GAAP fully diluted net income per share was $0.78, compared to $0.60 one year ago. That was higher than the market expectations of $0.68.

“Veeva reported a beat-and-raise F3Q with strength across all areas of the business. Guidance for F4Q and FY22 came in above consensus and looks conservative, especially as initial FY22 revenue guidance calls for a deceleration to 19% Y/Y growth. FY22 non-GAAP operating margin guidance reflects Veeva investing more in newer growth drivers, such as Data Cloud and MyVeeva, which we view as the right move. We maintain our BUY rating and $325 price target on Veeva Systems Inc,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

Veeva Systems Stock Price Forecast

Seven equity analysts forecast the average price in 12 months at $301.71 with a high forecast of $335.00 and a low forecast of $225.00. The average price target represents a 6.16% increase from the last price of $284.20. From those seven analysts, five rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $332 with a high of $532 under a bull-case scenario and $194 under the worst-case scenario. The firm currently has an “Overweight” rating on the cloud-computing company’s stock.

“Veeva delivered 11% billings upside in Q3, doubling the typical beat, while also driving op margins to company high of 41%. First look at FY22 revenue and profitability suggests plenty of conservatism to deliver beat/raise quarters. We roll forward estimates, remain OW and increase PT to $332,” said Stan Zlotsky, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Stifel raised their target price to $325 from $300. Needham upped the target price to $327 from $310. Raymond James increased the target price to $335 from $285. In August, Bank of America boosted their price objective to $302 from $230 and gave the stock a “buy” rating. Piper Sandler boosted their price target to $310 from $220and gave the stock an “overweight” rating.

Analyst Comments

“Veeva’s core products provide SaaS solutions for the Life Sciences industry, targeting $10B+ of spending today with potential overtime to address more of the $44B Life Sciences spend on IT, leveraging the company’s strong brand recognition and expanding its TAM into other regulated industries and use cases,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“As Veeva penetrates this large TAM, we see a sustainable 17% revenue CAGR over the next 5 years. Our $332PT is based on 2.4x EV/CY25 FCF/Growth adjusted, a premium to large-cap peers, but justified given the long term FCF durability and large market opportunity,” Zlotsky added.

Upside and Downside Risks

Risks to Upside: 1) VEEV penetrates its TAM faster than expected as it gains traction outside life sciences. 2) Traction within newer products and add-ons accelerates – highlighted by Morgan Stanley.

Risks to Downside: 1) 70%+ seat penetration in CRM could limit growth while declining sales headcount in Life Sciences may be a headwind. 2) TAM may be more limited due to vertical-specific focus. 3) Increased competition on CRM by competitors such as Iqvia.

Check out FX Empire’s earnings calendar

Daily Gold News: Wednesday, Dec. 2 – Gold Back Above $1,800

The gold futures contract gained 2.13% on Tuesday, as it retraced its recent declines. On Monday the market has extended a short-term downtrend following breaking below the recent local lows along the price level of $1,850. Three weeks ago gold sold off 5% in one day after global financial markets’ euphoria rally in reaction to Covid-19 Pfizer’s vaccine news release. Last week there has been a breakdown below the support level of $1,850, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold price is 0.3% higher this morning, as it is retracing some more of its recent decline. What about the other precious metals? Silver gained 6.63% on Tuesday and today it is 0.2% lower. Platinum gained 3.93% and today it is 0.6% higher. Palladium gained 0.99% yesterday and today it’s 0.4% lower. So precious metals are mixed this morning .

Yesterday’s ISM Manufacturing PMI release has been slightly lower than expected at 57.5. Today we will get ADP Non-Farm Employment Change , Beige Book releases and some more Fed talk including Fed Chair Powell’s Testimony.

The markets will wait for Friday’s monthly jobs data release .

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Wednesday, December 2

  • 8:15 a.m. U.S. – ADP Non-Farm Employment Change
  • 9:00 a.m. U.S. – FOMC Member Quarles Speech
  • 10:00 a.m. U.S. – Fed Chair Powell Testimony
  • 1:00 p.m. U.S. – FOMC Member Williams Speech
  • 2:00 p.m. U.S. – Beige Book
  • 8:45 p.m. China – Caixin Services PMI

Thursday, December 3

  • 8:30 a.m. U.S. – Unemployment Claims
  • 9:45 a.m. U.S. – Final Services PMI
  • 10:00 a.m. U.S. – ISM Services PMI

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Salesforce.com Earnings Beat Wall Street Estimates But Slack Acquisition Steals Thunder

Salesforce.com Inc, an American cloud-based software company, reported better-than-expected profit in the third quarter of the fiscal year 2021 with revenue increasing 20% year-over-year to $5.42 billion, but shares plunged over 4% in extended trading on news of Slack acquisition.

The company reported GAAP net income of $1.08 billion, or $1.15 per share, compared with a loss of $109 million, or 12 cents per share a year ago. Adjusted earnings came to $1.74 a share. That higher than the market consensus for earnings of 75 cents per share and revenue of $5.25 billion.

“Wide-moat Salesforce reported strong results, including a meaningful upside to both revenue and non-GAAP EPS, while guidance for the fourth quarter was mixed. Stealing the thunder from fine results was the formal announcement that the company is acquiring Slack, and this dominated the earnings call. We have mixed feelings on the Slack acquisition,” said Dan Romanoff, equity analyst at Morningstar.

“We are maintaining our fair value estimate of $253 for Salesforce as good organic results are offset by the seemingly modest deleterious impact on shareholder value arising from the Slack acquisition. With the recent pullback, we think Salesforce shares are looking increasingly attractive,” Romanoff added.

Salesforce’s shares closed 1.81% lower at $241.35; traded over 4% lower at $231.50 in extended trading on Tuesday. However, the stock is up about 50% so far this year.

Salesforce Stock Price Forecast

Eighteen equity analysts forecast the average price in 12 months at $291.53 with a high forecast of $325.00 and a low forecast of $234.00. The average price target represents a 20.79% increase from the last price of $241.35. From those 18 analysts, 15 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $332 under a bull-case scenario and $187 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the enterprise cloud computing solutions leader’s stock. Raymond James raised their target price to $280 from $255.

Several other analysts have also upgraded their stock outlook. Salesforce.com has been given a $275 price target by The Goldman Sachs Group. The brokerage currently has a “buy” rating on the CRM provider’s stock. Bernstein restated a “neutral” rating and set a $234 price target. Barclays boosted their price target to $315 from $264 and gave the stock an “overweight” rating.

Analyst Comments

“While Salesforce.com (CRM) remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains within an estimated $175 billion TAM over the next 4 years and >$200 billion longer-term,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see total revenue nearly doubling by FY24, but at CRM’s current scale and market cap, an increasing focus on FCF and earnings is likely necessary for further price appreciation. Our Equal-weight view on CRM shares is based on our $275 PT, which is based on 30X our CY25e FCF per share of $12.07, discounted back at 8.5%,” Weiss added.

Upside and Downside Risks

Risks to Upside: Slack Connect becomes a powerful contributor to net new customer additions. Net dollar retention rate stabilizes as new COVID-19 customers begin to meaningfully expand – highlighted by Morgan Stanley.

