Lumen Technologies (LUMN) reported earnings on February 10, posting a beat on the bottom line even as revenue came in slightly less than forecasted. In response, shares took an 8% tumble in the following session.
The company has been in the process of making a challenging pivot away from the broadband services space – an area that is seeing declining revenue due in part to a lack of pricing power.
On the company’s earnings call, CEO Jeffrey Storey reminded analysts that the last several years have been a time in which the company was making this transition. That work, according to Storey, came to fruition late last year when Lumen launched its Lumen Platform.
The Lumen Platform reflects the company’s foray into what it calls the “4th Industrial Revolution.” Put another way, it’s Lumen’s attempt to become a high-performance, fiber-based company with a presence in the hybrid cloud space.
By the looks of LUMN stock the day after its earnings release, investors don’t appear to be that excited. The reason may be related to its need for some serious growth. Specifically, some investors are concerned that achieving this growth could come at the expense of LUMN’s most appealing aspect, its dividend.
Will Its Strength Be Its Weakness?
One attribute of LUMN stock that has kept investors interested is its dividend, which not too long ago was yielding over 10%. That said, dividend yields can be a little deceiving. The company’s dividend for the full year was $1/share, paid out in quarterly installments.
This could very well suggest that LUMN’s biggest asset was its dividend. However, as the company makes this transition, they may need to cut its dividend to fuel the growth they need.
In fact, that process is already underway. In early 2019, Lumen slashed its quarterly dividend by more than half from 54 cents to 25 cents. Not surprisingly, LUMN stock plunged approximately 30% at that time. However, the company has held the line on the dividend in the last two years, and that should be recognized considering many companies suspended or cut their dividends during the pandemic.
Lumen now finds itself in a delicate situation. On the one hand, it will want to maintain the stability of its dividend. On the other, the company might need to continue to chip away at it to fund future growth.
Lumen Is Shoring Up Its Balance Sheet
For now, at least, that concern may be alleviated. On the earnings call, the company reported that it has managed to restructure its debt. The maturity on its largest debt obligation has been pushed out by two years to 2027. The plan is for the company to use its future cash flows, which are expected to grow, to pay down that debt. For 2021, Lumen has debt obligations of $2.4 billion.
Based on the information in its earnings presentation, LUMN finished the year with $2.9 billion in free cash flow and a requirement of $1.1 billion to meet its dividend obligation.
Lumen also reported that it continues to engage in cost-cutting initiatives that should help further boost margins. And right now, it appears that Lumen has adequate free cash flow to meet its debt obligations.
Analysts Weigh In
The analyst community gives LUMN a consensus rating of Hold, based on 1 Buy rating, 2 Holds and 2 Sells. Given its average analyst price target of $12.03, shares could rise 2% in the year ahead. (See Lumen Technologies stock analysis on TipRanks)
Wait For Better News From Lumen
Towards the end of his prepared remarks, Storey noted that the company will participate in a virtual investor day in the spring. At that time, he alluded to the fact that more information will be forthcoming regarding the company’s existing partnerships. This includes a very intriguing one with VMware (VMW).
However, outside of a potential dividend announcement, there’s nothing that’s particularly compelling about owning LUMN stock right now. Stay on the sidelines and wait for a better revenue story.
Disclosure: On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
In the last year, digital sports entertainment and gaming company DraftKings (DKNG) has been in a steady uptrend. During this period, the stock has returned 241% and currently trades at $61.07 per share.
With positive company specific developments coupled with industry tailwinds, DraftKings stock remains attractive even after its massive rally. Let’s discuss the reasons for this bullish outlook.
Strong Industry Growth in the Coming Years
According to Barry Jonas of Truist Securities, the U.S. sports betting and iGaming market is likely to be worth $20 billion by FY2030. By the company’s own estimates, the global sportsbook total addressable market is worth $70 billion.
Back in FY2018, the American Gaming Association estimated that Americans illegally bet at least $150 billion annually on sports. Even if part of this market shifts to legal betting and sports, the opportunity is significant. Therefore, from an industry perspective, there is big potential for growth in the next decade.
