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. 

S&P 500 Futures Move Higher Amid Optimism In Infrastructure Stocks

Stocks Set To Open Higher

S&P 500 futures are gaining some ground in premarket trading while traders wait for additional catalysts which could push stocks to new highs.

S&P 500 moved from the 4350 level to the 4700 level without any pullback, and its RSI has entered into the overbought territory.

The strong earnings season provided significant support to stocks, while recent news on COVID-19 treatments from Merck and Pfizer pushed the market to new highs.

Over the weekend, the $1 trillion infrastructure bill has finaly passed the U.S. House of Representatives. Infrastructure-related stocks like Caterpillar or Deere are already moving higher in premarket trading, and this market segment will likely enjoy significant support today.

Gold Moves Towards $1830 As U.S. Dollar Retreats From Highs

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, failed to settle above the resistance near yearly highs at 94.50 and moved closer to the 94 level.

Weaker dollar provided support to gold, which managed to settle above the psychologically important $1800 level and moved closer to the resistance level at $1830.

In case gold manages to settle above the resistance at $1830, it will gain additional upside momentum and move towards the next resistance at $1845 which will be bullish for gold mining stocks.

WTI Oil Tries To Settle Above $82

WTI oil has recently made an attempt to settle above the 82 level as traders continued to bet on the recovery of oil demand.

The recent pullback was short-lived, and WTI oil quickly managed to find buyers below the $80 level. Energy-related stocks are trading close to yearly highs, and they will have a good chance to gain additional upside momentum during today’s trading session.

While crude inventories have been moving higher in recent weeks, the market looks focused on rising demand, infrastructure investments and the reopening of international travel in the U.S., which serve as bullish catalysts for oil.

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

Saudi approves Pfizer’s COVID-19 vaccine for age group 5-11

CAIRO (Reuters) – The Saudi Food and Drug Authority said on Wednesday it had given its approval to use Pfizer‘s COVID-19 vaccine for those between five and eleven years of age.

The authority added in a statement its decision was “based on data provided by the company, which showed the vaccine met the special regulatory requirements”.

 

(Reporting by Ahmed Tolba; Writing by Ahmad Elhamy; Editing by Peter Graff)

Explainer-What to know about the COVID-19 vaccine for U.S. children

By Carl O’Donnell and Michael Erman

NEW YORK (Reuters) – The COVID-19 vaccine for children aged 5 to 11 from Pfizer Inc and BioNTech SE has been authorized by the U.S. Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention.

Here is what you need to know about the vaccine and children:

When will COVID-19 vaccines be available for 5- to 11-year-olds?

Some shots will be ready as soon as Wednesday but appointments will become increasingly available the week of Nov. 8.

Where will the shots be available?

Depending on the state, in pediatricians’ offices, pharmacies and schools. Some states are also setting up mass vaccination centers and mobile vaccination clinics to increase access to shots for children.

National pharmacy chains Walgreens Boots Alliance and CVS Health will start offering them on Saturday and Sunday.

Is it the same vaccine as the adult one?

Yes, but at a lower dose. Pfizer and BioNTech have asked for authorization of a 10-microgram dose of the vaccine, a third of the dose size given to people 12 and older. It is still a two-shot vaccine, with doses given around three weeks apart.

What if my child is a small 5-year-old, or a big 11-year-old? Should they get the children’s dose?

The dose is based on age and not weight, according to Brittany Kmush, an epidemiologist and professor at Syracuse University. “Vaccines are different than medication in the dosing strategy and it has more to do with the maturity of the immune system rather than weight or metabolism,” she said.

Is it safe?

Safety data from more than 3,000 children who received the vaccine in Pfizer’s 4,500 participant clinical trial was generally comparable to that for 16- to 25-year-olds. The most common side effects for children included fever, headaches and chills, which were generally reported less frequently and were milder than for 12- to 15-year-olds.

Both the Pfizer/BioNTech and Moderna Inc vaccines have been linked to rare cases of heart inflammation called myocarditis, especially in young men.

Still, Pfizer suggested that the rate of myocarditis in the age group is likely to be lower than observed in vaccinated 12- to 15-year-olds due in part to the lower dose.

Does it work?

Pfizer and BioNTech said last month their COVID-19 vaccine induced a robust immune response in the 5- to 11-year-olds in its clinical trial. The companies also said the vaccine showed 90.7% efficacy against COVID-19 in the same group.

If children are less likely to get seriously ill from COVID, why bother vaccinating them?