Risks to Downside: Competition from Microsoft, which offers a similar product for free to Office 365 users; Difficulty expanding outside of the IT department; Organizations defer to a bundled alternative (MSFT Teams, Google Workspace) in a weaker macro.

Check out FX Empire’s earnings calendar

COVID-19 Vaccine Update – Moderna Inc. Requests Approval from the FDA and the EMA

Moderna Inc.

Moderna Inc. has submitted its request to the FDA for a EUA approval. With the FDA reviewing the Pfizer Inc. vaccine on 10th December, the Moderna Inc. review will take place on 17th December.

With the race to deliver a COVID-19 vaccine to the U.S and beyond continuing, it has become a two-horse race.

Both pharmas have gone down the same road on the virology front, delivering an mRNA vaccine. Until now, no regulator has reportedly approved such a vaccine.

With COVID-19 efficacy rates of between 94% and 95%, the FDA and other regulators will likely have little choice but to approve the vaccines.

Following impressive results from Pfizer Inc. and BioNTech, Moderna Inc.’s final results were as impressive. An efficacy rate of 94.1% and 100% effectiveness in preventing severe cases of COVID-19 were well received.

Assuming that the FDA approves both vaccines, Pfizer Inc. and Moderna Inc. are likely to deliver vaccines days after the approvals.

According to the European Medicines Agency (“EMA”), it has also received applications for COVID-19 vaccines from Pfizer Inc. /BioNTech and Moderna Inc.

The Agency’s human medicines committee has scheduled extraordinary meetings to conclude the evaluations. In terms of timelines, the scientific committee for human medicines (“CHMP”) will conclude its assessment during an extraordinary meeting scheduled for 12th January at the latest.

Production Projections

Since lodging EUA requests, both have provided details on vaccine production numbers for this year and the next.

Moderna Inc. expects to have 20 million doses of the vaccine available to the U.S by the end of this year. For next year, the target is to manufacture between 500 million and 1 billion doses globally.

BioNTech/Pfizer Inc. is aiming to deliver between 5 million and 50 million doses by year-end.

Both vaccines require two doses. This means that Moderna Inc. and BioNTech/Pfizer Inc. could inoculate as many as 30 million people by year-end.

The Centers for Disease Control and Prevention

On Tuesday, the CDC is due to meet in order to deliver prioritization advice to the U.S states.

Expectations are for the CDC to prioritize health-care workers and residents of long-term care facilities.

The recommendations will come ahead of a Friday deadline for U.S states to submit vaccine distribution plans to the Federal Government.

Once phase 1a of the prioritization is complete, the CDC will then deliver further priority recommendations.

UnitedHealth Forecasts 2021 Revenue Between $277-$280 Billion; Target Price $400 in Best-Case

For this year, UnitedHealth Group expects revenues of about $257 billion, with net earnings to approach $15.90 per share and adjusted net earnings to approach $16.75 per share.

“Management previously braced investors that 2021 EPS growth would be below its long-term target of 13-16% due to COVID-19 uncertainty. The $18 starting point represents 8% growth, which is 2% below the Street. However, ex $1.80 of potential COVID-19 impact, growth would be an impressive 18%,” said David Windley, equity analyst at Jefferies.

“Other takes: 1) Positive enrollment updates: MA +13.5%, Commercial+1%; 2) Optum margins expand 45bps while Commercial declines 85bps due to COVID;3) Repurchases of $5BN vs $4.5BN in ’20,” Windley added.

At the time of writing, UnitedHealth’s shares traded 4.47% higher at $351.99 on Tuesday; the stock is up about 20% so far this year.

UnitedHealth Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $367.47 with a high forecast of $409.00 and a low forecast of $330.00. The average price target represents a 4.48% increase from the last price of $351.71. From those 16 analysts, 13 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $371 with a high of $449 under a bull-case scenario and $183 under the worst-case scenario. The firm currently has an “Overweight” rating on the insurance company’s stock.

“We calculate our price target by applying a 20.5x P/E multiple to our base case FY21E EPS of $18.14. Multiple reflects 0.8 turn premium to S&P 500 multiple of 19.6x. Premium in-line with UNH 5 year average premium UNH has historically traded at the adjusted repeal of HIF (+0.4x) and for periods in 2019 where fears over M4A weighed on multiple (we don’t believe this outcome is likely),” said Ricky Goldwasser, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. UnitedHealth Group had its price target increased by equities research analysts at Piper Sandler to $409 from $385. The firm presently has an “overweight” rating on the healthcare conglomerate’s stock. SVB Leerink lifted their price target to $373 from $370 and gave the company an “outperform” rating. Credit Suisse Group boosted their target price to $395 from $355 and gave the stock an “average” rating.

Analyst Comments

“UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the U.S. healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A,” Goldwasser added.

Upside and Downside Risks

Risks to Upside: 1) MA growth above the market. 2) Optum integration leads to industry-leading MLR performance. 3) Medicaid margins improve to target 3%-5% range – highlighted by Morgan Stanley.

Risks to Downside: 1) Regulatory uncertainty. 2) Slower growth in core growth areas such as Medicare Advantage, commercial, and Medicaid with focus on services. 3) Optum growth slows as competitors become more reluctant to work with UnitedHealth.

Daily Gold News: Gold’s Upward Correction, Back Above $1,800

The gold futures contract lost 0.40% on Monday, as it extended its short-term downtrend following breaking below the recent local lows along the price level of $1,850. Three weeks ago on Monday gold sold off 5% in one day after global financial markets’ euphoria rally in reaction to Covid-19 Pfizer’s vaccine news release. Last week there has been a breakdown below the support level of $1,850. And today the market is retracing some of the decline, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold price is 1.7% higher this morning, as it is retracing some of its short-term decline. What about the other precious metals? Silver lost 0.20% on Monday and today it is 3.6% higher. Platinum gained 0.11% and today it is 1.8% higher. Palladium lost 1.39% yesterday and today it’s 1.0% higher. So precious metals are advancing this morning .

Yesterday’s Chicago PMI and Pending Home Sales releases have been worse than expected. Today we will get the ISM Manufacturing PMI and the Fed Chair Powell Testimony at 10:00 a.m.

The markets will wait for Friday’s monthly jobs data release .

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Tuesday, December 1

  • 9:45 a.m. U.S. – Final Manufacturing PMI
  • 10:00 a.m. U.S. – ISM Manufacturing PMI , Fed Chair Powell Testimony , Construction Spending m/m, ISM Manufacturing Prices
  • 7:00 p.m. Australia – RBA Governor Lowe Speech
  • 7:30 p.m. Australia – GDP q/q
  • All Day, Eurozone – ECOFIN Meetings

Wednesday, December 2

  • 8:15 a.m. U.S. – ADP Non-Farm Employment Change
  • 9:00 a.m. U.S. – FOMC Member Quarles Speech
  • 10:00 a.m. U.S. – Fed Chair Powell Testimony
  • 1:00 p.m. U.S. – FOMC Member Williams Speech
  • 2:00 p.m. U.S. – Beige Book
  • 8:45 p.m. China – Caixin Services PMI

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Zoom Earnings Beat Wall Street Estimates But Shares Dip 5% After Hours on Disappointing Margins

Zoom, a cloud video communications provider, reported better-than-expected earnings in the third quarter of the fiscal year 2021 with a revenue surge of over 365% and forecasts total revenue between $2.575-$2.580 billion in the full fiscal year.

