S&P 500 (SPY) Remains Mixed In Choppy Trading

Key Insights

  • Stocks are swinging between gains and losses at the start of the week. 
  • Healthcare stocks got hit after Joe Biden declared that pandemic was over. 
  • Energy stocks rebound from session lows as oil markets recover after sell-off. 

Healthcare Stocks Dive After Biden’s Comments On The Pandemic

S&P 500 continues its attempts to settle below 3850 as Treasury yields keep moving higher ahead of the Fed Interest Rate Decision. Traders prepare for an aggressive Fed, and the yield of 2-year Treasuries is trying to settle above the 3.95% level.

It should be noted that today’s pullback is not broad. Healthcare stocks are the worst performers today as U.S. President Joe Biden said that pandemic was over. Moderna stock was down by almost 10% while Pfizer lost 2% in today’s trading.

Big tech stocks show mixed performance. Apple rebounds after the recent setll-off, while Microsoft is testing new lows.

Energy stocks rebounded from session lows together with oil markets. However, leading energy stocks like Exxon Mobil and Chevron have not managed to get back to the positive territory.

Trading will likely remain nervous ahead of the Fed decision. Markets have probably priced in a 75 bps rate hike, and the key question is whether Fed Chair Jerome Powell sends a hawkish signal.

At this point, traders are worried that aggressive rate hikes will push the economy into a real recession, which is accompanied by job losses and reduced profits for corporations. In this light, the market will be extremely sensitive to Powell’s comments.

Support At 3850 Stays Strong

S&P 500

S&P 500 settled below the 3885 level and continues to test the support at 3850. RSI remains in the positive territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

If S&P 500 mananges to settle below 3850, it will head towards the next support level at 3825. A successful test of this level will open the way to the test of the next support at 3800.

On the upside, the nearest resistance level for S&P 500 is located at 3885. If S&P 500 climbs back above this level, it will head towards the next resistance at 3900. A move above 3900 will push S&P 500 towards the resistance at 3920.

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

Best Healthcare Stocks To Buy In May

Key Insights

  • Pfizer and Merck are moving higher amid rising demand for safe-haven assets, which is bullish for leading healthcare stocks. 
  • Both companies are trading at attractive valuation levels. 
  • Analyst estimates for Merck have recently moved higher and pushed the stock to all-time high levels. 

Investors continue to search for potential safe-haven assets as S&P 500 is trading close to yearly lows. In this environment, healthcare stocks may get additional support. In fact, some healthcare stocks, like Pfizer, have recently gained upside momentum.

Pfizer

Pfizer stock has recently managed to settle back above the $50 level and developed strong upside momentum. The company is expected to report earnings of $6.79 per share in the current year and earnings of $5.33 per share in the next year, sot the stock is trading at 10 forward P/E.

Earnings estimates have been moving lower in recent weeks, which is typically bearish for the stock. However, Pfizer’s attractive valuation and rising demand for safe-haven assets have served as positive catalysts for the company’s shares. In case demand for safe-haven assets remains strong, Pfizer stock will likely move higher.

Merck

Merck is another example of a healthcare stock that is moving higher due to attractive valuation and rising demand for safe-haven assets.

At the end of April, the company released its quarterly report, which served as a bullish catalyst for the stock. Merck reported revenue of $15.9 billion and adjusted earnings of $2.14 per share, easily beating analyst estimates on both earnings and revenue.

Currently, the stock is trading at roughly 13 forward P/E. It should be noted that analyst estimates have been moving higher in recent weeks, which provided additional support to Merck stock.  The company’s shares have recently tested all-time high levels, and it looks that Merck stock has a good chance to continue the current trend.

To keep up with the latest earnings updates, visit our earnings calendar.

Best Defensive ETFs to Buy Now for May 2022

One way investors handle these conditions is by getting defensive – sometimes the best offense is a good defense. So, today I want to highlight defensive ETF opportunities. The focus will be on great companies that sell what’s in demand, regardless of economic conditions. Typically, that means bigger firms with solid balance sheets and cash on hand to pay dividends.

Markets and Big Money in the Last Six Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets. In fact, we created the Big Money Index (BMI), which measures large-scale investor activity and is a gauge of the market’s past and future (the BMI tends to lead markets). It’s nosedived recently:

That’s due to heavy selling and an absence of buying:

Chart Description automatically generated

These conditions are making investors play defense. As such, we’ve identified some defensive ETFs we think have good current prospects as well as solid long-term potential: MLPA, XYLD, VDE, SCHD, and HDV. Blended together at equal weight, a portfolio of these ETFs would pay a dividend yield of 5.3%.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best defensive ETF opportunities for May 2022.

Global X MLP ETF (MLPA) Analysis

This ETF focuses on master limited partnerships or MLPs. It offers the benefits of investing in MLPs (like favorable tax treatment) along with the ease and liquidity of an exchange-traded product. MLPA offers a current 7.3% dividend yield, which is enticing, and is full of solid energy companies.

MLPA holds several powerhouse stocks. One example is Energy Transfer LP (ET), which is up 37% this year, grew sales in a year by 73.1%, and has a profit margin of 8.1%. Here are Big Money signals for ET:

Global X S&P 500 Covered Call ETF (XYLD) Analysis

What makes XYLD special is it uses a “covered call” strategy. A simple way to think of it is earning dividends on dividends. This ETF holds a nice mix of growth names for tomorrow and household names of today, plus it pays a nearly 9.6% dividend yield.

One great stock XYLD holds is Tesla Inc. (TSLA). It’s a long-time Big Money favorite with fantastic fundamentals, including a 10.3% profit margin, 3-year EPS growth of 336.2%, and 3-year sales growth of 37.8%. As the multi-year chart below shows, it’s been a growing giant for a while:

Vanguard Energy Index Fund (VDE) Analysis

The energy sector has been red hot for a while now. But just as geopolitical situations can move markets up, they can also move them down, and that’s happened in energy recently. We can see that in VDE below. Still, there are tailwinds like inflation and global energy needs, so there’s still a bullish outlook. Don’t forget the dividends either – VDE pays a 3.2% current dividend.