Pediatric vaccination is a public health tool to prevent infectious diseases, even ones that do not have high rates of mortality or hospitalization in children. Children in the United States already receive vaccines for illnesses that have similar or lower levels of related mortality in kids, like hepatitis A, chickenpox, rubella and rotavirus. Children can spread COVID-19 to other, higher-risk groups even if they do not have symptoms.

 

(Reporting by Carl O’Donnell and Michael Erman; Editing by Richard Chang, David Gregorio and Mark Heinrich)

Marketmind: Aussie Cbank Caves in, Who’s Next?

A look at the day ahead from Sujata Rao.

The RBA sets the stage for the U.S. Fed, BoE and the Norges Bank later this week, with markets already pricing multiple rate hikes in the coming year given rising inflation.

But…stock markets don’t seem unduly perturbed. MSCI’s global index is back to record highs hit nearly two months ago and Wall Street is scaling new record peaks.

Leaving aside Monday’s 8.5% jump in Tesla, so-called value stocks outperformed, indicating possibly that recent “curve flattening” momentum on bond markets is abating. Indeed, the spread between two-and 10-year U.S. yields is 10 basis points wider than last Thursday.

Several analysts, including those at JPMorgan, see recent bond and money market moves as technically driven and expect normalcy to return. They advise buying more cyclical stocks to position for higher longer-dated yields. Watch this space.

Meanwhile, inflation is marching higher almost everywhere; South Korean price growth accelerated to a decade peak, staying above-target for the seventh straight month. High prices slowed U.S. manufacturing in October, the closely watched ISM survey showed on Monday. It also hinted at some moderation in demand.

What’s helping stocks stay aloft is of course the earnings season. CEOs may be bemoaning cost pressures, yet there’s no sign of margins being hit. U.S. Q3 earnings are expected to have climbed 39%, Refinitiv IBES says, versus the original Q3 prediction for 29% growth.

And then there’s M&A — $4.7 trillion in deals have been announced year-to-date, according to Refinitiv.

(For graphic on ISM – https://graphics.reuters.com/USA-STOCKS/jnvwewmdjvw/ISMPMI.png)

Key developments that should provide more direction to markets on Tuesday:

-StanChart Q3 profit doubles as bad loans shrink, trade finance booms

-BP to repurchase another $1.25 billion of shares by early 2022, after buying $900 million in Q3

-Shipping group Moller-Maersk said record-high freight rates boosted earnings despite lower container volumes due to port congestion

-U.S. earnings: Dupont, ThomsonReuters, Estee Lauder, Pfizer,  ConocoPhilips, Ralph Lauren, T-Mobile, Mondelez, Western union, Prudential

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

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

Pharmaceutical Giant Pfizer to Deliver Healthy Q3 Earnings

The blue-chip pharmaceutical giant Pfizer is expected to report earnings per share of $1.08 in the third quarter, which represents year-over-year growth of about 50% from $0.72 per share seen in the same period a year ago.

The pharmaceutical company, which ranked 64th on the 2020 Fortune 500 list of the largest U.S. corporations by total revenue, will report revenue of $22.7 billion, up nearly 90% from the same period a year ago.

Pfizer’s revenue and earnings have both reached new highs due to strong sales of its coronavirus vaccine. Orders of coronavirus vaccines have continued to flood-in this year, which has led the company to upgrade its guidance multiple times.

According to the company’s latest quarterly update back in July, it expects revenue of $78.0 billion to $80.0 billion with adjusted earnings per share of $3.95 to $4.05. That would be a significant improvement from the $41.9 billion revenue and $2.22 EPS the company generated in 2020.

The stock has risen on vaccine developments for over a year now, but most investors now wonder if vaccine stocks are still worth investing.

“We’re reaching a juncture where the markets are looking past the Covid-19 pandemic. Vaccine revenue is likely to see little growth or no growth over 2022, per consensus revenue estimates for the likes of Moderna and Pfizer. We think investors will need to evaluate vaccine stocks based on the potential of their future pipelines and other drugs,” noted analysts at TREFIS.

Pfizer Stock Price Forecast

Seven analysts who offered stock ratings for Pfizer in the last three months forecast the average price in 12 months of $46.79 with a high forecast of $61.00 and a low forecast of $40.50.

The average price target represents a 7.22% change from the last price of $43.64. From those seven analysts, one rated “Buy”, six rated “Hold”, while none rate “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $48 with a high of $56 under a bull scenario and $37 under the worst-case scenario. The firm gave an “Equal-weight” rating on the pharmaceutical company’s stock.