To put things into perspective, DraftKings has guided for revenue in the range of $750 to $850 million for FY2021. Even if the company captures 10% of the global addressable market, the revenue potential is $7 billion.
It’s also worth noting that sports betting is being gradually legalized throughout the United States. On Jan. 24, the company launched DraftKings Sportsbook in Virginia. With growing reach, the company’s addressable market is increasing, which will translate to an acceleration in top-line and earnings growth.
Overall, DraftKings is well positioned to benefit from secular industry tailwinds, likely resulting in a long-term stock uptrend.
Company Specific Bullish Triggers
DraftKings is scheduled to report Q4 2020 results on Feb. 26. It should be noted that the company has already guided for revenue of $550 million for FY2020. For the current year, the company’s revenue guidance is $800 million (mid-range). Therefore, the company expects 45% top-line growth on a year-on-year basis. Even beyond the current year, strong growth is likely to persist, reflecting one of the key stock upside triggers.
DraftKings is also looking at geographical expansion. The company is already entering new states in the U.S. as sports betting and iGaming is legalized. At the same time, international expansion is a key growth catalyst.
In October 2020, DraftKings partnered with Peermont Hotels to launch PalaceBet (a mobile and online sportsbook) in South Africa. Further, on Feb. 4, the company announced an agreement to expand their daily fantasy sports to Canada. This is just the beginning of the company’s international expansion and will ensure that healthy growth continues.
For Q3 2020, the company reported an adjusted EBITDA loss of $197 million. Although EBITDA level losses have increased on a year-on-year basis, that’s not a concern at an early growth stage.
What’s more, it’s worth noting that for Q3 2019, the company reported 621,000 average monthly unique payers (AMUP). For Q3 2020, AMUP was 1,021,000. Clearly, as paying users increase, the company will be positioned to generate robust EBITDA and cash flows. Once operating level profitability is achieved, the stock is likely to surge higher.
Wall Street’s Take
Looking to the analyst community, 12 Buys, 5 Holds and 1 Sell have been assigned in the last three months. So, DKNG has a Moderate Buy consensus rating. At $64.71, the average analyst price target suggests 6% upside potential. (See DraftKings stock analysis on TipRanks)
Concluding Thoughts
As of September 2020, the company reported cash and equivalents of $1.1 billion. Further, the company had zero debt outstanding. With ample financial flexibility, the company is positioned to push for aggressive growth.
The company’s CEO did mention during the Q3 2020 conference call that DraftKings is exploring opportunistic and accretive M&A. That’s another potential trigger for revenue and earnings acceleration.
Overall, DraftKings is positioned for multi-year growth. It’s very likely that the stock will remain in an uptrend, and thus, fresh exposure can be considered at current levels.
Disclosure: On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Shares in the parent company of Sharpie, Papermate and Rubbermaid, Newell Brands, dropped 7% on Friday after the company released better-than-expected fourth quarter results, but missed analysts’ forward-looking estimates.
Newell (NWL) posted adjusted EPS of $0.56 compared to analysts’ estimates of $0.48, while revenues rose 2.5% year-on-year to $2.69 billion, beating forecasts of $2.61 billion.
Full year 2020 operating cash flow of $1.4 billion reflected strong progress on working capital initiatives, compared to $1 billion in 2019.
However, the company expects adjusted earnings of between $1.55 and $1.65 per share in 2021, falling short of analysts’ previous estimates of $1.70, with net sales in the first quarter in the $2.04 to $2.08 billion range.
Ravi Saligram, Newell’s President and CEO, said, “We are proud of our accomplishments in 2020, returning to meaningful core sales growth and operating margin improvement in the back half of the year… I am excited about Newell's prospects and feel our best days are ahead.” (See Newell Brands stock analysis on TipRanks)
Jefferies analyst Kevin Grundy reiterated his Buy rating on Newell last week and raised his price target to $30 from $28. This implies upside potential of around 24% from current levels.
Commenting before the release of NWL’s results, Grundy told investors that he sees benefits from an improving macro/fundamental turnaround, leading to a better-than-expected Q1 2021 outlook.
Consensus among analysts is a Hold based on 2 Buys, 4 Holds and 1 Sell. The average analyst price target of $23.50 suggests that NWL is fully priced at current levels, with downside potential of around 3% over the next 12 months.