This ETF holds the big energy producers we’ve come to know, including Exxon Mobil Corporation (XOM), which is a dividend cash cow that’s been on a tear recently. The company has a one-year sales growth rate of 57.4% with a profit margin of 8.2%. It’s also been a Top 20 Big Money buy for years:

Schwab U.S. Dividend Equity ETF (SCHD) Analysis

If the best offense is a good defense, then SCHD is a stalwart because it’s long on defensive positions, especially great dividend stocks. It pays a current 2.9% dividend yield, saw big buying in early 2022, and could see more as people flock to defensive investments:

A great dividend stock within this ETF is Pfizer Inc. (PFE), a profitable healthcare company (27.6% profit margin) with growing sales (3-year sales growth rate of 23.8%) that’s been a Big Money magnet. The multiyear chart below shows lots of Big Money buying:

iShares Core High Dividend ETF (HDV) Analysis

This is another strong dividend play as this ETF has been trucking along this year, despite headwinds and uncertainty. HDV holds household names with strong balance sheets and attractive dividend payments. It also pays a current 3.2% dividend, which is a likely reason it’s attracting Big Money buys:

A fantastic stock in HDV is Johnson & Johnson (JNJ), the healthcare giant. It’s a steady large-cap stock that has paid dividends for years. The fundamentals look good too as it’s profitable (22.3% profit margin), grew sales recently (1-year sales growth of 13.5%), and has rising earnings (3-year EPS growth of 13.3%). That’s probably why Big Money has been all over it for years:

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a great opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

 

MLPA, XYLD, VDE, SCHD, and HDV are my top defensive ETFs for May 2022. I believe these funds can rise higher in rough environments primarily because they hold great defensive stocks. These ETFs feature solid balance sheets and attractive dividend yields, so they’re high quality and battle tested.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in MLPA, XYLD, VDE, SCHD, HDV, ET, TSLA, XOM, PFE, or JNJ in managed or personal accounts at the time of publication.

Contact:

https://mapsignals.com/contact/

Best Healthcare Stocks To Buy Now

Key Insights

  • Some healthcare stocks have outperformed S&P 500 this year amid rising demand for safe-haven assets. 
  • Johnson & Johnson has recently tested all-time highs and remains reasonably valued. 
  • While some healthcare stocks look rather expensive, Pfizer could be bought at less than 10 forward P/E. 

Recent trading sessions have been volatile, and investors continue to search for safe-haven assets. Healthcare stocks have often served in this role, so let’s take a look at the leaders in this market segment.

Johnson & Johnson

A traditional “widow-and-orphan” stock, Johnson & Johnson is trading near all-time highs despite the recent pullback of S&P 500.

The stock is trading at roughly 17 forward P/E, which is not cheap for an established company. However, the current valuation reflects the high demand for Johnson & Johnson stock and its safe dividend.

It should be noted that analyst estimates have started to move lower in recent weeks, but these changes failed to put any pressure on Johnson & Johnson.

Eli Lilly

Eli Lilly is more expensive than Johnson & Johnson. The stock has pulled back from recent highs, but it is still trading at an expensive 31 forward P/E.

The market is ready to pay a premium for Eli Lilly stock as earnings estimates are increasing at a robust pace. The potential increase of demand for safe-haven assets could provide more support to Eli Lilly shares.

Pfizer

Pfizer stock has lost momentum in recent months as traders focused on the weaker-than-expected demand for the company’s antiviral drug Paxlovid. In addition, all vaccine stocks have found themselves under pressure as traders believed that the acute phase of the coronavirus pandemic was coming to an end.

However, Pfizer is not a one trick pony, and its revenue base is stable. Currently, analysts expect that Pfizer will report earnings of $5.58 per share in the next year, so the stock is trading at less than 9 forward P/E. Such valuation levels could attract value-oriented investors.

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

Pfizer Is Under Pressure Today, Here Is Why

Key Insights

  • Reuters reported that demand for Paxlovid lagged estimates. 
  • Pfizer’s coronavirus drug was expected to boost the company’s financial performance. 
  • Earnings estimates have started to move lower, which is bearish for Pfizer shares. 

Pfizer Stock Falls As Report Indicates That Demand For Paxlovid Is Weaker Than Expected

Shares of Pfizer gained downside momentum after a Reuters report indicated that demand for the company’s antiviral drug Paxlovid was lower than previously expected.

The report noted that factors like reduced testing and the spread of Omicron, which is believed to be less severe than Delta, contributed to the decline in demand for Paxlovid.

Previously, markets thought that Paxlovid would be a material contributor to Pfizer’s bottom line. However, it looks that analysts will have to adjust their forecasts after the new report. Not surprisingly, Pfizer shares found themselves under pressure after the Reuters report was released.

What’s Next For Pfizer Stock?

Analysts expect that Pfizer will report earnings of $7.23 per share in the current year and earnings of $5.69 per share in the next year, so the stock is trading at 9 forward P/E.

It should be noted that analyst estimates have started to move lower in recent weeks as analysts began to adjust their demand forcasts for coronavirus vaccines and treatments.

While Pfizer stock looks cheap at current valuation levels, it remains to be seen whether speculative traders will rush to buy the stock in the current situation.

Earnings are expected to decline, and earnings estimates may move even lower in case sales of Paxlovid are weak as the Reuters report suggests.

If analyst estimates continue to move lower in the upcoming weeks, Pfizer stock could find itself under more pressure and move closer to yearly lows near the $45.50 level.

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

Pfizer Nears Long-Term Buying Opportunity

Dow component Pfizer Inc. (PFE) is trading near a four-month low on Wednesday, continuing to lose ground despite a 25% haircut since posting an all-time high at 61.71 in December. The selloff has coincided with an even larger Moderna Inc. (MRNA) decline, driven by crashing infection numbers and the emergence of protein-based vaccines that are better suited to worldwide distribution because they don’t require storage at low temperatures.

Paxlovid Profit Potential

Even so, Pfizer investors are well-positioned due to the rollout of the Paxlovid anti-viral drug, which should become the treatment of choice in the Western world in coming months.  On Tuesday, the Biden administration announced the drug will be free for Americans if they test positive at a local pharmacy. The program is now being rolled out at hundreds of sites, including pharmacy departments at Kroger Company (KR), CVS Health Corp. (CVS) and Walgreen-Boots Alliance Inc. (WBA) Inc.