Several other analysts have also updated their stock outlook. Citigroup raised the price target to $46 from $43. Independent Research lifted the target price to $51 from $49.

Analyst Comments

“We project solid growth prospects, and the company’s COVID vaccine offers significant accretion potential in 2021 and 2022. But we expect COVID vaccine sales and profits to decline significantly in 2023+,” noted Matthew Harrison, equity analyst at Morgan Stanley.

Pfizer’s dividend is expected to continue to increase at current level despite Viatris’ dividend payment. Lack of clarity in near to mid-term pipeline potential. Pipeline execution and M&A will be key to investor perception, given late-decade patent expiration exposure.”

Check out FX Empire’s earnings calendar

Earnings Week Ahead: NXP Semiconductors, Pfizer, Ferrari, Expedia and Moderna in Focus

Earnings Calendar For The Week Of November 1

Monday (November 1)

IN THE SPOTLIGHT: NXP SEMICONDUCTORS

The Eindhoven, Netherlands-based semiconductor manufacturer NXP Semiconductors will post earnings of $2.75 per share in the third quarter, which represents year-over-year growth of over 60% from $1.59 per share seen in the same period a year ago.

The leading supplier of high-performance mixed-signal products would post revenue growth of about 26% to around $2.8 billion. It is worth noting that the company has beaten consensus earnings per share estimates in each of the last four quarters.

NXP Semiconductors (NXP) has attractive exposure to secular growth themes like EVs, increasing penetration of ADAS, connectivity and mobile payments. Furthermore, the company has executed well this cycle and in particular its lean channel inventory positions them well for a snapback as demand improves,” noted Joseph Moore, equity analyst at Morgan Stanley.

“However, we move to the sidelines after a period of strong outperformance in the stock. NXPI’s multiple relative to peers has moved from a material discount to slightly above where it typically trades. Furthermore, we think meaningful EPS revisions are going to be more difficult to come by near term.”

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

Ticker Company EPS Forecast
CCC Computacenter £81.30
MSGS Madison Square Garden Sports -$1.08
RYAAY Ryanair $1.06
ON ON Semiconductor $0.74
TTM Tata Motors -$0.14
L Loews $0.63
CNA CNA Financial $0.66
TKR Timken $1.17
AMG Affiliated Managers $3.91
SANM Sanmina $0.99
CHT Chunghwa Telecom $0.34
BEN Franklin Resources $0.86
CXP Columbia Property $0.02
ANET Arista Networks $2.73
O Realty Ome $0.40
PCG PG&E $0.26
CLX Clorox $1.03
FANG Diamondback Energy $2.78
HOLX Hologic $1.00
SBAC SBA Communications $0.81
WMB Williams Companies $0.28
NXPI NXP Semiconductors $2.75
SPG Simon Property Group $1.06
MOS Mosaic $1.54
BRKR Bruker $0.44
CAR Avis Budget $6.85
CACC Credit Acceptance $11.74
NBIX Neurocrine Biosciences $0.61
CHGG Chegg $0.19
VNO Vornado Realty $0.29
OHI Omega Healthcare Investors $0.43
BRX Brixmor Property $0.09
ADC Agree Realty $0.46
NSP Insperity $0.86
CRUS Cirrus Logic $1.63
OGS One Gas $0.38
FN Fabrinet $1.33
AWR American States Water $0.75
KMT Kennametal $0.38
VRNS Varonis Systems $0.02
LEG Leggett & Platt $0.77
RIG Transocean -$0.16
OTTR Otter Tail $1.13
RMBS Rambus $0.33
BCC Boise Cascade $2.09
MCK McKesson $4.66
PSA Public Storage $2.14
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.45

Tuesday (November 2)

IN THE SPOTLIGHT: PFIZER, FERRARI

PFIZER: The world’s largest pharmaceutical giant is expected to report a profit of $1.08 in the third quarter, which represents year-over-year growth of about 50% from $0.72 per share seen in the same period a year ago. The pharmaceutical company, which ranked 64th on the 2020 Fortune 500 list of the largest U.S. corporations by total revenue, will report revenue of $22.7 billion, up nearly 90% from the same period a year ago.

Pfizer’s revenue and earnings have both reached new highs due to strong sales of its Coronavirus vaccine. Orders of coronavirus vaccines have continued to flood-in this year, which has led the company to upgrade its guidance multiple times.