But shares traded down 5% in the aftermarket, partially on gross margins that were light of consensus and down sequentially, driven by the high volume of free users and higher public cloud usage. Zoom’ shares closed 1.43% higher at $478.36 on Monday; the stock is up over 600% so far this year.

The company said its revenue climbed 367% to $777.2 million in the third quarter ended October 31, beating the Wall Street consensus estimate of around $694 million. Adjusted earnings came in at 99 cents per share, also beating market expectations of 76 cents per share.

Zoom forecasts revenue between $806-$811 million in the fourth quarter, above estimates of $730.1 million and non-GAAP income from operations between $243.0 million and $248.0 million. Non-GAAP diluted EPS is expected to be between $0.77 and $0.79 with nearly 306 million non-GAAP weighted average shares outstanding.

“Zoom (ZM) reported a record F3Q21, but shares traded down 5% AMC on light gross margins (partly the result of more free users). We would be buyers on a sustained pullback, as the quarter was beyond impressive, with ZM scoring a 420 on a “Rule of 40” basis,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

“In our view, the key debate is about the sustainability of ZM’s growth post-pandemic and we take the view that ZM will be increasingly necessary to enable a hybrid remote work strategy and that many of the changes in work brought on by the pandemic are irreversible in nature. We maintain our BUY rating and $600 price target on Zoom Video Communications,” N. Jaluria added.

Zoom Stock Price Forecast

Twenty equity analysts forecast the average price in 12 months at $486.33 with a high forecast of $611.00 and a low forecast of $315.00. The average price target represents a 1.67% increase from the last price of $478.36. From those 20 analysts, ten rated “Buy”, nine rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $380 with a high of $530 under a bull-case scenario and $250 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the video communications provider’s stock.

“We are rolling forward our price target a year as the year comes to a close. As a result, our price target increases to $380 from $350, which represents 29x EV/FY23e Revenue or 28x EV/discounted FY32e FCF. We believe that while COVID-19 keeps video conferencing as a critical piece of employee connectivity, valuation is likely to remain closer to our bull case,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our bull case moves to $530 from $500 and represents 31x EV/FY23e Rev or 29x EV/discounted FY32e FCF. Our bear case also increases to $250 from $210, which represents 19x EV/FY23e Revenue or 27x EV/discounted FY32e FCF. Risks to valuation remain macro headwinds, competitive efforts, COVID-19 vaccine causes a return to work/school.”

Several other analysts have also upgraded their stock outlook. Citigroup raised their stock price forecast to $467 from $377; RBC lowered the price target to $550 from $600; Credit Suisse upped their target price to $340 from $315; JP Morgan raised the target price to $450 from $425; Bernstein increased their target price to $611 from $228 and D.A. Davidson increased their target price to $600 from $460.

Analyst Comments

“Zoom eliminates barriers to video conferencing growth. Company has meaningful competitive moat built on more than just architecture. Leveraging position with customers to be center of UC platform. WFH has permanence but diminishes post-COVID-19. Valuation credits significant expansion opportunities in broader unified communications landscape, supported by initial Phone execution,” Morgan Stanley’s Marshall added.

Upside and Downside Risks

Risks to Upside: 1) Zoom Phone adopted faster than expected. 2) Sales efficiency matches previous levels. 3) International business shows continued leverage. 4) Topline beats to flow to bottom line WFH permanence. 5) K-12 Market – highlighted by Morgan Stanley.

Risks to Downside: 1) Macro conditions suffer. 2) Large competitor refreshes portfolio and gets aggressive on the price. 3) WFH wanes post COVID-19. 4) China / K-12 opportunity not monetizable.

Check out FX Empire’s earnings calendar

JetBlue Forecasts Revenue to Plunge 70% in Q4 as Fresh Spike in COVID-19 Cases Hurts

JetBlue Airways, a major American low-cost airline, forecasts revenue to plunge 70% y/y in the fourth quarter, worse compared to a previous prediction of nearly 65% y/y decline, and expects cash burn to surge to around $8 million per day as a resurgence in COVID-19 cases hammered air travel demand.

The passenger carrier said given the recent booking trends and the delay in receipt of cash tax refunds of nearly $70 million originally anticipated during the fourth quarter, the company now expects its average daily cash burn in the fourth quarter to be in a range of $6 million and $8 million, compared to its prior expectation of a range between $4 million and $6 million.

Booking trends remain volatile and the company continues to believe demand and revenue recovery will be non-linear through the fourth quarter and beyond, JetBlue added.

JetBlue Airways’ shares were down about 16% so far this year, traded nearly flat in pre-market trading on Monday.

JetBlue Airways Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $13.50 with a high forecast of $17.00 and a low forecast of $12.00. The average price target represents a -14.29% decrease from the last price of $15.75. From those ten analysts, three rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $16 with a high of $29 under a bull-case scenario and $6 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. Stifel raised their price target to $13 from $12. Cowen and Company upped their target price to $13 from $10. Credit Suisse increased the target price to $12 from $11. JP Morgan lowered the target price to $16 from $17. UBS raised the target price to $13 from $9.

Analyst Comments

“We like JetBlue’s significant exposure to the “Medium Haul” U.S. domestic market, which we believe is likely to be the first to return (with short-haul challenged by driving and long-haul more challenged by international regulations). Additionally, JBLU’s “snowbird” network provides significant upside as leisure travel returns,” said Ravi Shanker, equity analyst at Morgan Stanley.

“We use a 10-year DCF assuming a 6.8% WACC and terminal cash flow perpetual growth rate of 2%. Our DCF valuation implies a 2023 EV/EBITDAR multiple of 6.1x, which is in line with LUV’s historical average given the “best in class” operating model,” Shanker added.

Upside and Downside Risks

Risks to Upside: 1) COVID-19 vaccine timing. 2) Leisure market recovery for point to point network. 3) Industry rationalization and fare stability – highlighted by Morgan Stanley.

Risks to Downside: 1) COVID-19 the second wave. 2) Better improvement in international travel vs. domestic.

Daily Gold News: Gold Extending Sell-off Below $1,800

The gold futures contract lost 0.96% on Friday, as it extended its short-term downtrend following breaking below the recent local lows along the price level of $1,850. Three weeks ago on Monday gold sold off 5% in one day after global financial markets’ euphoria rally in reaction to Covid-19 Pfizer’s vaccine news release. The yellow metal came back down to $1,850 price level. Last week there has been a breakdown below that support level, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold is 0.8% lower this morning, as it is further extending the downtrend. What about the other precious metals? Silver lost 3.09% on Friday and today it is 2.5% lower. Platinum lost 0.52% and today it is 0.2% lower. Palladium gained 3.17% on Friday and today it’s 0.7% lower. So precious metals are lower again this morning .

Today we will get Chicago PMI and Pending Home Sales releases. But the markets will now wait for Tuesday’s-Wednesday’s Fed Chair Powell testimony and Friday’s monthly jobs data release .