Jefferies just sounded the alarm about protein based vaccines and their impact on PFE profits, with strategist Will Sevush cautioning “This is bad for mRNA. This is bad for Pfizer”. Analyst Peter Welford was more nuanced, warning that “it is feasible that some patients may prefer to opt for a protein-based vaccine as a booster shot if one is available. In the developing world, where there are still large unvaccinated populations, the ability to store protein-based vaccines at normal refrigerator temperatures could facilitate distribution.”

Wall Street consensus has cooled in recent months, now standing at an ‘Overweight’ rating based upon 11 ‘Buy’, 14 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $49 to a Street-high $78 while the stock is set to open Wednesday’s session about $3 below the low target and $11 below the $57 median target. This dismal placement highlights analyst confusion about the direction of Pfizer profits in the post-pandemic world.

Wall Street and Technical Outlook

Pfizer completed a cup and handle breakout above 22-year resistance in the mid-40s in November 2021, lifting to an all-time high in December. The subsequent decline has now returned to breakout support, which has narrowly aligned with the 200-day moving average and .786 Fibonacci rally retracement level. Ukraine-induced volatility could delay buying interest but long-term term relative strength readings are rapidly approaching oversold levels, raising odds the stock will eventually bottom around this price zone.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Why Moderna Stock Is Down By 13% Today

Moderna Stock Drops As Skepticism About Future Vaccine Sales Grows

Shares of Moderna gained downside momentum after the FDA postponed a meeting on the authorization of Pfizer/BioNTech vaccine for children aged from six months to 5 years.

Moderna stock is already down by more than 70% from the highs that were reached back in August 2021, but there is no rush to buy the stock as traders question the future of vaccine sales.

Currently, analysts expect that Moderna will report earnings of $28.32 per share in 2022, so the stock is trading at 5 forward P/E. However, the market is worried that the company’s earnings will dive in 2023 as demand for vaccines may decrease.

What’s Next For Moderna Stock?

The dynamics of Moderna stock will depend on the market’s evaluation of the future trajectory of the coronavirus pandemic. The recent protests around the world highlighted people’s pandemic fatigue, and political pressure to ease coronavirus-related restrictions is clearly growing.

In addition, the rapid spread of Omicron did not lead to a collapse of the healthcare system, boosting hopes that the pandemic is finally coming to an end. This is bullish for the economy but bearish for the stocks of vaccine makers.

The original enthusiasm towards Moderna’s stock has almost evaporated, and the market is worried that the company is a “one-trick pony”. It is hard to predict the vaccine sales in 2023 and beyond as they will depend on the course of the pandemic and on whether any variants emerge, so traders will likely follow general market sentiment.

At this point, the market completely ignores the coronavirus pandemic and is focused on inflation and Fed’s interest rate decisions. In this environment, Moderna stock may have more room to fall in the upcoming trading sessions, together with other vaccine stocks like BioNTech and Novavax.

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

Are Biotech Stocks Still Worth Buying in 2022?

Even as most countries started seeing rapid vaccination campaigns being rolled out, major pharmaceutical companies including Moderna, Johnson & Johnson, and Pfizer saw their stocks slide as the year drew to a close.

Volatile Markets and Underperforming Stocks

At close on Tuesday, 8 February, vaccine makers, including Novavax (NVAX) and Moderna (MNRA) fell by 11.97% and 4.43%, respectively. Novavax is down more than 60% since its peak in November, with Pfizer (PFE) slipping 8.07% over the month, and still declining well into February.

On the other hand, J&J (JNJ) stocks fell by almost 1%, at 0.91% on average over one month between January and February 2022. The newest data showed that new pharmaceutical research, tools, and other medical devices helped give the company a boost in the fourth quarter.

The S&P 500 has been bearish in recent days, rallying red with day-to-day losses at the opening bell.

Over the last year, biotech stocks on the iShares Biotechnology ETF were down by 12.8%, below the Russell 1000’s return of 21%. Even as the new year closed in, major biotech stocks would slip below their peaks.

Now as the S&P is slipping out of control, biotech stocks look to regain their reputation on the market. Investors are reconsidering whether these stocks are still worth the high risk for the year ahead?

Approval Rates are Dropping

But it’s not just a volatile market that has kept biotech stocks from reclaiming their position among investors. Tightening of approval from drug and pharmaceutical regulators such as the Food and Drug Administration (FDA) has left the lucrative sentiment for biotech stocks erratic.

Approval rates from not just governments, but the general public have also been decreasing, as evidence reveals that some vaccines aren’t as effective as initially proclaimed. When vaccines were first designed to boost immunity against alpha and beta variants, researchers found that newer and more contagious variants have decreased vaccine efficacy.

Although vaccines can perhaps still provide the needed immunity against the novel coronavirus, some are speculating that newer and more infectious variants of the virus will lower the trajectory of not just public support, but also how biotech stocks perform on the market.

J&J Shares a Different Outlook

Vaccine maker, J&J claimed that their vaccine sales will help boost annual revenue by more than 46% in a media release published by The Economic Times on 25 January. Vaccine sales in 2021 brought in more than $1.62 billion at the start of the fourth quarter. Once the company approved booster shots for its initial single-shot dose, sales jumped nearly double, ending the quarter with $2.48 billion in vaccine sales for the year.

Earnings for 2021 were around $2.13 per share, with sales topping more than $42.8 billion for the fourth quarter. The company reported that the coming year will see share earnings reach between $10.40 and $10.60.

While J&J is mostly riding on the success of their vaccines and booster shots which have been proven to still offer around 85% immunity against the Omicron variant, the company is still diversifying their research and product development – focussing on other niche product lines.

But it’s not just companies such as J&J that are looking to improve vaccine efficacy as the ongoing pandemic strains healthcare systems across the world. Some companies are struggling to keep up with demand, and manufacturing has been slowing as the U.S. experiences supply and labor shortages.

Biotech Stocks you should be looking at

Investors are still feeling somewhat reluctant to invest in biotech and biopharma stocks in the coming year. While share returns may have decreased over the last few months, and the market remains volatile, some under-the-radar companies are proving to provide more benefits and guaranteed returns for investors.

Seagen Inc. (SGEN)

Seagen develops therapies and pharmaceuticals that help treat oncology patients. The company has undergone major scrutiny in recent months following its approval of Tvidak in September 2021. Seagen Inc provides a more diversified outlook on the market, with experts citing that stock prices will jump between $40 and $50 in the next few months.