According to the company’s latest quarterly update back in July, it expects revenue of $78.0 billion to $80.0 billion with adjusted earnings per share of $3.95 to $4.05. That would be a significant improvement from the $41.9 billion revenue and $2.22 EPS the company generated in 2020.

“We project solid growth prospects, and the company’s COVID vaccine offers significant accretion potential in 2021 and 2022. But we expect COVID vaccine sales and profits to decline significantly in 2023+,” noted Matthew Harrison, equity analyst at Morgan Stanley.

Pfizer’s dividend is expected to continue to increases at current level despite Viatris’ dividend payment. Lack of clarity in near to mid-term pipeline potential. Pipeline execution and M&A will be key to investor perception, given late-decade patent expiration exposure.”

FERRARI: The luxury sports car maker is expected to report earnings of $1.19 per share in the third quarter, representing a nearly 30% increase from $0.92 per share seen a year earlier. The company, known for its prancing horse logo, would post revenue growth of over 21% to around $1.3 billion.

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

Ticker Company EPS Forecast
BP BP £0.15
STAN Standard Chartered £0.22
NRZ New Residential Investment $0.35
MYGN Myriad Genetics -$0.05
ARNC Arconic Inc $0.52
SRCL Stericycle $0.60
IEP Icahn Enterprises $0.11
MPLX MPLX $0.72
TRI Thomson Reuters USA $0.38
MPC Marathon Petroleum $0.70
ZBRA Zebra Technologies $4.06
EIX Edison International $1.74
EL Estée Lauder $1.70
ETRN Equitrans Midstream Corp $0.16
LEA Lear $0.61
LDOS Leidos $1.62
FMS Fresenius Medical Care $0.56
TECH Bio Techne $1.72
LPX Louisiana Pacific $3.47
EXPD Expeditors International Of Washington $1.79
MKL Markel $13.64
SABR Sabre -$0.55
BP BP $0.89
WAT Waters $2.36
XYL Xylem $0.59
UAA Under Armour Inc $0.15
UA Under Armour C share $0.15
WEC Wisconsin Energy $0.78
SEE Sealed Air $0.82
INCY Incyte Corp $0.57
INGR Ingredion $1.45
PEG Public Service $0.92
RL Ralph Lauren $2.00
LGIH LGI Homes $4.12
ARCB ArcBest Corp $2.44
CTLT Catalent $0.65
GNRC Generac $2.37
OMCL Omnicell $0.91
HEP Holly Energy Partners $0.46
IART Integra LifeSciences $0.72
KKR KKR & Co LP $0.93
PFE Pfizer $1.08
MMP Magellan Midstream Partners $0.97
IDXX Idexx Laboratories $1.91
ETN Eaton $1.73
APO Apollo Global Management $1.09
AME Ametek $1.18
DD DuPont $1.12
RHP Ryman Hospitality Properties -$0.28
EPD Enterprise Products Partners $0.51
WLK Westlake Chemical $3.96
IPGP IPG Photonics $1.28
COP ConocoPhillips $1.51
GPN Global Payments $2.15
ROK Rockwell Automation $2.16
MLM Martin Marietta Materials $4.23
IT Gartner $1.56
EXLS ExlService $1.06
HSIC Henry Schein $0.94
BCH Banco De Chile $0.44
VRTX Vertex Pharmaceuticals $3.08
WES Western Gas Partners $0.62
TMUS T-Mobile Us $0.49
RARE Ultragenyx Pharmaceutical -$1.39
AMGN Amgen $4.27
AWK American Water Works $1.52
AKAM Akamai $1.39
LSCC Lattice Semiconductor $0.24
RACE Ferrari $1.19
CMI Cummins $3.93
DOX Amdocs $1.18
PACB Pacific Biosciences Of California -$0.22
EC Ecopetrol $2,419.00
NNN National Retail Properties $0.41
KAI Kadant $1.67
EXEL Exelixis $0.16
STE Steris $1.82
WU Western Union $0.58
RDN Radian $0.71
CRK Comstock Resources $0.35
LSI LIFE STORAGE $0.81
EXAS Exact Sciences -$0.84
HALO Halozyme Therapeutics $0.43
DEI Douglas Emmett $0.07
MANT ManTech International $0.85
VRSK Verisk Analytics $1.37
ENLC EnLink Midstream $0.04
GNW Genworth Financial $0.28
AIZ Assurant $1.37
MCY Mercury General $0.80
FNF Fidelity National Financial $1.65
IOSP Innospec $1.01
HLF Herbalife $1.09
LYFT Lyft Inc -$0.02
AMCR Amcor PLC $0.18
BFAM Bright Horizons Family Solutions $0.63
OKE ONEOK $0.82
Z Zillow $0.15
PAYC Paycom Software $0.90
PEAK Healthpeak Properties Inc $0.10
LPSN LivePerson -$0.15
EGHT 8X8 $0.01
FMC FMC $1.32
ATVI Activision Blizzard $0.70
DVN Devon Energy $0.93
AMED Amedisys $1.36
BKH Black Hills $0.65
PKI PerkinElmer $1.71
MRCY Mercury Systems $0.40
VOYA Voya Financial $1.61
XPO XPO Logistics $0.91
NMIH NMI $0.71
CDK Cdk Global $0.68
SRC Spirit Realty Capital New $0.36
MTCH Match Group $0.57
CZR Caesars Entertainment $0.16
TX Ternium $5.22
FRSH Papa Murphy’s -$0.14
MDLZ Mondelez International $0.70
PRU Prudential Financial $2.76
UNM Unum $1.15
CIB Bancolombia $0.60
AFG American Financial $1.86