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Monday, November 30

  • 5:00 a.m. Eurozone – ECB President Lagarde Speech
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Pending Home Sales m/m
  • 10:30 p.m. Australia – Cash Rate, RBA Rate Statement
  • All Day – OPEC Meetings

Tuesday, December 1

  • 9:45 a.m. U.S. – Final Manufacturing PMI
  • 10:00 a.m. U.S. – ISM Manufacturing PMI , Fed Chair Powell Testimony , Construction Spending m/m, ISM Manufacturing Prices
  • 7:00 p.m. Australia – RBA Governor Lowe Speech
  • 7:30 p.m. Australia – GDP q/q
  • All Day, Eurozone – ECOFIN Meetings

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

S&P Global in Advanced Talks to Acquire London-based IHS Markit for $44 Billion

S&P Global Inc, a leading provider of independent ratings, benchmarks, analytics and data to markets worldwide, is in advanced talks to acquire IHS Markit, a financial information services company, for nearly $44 billion, according to the Wall Street Journal.

This deal for IHS would be the largest of the year globally, according to Dealogic data, topping both chipmaker Nvidia Corp’s about $40 billion deal to buy chip designer Arm Holdings and nearly $40 billion deal between Nippon Telegraph & Telephone Corp. and a subsidiary, reported by the WSJ.

S&P Global’s shares closed 1.0 4% higher at $341.57 on Friday; the stock is up about 25% so far this year.

S&P Global Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $397.25 with a high forecast of $422.00 and a low forecast of $353.00. The average price target represents a 16.30% increase from the last price of $341.57. From those nine analysts, seven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $411 with a high of $629 under a bull-case scenario and $242 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. UBS raised the price target to $424 from $422. BMO lowered their stock price forecast to $375 from $392. Credit Suisse increased their target price to $405 from $400. Stifel upped the target price to $353 from $351 and Oppenheimer raised the price objective to $399 from $396.

Analyst Comments

“S&P Global’s collection of businesses include a top two ratings agency, a leading index franchise, a market data platform, and a leading commodity pricing provider. It has a wide moat, strong market share, and high margins,” said Toni Kaplan, equity analyst at Morgan Stanley.

“We expect SPGI’s pricing power, the potential for product innovation, global expansion, commercial transformation, and cross-enterprise opportunities will drive an 11% EPS CAGR through 2024 with potential upside from China, Kensho, and ESG,” Kaplan added.

Upside and Downside Risks

Risks to Upside: Better-than-expected debt issuance due to rapid economic recovery. Counter-cyclicality of non-transaction revenue and ERS business could offset weaker issuance. Higher-than-expected synergies from BvD acquisition – highlighted by Morgan Stanley.

Risks to Downside: Greater-than-expected issuance decline due to credit-led recession. Additional industry regulation. Increased share loss to smaller rating agencies in both structured and corporate.

Earnings to Watch Next Week: Zoom, Salesforce.com and Splunk in Focus

Following is a list of company earnings scheduled for release November 30-December 4, along with earnings previews for select companies.

Earnings Calendar For The Week Of November 30

Monday (November 30)

IN THE SPOTLIGHT: ZOOM VIDEO COMMUNICATIONS

Zoom, a cloud video communications provider, is expected to report a profit of $0.57 in the third quarter lower than Q2’s $0.92 as the company is nearing the end of their growth cycle. Zoom’s shares closed 6.28% higher at $471.28 on Friday; the stock is up over 600% so far this year.

“Recent selloff makes some rebound on print more likely as current conditions have not changed. While a vaccine does change the outlook for how many employees will be working from home by the end of 2021, it doesn’t change the fact that in 2020, most employees remain at home (at least for a good portion of the week). While we are cautious on the achievability of long-term growth assumptions built into Zoom’s valuation, we are cognizant that the recent move discounts Zoom’s ability to post a meaningful beat in FQ3,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our expectations for FQ3 and FY21 non-GAAP revenue / EPS are $688.1 million / $0.75 and $2.4 billion / $2.44, respectively. Our revenue forecasts imply 313% Y/Y growth in FQ3 (4% sequentially) and 283% growth for FY21, with quarterly, adds slowing meaningfully in our assumptions from the 102% Q/Q increase in FQ2. In general, we would view our estimates as conservative given churn rates should still be low and ability to sign new customers or expand deployments should be high. We believe a 9% beat is reasonable, at ~$750 million revenue (up 350% Y/Y) and implying 2 million net adds. Given last quarter’s Y/Y growth of 355%, we would note that continued acceleration is possible, which would cause a bigger correction in the name. With the 20% selloff since the peak, we continue to think there could be a correction this print,” Morgan Stanley’s Marshall added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 30

Ticker Company EPS Forecast
NJR New Jersey Resources $0.57
ADNT Adient PLC $0.68
MNTA Momenta Pharmaceuticals -$0.46
ATHM Autohome $6.40
WB Weibo $0.60
BMA Banco Macro $1.30
IMMU Immunomedics -$0.29
EC Ecopetrol $0.15
VIST Vista Oil Gas -$0.19
GPFOY Financiero Inbursa ADR $0.09
MSNFY Minera Frisco ADR $0.05
GCTAY Siemens Gamesa ADR $0.01
AEG Aegon $0.27
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.40
WF Woori Bank $1.57

 

Tuesday (December 1)

IN THE SPOTLIGHT: SALESFORCE.COM

Salesforce.com, an American cloud-based software company headquartered in San Francisco, is expected to report a $0.75 profit in the third quarter with more than 16% growth in revenue to over $5 billion. Salesforce.com’s shares closed 0.32% higher at $247.63 on Friday; the stock is up over 50% so far this year.

“Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Salesforce’s sustained focus on introducing more aligned products as per customer needs is driving it stop-line. Continued deal wins in the international market is another growth driver,” equity analysts at Zacks Research noted.

“Furthermore, the recent acquisition of Tableau positions the company to be a leader in business analytics for actionable results in everything from operations to HR. The stock has outperformed the industry in the past year. However, stiff competition from Oracle and Microsoft is a concern. Besides, unfavourable currency fluctuations along with increasing investments in international expansions and data centers are an overhang on near-term profitability.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 1

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR $0.85
BMO Bank Of Montreal USA $1.46
BNS Scotiabank $0.93
NTAP NetApp $0.73
TCOM Trip.com Group Ltd $1.02
VEEV Veeva Systems $0.68
HPE Hewlett Packard $0.34
BOX BOX $0.14
JRONY Jeronimo Martins $0.45
HOCPY Hoya Corp $0.74
AVAV AeroVironment $0.30

 

Wednesday (December 2)

IN THE SPOTLIGHT: SPLUNK

Splunk, the market leader in analyzing machine data, is expected to report a $0.09 profit in Q3 for the first time in the last three quarters with cloud revenue growth of over 85%. Splunk’s shares closed 2.6% higher at $204.03 on Friday; the stock is up over 35% so far this year.