Gritstone Bio (GRTS)

Researchers at Gritstone Bio have been working to develop an almost “second generation” mRNA vaccine, similar to that offered by Pfizer. Over time, investors, and analysts have been keeping a close eye on Gritstone, with the company not only working to develop more highly effective vaccines but also for its research and innovation in the field of oncology.

Seres Therapeutics Inc. (MCRB)

The microbiome therapeutics giant helps develop drugs that work to restore and repair dysbiotic microbiomes. In the third quarter, the company reported revenues of more than $60 million, with year-over-year returns jumping above $120 million. In 2021, Seres underwent a collaboration with Nestle Health Science to boost efforts for ongoing research in therapeutic drug development.

Ascendis Pharma (ASND)

The Danish-based company, Ascendis Pharma has gained a reputation for Skytrofa, a treatment for pediatric growth hormone deficiency. The company has an exciting year lined up, as Ascendis is in to receive increased support and licensing collaboration from leading global biotech brands. Stocks are targeted to reach around $180, with prices currently hovering close to $110.84 per stock as of 25 January

Edgewise Therapeutics Inc. (EWTX)

Investors who are willing to bet less, Edgewise is a biopharma company focussing on treating rare muscle disorders. While some Wall Street analysts have claimed that Edgewise may still be a high-risk stock in its infancy, with stock prices below $15.00 as of January 2021, some expect stock prices to reach more than $30 closer to the fourth quarter.

Takeaway

While opinions over whether biotech and biopharma stocks are double-sided, some still feel that the year ahead will have leading vaccine and pharmaceutical manufacturers stocks slip below their highs of 2021.

Market volatility has raised concern over whether running the high risk with biotech stocks is worth it or not. There’s still a chance that 2022 will see some smaller names in the pharmaceutical industry surpass current predictions.

Investors will still need to consider the risk factor that trails biotech stocks in a volatile market. As the world, and investors hold their breath for the coming year, the development of more effective vaccines and better pharmaceutical research will help not only companies see more support from their regulators, but also help investors see the potential these companies can have for the biotech industry.

Why Pfizer Stock Is Down By 6% Today

Pfizer Stock Drops After Q4 2021 Report

Shares of Pfizer gained downside momentum after the company released its fourth-quarter earnings report. The company reported revenue of $23.84 billion and adjusted earnings of $1.08 per share, missing the analyst estimates on revenue and beating them on earnings.

In 2022, Pfizer expects to report revenue of $98 billion – $102 billion and adjusted earnings of $6.35 – $6.55 per share. Revenue guidance for Comirnaty was raised to $32 billion, while the revenue guidance for Paxlovid was initiated at $22 billion.

It looks that market expected stronger guidance from Pfizer, so traders rushed out of the company’s stock. Shares of other vaccine makers have also found themselves under pressure today. Moderna and BioNTech are down by 7-8%, while Novavax stock is losing about 14% of its value during today’s trading session.

What’s Next For Pfizer Stock?

Analysts believed that Pfizer would report earnings of $6.73 per share in 2022, so the company’s guidance of $6.35 – $6.55 per share missed their estimates. Assuming that Pfizer is able to report earnings at the midpoint of its guidance, the stock is trading at less than 8 forward P/E.

While the stock may look extremely cheap, the key question is whether Pfizer will be able to report such earnings in 2023 and beyond when the world gets back to normal after the coronavirus pandemic.

Analysts are skeptical and expect that Pfizer’s earnings will be moving lower in the next several years. The same worries put pressure on shares of other vaccine makers.

Pfizer is a big and diversified company, so its shares are less volatile compared to other vaccine stocks. However, coronavirus-related revenue is very significant for Pfizer stock, so the trajectory of the pandemic will remain the main driver for the shares in the upcoming months.

Pfizer stock has already declined by roughly 20% from the highs that were reached back in December, but it is not clear whether speculative traders will rush to buy the dip. If the market views Omicron as the last major variant of coronavirus, all vaccine-related stocks, including Pfizer, will have more downside.

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

Pfizer COVID Sales Outlook Disappoints

Dow component Pfizer Inc. (PFE) is trading lower by 4% in Tuesday’s pre-market session after beating Q4 2021 profit estimates and issuing downside fiscal year 2022 guidance. The company posted a profit of $1.08 per-share, $0.21 better than expectations, while revenue missed the mark despite a 104.0% year-over-year increase to $23.84 billion. Traders hit the exits after the guidance warning, which slashed 2% off revenue and 5% off earnings-per-share (EPS).

Disappointing 2022 Sales Outlook

2022 revenue guidance for Comirnaty (COVID vaccine) and Paxlovid (COVID anti-viral) was disappointing, likely triggering the next leg of an intermediate downtrend that just failed a two-week test at 50-day moving average resistance. Comirnaty is now expected to earn $32 billion including recent contracts, while Paxlovid books $22 billion that also includes sales signed or committed as of late January 2022.

Pfizer has other drugs in the pipeline but COVID compounds have moved the stock since the second quarter of 2020. Sadly for shareholders, the vaccine may not achieve the profitability projected by analysts, due to intense political pressure on pricing. In addition, jab uptake declines steadily after the first dose and in younger demographics. Expect greater resistance when officials push fourth doses while, on the flip side, demand for the anti-viral pill could grow exponentially.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 11 ‘Buy’, 0 ‘Overweight’, 12 ‘Hold’, 1 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $49 to a Street-high $76 while the stock is set to open Tuesday’s session about $3 above the low target. This poor placement highlights growing confusion about long-term earnings potential for Pfizer and rival Moderna Corp. (MRNA) vax plays.

Pfizer rallied above the 1999 high in the 40s in August 2021, completing a massive cup and handle breakout. It hit an all-time high at 61.71 in December and rolled over, entering an intermediate decline that reversed at breakout support in January, The subsequent bounce to 50-day moving average resistance has now failed, generating a test of the low that could yield a breakdown into the 200-day moving average in the upper 40s.In turn, that level could mark a low-risk long-term buying opportunity.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

The SPYX ETF is a Cheap Way to Get into ESG and Delivers a Better Performance Than the S&P 500 Too

Have you ever been stopped by a building? This building literally stopped me in my tracks as if it was trying to tell me something. It is the Oasis Hotel Downtown in Singapore with its entire 27-floor external facade wrapped in a natural vine-covered sunscreen. It also has four lush sky terraces, but these are not only for decoration purposes or demonstration of some green slogan, but serve some real purpose as they allow for good cross ventilation in a mostly hot tropical country and ultimately reduce overall energy cost.