Wednesday (November 3)

Ticker Company EPS Forecast
EMR Emerson Electric $1.18
EVRG Evergy Inc $1.74
SBRA Sabra Health Care Reit $0.14
OMI Owens Minor $0.61
CDW CDW $2.06
CRTO Criteo $0.35
ATRC AtriCure -$0.33
HZNP Horizon Pharma $1.54
CVS CVS Health $1.79
CLH Clean Harbors $1.02
IONS Ionis Pharmaceuticals -$0.51
ETR Entergy $2.40
MDU MDU Resources $0.82
EXC Exelon $1.08
MATX Matson $5.23
EQIX Equinix $1.61
BCRX BioCryst Pharmaceuticals -$0.29
BWA Borgwarner $0.72
BR Broadridge Financial Solutions $0.97
HBM HudBay Minerals Ord Shs $0.05
NVO Novo Nordisk A Fs $0.78
HUM Humana $4.67
CPRI Capri Holdings Ltd $0.94
BIP Brookfield Infrastructure $0.37
MAR Marriott International $0.99
DISCA Discovery Communications $0.38
DISCK Discovery Communications Disck $0.38
DISCB Discovery Communications Discb $0.38
NYT New York Times $0.20
CIM Chimera Investment $0.37
AVA Avista $0.06
SPR Spirit AeroSystems -$0.77
JLL Jones Lang LaSalle $3.53
BGCP BGC Partners $0.15
AAWW Atlas Air Worldwide $4.30
SMG Scotts Miracle-Gro -$0.87
HFC HollyFrontier $0.76
CRL Charles River Laboratories $2.58
BDC Belden $1.18
CWH Camping World Holdings $1.79
VSH Vishay Intertechnology $0.65
NI NiSource $0.09
LANC Lancaster Colony $1.51
LAMR Lamar Advertising $1.15
SUN Sunoco $1.06
MAC Macerich -$0.08
ODP Office Depot $1.51
FUN Cedar Fair $2.09
NCLH Norwegian Cruise Line -$2.04
QGEN Qiagen $0.54
CORT Corcept Therapeutics $0.22
ES Eversource Energy $1.06
PCRX Pacira $0.67
UTHR United Therapeutics $3.59
SHOO Steven Madden $0.77
FOX Twenty First Century Fox $1.03
ITUB Itau Unibanco $0.12
AGIO Agios Pharmaceuticals -$1.57
CVE Cenovus Energy USA $0.34
CLR Continental Resources $1.21
REGI Renewable Energy $1.16
PXD Pioneer Natural Resources $3.88
MFC Manulife Financial USA $0.64
STN Stantec USA $0.55
TTWO Take Two Interactive Software $1.35
APA Apache $0.91
FNV Franco Nevada $0.85
SID Companhia Siderurgica Nacional $0.43
KW Kennedy Wilson -$0.05
SWN Southwestern Energy $0.21
MGM MGM Resorts International -$0.06
FLT Fleetcor Technologies $3.48
EPR EPR Properties $0.28
SJI South Jersey Industries -$0.17
FOXA Twenty-First Century Fox $1.03
OAS Oasis Petroleum $1.75

Thursday (November 4)

IN THE SPOTLIGHT: EXPEDIA, MODERNA

EXPEDIA: The online travel shopping company would post its third-quarter earnings of $1.68 per share, which represents year-over-year growth of over 800% from a loss of -$0.22 per share seen in the same quarter a year ago. The Bellevue, Washington would post revenue growth of about 84% to around $2.8 billion.