“Our partner checks show weaker performance vs. last quarter & our gov’t checks also imply weaker growth on tough comps. Combined w/ some GTM changes under new sales leadership & pivot towards Observability & we see a lot of moving parts. We do see the upside to margins & 4Q pipelines sound good, but we feel top-line bookings could be more volatile Q-to-Q. Maintain Market Perform,” said J. Derrick Wood, equity analyst at Cowen and Company.

“For 3Q, we model -27% license growth, cloud growth at 87%, total revenue growth at -1% and ARR growth at 48%. We estimate normalized product bookings growth (ex-perpetual) in the high-teens for 3Q. For 4Q, we model -29% license growth, cloud growth of 86%, total revenue growth of -6% (Street -2%) and ARR growth of 45%,” Derrick Wood added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 2

Ticker Company EPS Forecast
RY Royal Bank Of Canada $1.55
PDCO Patterson Companies $0.38
SNOW Intrawest Resorts -$0.38
CRWD CrowdStrike Holdings Inc. Cl A -$0.15
FIVE Five Below $0.20
SNPS Synopsys $1.56
SMTC Semtech $0.46
PVH PVH $0.18
RH Restoration Hardware $5.31
VRNT Verint Systems $0.60

 

Thursday (December 3)

IN THE SPOTLIGHT: DOLLAR GENERAL, KROGER AND ULTA BEAUTY

Ticker Company EPS Forecast
DG Dollar General $1.98
CM Canadian Imperial Bank Of Commerce USA $1.92
TD Toronto-Dominion Bank $0.97
KR Kroger $0.66
DCI Donaldson $0.45
ULTA Ulta Salon Cosmetics Fragrance $1.44
SAIC Science Applications International $1.53
COO Cooper Companies $3.09
MRVL Marvell Technology $0.25
OLLI Ollies Bargain Outlet Holdings Inc $0.58
CLDR Cloudera Inc. -$0.04
DOCU DocuSign Inc. -$0.23
YEXT Yext Inc. -$0.22
MDLA Medallia, Inc. -$0.18
PD PagerDuty Inc. -$0.20
FIZZ National Beverage $0.93

 

Friday (December 4)

No major earnings scheduled for release.

COVID-19 Vaccine Update – Focus Shifts to Pre-orders and Distribution

Government Pre-Orders

Following the positive COVID-19 vaccine news in recent weeks, the focus has now shifted to vaccine distribution.

The Pfizer Inc. and BioNTech partnership continue to lead the way. They have made progress towards the required emergency approval and distribution.

Unsurprisingly, the wealthier countries have made pre-orders of COVID-19 vaccines that could leave 3rd world countries waiting on a vaccine for some time.

According to recent reports, the U.S, the UK, Japan, and Canada have over-ordered enough vaccine doses.

The Duke Global Health Innovation Center has released a breakdown of pre-ordered vaccines by country.  It doesn’t bode well for many nations.

Pre-Orders

Focussing purely on the 3 front runners, Pfizer Inc., Moderna Inc., and AstraZeneca, pre-orders are as follows:

  • The EU – 700 million doses: Pfizer Inc. (300 million) and AstraZeneca (400 million).
  • The US – 700 million doses: Pfizer Inc. (100 million); Moderna Inc., (100 million); and AstraZeneca (500 million). The U.S Government also has the option to order an additional 500 million doses from Pfizer Inc.
  • India – 500 million: AstraZeneca (500 million)
  • Japan – 290 million: Pfizer Inc. (120 million); Moderna Inc. (50 million); and AstraZeneca (120 million).
  • The UK – 145 million: Pfizer Inc. (40 million); Moderna Inc. (5 million); and AstraZeneca (100 million).
  • Indonesia – 100 million: AstraZeneca (100 million).
  • Brazil – 100 million: AstraZeneca (100 million).
  • Canada – 96 million: Pfizer Inc. (20 million); Moderna Inc. (56 million); and AstraZeneca (20 million).
  • Australia – 43.8 million: Pfizer Inc. (10 million) and AstraZeneca (33.8 million).
  • Egypt – 30 million: AstraZeneca (30 million).
  • Chile – 24.4 million: Pfizer Inc. (10 million) and AstraZeneca (14.4 million).
  • Argentina – 22 million: AstraZeneca (22 million).
  • Peru – 9.9 million: Pfizer Inc. (9.9 million).

Population Coverage

Based on these figures and assuming that all three vaccines receive approvals by the respective countries, Canada would have 127.7% population coverage. As previously mentioned, Japan (114.6%), the UK (108.7%), and the U.S (106.6%) have also ordered doses in excess of population numbers.

Other countries, however, fall short of the 100% mark. While Australia (87.6%) and the EU (78.2%) aren’t far off, other nations come woefully short.

Badly affected Brazil has only pre-ordered enough to inoculate 23.9% of the population. India, which has the 2nd highest number of cases, has pre-ordered equivalent to just 18.5% of the population.

Possible Outcomes

Governments of poorer nations are unable to pre-order in sizeable numbers. Additionally, poorer nations have looked to take advantage of AstraZeneca’s no profit pledge.

Many nations, therefore, have only pre-ordered from a single pharma. This could leave them without an effective vaccine should emergency approvals not be forthcoming.

The U.S, the UK, Japan, and Canada have spread their pre-orders across the 3 pharmas to avoid such an eventuality.

Other nations have not, with a number of highly populated, but poorer nations, placing orders only with AstraZeneca.

Last week’s concerns over AstraZeneca’s clinical trial results was all the more alarming when considering the demand for AstraZeneca’s vaccine.

In the wake of last week’s bad press, however, news has hit the wires that AstraZeneca is addressing issues raised.

AstraZeneca has announced that the vaccine will undergo a new global trial to address the concerns raised. That means, however, that any FDA approval will likely be delayed.

By contrast, the UK government has submitted a request to the MHRA to being the approval process. The AstraZeneca and University of Oxford partnership is a British bid to deliver a vaccine. A significantly lower price per dose and the ability to transport the vaccine at higher temperatures has driven demand from countries around the world. Failure to deliver will leave many nations without, which could lead to quite dire consequences.

It goes without saying that not all agencies responsible for approving vaccines are as strict as the likes of the FDA. That will be of some comfort for poorer nations.

Without the AstraZeneca Vaccine

For Britain and the U.S, removing AstraZeneca’s pre-orders would leave both short of inoculating their entire populations. The same is the case for Japan. In fact, only Canada would still have pre-orders that exceed the total population if AstraZeneca’s vaccine does not receive approval.

Things are far worse for countries such as Indonesia, India, and Brazil, however. These nations have only placed pre-orders with AstraZeneca.

The cost of both Pfizer Inc. and Moderna Inc.’s vaccines are significantly higher than that of AstraZeneca. This would likely lead to far lower vaccine coverage and leave the respective countries at the mercy of COVID-19. Only the wealthier population of these countries will be in a position to pay for the Pfizer Inc. vaccine for example.

As previously stated, Brazil has only pre-ordered doses to inoculate 23.9% of the population. India, which has the 2nd highest number of cases has pre-ordered equivalent to just 18.5% of the population. Indonesia has an 18.7% coverage, with pre-orders also only placed with AstraZeneca.

The Latest COVID-19 Numbers

Looking at the latest COVID-19 numbers, it begins to paint quite a grim picture.