This photograph taken on July 23, 2021 shows a view of the Oasis hotel in Singapore. - Green spaces have also been shown to improve health and...

Source: gettyimages.com

There are other green buildings around the world that have adopted principles of circularity, using recycled materials and green technologies for building design. These show us that ESG (Environmental Social and Governance) principles are not just about replacing fossil fuels with renewables or electrifying the whole fleet of internal combustion engines to electric vehicles or EVs. Neither is it just about investing massively in solar panels, whose production has often been highlighted by ecologists as being highly carbon-emitting due to the factories which produce them consuming coal.

For this matter, ESG is also about achieving better energy efficiency and cutting down on stocks that own oil reserves, instead of heavily relying on the success of solar or wind stocks at generating more revenues. For this particular purpose, there is the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX), one of SSGA’s thematic ESG funds.

The SPYX

The ETF tracks the S&P 500 Fossil Fuel Free Index, whose objective is to allow climate change-conscious investors to align the core of their investment strategy with their values by eliminating companies that own fossil fuel. Consequently, the main holdings which find their way in SPYX’s portfolio are the U.S. large-cap equities like the big tech names as per the table below.

Source: ssga.com

Additionally, the lists also include companies operating in the Financials, Healthcare and Consumer Discretionary, Material, and Industrial sectors. There are also REITs. Further down the list of the fund’s 489 holdings (of which just 23 are shown above), there are energy plays and utilities too, but which do not own fossil fuel or coal reserves for chemical byproducts, residential use, or pharmaceutical purposes. There is also Marathon Petroleum (MRP) which provides exposure to oil refining but has also entered into a joint venture for the production of soybean oil.

Better performance compared to the S&P 500 despite excluding oil giants

Oil giants with reserves are excluded from SPYX as the environment increasingly starts to surface during shareholders’ meetings of energy companies. At the same time, more stringent measures are continuously being applied by the U.S. authorities to tackle the climate change problem which has resulted in billions of dollars of losses in the last five years.

Now, to be realistic, policy decisions especially those related to renewables are subject to change with the different Presidential administrations and this may lead some investors to doubt the long term success of SPYX, especially given the fact that it relies on corporations’ green mandates instead of investing in building up solar capacity like the Invesco Solar Portfolio ETF (TAN) which bears an expense ratio of 0.66%.

Well, a look at the chart below shows that not only that the SPYX (in blue) has outperformed the SPDR S&P 500 ETF (SPY), with the gain in performance gradually increasing over the last five years, irrespective of what U.S. President was in charge.

Source: Trading View

Scanning the industry, there are other ETFs adopting the same strategy like the Etho Climate Leadership U.S. ETF (ETHO) which has produced roughly the same five-year gain as SPYX, but, the former charges an expense ratio of 0.4%. On the other hand, SPYX charges just 0.2% and suffers from relatively less volatility.

The rationale for SPYX instead of investing in individual names

Each of the fund’s holdings has its own way of contributing to the reduction in the use of fossil fuels with many having committed to carbon neutrality by 2050 as part of the United Nations Framework Convention on Climate Change.

While for Tesla (TSLA), its electric vehicles are proving handy to replace internal combustion vehicles consuming fossil fuels, Amazon (AMZN), through its online market place helps to reduce carbon footprint by enabling people to purchase goods without having to make the move to distant stores. As for Pfizer (PFE), it has a climate action plan aimed at obtaining sustainable energy accreditation for its administrative office buildings and using renewables.

Finally, even if you are a dedicated activist ESG investor, it will take considerable time to screen the list of 2400 names on the NYSE to choose an appropriate one. In this context, SPYX composed of essentially the same stocks as in the S&P 500 index funds, except for fossil fuel reserves owing ones, constitutes a valid option unless you have already zeroed in on a particular “green” name.

Disclosure: I am long Apple. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

 

XLV: Confidence in Medical Science at Containing Covid Is Highly Beneficial

The year 2020 was so hard for most of us as the pandemic struck bringing an unprecedented level of disruption to our lives. It’s now more than two years that the world is affected by the deadly and invisible virus with millions being infected and millions more have lost their jobs as the economies of many countries were devastated and governments were challenged into putting into place tough social distancing measures.

However, while infection rates have reached a new peak with the Omicron strain (as per the chart below in blue), the number of people who have actually lost the battle against the invisible enemy continues to fall as depicted by the death rate in the grey chart below trending lower.

https://static.seekingalpha.com/uploads/2022/1/3/49663886-16411948064843268.png

Source: Google

There are many reasons for the decrease in death rate with the most important ones being the rise in vaccination among populations worldwide as well as the provision of better hospital-level care to patients infected with Covid. This has been made possible by new antibodies treatments. For this purpose, the Health Care Select Sector SPDR Fund (XLV) includes key plays like Johnson and Johnson (JNJ) with its Janssen vaccine as well as Pfizer (PFE) with its Covid pill, as longer-term solutions to countering Covid.

Apparently trivial, but equally important, there is the important role played by diagnostics companies in early detection of the coronavirus so that infected people can be isolated. This separation act has been critical in order to contain the infection, in turn reducing hospitalization rates. Here, companies like Thermo Fisher (TMO) and Abbott (ABT) who were quick to develop relatively cheap Covid tests come to mind. In this respect, for those wondering about the role of these medical devices and tool plays in the future where Covid becomes more analogous to “normal” seasonal flu, there is the stark reality of the coronavirus mutating rapidly into Alpha, Delta, and Omicron strains. Thus, the market for Covid testing should become a constant in the new normal.

https://static.seekingalpha.com/uploads/2022/1/3/49663886-16411948065317018.png

Source: ssga.com

Moreover, XLV is not just about Covid as seen with health insurance plays like United Healthcare (UNH). The company makes the system work better for everyone by simplifying the health care experience through the use of advanced data and technologies, breakthrough treatments, and consumer choice. Talking diversification, with normalization in health care, there are a number of sectors including ophthalmology and dentistry as well as clinical trials activities in areas like biotech research which should prove beneficial for XLV’s holdings.

