Stocks’ Details

Harmony Biosciences Holdings, Inc.

HRMY Receives Nod From FDA: Harmony Biosciences Holdings, Inc. (NASDAQ: HRMY), is a pharmaceutical company, engaged in the development and commercialization of therapies for rare neurological disorders. On 14 October 2020, the company informed the market that it has received a nod for WAKIX® (pitolisant) from the U.S. Food and Drug Administration (FDA) for the treatment of cataplexy in adult patients with narcolepsy. WAKIX is the first and only therapy that is used to treat people with massive daytime sleepiness.

Key Financial Highlight for the Period Ended 30 June 2020: Net product revenue for the period came in at $38 million, up from the previous quarter’s figure of $19.8 million. Cost of product sales also increased from $3.5 million in 1QFY20 to $6.5 million in 2QFY20. Gross profit came in at $31.5 million, as compared to $16.4 million in 2QFY20. Operating expenditure also reduced from $24.8 million in 1QFY20 to $24.2 million in 2QFY20. The company has become profitable in 2QFY20 with operating income amounting to $7.3 million, as compared to a loss of $8.5 million reported in the previous quarter. Notably, by the end of 2QFY20, more than 2,700 patients started on WAKIX treatment.

2QFY20 Key Highlights (Source: Company Reports) 

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

EV/Sales Multiple Based 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 exited the quarter with a cash balance of $76.3 million and long-term debt amounted to $200 million. The stock made a 52-week low and high of $28.96 and $47.37, respectively, and is currently trading close to its 52-week’s high level. The stock went up ~33.2% in the last one month. Notably, the company is set to report its 3QFY20 results on 12 November 2020. On a technical analysis front, the stock has a support level of ~$42.5 and a resistance level of ~$46.5. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method. For this, we have considered peers like Avadel Pharmaceuticals PLC (NASDAQ: AVDL), Horizon Therapeutics PLC (NASDAQ: HZNP), Jazz Pharmaceuticals PLC (NASDAQ: JAZZ), to name a few, and arrived at a target price which is offering a lower double-digit upside (in % terms). Considering the above factors, robust adoption of WAKIX, increased operating profit in 2QFY20, lower operating expenses, and key risks, we give a ‘Speculative Buy’ recommendation on the stock at the closing price of $45.65, down by 4.44% as on 6 November 2020.

Roku, Inc.

A Look at ROKU’s 3QFY20 Results: Roku, Inc. (NASDAQ: ROKU) is one of the top TV streaming platform providers in the United States. For Q3FY20, the company reported earnings per share of 9 cents as compared to a loss of 22 cents per share reported in Q3FY19. Revenues during the quarter came in at $451.6 million, up by 73% on a year over year basis. Active accounts increased a whopping 43% on pcp, owing to robust sales of players and Roku TVTM models in both the United States and international markets. During the quarter, gross margin came in at 47.6%, up 216 basis year over year. Total operating expenses increased 40% year over year and came in at $202.9 million, owing to higher headcount and sales & marketing (S&M) expenses. Adjusted EBITDA came in at $56.2 million compared to a loss of $0.43 million reported in 3QFY19. Operating income was $12 million in the reported quarter, against an operating loss of $26.5 million in the year-ago period. The company exited the quarter, with a cash balance of $1.04 billion. Long-term debt at the end of the quarter amounted to $91.1 million.

Key Financial Highlights (Source: Company Reports)

Outlook: ROKU expects 4QFY20 revenues to increase in the mid-40% range. Platform revenues are likely to account for nearly two-thirds of total revenues. Further, platform gross margin is expected to be in the mid-50% to 60% range in 4QFY20. For FY2020, the company withdrew its outlook, owing to global economic uncertainty led by COVID-19 led outbreak.

Stock Recommendation: Over the last three months, the stock of ROKU has provided a return of ~62%. Further, in the last six months, the stock went up by ~100% and is trading close to its 52-weeks high price of $255.66. On the technical analysis front, the stock has an immediate support level of ~$252.5 and a resistance of ~$261.5. In addition, the stock is trading at an EV/Sales multiple of 18.8x as compared to the industry median of 2.0x on TTM basis. Therefore, considering the current trading level, steep price movement and higher valuation, we are of the view that most of the positive factors have been discounted. Hence, we give an “Expensive” rating on the stock at the current market price of $253.36 per share, up by 12.57% on 6^th November 2020. 

NIO Inc.

October 2020 Delivery Update: NIO Inc. (NYSE: NIO) is a china-based automobile company mainly involved in the designing, manufacturing, and selling of smart and connected premium electric vehicles (EV). During the month of October 2020, the company delivered 5,055 vehicles, including 2,695 ES6s, and 1,477 ES8s and 883 EC6s. The number of deliveries depicted a growth of 100.1% on a year over year basis.  Including the numbers from October 2020, so far, the company has delivered 31,430 vehicles in 2020 in total, representing a YoY growth of 111.4%.

September 2020 Quarter Key Highlights: During the quarter, the company delivered 12,206 vehicles, up 154.3% on the previous corresponding period (pcp). In September month alone, the company delivered 4,708 vehicles, up 133.2% year-over-year. In late September 2020, the company commenced deliveries of the EC6, a 5-seater premium electric coupe SUV. For the June 2020 quarter, the company reported vehicle sales of RMB3,486.1 million, up 146.5% on pcp. Further, the company reported total revenue of RMB3,718.9 million, up 146.5% on pcp.

Q2FY20 Results (Source: Company Reports)

Future Expectations: The company is focused on improving its operating efficiency while investing in the technologies and services to provide its users with the best products and experience in the future.

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

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

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

Stock Recommendation: Over the last six months, the stock of NIO has provided a whopping return of ~1,004.2%, and in the last three months, the stock was up by 210.2%. On 6 November, the stock touched its new 52-weeks high level of $43.3. On the technical analysis front, the stock has a support level of ~$40.3 and a resistance level of ~$46.5.  The company is set to report its 3QFY20 results on November 17, 2020. We have valued the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of low double-digit (in % terms). For the purpose, we have taken peers like Tesla Inc (NASDAQ: TSLA), Li Auto Inc. (NASDAQ: LI), and Xpeng Inc (NYSE: XPEV). Considering the substantial rise in the stock price over the past months, current trading levels and valuations, we suggest investors to wait for better entry levels and hence, give an “Expensive” rating on the stock at the closing price of $41.63, down by 1.7% on 6 November 2020. 

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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