At the time of writing, the total number of COVID-19 cases worldwide stood at 61,988,655. The U.S alone accounted for 13,454,346 cases, with cases in Brazil and India standing at 6,238,350 and 9,351,224 respectively.

Looking at the most affected EU member states, France, Spain, Italy, and Germany had a combined 6,407,853 cases.

When you include the UK’s 1,589,301, the total cases the total number of cases get much closer to 10 million.

Containment measures across the EU member states and the UK, however, have seen the number of new cases slow.

For the U.S, however, new cases continue to surge as is the case in other parts of the world.

Looking Ahead

As the markets continue to look ahead to the FDA meeting on 10th December, the AstraZeneca situation does also need consideration.

A delayed distribution of AstraZeneca’s vaccine to countries that have placed pre-orders will extend the lifespan of COVID-19.

New cases continue to surge. This had resulted in governments maintaining or reintroducing containment measures.

An extended containment period, due to the unavailability of an effective vaccine, will have even more catastrophic effects on the economies of nations awaiting the AstraZeneca vaccine.

The damage would not just be an economic one. The social impact could also be dire and may lead to more social and civil unrest.

It is, therefore, in the interest of all nations to support AstraZeneca’s global trial so that the pandemic does not continue to wreak havoc across the globe.

Focus Shifts to Speed of Recovery After Autodesk’s Upbeat Q3 Earnings; Target Price $290

Autodesk, an American multinational software corporation, reported better-than-expected earnings in the third quarter, largely driven by a recovery in subscription renewal rates, sending its shares up about 2% in pre-market trading on Friday.

The software company said its total revenue increased 13% to $952 million; GAAP operating margin was 18%, up 5 percentage points; Non-GAAP operating margin was 30%, up 3 percentage points; GAAP diluted EPS was $0.59; Non-GAAP diluted EPS was $1.04, beating market expectations of $0.96.

“Despite another great quarter for Autodesk, the company warned of the lagged effects they expect in fiscal 2022 as a result of the nature of subscription revenue recognition. While we previously had factored in such a lag, the effect is greater than we expected, moderating our fiscal 2022 expectations. Considering the rosy third-quarter results sobered by what could be an anomalous 2022 ahead, we are maintaining our fair value estimate of $198 per share for wide-moat Autodesk,” said Julie Bhusal Sharma, equity analyst at Morningstar.

“Share have remained flat upon news of the quarter, leaving shares trading at $258 per share. As a result, we continue to believe Autodesk is overvalued. Nonetheless, we reiterate our continued belief that Autodesk has built an extremely moaty company which we think will be well protected in the future,” Morningstar’s Sharma.

Autodesk’s shares closed 4.74% higher at $271.24 on Wednesday; the stock is up about 50% so far this year.

Autodesk Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $290.67 with a high forecast of $310.00 and a low forecast of $266.00. The average price target represents a 7.16% increase from the last price of $271.24. From those 13 analysts, 11 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $266 with a high of $370 under a bull-case scenario and $193 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the software company’s stock.

“An acceleration to +18% cRPO bookings growth likely suggests the worst is behind Autodesk. While our reseller checks and management commentary suggest a more gradual recovery thru FY22, greater confidence in durable 20%+ FCF growth into and through FY23 could drive a re-rating in the stock,” said Keith Weiss, equity analyst at Morgan Stanley

Several other analysts have also upgraded their stock outlook. Autodesk had its price target hoisted by equities research analysts at Credit Suisse Group to $275 from $265. The brokerage currently has an “outperform” rating on the software company’s stock. Mizuho upped their target price to $290 from $280 and gave the company a “buy” rating. Barclays increased their price objective to $295 from $283 and gave the company an “overweight” rating.

Analyst Comments

“The subscription transition (now largely complete) has significantly reduced volatility in earnings, which has driven the multiple higher. Additionally, Autodesk has found multiple avenues to better monetize a sticky customer base. However, long-standing debates on the longer-term sustainable growth, higher macro sensitivity and quality of near-term FCF likely limit further multiple expansion NT, leaving us EW on ADSK,” said Keith Weiss, equity analyst at Morgan Stanley.

“Our long-term model forecasts $9.80 in FCF/share by FY23 and $14.24 by FY26, applying a 25X EV/FCF multiple against this FCF and discounting back at 11.3% drives our $266 price target. Our applied 25X multiple is in line with design software peers,” Weiss added.

Upside and Downside Risks

Risks to Upside: Improved monetization of the customer base and reduction of piracy drives better than expected top-line growth. Secular opportunities within newer markets like Field Construction drives higher Cloud ARR growth – highlighted by Morgan Stanley.

Risks to Downside: High correlation to the global macro environment given a high dependence on construction and manufacturing industries. The increased investment is necessary to enter new markets pressures margins.

Check out FX Empire’s earnings calendar

Daily Gold News: Gold’s Low Volatility Following Recent Declines

The gold futures contract gained 0.05% on Wednesday, as it fluctuated following Monday’s sell-off after breaking below the recent local lows along the price level of $1,850. More than two weeks ago on Monday gold sold off 5% in one day after global financial markets’ euphoria rally in reaction to Covid-19 Pfizer’s vaccine news release. The yellow metal came back down to $1,850 price level. And on Monday there has been a breakdown below that support level, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold is 0.2% lower this morning, as it is trading within a short-term consolidation. What about the other precious metals? Silver gained 0.27% on Wednesday and today it is 0.6% lower. Platinum gained 1.20% and today it is 0.9% lower. Palladium gained 0.53% on Wednesday and today it’s 0.4% lower. So precious metals are lower this morning .

Wednesday’s Preliminary GDP release has been as expected at +33.1% (q/q). And the Unemployment Claims number has been slightly worse than expected at 778,000.

There will be no new important economic data releases today, and trading hours will be shorter due to Thanksgiving long weekend.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Salesforce.com in Advanced Talks to Buy Workplace Communication App Slack; Shares Down Over 5%

Salesforce.com Inc, an American cloud-based software company headquartered in San Francisco, is in advance talks to buy workplace messaging application Slack Technologies, according to the Wall Street Journal.

“Strategically, this would be a sound acquisition for Salesforce, as it would add serious direct exposure to collaboration and the remote work movement, large and rapidly growing markets that the company indirectly participates in, and would allow for yet another connection between Salesforce and its customers. We stress that no deal has been formally announced, so obviously, there are no deal metrics to consider,” said Dan Romanoff, equity analyst Morningstar.

“The reports have sent shares of Slack up more than 20% intraday while weighing on Salesforce shares by approximately 3%. With Slack’s market cap at $21 billion now, the deal would likely be the largest ever for Salesforce in terms of dollars. However, it would be smaller than Salesforces’ June 2019 Tableau deal announcement in terms of percentage of market cap, with Slack currently at 9% of Salesforce’s market cap, compared with 13% for the Tableau deal. For now, we are maintaining our fair value estimates of $253 for Salesforce and $20 for Slack,” Morningstar’s Romanoff.

Salesforce.com’s shares closed 5.37% lower at $246.82 on Wednesday. However, the stock is up over 50% so far this year.