The market seems to already have realized this, rewarding XLV with 7.36% during the last month against only 2.69% for the S&P 500.

Source: Trading View

I believe that this outperformance should continue in 2022, as the role of medical science, especially through sequencers in rapidly understanding the DNA of the coronavirus as well as its mutants has been established. There may be periods of doubt as for example when investors’ high expectations of Merck’s Covid pills were dashed when some clinical trial data suggested that Molnupiravir was less effective than originally thought. This resulted in volatility in the State Street fund around December 13. Subsequently, XLV rapidly overcome this “volatility episode” and is now at the $140-141 range.

Looking at the sector, XLV comes with an expense ratio of just 0.12% and a dividend yield of 1.32%. Another peer, the Vanguard Health Care ETF (XHT) does offer lower fees of just 0.10%, but, it is the State Street fund that has outperformed both on a one-year and one-month basis, by 600 and 110 basis points respectively.

Finally, in line with its five-year performance, XLV should continue with its uptrend and reach the $150-155 level by the middle of 2022.

 

Pfizer’s Covid Pill Gains Regulatory Approval in the United Kingdom

Pfizer’s Coronavirus pill, 90% success in preventing severe illness among vulnerable adults, has now gained approval in the United States and the United Kingdom.

MHRA Approves Pfizer’s Paxlovid

The Medicines and Healthcare products Regulatory Agency (MHRA), the UK medicines regulator, approved Pfizer’s antiviral drug Paxlovid earlier today. Paxlovid reportedly has a 90% success in preventing severe illness among vulnerable adults if taken soon after becoming infected with the Coronavirus.

MHRA said, “Paxlovid is safe and effective at reducing the risk of hospitalization and death in people with mild to moderate Covid-19 infection, who are at an increased risk of developing severe disease.”

The regulatory agency added that the drug is very effective when taken during the initial stages of the virus infection. MHRA said it recommends using Paxlovid within five days of a patient’s first symptoms.

The United Kingdom has approved the drugs for patients aged 18 and over with at least one risk factor for becoming severely ill, like obesity or diabetes, or being over 60. Dr. June Raine, the MHRA’s chief executive, stated that “We now have a further antiviral medicine for the treatment of Covid-19 that can be taken by mouth rather than administered intravenously. This means it can be administered outside a hospital setting before Covid-19 has progressed to a severe stage. I hope the announcement gives reassurance to those particularly vulnerable to Covid-19, for whom this treatment has been approved. For these individuals, this treatment could be life-saving.”

Following this latest development, Pfizer’s Paxlovid is now approved in the United States and the United Kingdom.

PFE Rallies Following the Announcement

The shares of Pfizer have been rallying since MHRA announced the approval of Paxlovid earlier today. Since the US market opened, PFE has added 1.59% to its value and is now trading above $59 per share.

PFE performed excellently over the past 12 months. The shares of the company have surged by 67% year-to-date, outperforming numerous stocks in the healthcare sector.

Why Novavax Stock Is Up By 6% Today

Novavax Stock Rallies After Company Gets Emergency Use Authorization For COVID-19 Vaccine In India

Shares of Novavax gained strong upside momentum after the company received an emergency use authorization for its coronavirus vaccine in India.

Novavax stock has been very volatile in recent months and traded in a wide range between the lows near $120, that were reached back in October, and the highs near $235, that were reached a week ago.

It should be noted that other vaccine stocks like Moderna and BioNTech have also experienced significant volatility. It looks that traders are concerned about sustainability of current revenue and profits.

New anti-viral drugs appeared in the market, and there are hopes that Omicron, which has already became the dominant variant in the U.S. according to CDC, may be less dangerous than Delta. In this environment, market sentiment shifts quickly, which is visible in the recent dynamics of Novavax stock.

What’s Next For Novavax Stock?

Analysts expect that Novavax will report a loss of $12.12 per share in the current year and a profit of $25.71 per share in the next year, so the stock is trading at less than 7 forward P/E.

As I mentioned above, the key problem for Novavax and other vaccine stocks is poor earnings visibility. In addition, earnings estimates for the next year have been steadily declining, which served as an additional bearish catalyst for Novavax stock.

While Novavax is cheaper than its peers, the discount is not dramatic, so it remains to be seen whether speculative traders will choose Novavax stock over the above-mentioned Moderna or BioNTech if they decide to bet on the rebound of the segment.

In recent weeks, we have seen some rush to safety, and bigger, diversified players like AstraZeneca and Pfizer had good stock price dynamics while shares of  non-diversified vaccine makers found themselves under pressure. If this trend continues, shares of Novavax will move lower despite good news from India.

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

Will Santa Give Us Interest Rate Hikes for 2022?

With Fed officials increasingly hawked up, the narrative shifted from a tapering of asset purchases to potential interest rate hikes. And now, with whispers of the Fed plotting to normalize its balance sheet, questions have arisen over the potential impact on the PMs.

To explain, I wrote on Dec. 20:

After admitting that inflation “is alarmingly high, persistent, and has broadened to affect more categories of goods and services,” Waller implored the Fed to sell some of its bond holdings.

For context, tapering means that bonds are purchased at a slower pace or not at all. However, even zero purchases result in the Fed’s nearly $8.76 trillion in bond holdings remaining constant. Conversely, if the Fed reduces its balance sheet by selling bonds to private investors, it’s akin to a taper on steroids. Waller said:

“If we start doing some balance sheet runoff by summer, that’ll take some pressure off, you don’t have to raise rates quite as much. My view is we should start doing that by summer.”

TextDescription automatically generatedSource: Bloomberg

However, is this a plausible path for the Fed over the medium term? In a word: no. While the prospect is profoundly bullish for the USD Index and profoundly bearish for the PMs, Chairman Jerome Powell will likely avoid quantitative tightening.

For one, if the Fed tries to reduce its balance sheet from 35% to 20% of GDP, the financial markets will freak out. Currently, the Fed has such a large stockpile of bonds that private investors can’t absorb that kind of supply. Thus, another taper tantrum will likely unfold if the Fed tries to ‘normalize’ its balance sheet through the open market.