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Lincoln Electric Holdings posted better-than-expected earnings in the fourth quarter, driven by an expansion of adjusted operating margin and prudent cost management. However, a decline in organic sales and currency headwinds kept its sales under pressure.
Lincoln Electric’s (LECO) 4Q adjusted earnings increased 7.8% to $1.24 per share on a year-over-year basis and beat Street estimates of $1.06 per share. Sales decreased 5.8% to $693.8 million, but were above analysts’ expectations of $682.65 million.
Meanwhile, the company’s adjusted operating margin during the quarter expanded to 13.4% from 12.4% year-on-year. That said, organic sales fell 5.6%. (See Lincoln Electric stock analysis on TipRanks)
Lincoln Electric CEO Christopher L. Mapes said, “Strong execution of our strategic initiatives and cost reduction actions generated record cash flows, strong cash conversion performance and earnings growth in the quarter while also delivering record safety and environmental performance.” “Looking ahead, we are well-positioned to capitalize on growth and increase profitability and returns as we focus on achieving our long-term Higher Standard 2025 Strategy goals and superior long-term value for our stakeholders,” he added.
Following the 4Q results, Oppenheimer analyst Bryan Blair maintained a Hold rating on the stock. The analyst remains “encouraged by improving demand trends (vs. easy comps) and the rebound prospects of Lincoln’s differentiated automation platform.”
“Balancing this momentum with continued pandemic-related uncertainties,” Blair argues the company “is reasonably valued in current price range.”
The Street’s consensus rating on the stock is a Hold. That’s based on 2 Holds, 1 Buy and 1 Sell. Looking ahead, the average analyst price target stands at $121.67, putting the upside potential at about 5.1% over the next 12 months. Shares have increased nearly 26.3% over the past year.
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Boeing has maintained that it acted urgently in response to the fatal plane crashes that killed 346 people on board two of its 737 MAX aircrafts, but newly released company documents may contradict these claims, according to The Wall Street Journal.
A lawsuit by shareholders against Boeing (BA) suggests that directors breached their fiduciary duties in overseeing management's response to the fatal crashes, and also accuses then lead-director and current CEO, David Calhoun, of exaggerating the degree to which board members reacted to safety concerns about the aircrafts, WSJ reports.
According to the lawsuit, directors were reportedly “notified immediately” about the first 737 MAX crash in Indonesia on Oct. 29, 2018, but the WSJ has revealed that newly released portions of the suit show that directors only received their first written communication a week after the accident.
Furthermore, the board only held its first formal meeting around seven weeks after the initial crash, and minutes from this meeting indicate that “no substantive discussion” regarding safety issues were discussed. Conversation around the 737 MAX was focused on production recovery, supply chains and engines as it was preparing to accelerate deliveries of its top moneymaker.
According to the WSJ, a Boeing spokesperson claimed that the lawsuit has distorted the CEO’s account of the incidents, adding that the claims present a “misleading and incomplete picture” of Boeing’s actions. (See Boeing stock analysis on TipRanks)
Morgan Stanley analyst Kristine Liwag double-upgraded her rating on Boeing two weeks ago from a Sell to a Buy, raising her price target to $230 from $165. This implies upside potential of around 9% from current levels.
Following the release of what was considered a “kitchen sink” earnings report, Liwag told Bloomberg that getting all the bad news out of the way sets up a clear runway for Boeing and called the aerospace giant “a COVID-19 recovery play with upside.”
Consensus among analysts is a Hold based on 9 Buys, 9 Holds and 4 Sells. The average analyst price target of $231.26 suggests upside potential of around 10% over the next 12 months.
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Nvidia’s proposed acquisition of Arm Ltd could be in trouble, according to a Reuters report from Feb. 13, citing Bloomberg. The Federal Trade Commission (FTC) has opened a probe into the acquisition and has sent demands for information to third parties, Reuters said, citing Bloomberg.
Nvidia’s (NVDA) proposed acquisition of Arm has also been opposed by tech giants like Alphabet (GOOGL), Qualcomm (QCOM) and Microsoft (MSFT).