“We see a favorable Expedia (EXPE) risk/reward given our expectation for a U-shaped room night decline and recovery as we see online travel room night growth returning to positive growth in ’21,” noted Brian Nowak, equity analyst at Morgan Stanley.

“We are bullish about EXPE’s recent strategic investments to increase its global property supply, invest in VRBO, and improve performance marketing and see these leading to faster long-term room night growth. While these investments are likely the correct long-term strategies for growth, we see higher execution risk, longer payback and more near-term margin pressure.”

MODERNA: The biotech company focused on drug discovery, is expected to report its third-quarter earnings of $9.01 per share, which represents year-over-year growth of over 1,600% from a loss of -$0.53 per share seen in the same period a year ago. The Massachusetts-based biotechnology company’s revenue would post revenue growth of 3,500% to around $6.09 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 4

Ticker Company EPS Forecast
IBP Installed Building Products $1.63
BLDR Builders Firstsource $1.63
TM Toyota Motor $2.62
PZZA Papa John’s International $0.71
TRGP Targa Resources $0.47
ZBH ZIMMER BIOMET HDG. $1.76
W Wayfair Inc. $0.03
MELI MercadoLibre $1.25
PWR Quanta Services $1.45
PENN Penn National Gaming $0.84
NTLA Intellia Therapeutics Inc -$0.85
APTV Aptiv PLC $0.37
IX Orix $2.27
GPRE Green Plains -$0.29
MUR Murphy Oil $0.14
BGNE BeiGene -$4.70
BBD Banco Bradesco $0.12
CVCO Cavco Industries $2.72
PDCE PDC Energy $1.60
ILMN Illumina $1.26
EXPE Expedia $1.68
CYRX Cryoport Inc -$0.15
QDEL Quidel $3.52
IOVA Iovance Biotherapeutics -$0.53
MNST Monster Beverage $0.67
EOG EOG Resources $2.02
NFG National Fuel Gas $0.69
PFSI Pennymac Financial Services $3.43
OXY Occidental Petroleum $0.66
PRTA Prothena $2.26
MTZ MasTec $1.70
GBT BMTC Group -$1.11
TDS Telephone Data Systems $0.27
BAP Credicorp USA $10.73
USM United States Cellular $0.48
NKTR Nektar Therapeutics -$0.80
SWKS Skyworks Solutions $2.55
AL Air Lease $0.71
AIG AIG $0.91

Friday (November 5)

Ticker Company EPS Forecast
MGA Magna International USA $0.64
HE Hawaiian Electric Industries $0.59
SRE Sempra Energy $1.70
PNW Pinnacle West Capital $2.81
TRP Transcanada USA $0.80
HMC Honda Motor $0.56
VTR Ventas $0.05

 

Why Moderna Stock Is Up By 4% Today

Moderna Stock Gains Ground As The Company Is Expected To Take A Big Share Of Vaccine Market In 2022

Shares of Moderna gained upside momentum after a Financial Times report indicated that Pfizer/BioNTech and Moderna will control 3/4 of non-China coronavirus vaccine market in the next year.

According to the report, Moderna is projected to make $38.7 billion in revenue due to demand for booster shots in developed countries.

Moderna stock has declined from all-time highs at $497.49 to the $300 level as traders questioned whether the company’s valuation is justified, but the stock managed to find buyers in recent weeks and is currently trying to settle above the $335 level.

What’s Next For Moderna Stock?

Earnings estimates for Moderna have slightly improved compared to the levels seen at the beginning of the month. Currently, analysts expect that Moderna will report a profit of $29.34 per share in 2021 and $27.28 per share in 2022, so the stock is trading at roughly 12 forward P/E which is cheap for the current market environment.

The sustainability of Moderna’s revenue remains the main question for traders and investors. If Moderna can generate strong earnings in the next few years and use its revenue to expand the business into other areas in order to ensure the firm’s financial health after the end of the coronavirus pandemic, its shares look attractive at current levels.

The report from Financial Times may serve as a significant catalyst for the stock which has found itself under material pressure after Merck announced positive results of its antiviral drug. Merck plans to produce at least 20 million courses of its drug in 2022, so the world will still have to rely on initial vaccination and booster doses which is bullish for Moderna. If the market stays focused on the recent revenue forecast from the Financial Times report, the stock will have a good chance to develop additional upside momentum in the upcoming trading sessions.

