The market has proven itself difficult to predict at the best of times, yet the sustained rally since mid-March has left many perplexed. As the bad news on Main Street has kept piling up, Wall Street has nonchalantly marched on, seemingly oblivious to the pandemic’s destructive effect and buoyed by the stimulus measures.
But perplexing market moves are nothing new. Which brings us to Roku (ROKU). The OTT leader delivered a solid quarterly report last week, and promptly tanked in the market, as shares dropped by 8% in Friday’s session.
At first glance, this may seem odd. Roku reported revenue of $321 million, up by 55.3% year-over-year and beating the estimates by $11.77million. Q1 GAAP EPS of -$0.45 met Street expectations, while active accounts increased year-over-year by 36.8% to 39.8 million. Unsurprisingly, in these stay at home times, engagement soared to 13.2 billion hours, up by 49% compared to the same period last year.
So where was the problem? Maybe problem is the wrong word. But you could argue the good news was already priced in, as Roku announced preliminary results in mid-April, and therefore Wall Street knew what was coming. Secondly, it should be noted Roku stock has exploded since the mid-March lows. The majority of the market has surged too, but not many increased by 115% since then, so, it is possible some trading profits were locked in.
Another explanation for the sell-off might be down to Roku’s assertion that ad spend – a major ARPU (average revenue per user) growth driver - is expected to be slashed amid the economic uncertainty. The trend was already in place in the quarter as ad cancellations came in fast and furious during late March through mid-April.
Nevertheless, the pullback hasn’t dampened Rosenblatt analyst Mark Zgutowicz’ views on Roku’s prospects. As it happens, following the earnings report, the 5-star analyst reiterated a Buy and increased the price target from $110 to $145. Expect upside of 23%, should the target be met in the months ahead. (To watch Zgutowicz’ track record, click here)
Zgutowicz commented, “While macro and subsequent ad market uncertainties look to be with us for some time, we remain focused on long-term potential silver linings to pandemic disruptions, including ecommerce and OTT video. Roku’s dominant US brand/household positioning in OTT, and early innings globally, make it hard to bet against, even with acknowledged less than perfect financial model transparencies. OTT video streaming and importantly Roku’s market position, should come out the other end of this stronger.”
All in all, the Street keeps a positive, though more measured view. 7 Buys, 4 Holds and 2 Sells coalesce to a Moderate Buy consensus rating. The average price target is $128.33 and implies miniscule upside of 9%. (See Roku stock analysis on TipRanks)
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Empty streets, shuttered buildings, and silent cities. The world has indeed resembled a dystopian film set at times over the last 3 months. But Oppenheimer analyst Hartaj Singh takes the science fiction analogy a step further and applauds Moderna’s (MRNA) "warp speed" progress in developing a COVID-19 vaccine.
Although Moderna’s pipeline has several drugs in various stages of development, focus has naturally turned to the progress of its COVID-19 vaccine candidate, mRNA-1273.
A Phase 1 trial is currently taking place, and a Phase 2 trial has already received the FDA’s nod of approval and is likely to commence shortly. Furthermore, the company has already begun preparations for a Phase 3 trial in the summer, but has cautioned investors this is a "best plan" outcome.
However, Singh believes "MRNA's recent fast-mover success with its CMV vaccine, its scalable platform, and “the safety and efficacy profile of its vaccines (all eight vaccines have demonstrated neutralizing antibodies)" increase the possibility of success.”
If things go as planned, then a possible vaccine could be ready by 1H21.
Add a recent agreement with biotech powerhouse Lonza to facilitate the large scale manufacturing of mRNA-1273 along with plans to initiate a non US based mRNA-1273 trial (which could possibly preserve Moderna’s worldwide rights for the drug), and Singh is ebullient when considering the biotech’s prospects.
“We point out to investors that MRNA's decade-long investments in IP, manufacturing and information technology have combined with its world-beating preclinical and clinical mRNA platform to be potentially ‘perfectly positioned’ to respond the COVID-19 pandemic and the need for a vaccine, with a speed and scale that is frankly astonishing by any historical measure. While there is much to be done, we stay bullish,” the 5-star analyst concluded.
Moderna was undoubtedly one of 2020’s success stories. The stock has exploded upward to the tune of 200% year-to-date. Following the mercurial run up, is a pullback on the horizon?
With 9 Buys and 2 Holds, the mRNA player has a Strong Buy consensus rating. Although on account of the stock’s constant upward trajectory, the average price target of $53.67 implies possible downside of 9%. It will be interesting to see if the analysts update their models shortly to consider the recent developments. (See Moderna stock analysis on TipRanks)
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