In September last year, Nvidia had proposed a $40 billion acquisition of Arm, from the SoftBank Group. The acquisition aimed to build an Arm and Nvidia powered AI (artificial intelligence) supercomputer and expand Arm’s IP (intellectual property) licensing portfolio with Nvidia technology. Arm provides IP semiconductors, and has shipped 180+ billion chips to-date. (See Nvidia stock analysis on TipRanks)
Currently, a chip shortage has affected several companies including Qualcomm. During the announcement of its 1Q FY21 results, the company said that financial performance could have been stronger if it had not been “supply constrained.”
Furthermore, Qualcomm executives told Reuters that chip supply constraints will remain tight through the first half of 2021 without detailing the supply issue. “If we could make more, we could sell it,” Qualcomm CEO Steve Mollenkopf told Reuters in an interview.
On Feb. 11, Wells Fargo analyst Aaron Rakers reiterated a Buy rating and a price target of $625 on the stock. Rakers said about the sales of the company’s GeForce graphics card, “With an expanding catalog of next-gen games supporting ray tracing, and thus the need for performance upgrades, we continue to expect that NVIDIA's gaming GPU product cycle momentum will remain strong through 1H2021.”
Meanwhile, Nvidia scores a Strong Buy consensus rating from the analyst community. That’s based on 14 analysts recommending a Buy and 4 analysts suggesting a Hold. The average analyst price target of $605.71 implies 1.2% upside potential to current levels.
Nvidia scores an 8 out of 10 on the TipRanks Smart Score system, indicating the stock has a high likelihood of outperforming the market.
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India Today has reported that Tesla will be opening an electric vehicle (EV) manufacturing plant in Karnataka, India, according to a statement released by Chief Minister BS Yediyurappa on Saturday.
Tesla’s (TSLA) CEO, Elon Musk, has been very vocal recently about his intention to enter the Indian market, and last month, registered Tesla Motors India and Energy Private Limited in the city of Bengaluru in Karnataka.
India’s desire to reduce its dependence on oil in its bid to cut down on air pollution and greenhouse gas emissions has been widely reported, but its efforts to develop an EV industry have been frustrating due to a lack of investment in infrastructure and manufacturing.
Last year, Reuters reported that India was setting up a $4.6 billion incentives scheme for companies who would develop advanced EV battery manufacturing facilities in India. (See Tesla stock analysis on TipRanks)
Morgan Stanley analyst Adam Jonas reiterated his Buy rating on Tesla three days ago and set his price target at $880. This implies upside potential of around 8% from current levels.
Jonas highlighted his concerns about the expected shortfall in battery supply as the demand for electric vehicles gains momentum. This sentiment was confirmed by Elon Musk, who said that “the fundamental limit on electric vehicles right now, in general, is total availability of cells.”
Consensus among analysts is a Hold based on 7 Buys, 14 Holds and 7 Sells. The average analyst price target of $603.83 suggests that TSLA shares are overpriced at current levels, with around 26% downside potential over the next 12 months.
Tesla scores a 9 out of 10 from TipRanks’ Smart Score system, which suggests that analysts expect the company to outperform expectations moving forward.
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Shares of Coherent jumped nearly 13.8% on Feb. 12 after the provider of lasers and laser-based technologies received a buyout offer from II-VI. The cash and stock deal has a total enterprise value of $6.5 billion.
Per the terms of the unsolicited acquisition proposal, the manufacturer of engineered materials and optoelectronic components has proposed to pay $130 in cash and 1.3055 shares of II-VI for each share of Coherent (COHR). The total value, which comes in at $260 per share, represents a 14.6% premium to COHR's closing price on Feb. 11. Shares of II-VI dropped 9.7% at the close on Feb. 12.
After closure, II-VI (IIVI) expects the deal to be accretive to adjusted EPS in the second year. Combined run-rate synergies of $200 million are likely to be realized annually within thirty-six months.
Last month, Coherent entered into a cash-stock deal with California-based manufacturer of optical and photonic products, Lumentum Holdings, to be acquired for $100 in cash and 1.1851 shares of Lumentum (LITE) common stock for each share of Coherent.