Salesforce.com Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $292.20 with a high forecast of $325.00 and a low forecast of $234.00. The average price target represents an 18.39% increase from the last price of $246.82. From those 16 analysts, 14 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $332 under a bull-case scenario and $187 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the enterprise cloud computing solutions leader’s stock.

“CRM is down 5% after Wall Street Journal reported Salesforce is in advanced talks to buy Slack. At the current $23B valuations (21x EV/ NTM sales), the deal would be CRM’s largest yet and likely dilutive. While WORK can give CRM a boost in collaboration tools, MSFT competition remains a key risk,” said Keith Weiss, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Salesforce.com has been given a $275 price target by The Goldman Sachs Group. The brokerage currently has a “buy” rating on the CRM provider’s stock. Bernstein restated a “neutral” rating and set a $234 price target. Barclays boosted their price target to $315 from $264 and gave the stock an “overweight” rating.

Analyst Comments

“While Salesforce.com (CRM) remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains within an estimated $175 billion TAM over the next 4 years and >$200 billion longer-term,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see total revenue nearly doubling by FY24, but at CRM’s current scale and market cap, an increasing focus on FCF and earnings is likely necessary for further price appreciation. Our Equal-weight view on CRM shares is based on our $275 PT, which is based on 30X our CY25e FCF per share of $12.07, discounted back at 8.5%,” Weiss added.

Upside and Downside Risks

Risks to Upside: Slack Connect becomes a powerful contributor to net new customer additions. Net dollar retention rate stabilizes as new COVID-19 customers begin to meaningfully expand – highlighted by Morgan Stanley.

Risks to Downside: Competition from Microsoft, which offers a similar product for free to Office 365 users; Difficulty expanding outside of the IT department; Organizations defer to a bundled alternative (MSFT Teams, Google Workspace) in a weaker macro.

Biden and Yellen Pushed Gold to $1,800

Whoa! Tuesday, November 24 wasn’t too good for gold. The price of the yellow metal plunged then from $1,840 to $1,800. Actually, November was an awful month for gold prices, which dropped from a local peak of $1,941, or more than 7 percent.

So, what happened? Well, it seems that the positive news of the vaccines eliminated the negative tail-risk related to the pandemic. In consequence, the safe-haven demand for gold declined . On the other hand, the price of Bitcoin has jumped recently as investors increased their risk appetites. Moreover, the elections results also reduced the uncertainty in the marketplace. In other words, the economic outlook is improving as the uncertainty clouds begin to part.

Indeed, this week President-elect Joe Biden announced the beginning of a formal transition of power from Trump’s administration to his. Biden also started to announce nominations for top positions, which served to reduce the risk that a contested election had for uncertainty among investors.

In particular, there are rumors that Biden is likely to tap former Fed Chief Janet Yellen to become the next Treasury secretary. Investors know her and trust her, so they welcomed the possibility of her nomination for a key position in the new administration. Indeed, Yellen is well-known and well-respected, while having the knowledge and skills necessary for the position (although she has more experience in monetary policy than fiscal policy ).

Moreover, Yellen, who is seen as a dovish person , is believed to be supportive of bigger government economic aid in order to stimulate the economy and recover quickly from the coronavirus crisis . Actually, she has for some time been calling for increased government spending to help combat the recession and has always been concerned about the labor markets, low participation rates and high unemployment. As well, as the former Fed Chief, Yellen will closely cooperate with the US central bank and will listen to the Fed’s calls for a fiscal package. She will, therefore, help sustain high government expenditure to assure that the labor market is recovering.

Implications for Gold

What does it all mean for the gold market? Well, the recent plunge in the gold market is disturbing. Some declines are perfectly understandable as the uncertainty related both to the pandemic and elections diminished. However, the divergence between equities and gold in their reaction to higher odds of more economic stimulus is bad news for the precious metals market. The return of normalcy in the marketplace and resulting strengthened risk appetite could make gold struggle for a while , especially if the real interest rates increase.

You see, the coronavirus crisis was very deep but short-lived and the return to normalcy has to arrive earlier than it did after the Great Recession . However, I don’t think that we will experience a replay of 2013 yet. The risk appetite increased, but the monetary and fiscal policies are still far from normalization. There is, of course, the risk of an increase in the interest rates, but the Fed will actively try to suppress the interest rates as long as it will not see inflation above two percent.

However, the long-term fundamentals haven’t significantly changed. The real interest rates actually remain deep below zero while the U.S. dollar remains weak. These factors should support gold prices and the expanding public debt should also help the yellow metal. Investors also shouldn’t forget about the possibility of a debt crisis or the risk of accelerating inflation when the epidemic ends and people increase their spending.

In other words, the ongoing fiscal and monetary stimulus should support or even push gold prices higher in the medium to long-run. It’s possible that, when confronted with the lack of a fiscal package, the Fed will introduce some changes at its upcoming meeting in December to keep the real interest rates at ultra low levels and to stimulate the economy.

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For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

COVID-19 Vaccine Update – AstraZeneca Leaves the Door Ajar for Other Pharmas

AstraZeneca and the University of Oxford

At the start of the week, yet more good news greeted the markets on the COVID-19 vaccine front.

AstraZeneca, teamed with the University of Oxford, announced an efficacy rate of 90% from phase 3 trials.

The devil was in the details, however. Efficacy rates varied depending upon the dosage regimen chosen. The average efficacy rate from the combined regimens was actually 70%.

While this was a particularly weak result, one dosage regiment did deliver a 90% efficacy rate. The dosage regimen would require a half does and then a full dose at least one month apart.

Of greater significance was the reported cost of production of the vaccine. Having already stated that there would be no profits derived from the vaccine, the vaccine is reportedly cheaper than a British cup of coffee.

By comparison, AstraZeneca’s dose is reported to cost around $2.50. Pfizer Inc.’s vaccine is expected to cost around $20 per dose and Moderna Inc.’s between $15 and $25.

Perhaps of even greater significance is the fact the vaccine can be stored at between 36F and 46F.

For Pfizer Inc. and Moderna Inc., the vaccine needs to be stored at particularly low temperatures that increase storage and transportation costs. Storage temperatures of as low as -90F for Pfizer Inc.’s vaccine also raise questions over global delivery.

Back in the Press but for the Wrong Reasons

Following the positive results from earlier in the week, AstraZeneca and the University of Oxford are back in the press. This time around, however, it’s for all the wrong reasons.

Questions have been raised over the vaccine trial methodology. Reports have surfaced that the dosage regimen delivering an efficacy rate of 90% excluding trial participants over the age of 55.

This means that AstraZeneca only included the “most at risk” in the 2nd dosage regiment that resulted in an efficacy rate of just 62%.

Also of concern is the fact that the efficacy rates varied by such a large degree depending upon dosage regimen. A half dose followed by a full dose delivered better results that raised further question markets over clinical trial parameters.

In terms of credibility, things couldn’t get much worse for the partnership. The more effective half dose/full dose regimen was actually in error.

The loss of credibility and lack of trial data for the over 55s in the 90% efficacy rate dose regimen raises too many unknowns for government agencies such as the FDA to approve a EUA.