Second, the Fed’s only hawkish goal is to calm inflation. To explain, when inflation was running hot and most Americans bought into the “transitory” narrative, Fed officials exuded confidence. However, when consumer confidence sunk to a 10-year low and inflation became political, the Fed changed its tune. As a result, Powell wants to reduce inflation while tightening as little as possible (3% to 4% inflation may be considered acceptable in 2022). Thus, normalizing the balance sheet is likely a bridge too far.

However, please remember that if quantitative tightening is a ten on the hawkish scale, hitting a seven or an eight is still profoundly bearish for the PMs. To explain, I highlighted on Dec. 20 how San Francisco Fed President Mary Daly had a come-to-Jesus moment. I wrote:

Daly – a major dove that urged patience in November – admitted on Dec. 17 that “I have adjusted my stance.”

And conducting another interview with The New York Times on Dec. 21, Daly said:

“My community members are telling me they’re worried about inflation. What influenced me quite a lot was recognizing that the very communities we’re trying to serve when we talk about people sidelined” from the labor market “are the very communities that are paying the largest toll of rising food prices, transportation prices and housing prices….

“I’m comfortable with saying that I expect us to need to raise rates next year. But exactly how many will it be – two or three – and when will that be – March, June, or in the fall? For me it’s just too early to know, and I don’t see the advantage of a declaration.”

However, with her slip of “two or three” rate hikes offering a window into her thought process, it’s clear that more hawkish policy will materialize over the medium term.

Please see below:

TextDescription automatically generatedSource: The New York Times

To that point, many short and medium-term gold bulls support the narrative that “the Fed is trapped.” For context, we’re bullish on the PMs over the long term. However, we expect sharp medium-term corrections before their uptrends resume.

Moreover, the narrative implies that the Fed can’t tighten monetary policy without crashing the U.S. economy. Thus, Fed officials are “trapped,” and the PMs should soar as inflation runs wild. However, this hyper-inflationist theory is much more semblance than substance.

To explain, adopters assumed that the Fed couldn’t taper its asset purchases without crashing the U.S. economy. However, the Fed tapered, then accelerated the taper, and the U.S. economy remained resilient. Now, the new narrative is that the Fed can’t raise interest rates without crashing the U.S. economy. However, it’s simply misleading. 

As evidence, anxiety has increased with U.S. monetary and fiscal spending stuck in reverse/neutral. For example, the Fed is tightening monetary policy and Americans are no longer receiving stimulus checks and enhanced unemployment benefits. Moreover, U.S. President Joe Biden’s $1.75 trillion stimulus package was torpedoed by Senator Joe Manchin. As a result, who knows if it will pass in 2022?

However, while “the Fed is trapped” crew cites these issues as reasons for an economic calamity, they often miss the forest through the trees. For example, while the fiscal spending spree may end, U.S. households are still flush with cash.

Please see below:

Chart, line chartDescription automatically generated

To explain, the green line above tracks U.S. households’ checkable deposits (data released on Dec. 9). In a nutshell: it’s the amount of money that U.S. households have in their checking accounts and/or demand deposit accounts.

If you analyze the vertical ascent on the right side of the chart, you can see that U.S. households have nearly $3.54 trillion in their checking accounts. For context, this is 253% more than Q4 2019 (pre-COVID-19).

Likewise, even though U.S. stimulus has disproportionately flowed to the top, the bottom 50% of American households (based on wealth percentiles) still have plenty of money to spend.

Please see below:

Chart, line chartDescription automatically generated

To explain, the green line above tracks the checkable deposits held by the bottom 50% of U.S. households (again, data released on Dec. 9). And with these individuals sitting on nearly $243 billion in cash, it’s 142% more than Q4 2019.

Finally, it’s important to remember that more than 75% of Canada’s exports are sent to the United States. And with the former’s exports to the latter hitting an all-time high in October (data released on Dec. 7), it’s another indicator that U.S. consumer demand remains resilient.

TextDescription automatically generatedSource: Statistics Canada

The bottom line? While some investors expect a dovish 180 from the Fed, they shouldn’t hold their breath. With U.S. economic growth still resilient and the U.S. consumer in much better shape than some portray, the Fed can raise interest rates without crashing the U.S. economy. As a result, Powell will likely stick to his hawkish script and forge ahead with rate hikes in 2022.

Conversely, the only wild card is the Omicron variant. If the latest strain severely disrupts economic activity, the Fed could slow its roll. However, this is extremely unlikely. For one, the strain’s spread has been violent, but so far, the data shows it’s much milder than Delta. Second, the Fed needs to solve its inflation problem. And with the FOMC’s dot plot and officials’ rhetoric nodding in agreement, they likely realize that a continuation of 6%+ inflation will do more harm to the U.S. economy than raising interest rates.

Also, please note that when the Fed called inflation “transitory,” I wrote for months that officials were misreading the data. As a result, I don’t have a horse in this race. However, now they likely have it right. Thus, if investors assume that the Fed won’t tighten, their bets will likely go bust in 2022.

In conclusion, the PMs rallied on Dec. 22, as an FDA approval of Pfizer’s coronavirus treatment pill helped uplift sentiment. However, the next several months will likely test their mettle. With the Fed hawked up and little stopping interest rate hikes in 2022, the pace of the current liquidity drain should surpass the precedent set in 2013/2014. As a result, more downside likely confronts the PMs over the medium term.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are 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 deemed to be accurate, Przemyslaw Radomski, CFA 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA 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. Przemyslaw Radomski, CFA, 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.

 

Why Moderna Stock Is Down By 4% Today

Moderna Stock Keeps Moving Lower Despite Worries Over The Spread Of Omicron

Shares of Moderna gained additional downside momentum today after Merck‘s COVID-19 drug molnupiravir received an emergency use authorization from FDA. Earlier, Moderna stock faced pressure when Pfizer‘s Paxolovid got an emergency use authorization from FDA.

The market’s logic is simple. Anti-coronavirus pills will serve as an additional tool in the fight against the pandemic. If the danger from coronavirus decreases thanks to new drugs, demand for vaccines will fall over time, which will be bearish for Moderna.

In addition, the competition in the vaccine space is intensifying. Novavax vaccine has recently recevied an emergency use listing (EUL) from the World Health Organization. EUL will allow Novavax to participate in the COVAX, which aims to distribute vaccines to less developed countries.

What’s Next For Moderna Stock?