Earlier this week, the company also received an unsolicited acquisition proposal from MKS Instruments, in which each share of Coherent common stock would be exchanged for $115 in cash and 0.7473 per share of MKS (MKSI) common stock.
II-VI’s offered price reflects a 24% premium to the implied value of the Lumentum deal and a 9.8% premium to the implied value of MKS Instruments’ buyout proposal. II-VI’s proposal is undergoing Coherent’s board of directors’ review. (See Coherent stock analysis on TipRanks)
The pending merger deal with Lumentum along with the proposed offers of MKS and II-VI are all subject to customary closing conditions, which includes U.S. and foreign antitrust approvals as well as stockholder approvals.
On Feb. 11, Benchmark Co. analyst Mark Miller downgraded the rating to Hold from Buy, as he is “awaiting the decision on what firm will acquire Coherent.”
Meanwhile, the Street’s consensus rating on the stock is a Hold. That’s based on a unanimous 6 Holds. Looking ahead, the average analyst price target stands at $210.33, putting the downside potential at about 18.5% over the next 12 months. Shares have jumped 65.6% over the past year.
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On Feb. 12, medical technology company Becton Dickinson & Co announced that it had received emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) for a new molecular diagnostic product to detect SARS-CoV-2 and Influenza A & B in a single test. The test can produce results in 2-3 hours. Shares of Becton Dickinson rose 1.16% at the close of trade on Friday.
Becton Dickinson (BDX) noted that the test can address variants of SARS-CoV-2, including variants from the U.K and South Africa. Analysis showed that 99.9% of genetic sequences of these variants are identical to at least one of the two molecular targets of the test.
Dr. Charles Cooper, vice president of Medical and Scientific Affairs for integrated diagnostic solutions at Becton Dickinson, said, “Since these two diseases generally present with similar symptoms, a single specimen for diagnosis speeds up time to results and helps in determining right care approach faster to prevent community transmission.”
Dave Hickey, president of life sciences at Becton Dickinson added, “The new information on the test of detecting variants from the U.K and South Africa will provide helpful guidance to practitioners.” (See Becton Dickinson stock analysis on TipRanks)
On Feb. 5, Citigroup analyst Joanne Wuensch raised the price target on the stock to $280 from $273 and reiterated a Hold rating (9.24% upside potential). Joanne highlights the positive impact from COVID-19 diagnostic sales on the company’s bottom line in 1Q.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 4 Buys and 2 Holds. The average analyst price target of $285.60 implies 11.42% upside potential from current levels.
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Shares of Amtech spiked 22% at end of trading on Friday after the capital equipment manufacturer’s quarterly profit blew past the Street consensus.
Amtech Systems (ASYS) posted earnings per share (EPS) of $0.05 during the first quarter, which came in ahead of the $0.08 net loss per share expected by analysts. Revenue decreased 13.4% year-on-year to $18 million, but topped analysts’ estimates of $16.55 million.
This reflected a sequential quarterly revenue growth of 19% on the back of the shipment of Amtech’s 300mm clustered HTR diffusion furnace to a global power semiconductor client. Favorable product mix also helped the company generate a higher gross margin of 41.8% in Q1, compared to 32.9% in the previous quarter.
Looking ahead for 2Q 2021, Amtech sees revenues of between $18 million to $20 million and a gross margin of ~40%. This outlook reflects the impact from the shipping container shortage and associated delays in products shipped from China amid the COVID-19 pandemic.
Amtech CEO Michael Whang expects the increasing product demand for Amtech’s semiconductor segment to continue in the second quarter with an expanding quoting activity across different end markets. Further, amid the present chip shortages in the market, he sees long-term demand drivers remaining strong in the years ahead. (See Amtech stock analysis on TipRanks)
On Friday, Benchmark Co. analyst Mark Miller upgraded the stock to Buy from Hold with a price target of $10 (7.4% downside potential). Mark sees Amtech having a profitable fiscal 2021 based on his revised forecasts and increased quoting activity in Amtech’s end markets. The stock has already yielded 104% over the past year.
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Sanofi’s CEO, Paul Hudson, said that the mRNA-based (messenger Ribonucleic acid) COVID-19 vaccine developed by the pharma giant and Translate Bio will not be ready this year, according to a Reuters report, citing the French newspaper Le Journal du Dimanche.
Sanofi (SNYNF) expects to start the clinical trials of the mRNA-based vaccine this quarter, Reuters said, citing Le Journal du Dimanche. Hudson told the French newspaper, “This vaccine will not be ready this year, but it could be of use at a later stage all the more if the fight against variants was to continue.”
In October last year, the company had said that the pre-clinical trials of the experimental COVID-19 vaccine developed along with Translate Bio (TBIO) resulted in the production of neutralizing antibodies, indicating a favorable response from the immune system. At that time, the company said that it expected to begin a Phase 1 clinical trial in the last quarter of 2020.
The delay in the development of the vaccine could be another setback for Sanofi, in addition to the delay in the development of its COVID-19 vaccine along with Glaxo SmithKline (GSK). In December last year, Sanofi had said that a Phase 1 study of the antigen-based COVID-19 vaccine indicated that it was less effective in older adults as compared to adults in the age group of 18 to 49 years.
This prompted Sanofi to say that it plans to conduct a Phase 2b study in February this year with an improved antigen formulation of the vaccine, and expects to bring the vaccine to market in the fourth quarter of this year.
Sanofi has also collaborated with other companies to develop or manufacture a COVID-19 vaccine.
Late last month, Sanofi announced an agreement with BioNTech (BNTX), under which the company will provide BioNTech access to its production infrastructure for the COVID-19 vaccine. BioNTech is developing its COVID-19 vaccine along with Pfizer (PFE).
From the summer of this year, Sanofi will conduct late-stage manufacturing of the BioNTech vaccine and aims to supply 125 million doses to the European Union (EU) to increase the availability of the vaccine. (See Sanofi stock analysis on TipRanks)
Earlier this month, following the company’s 4Q and FY20 results, Liberum Capital analyst Alistair Campbell reiterated a Hold rating and a price target of $116.36 on the stock. Campbell said that the company’s 4Q and FY20 results were a “solid end” to the year, and while the analyst notes that the company’s outlook was slightly below consensus estimates, it appeared to be on the conservative side.
Meanwhile, Sanofi scores a Moderate Buy consensus rating from the analyst community. That’s based on 9 analysts recommending a Buy, 4 analysts suggesting a Hold and 1 analyst recommending a Sell. The average analyst price target of $117.23 implies 24.9% upside potential to current levels.
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G1 Therapeutics announced that the US Food and Drug Administration (FDA) has approved its COSELA drug as a first-of-its-kind treatment for patients with extensive-stage small cell lung cancer receiving chemotherapy. Shares rose nearly 20% in Friday’s extended trading session after closing nearly 5.2% lower on the day.
The biopharmaceutical company said that the approval followed clinical trials, which showed that COSELA significantly lowered the duration and severity of neutropenia in adult patients. The injection decreased the occurrence of chemotherapy-induced bone marrow suppression. In early March, COSELA is likely to be available through G1 Therapeutics’ (GTHX) specialty distributor partner.
About 30,000 patients in the US undergo small cell lung cancer treatment annually. (See G1 Therapeutics stock analysis on TipRanks)
G1 Therapeutics CEO Jack Bailey said, “COSELA will help change the chemotherapy experience for people who are battling ES-SCLC. G1 is proud to deliver COSELA to patients and their families as the first and only therapy to help protect against chemotherapy-induced myelosuppression.”
On Jan. 20, H.C. Wainwright analyst Edward White reiterated a Buy rating on the stock with a price target of $82 (165.5% upside potential). The analyst views “G1 Therapeutics as a solid stock pick for investors,” based on the company’s “several promising products in development, a near-term potential approval for trilaciclib in small cell lung cancer (SCLC), and a strong cash position with a runway into 2022.”
G1 Therapeutics shares have exploded 95.9% in the past six months, while the stock still scores a Strong Buy consensus rating based on 3 unanimous Buys. That’s alongside an average analyst price target of $78, which implies around 152.5% upside potential over the next 12 months.
Meanwhile, G1 Therapeutics scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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