Stocks’ Details

Oracle Corporation

FY20 Results Highlights: Oracle Corporation (NYSE: ORCL) provides products and services that address enterprise information technology (IT) environments. For FY20, the company reported total revenues of $39.1 billion, down by 1% YoY and flat on a constant currency basis. From Cloud services and license support segment, the company received a revenue of $27.4 billion. During the year, GAAP earnings per share increased by 4% to $3.08. Over the year, the company returned $22.3 billion to its shareholders. This includes $19.2 billion returned through repurchases of common stock and $3.1 billion paid through dividends. As on 31 May 2020, the company had cash and cash equivalents of $37.23 billion, compared to $20.51 billion in FY19.

FY20 Revenue Breakup (Source: Company Reports)

What to Expect: Due to the expected growth in the company’s cloud services and license support offerings and continued demand for its cloud license and on-premise license offerings, the company expects its total cloud and license revenues to increase in the future. The company believes that it is well placed to fund its future acquisitions with its internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional securities. The company intends to release its Q1FY21 release on 9 September 2020.

Key Risks: The duration and extent of the COVID-19 pandemic are expected to impact the company’s future results of operations. The conditions caused by the COVID-19 pandemic have adversely affected the customers’ willingness to purchase the company’s products and delayed prospective customers’ purchasing decisions. Further, the company is exposed to the risk of potential significant coding, manufacturing or configuration errors in its cloud, license, and hardware offerings.

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

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

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of ORCL has provided a return of 5.69% in the last three months and is inclined towards its 52 weeks high of $57.84. On the technical analysis front, the stock is trading at a support level of ~$54.02 and a resistance level of ~56.89. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of high single-digit upside (in % terms). For the purpose, we have taken peers like International Business Machines Corp (NASDAQ: IBM), Cisco Systems Inc (NASDAQ: CSCO), Hewlett Packard Enterprise Co (NASDAQ: HPE), etc. Considering the company’s decent FY20 results, expected growth in the cloud services and license support offerings and continued demand for its cloud license and on-premise license offerings, we suggest a “Hold” recommendation on the stock at the current market price of $55.19, down by 0.13% on 21 August 2020.

Oragenics Inc.

Avid Bioservices Selected to Provide Essential Services: Oragenics Inc. (NYSE: OGEN) is a health care company involved in the development of novel antibiotics against infectious diseases. The company is currently focused on the creation of the Terra CoV-2 vaccine candidate to combat the novel coronavirus pandemic. On 20 August 2020, the company announced that it has signed a process development and drug substance manufacturing agreement with Avid Bioservices, Inc. (NASDAQ: CDMO), under which, OGEN will receive analytical method development, process development and drug substance manufacturing services from Avid Bioservices, Inc. for the development of Terra CoV-2. Following the completion of analytical method feasibility and qualification activities, both the companies will together work for the upstream and downstream process development and CGMP drug substance manufacturing of Terra CoV-2.

Earlier, through its wholly-owned subsidiary, Noachis Terra, the company had signed a deal with Aragen Bioscience, to advance TerraCo-2. The company intends to bring its COVID-19 vaccine candidate into human clinical trials by early 2021.

NIH Produces Neutralizing Antibodies: Recently, National Institutes of Health (NOH) created a stabilized pre-fusion spike protein (CoV-2 S-2P) licensed by Oragenics Inc. As per the Preclinical Study, this spike protein has generated neutralizing antibodies in mice during immunization against SARS-CoV-2, the virus that causes COVID-19.

June 2020 Quarter Update: For the quarter ending 30 June 2020, the company reported total operating expenses of $12.35 million and net loss of $12.33 million. The net cash used in operating activities stood at $8.65 million. At the end of the June quarter, the company had cash and cash equivalent of $9.629 million and total assets of $10.73 million.

June 2020 Results (Source: Company Reports)

What to Expect: The company has incurred significant losses since its inception and expects to experience losses for the foreseeable future, as it intends to dedicate a significant amount of its financial resources to research and development, including its nonclinical development activities and clinical trials.  The company expects that its cash resources, together with the proceeds from recent warrant exercises, will be sufficient to fund its operations as presently structured into the first quarter of 2021. 

Key Risks: The current COVID-19 pandemic has presented substantial public health and economic challenge around the world and is affecting the company’s employees, development partners, communities, and business operations. The company’s future success is dependent on its ability to obtain regulatory approval for its product candidates and its ability to partner or sub-license its product candidates and their subsequent successful commercialization. 

Stock Recommendation: The stock of OGEN has provided a return of 75.2% on YTD basis, and in the past three months it has provided a return of 56.05%. The stock is trading lower than the average of its 52 weeks trading range of $0.36 - $2.09, offering a decent opportunity for accumulation. On the technical analysis front, the stock is trading at a support level of ~$0.40 and a resistance level of ~1.70. The company currently seems to be well-placed to fund its operations. Considering the company’s progress in the development of Terra CoV-2 vaccine candidate, the recent data from the preclinical study for the stabilized pre-fusion spike protein, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.9163, down by 0.40% on 21 August 2020.

CureVac N.V.

Commenced Trading on NASDAQ: CureVac N.V. (NASDAQ: CVAC) is a clinical-stage biopharmaceutical company primarily involved in the development of a new class of transformative medicines based on messenger ribonucleic acid (mRNA).  From the IPO, the company raised gross proceeds of around $245.3 million with the offering of 15,333,332 common shares at an offer price of $16.00 per common share. On 14 August 2020, the company’s shares began trading on NASDAQ under the ticker “CVAC”. Earlier in July 2020, the company completed private financing round, raising a total of $640 million.

Potential mRNA-based COVID-19 Vaccine Update: On 20 August 2020, the company concluded its discussion with the Europe Commission for the supply of up to 405 million doses of potential mRNA-based COVID-19 Vaccine. mRNA-based vaccine candidate is currently in Phase 1 clinical trial with the first results expected in early Q4 2020. Following the release of results, the company intends to commence a Phase 2b/3 clinical trial in Q4 2020.

March Quarter Update: For the three months ended 31 March 2020, the company reported total revenue of €3.119 million compared to revenue of €3.15 million reported in pcp. For the quarter, the company reported a total net loss of €23.85 million. At the end of the March quarter, the company had actual cash and cash equivalents of €43.47 million.

March 2020 Quarter Results (Source: Company Reports)

What to Expect: The company intends to spend substantial resources in the foreseeable future for developing its proprietary product candidates. The company expects to incur losses in the future as it continues its research and development and seeks regulatory approvals for its product candidates and maintains and develops new technology platforms.

Key Risks: The outbreak of COVID-19 may cause business disruptions and could have a material adverse effect on the company’s business plan or clinical trials. Some of the company’s clinical trial sites are located in countries, such as Spain and Italy, which have experienced a shortage of medical staff due to the COVID-19 pandemic. If clinical trials of the company’s product candidates or production of its product candidates are prolonged or delayed, it may be unable to obtain required regulatory approvals, and therefore, be unable to commercialize its product candidates on a timely basis.

Stock Recommendation: The stock of CVAC is currently trading at a price of $67.2 with a market cap of $11.82 billion. The stock price has gained ~320% from the listing price of US$16 per share. The company currently awaits the results of Phase 1 clinical trial of its COVID-19 vaccine, following which it intends to commence the second and third trials. Considering the company’s limited trading history and expected trial results, and strong listing, we suggest investors to wait for further updates from the company for its trial program and hence, have a watch stance on the stock at the closing price of $67.2, up by 1.82% on 21 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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