Currently, analysts expect that Moderna will report earnings of $25.89 per share in 2021 and earnings of $26.47 per share in 2022, so the stock is trading at roughly 9 forward P/E, which is cheap for the current market environment.

However, earnings visibility remains Moderna’s key problem. While it is obvious that the company will enjoy strong demand for its vaccine for 2022, the picture for 2023 is less clear. At first glance, it looks that demand should stay strong as developed countries are already rushing to introduce boosters due to the spread of Omicron while developing countries have not completed their initial vaccination programs.

However, it is not clear whether the company will be able to deliver strong profits after the pandemic ends. These worries have already put significant pressure on Moderna stock, so news about new drugs or alternative vaccines serve as bearish catalysts for Moderna shares. It remains to be seen whether speculative traders will rush to buy Moderna stock after the recent pullback or wait for more data on Omicron to adjust their estimates.

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

Pfizer Set to Acquire Arena Pharmaceuticals for $6.7 Billion

Pfizer has been one of the best-performing stocks this year, and the company is set to close 2021 on a high note.

Pfizer Agrees to Buy Arena Pharmaceuticals

Leading pharmaceutical company Pfizer announced earlier today that it had reached a deal to acquire drug developer Arena Pharmaceuticals for $6.7 billion in cash. This latest development will allow Pfizer to develop promising treatments for diseases affecting the stomach and intestine.

Pfizer is set to acquire the company at $100 per share, which is twice ARNA’s trading price at the close of the market on Friday. Following the announcement of the deal, ARNA’s value has surged by more than 80%, and it is currently trading at $90.09 per share.

Pfizer has been acquiring companies in a bid to expand its treatment pipeline. Last month, the company acquired immuno-oncology company Trillium Therapeutics in a deal worth $2.22 billion as it looks to strengthen its arsenal of blood cancer therapies.

Arena is currently developing numerous treatments for gastroenterology, dermatology and cardiology. Etrasimod, its leading drug, is currently being tested in a late-stage study in ulcerative colitis and also a mid-to-late stage study in Crohn’s disease. Both diseases are inflammatory bowel diseases that cause ulcers in the digestive tract.

Pfizer executive Mike Gladstone said, “The proposed acquisition of Arena complements our capabilities and expertise in inflammation and immunology.” He added that the company intends to accelerate the clinical development of etrasimod.

PFE Rallies by More Than 5%

The shares of Pfizer have been rallying since the company announced that it would acquire Arena Pharmaceuticals. Since the start of the market, PFE’s value has increased by more than 5%. PFE is currently trading at $55.30 per share at press time.

PFE is one of the best-performing stocks in the health sector so far this year. Year-to-date, PFE’s value has increased by 56%, outperforming numerous pharmaceutical companies in the process.

Why Moderna Stock Is Up By 23% Today

Moderna Stock Rallies As Traders Focus On The New COVID-19 Variant

Shares of Moderna gained strong upside momentum on worries about the new variant of coronavirus.

S&P 500 is down by almost 2% today, but vaccine stocks are rallying. BioNTech is up by 19%, Pfizer gains 6% while Novavax is up by 10%.

The emergence of the new variant will likely boost demand for vaccines as countries rush to vaccinate their residents or to provide boosters for them. While it remains to be seen whether existing vaccines work well against the new variant, the world has little options to choose from, so countries will likely be forced to bet on increased vaccine adoption.

What’s Next For Moderna Stock?

Moderna stock received strong support today as traders were trying to find a way to protect their funds against the risks posed by the new variant of the virus. In this environment, vaccine stocks served as safe-haven assets.

Analysts expect that Moderna will report earnings of $25.76 per share in 2021 and $26.21 per share in 2022, so the stock is trading at roughly 13 forward P/E. As usual, the key question is whether Moderna will be able to enjoy strong demand for its vaccine in the next few years.

Back at the beginning of November, Moderna stock made an attempt to settle below the $210 level but managed to gain upside momentum and is currently trying to settle above the $340 level.

The near-term dynamics of Moderna stock will depend on the developments on the coronavirus front. In case the new variant is a real threat, the stock will have a good chance to gain additional upside momentum.

In fact, Moderna stock may get additional support even in the scenario when the current panic turns out to be unjustified. The emergence of a new variant with many mutations has already highlighted major risks, so demand for vaccines will likely increase in any scenario.

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

Zoom Could Bottom Out This Week

Zoom Interactive Communications Inc. (ZM) reports Q3 2021 results after Monday’s closing bell, with analysts forecasting a profit of $1.10 per-share on $1.02 billion in revenue. If met, earnings-per-share (EPS) will mark an 11% improvement compared to the same quarter in 2020 when infections ticked higher ahead of the winter wave. The stock crashed 16.7% in August after beating Q3 expectations and has dropped another 13% into mid-November.

Shedding Points at a Rapid Pace

The remote meeting provider has been shedding points since topping out in October 2020 but still posted a phenomenal 495% return last year, suggesting the steep decline marks a natural proportional retracement, following the old market wisdom that ‘big winners in one year become the next year’s big losers’.  It’s now relinquished more than 60% of the gains posted since 2019, suggesting reward-to-risk for new entries is moving rapidly in the buyer’s favor.

JP Morgan analyst Sterling Auty offered an upbeat view on Zoom’s outlook recently, noting “We believe growth will bottom in the fourth quarter but think the market has priced that into the current stock price such that the risk/reward looks more attractive. The entire UCaaS space has been rerated lower on these concerns and worries about Microsoft’s ability to capture share through Teams. We expect Zoom to be the other big winner in the enterprise UCaaS (video, phone, etc.) market and RingCentral in the mid-market”.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 14 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $145 to a Street-high $571 while the stock is set to open Monday’s session nearly $100 below the median $350 target. This humble placement should offer a perfect opportunity for solid quarterly results to force short covering and a rapid advance to the $300 level.

Zoom hit an all-time low at 60.97 in October 2019 and exploded higher when the pandemic struck in the first quarter of 2020. It gained 965% off the low, topping out at 588.84 in October, just two weeks before Pfizer Inc. (PFE) introduced the first COVID vaccine. Price action has carved a series of lower highs and lower lows since that time, settling below the .618 Fibonacci retracement of the historic uptrend. Long-term relative strength has now crashed to the most oversold reading since the stock came public in 2019, suggesting it’s nearing a long-term bottom.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication.