Stocks’ Details

Sony Corporation

Q2FY20 Financial Update: Sony Corporation (NYSE: SNE) is a consumer electronics and appliances company. The market capitalization of the company as on 26 January 2021, stood at ~$123.28 billion. The company reported a decrease in sales & operating revenue to ¥2,113.5 billion in Q2FY20 from ¥2,122.3 billion in Q2FY19. There was a significant decrease in the pictures segment sales. However, there was an increase in the net income to ¥459.6 million from ¥187.9 million during the same period under consideration. There was an increase in the debt of the company to ¥1,265.4 billion in Q2FY20 from ¥813.3 billion during 31 March 2020. Cash position stood at ¥1,275.8 million as on 30 September 2020, reflecting a net debt of negative ¥10.4 billion.

Q2FY20 Financial Performance (Source: Company Reports)

Outlook: The company’s image sensor business has been impacted due to the export restrictions imposed by the U.S. Government. However, it has experienced a demand in its gaming business owing to people staying at homes due to the COVID-19 pandemic. SNE will announce Q3FY20 earnings on 3 February 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company reported a debt to equity ratio of 0.43x in Q2FY20, above the industry median of 0.24x. SNE gave a positive return of 28.70% in the past three months and a positive return of 28.45% in the past six months. The stock of SNE is trading close to its 52-weeks’ high level of $100.18. On a technical front, the stock of SNE has a support level of $93.16 and a resistance level of $105. We have valued the stock using an EV/Sales multiple based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers such as Apple Inc (NASDQ: AAPL), HP Inc (NYSE: HPQ), to name a few. Considering the valuation, steep price movement in the past few months and increase in debt levels, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $99.71, up by 0.43% as on January 26, 2021.

Illumina, Inc.

Business Update: Illumina, Inc. (NASDAQ: ILMN) is engaged in DNA sequencing and array-based technologies. The market capitalization of the company as on 26 January 2021, stood at ~$61.4 billion. As per a recent update, the company has won a patent infringement suit against BGI in the United Kingdom. The Court observed that four of the five patents under consideration were valid and infringed by BGI.

Q3FY20 Financial Update: The company reported a revenue of $794 million in Q3FY20, which is a decrease of ~12% compared to $907 million in the previous corresponding period. Net income was at $179 million, compared to $234 million in the prior period. Cash flow from operations stood at $153 million during the period, and free cash flow was at $105 million. The company held $3.3 billion in cash and short-term investments, during the quarter-end.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company has withdrawn its previously announced FY20 guidance, due to uncertainties and volatility associated with the COVID-19 pandemic. 

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company reported a gross margin of 66.2% in Q3FY20, compared to 71.5% in the pcp. ILMN gave a positive return of ~30.71% in the past three months and a positive return of ~34% in the past one month. The stock of ILMN is trading close to its 52-weeks’ high level of $425.92. On a technical front, the stock of ILMN has a support level of $379.83 and a resistance level of $424.80. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation and have arrived at a target price with a correction of low double digit (in % terms). For the purpose, we have taken peers such as Waters Corp (NYSE: WAT), Bruker Corp (NASDAQ: BRKR), Myriad Genetics Inc (NASDAQ: MYGN), to name a few. Considering the steep price movements in the past few months, valuation and the decline in revenue, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $420.55, down by 0.11% as on January 26, 2021.

Vir Biotechnology, Inc.

Positive Results from Phase 1 Trial: Vir Biotechnology, Inc. (NASDAQ: VIR) is a clinical-stage immunology company. The market capitalization of the company as on 26 January 2021, stood at ~$9.85 billion. As per a recent update, the company has announced that initial data from the phase 1 trial of VIR-3434 for chronic hepatitis B virus infection has shown a significant reduction in hepatitis B surface antigen. 

Clinical Collaboration with Gilead: The company has established clinical collaboration with Gilead Sciences, Inc to evaluate novel therapeutic combination strategies for developing a functional cure for chronic hepatitis B virus.

Q3FY20 Financial Update: The company reported revenues of $1.9 million during the quarter, aided by research activities under the HIV and TB grants with the Bill & Melinda Gates Foundation. Net loss was at $84.6 million in Q3FY20, compared to a loss of $48.3 million in the previous corresponding period. The cash position stood at ~$826.6 million as on 30 September 2020.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company has four technology platforms, designed to stimulate and enhance the immune system by providing critical observations of natural immune processes. The present development pipeline consists of products targeting SARS-CoV-2, hepatitis B virus, influenza, etc. to name a few.

Stock Recommendation: The company reported an EBITDA margin of negative 4,470.2% in Q3FY20. VIR gave a positive return of 117.78% in the past three months and a positive return of 161.94% in the past one month. The stock of VIR is trading close to its 52-weeks’ high level of $78.28. On a technical front, the stock of VIR has a support level of $40.52 and a resistance level of $78.25. On a TTM basis, the stock of VIR is trading at an EV/Sales multiple of 61.1x, higher than the industry median (Biotechnology & Medical Research) of 33.5x. Also, on a TTM basis, the stock of VIR is trading at a P/BV multiple of 7x, higher than the industry median (Biotechnology & Medical Research) of 4.6x. Considering the current valuation levels, steep price movement in the past few month and increase in net losses, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $77.38, up by 74.32% as on January 26, 2021. The reason for the price increase can be attributed to the promising results from the initial stage study of its antibody treatment for the hepatitis B virus.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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