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

Moderna Could Offer Low-Risk Buying Opportunity

Moderna Inc. (MRNA) fell 11.4% on Friday after Dow component Merck and Co. Inc. (MRK) announced positive clinical results for a pill to reduce COVID-19 hospitalizations and death. If emergency use is approved, patients can take the pill after infection but it won’t replace the billions of vaccinations still needed to inoculate the planet. The decline added to a string of losses since late September, bringing the total weekly loss to a staggering 19.44%.

The Pure COVID Play

MRNA’s float is just 344 million shares, far lower than the billions at Merck, Pfizer Inc. (PFE), and AstraZeneca PLC (AZN), generating volatile price action that’s highly levered to pandemic catalysts, positive and negative. In fact, shareholders have been whipsawed by price swings of 80 points or more, higher and lower, four times since the end of July. Unfortunately, accumulation has deteriorated badly on the latest downturn, exposing the stock to a deep Q4 correction.

However, the future is bright for the Cambridge, MA juggernaut, which holds the most important biotech patents since statins hit the market in the 1980s. The company announced a host of “significant advances across its growing portfolio” at a Research and Development Day last month, with ongoing trials and treatments for the COVID booster, RSV + hMPV, Epstein-Barr, and forms of cancer. In addition, it announced that 37 programs are now in development, including 22 in ongoing clinical studies.

Wall Street and Technical Outlook

Wall Street consensus is mixed after Moderna’s historic gains, with a ‘Hold’ rating based upon 5 ‘Buy’, 7 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $85 to a Street-high $485 while the stock closed Friday’s session more than $100 below the median $453 target. It’s instructive to note that analysts have been horrifically wrong about the pandemic’s trajectory since the start of 2020.

Moderna came public at 22 in 2018 and traded in a range between 11 and 30 into 2020 when it broke out in a powerful but highly volatile uptrend. It cleared resistance in the 80s in November and another barrier at 160 in June 2021, entering a final wave that posted an all-time high at 497.49 in August. The stock just broke down from a double top pattern, favoring downside that could offer a low-risk buying opportunity at the unfilled July gap between 260 and 271.

For a look at this week’s economic events, check out our economic calendar.

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

Merck COVID-19 Pill Success Slams Moderna Shares, Shakes Up Healthcare Sector

Merck shares jumped as much as 12.3% and hit their highest level since February 2020 after data showed the company’s pill molnupiravir  could halve the chances of dying or being hospitalized for those most at risk of contracting severe COVID-19. Experts hailed the news as potentially a huge advance in the fight against COVID-19.

At the same time, shares of vaccine makers such as Moderna Inc, Pfizer Inc and partner BioNTech SE were hit, with some analysts saying the promise of an oral drug that can be taken at home could change the public perception of risks associated with COVID-19.

“We see modest perceived headwind to vaccine stocks such as MRNA (Moderna) if the market thinks people will be less afraid of COVID-19 and less inclined to get vaccines, if there is a simple pill that can treat COVID-19,” Jefferies analyst Michael Yee said in a client note.

Moderna shares tumbled 13% in midday trading, while Pfizer, which is developing a COVID-19 pill of its own, fell 1.3%. U.S. shares of BioNTech dropped 11%.

For Moderna investors, the Merck news presented an opportunity to lock in gains after an already stunning run. Shares of Moderna, which were added to the S&P 500 in mid July, remain up some 220% in 2021 despite Friday’s declines. BioNTech’s shares were also still up about 200% for the year, even with Friday’s fall. The Merck news is a “great reason for folks to be taking profits off the table” in Moderna and BioNTech shares, said Sahak Manuelian, head of equity trading at Wedbush Securities. “These moves can get exacerbated to the downside given the momentum they have had to the upside.”

Shares of other companies with COVID-19 vaccines also fell, with AstraZeneca down 2% and Novavax falling 16%.

Companies with other COVID-19 therapies that are administered intravenously or through injection also traded lower, with Regeneron Pharmaceuticals In down nearly 5% and Gilead Sciences Inc off about 2%.

Healthcare was the only one of the 11 S&P 500 sectors in negative territory in mid-day trading, falling 0.5%. “We see molnupiravir, with its oral format as a clear game changer that is likely to meaningfully impact not just the treatment paradigm for COVID-19 but also has potential utility in the prevention setting,” Piper Sandler analyst Christopher Raymond said in a research note.

Merck is conducting a late-stage trial to see if its antiviral pill can prevent COVID-19 infection, in addition to the study that showed it can significantly cut hospitalization and death in those already infected.