It’s therefore unsurprising that AstraZeneca has seen its share price fall from a Monday high £83.24 to a Wednesday low £78.00. That’s a 6.3% slide peak to trough in response to the negative news. On Wednesday, AstraZeneca ended the day at £78.08.

The Latest COVID-19 Numbers

At the time of writing, the total number of COVID-19 cases worldwide stood at 60,719,957. The U.S alone accounted for 13,137,692 cases, with India accounting for 9,266,705.

Looking at the most affected EU member states, France, Spain, Italy, and Germany had a combined 6,257,334 total number of cases. Back in mid-September, the 4 member states had a combined total of less than 1 million.

When you include the UK’s 1,557,007 total cases the total number of cases gets much closer to the 10 million mark.

Containment measures across the EU member states and the UK, however, should see the number begin to plateau.

For now, it is a different story for the U.S, which has yet to reintroduce nationwide containment measures.

When considering the U.S numbers, both Pfizer Inc. and Moderna Inc. will likely be inoculating the U.S before many other nations.

Looking Ahead

The markets are now in wait-and-see mode, as the FDA prepares to review clinical trial results on 10th December.

Between now and then, updates on production capacity and logistics will be watched closely.

There is one other factor for the markets to consider, however.

Governments have preordered from Pfizer Inc. and Moderna Inc. and other pharmas. When considering the size of orders from both the U.S and from the EU and Japan, it may take some time for vaccines to reach other countries.

This could lead to a global economic decoupling, which would raise questions over the market optimism of a 1st quarter economic rebound.

The Department of Health and Human Services and the Department of Defense have reportedly ordered 100 million doses of the Pfizer Inc. and BioNTech SE vaccine. An option for an additional 500 million doses is also available.

The EU has reportedly pre-ordered 200 million doses of Pfizer Inc.’s vaccine.

Pfizer Inc. has reportedly announced plans to produce 50 million doses by the end of this year. The company then has a target of producing 1.3 billion doses for next year.

Pre-orders for Pfizer Inc. alone, alongside manufacturing targets, certainly suggest the need for 2 or even 3 other vaccines.

With AstraZeneca and the University of Oxford vaccine trial results now in question, the door is now ajar for the likes of Johnson & Johnson and Novavax to play catch up.

As mentioned earlier, once the emergency approvals are in place, vaccine production will be the next area of focus.

Deere Earnings Beat Wall Street Estimates; Forecasts Net Income Between $3.6-4.0 Billion for FY2021

Deere & Company, the world’s largest makers of farm equipment, reported better-than-expected earnings in the fourth quarter as demand for farm machines bounced on higher crop prices and government subsidy payments.

Agricultural, construction and forestry equipment manufacturer reported net income of $757 million for the fourth quarter ended November 1, 2020, or $2.39 per share, beating market expectations of $1.55 per share, up compared with net income of $722 million, or $2.27 per share, same period last year.

“The coronavirus pandemic was undoubtedly a headwind for Deere in fiscal 2020, but the company managed to post resilient operating margins in the fourth quarter, largely due to cost-cutting and solid pricing. We are raising our fair value estimate to $187 per share from $183 due to a more favourable near-term outlook than we previously modelled. In fiscal 2021, we expect Deere’s top-line to grow by roughly 10% compared with 2020,” said Brian Bernard, sector director at Morningstar.

“We expect Deere will benefit from increased investment from its dealer network over our forecast, resulting in 3% average sales growth from 2021-2025,” Bernard added.

For fiscal 2020, net income attributable to Deere & Company was $2.751 billion, or $8.69 per share, compared with $3.253 billion, or $10.15 per share, in 2019. Worldwide net sales and revenues decreased 2%, to $9.731 billion, for the fourth quarter of 2020 and declined 9%, to $35.540 billion, for the full year.

However, uncertainties regarding supply constraints as well as labour force availability due to the ongoing COVID-19 pandemic could negatively affect the company’s results and financial position in the future.

Deere’s shares closed 1.94% lower at $256.43 on Wednesday amid a weak broader market. However, the stock is down about 50% so far this year.

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $3.6 billion to $4.0 billion. In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to John C. May. That forecast is higher than the Wall Street estimate of $3.3 billion.

Executive Comments

“Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment. At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers’ operations,” said John C. May, chairman and chief executive officer.

Deere Stores Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $254.70 with a high forecast of $285.00 and a low forecast of $220.00. The average price target represents a -0.67% decrease from the last price of $256.43. From those ten analysts, four rated “Buy”, five rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $335 with a high of $467 under a bull-case scenario and $134 under the worst-case scenario. The firm currently has an “Overweight” rating on agricultural equipment manufacturer’s stock.

Several other analysts have also upgraded their stock outlook. Deere & Company had its price objective raised by Robert W. Baird to $281 from $250. The brokerage currently has an outperform rating on the industrial products company’s stock. Deutsche Bank raised their price target to $244 from $227 and gave the stock a hold rating. BMO Capital Markets increased their price objective to $235 from $150 and gave the stock an outperform rating.

Analyst Comments

“Deere is one of the highest quality, most defensive names within the broader Machinery universe, given a historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” said Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in Deere’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group,” Yakavonis added.

Upside and Downside Risks

Risks to Upside: 1) Recovery in commodity prices and US cash receipts. 2) Better than expected margin improvement efforts. 3) US infrastructure bills pass, driving outsized C&F growth – highlighted by Morgan Stanley.

Risks to Downside: 1) Commodity prices truncate ongoing replacement cycle. 2) Excess Used inventories limit pricing power and demand pull-through. 3) Mis-execution around 15% operating margin target. 4) Supply chain woes and price/material headwinds persist.

Check out FX Empire’s earnings calendar

Daily Gold News: Volatility Dropping Ahead of Thanksgiving Holiday

The gold futures contract lost 1.81% on Tuesday, as it extended its Monday’s sell-off following breaking below the recent local lows along the price level of $1,850. Two weeks ago on Monday gold sold off 5% in one day after global financial markets’ euphoria rally in reaction to Covid-19 Pfizer’s vaccine news release. The yellow metal came back down to $1,850 price level. And on Monday there has been a breakdown below that support level, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold is 0.3% higher this morning, as it is retracing some of the recent declines. What about the other precious metals? Silver lost 1.41% on Tuesday and today it is 0.5% higher. Platinum gained 2.85% and today it is 0.7% lower. Palladium lost 0.07% yesterday and today it’s 0.9% lower. So precious metals are mixed this morning .

Yesterday’s Consumer Confidence release has been slightly worse than expected at 96.1. Today we will get the Preliminary GDP and the FOMC Meeting Minutes releases, among others.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Wednesday, November 25

  • 4:00 a.m. Eurozone – ECB Financial Stability Review
  • 8:30 a.m. U.S. – Preliminary GDP q/q , Unemployment Claims, Durable Goods Orders m/m, Core Durable Goods Orders m/m, Goods Trade Balance, Preliminary GDP Price Index q/q, Preliminary Wholesale Inventories m/m
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations, Personal Income m/m, Personal Spending m/m, Core PCE Price Index m/m, New Home Sales
  • 2:00 p.m. U.S. – FOMC Meeting Minutes

Thursday, November 26

  • All Day, U.S. – Bank Holiday

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.
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Disclaimer

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