Merck, whose shares were last up about 9%, leads the race in developing the first oral antiviral medication for COVID-19. Rivals such as Pfizer and Swiss drugmaker Roche Holding AG with partner Atea Pharmaceuticals Inc are running late-stage trials of their pills. Atea shares were up 19%.

Merck, which discontinued its own COVID-19 vaccine program, had seen its shares fall about 4% for the year through Thursday, before they moved into positive territory for 2021 on Friday.

“Merck has kind of been dead in the water to investors for the past couple of quarters,” said Kevin Gade, portfolio manager with Bahl & Gaynor, which owns Merck shares. “This shows their R&D engine is not dead and they were first … in what could be a multi-billion dollar opportunity.”

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

(Reporting by Lewis Krauskopf in New York and Manojna Maddipatla in Bengaluru; Editing by Ira Iosebashvili and Bill Berkrot)

Pfizer Close to Long-Term Buying Opportunity

Pfizer Inc. (PFE) and BioNTech SE (BNTX) released positive data on their COVID-19 vaccine for ages 5 to 11 on Monday but the stock is losing ground with the broad market, adding to a five-week slide that’s already relinquished more than 16%.  The decline is roughly tracking the slow rollover of U.S. Delta infections and another slowdown in daily vaccinations. Last week’s FDA advisory meeting didn’t help, with the group declining to recommend broad-based booster shots.

Pulling Back from August Breakout

The pharmaceutical giant has gained 17% so far in 2021 despite the latest downturn, with a good portion of selling pressure generated by a rotation out of pandemic plays. However, the last six months have proved how difficult it will be to transition from pandemic to endemic, especially with billions around the world still unvaccinated. Taken together with Pfizer’s bullish breakout pattern, the current decline should offer a low risk buying opportunity.

Approval for ages 5 to 11 will open eligibility to more than 50 million new vaccinations in the EU and USA. As the business partners noted on Monday, “Pfizer and BioNTech plan to share these data with the FDA, European Medicines Agency (EMA) and other regulators as soon as possible. For the United States, the companies expect to include the data in a near-term submission for Emergency Use Authorization (EUA) as they continue to accumulate the safety and efficacy data required to file for full FDA approval in this age group.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly lukewarm, with a ‘Hold’ rating based upon 4 ‘Buy’, 15 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $39 to a Street-high $61 while the stock is set to open Monday’s session on top of the median $44 target. While this placement indicates that Pfizer is fairly-valued, it’s also likely that analysts are underestimating the vaccine’s long-term revenue potential.

Pfizer topped out at 44.05 in 2018 and sold off to a six-year low during 2020’s pandemic decline. A volatile recovery finally reached the prior peak in August 2021, setting off an immediate breakout that posted an all-time high at 51.86 less than three weeks later. The pullback into September is now approaching a zone of strong support near 40, raising odds for a buy-the-dip wave that confirms the breakout and sets the stage for strong 2022 upside.

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

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

Why Pfizer Stock Is Moving Higher Today

Pfizer Stock Rebounds From Multi-Week Lows

Shares of Pfizer gained upside momentum and moved away from multi-week lows after reports indicated that the company planned to apply for U.S. authorization of its coronavirus vaccine for kids aged five and under in November.

Meanwhile, Pfizer’s vaccine was recommended as a booster shot for people over the age of 50 in the UK. It was also recommended for all vulnerable people.

The stock has been under pressure in recent weeks as traders took profits after the major rally which took the stock to new all-time high levels. However, the stock found support in the $44 – $45 range and is currently trying to rebound as traders prepare for potential positive catalysts.

What’s Next For Pfizer Stock?

A recent article in Lancet, written by two departing FDA officials and scientists from WHO, argued that booster shots were not required for the general population. This article has put some short-term pressure on vaccine stocks, but they quickly managed to recover as traders focused on the expanding market for vaccines.

The outlook for vaccine demand in 2022 is exceptional since most developed countries will likely introduce booster shots, less-developed countries have a long way to complete their initial vaccination process while vaccines can be also introduced to kids and teenagers.

Currently, analysts expect that Pfizer will report earnings of $4.09 per share in 2021 and $3.6 per share in 2022, so the stock is trading at less than 13 forward P/E. While analysts expect that earnings will decline in 2022 compared to 2021, these estimates may change as demand for coronavirus vaccines will likely be stronger than originally expected.

In this light, Pfizer stock may attract value-oriented investors and speculative traders who are willing to buy the stock after the significant pullback due to its attractive valuation and potential upside catalysts.

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