Fulgent Genetics, Inc.

FLGT Details

Fulgent Genetics, Inc. (NASDAQ: FLGT) is a technology company that provides in-depth genetic testing to physicians to give clinically diagnostic information aimed at enhancing patient care. FLGT offers complete gene sequencing with deletion/duplication analysis in single-gene testing to meet client-specific demands by combining next-generation sequencing (NGS) with its own technological platform. It currently generates revenue by offering COVID-19 and other genetic testing services. FLGT’s customers include hospitals, medical institutes, labs, government agencies, and large corporations. As of July 20, 2021, the company’s market capitalization stood at USD 2.43 billion.

Strategic Investment in Chinese Joint Venture: On May 10, 2021, the company announced its investment in FF Gene Biotech, a Chinese firm created by a joint venture between FLGT, Xilong Scientific, and Fuzhou Jinqiang Investment Partnership (FJIP). The company invested ~USD 19.0 million, giving it a majority and controlling stake in the joint venture. As a result, FLGT now has an operational presence in China, allowing it to take advantage of the country's large and developing genetic testing market.

Government Contract to Study COVID-19 Variants: On March 15, 2021, the U.S. Centers for Disease Control and Prevention (CDC) offered FLGT a contract to conduct genetic analysis of SARS-CoV-2 utilizing the company's NGS capabilities.

Q1FY21 Results: The company’s revenues increased 46.35x YoY to USD 359.43 million in Q1FY21 (ended March 31, 2021) compared to USD 7.75 million in Q1FY20 due to increased orders for COVID-19 tests. In addition, FLGT reported an increase in net income to USD 200.69 million in Q1FY21 vs. a net loss of USD 1.95 million in Q1FY21. As of March 31, 2020, the company stood with cash and cash equivalents (including short-term investments) of USD 409.78 million, with total debt of USD 15.05 million.

Key Risks: The company's top customer, i.e., the County of Los Angeles, accounted for 25% of the total revenue generated during Q1FY21. As a result, excessive reliance on a single client for business could prove detrimental to the company's financial health in the long run.

Outlook: For FY21, the company expects its total revenue to be around USD 830 million, with NGS revenue estimated to be approximately USD 100 million. Its GAAP and non-GAAP income are expected to be approximately USD 12.00 per share and USD 12.50 per share, respectively, in FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FLGT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FLGT’s share price fell 11.34% quarter to date (QTD) and is currently trading leaning towards the lower-band of the 52-week range of USD 18.80 to USD 189.89. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 49.54. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 99.11. Considering the company's strong cash position, strategic investments, new contracts, solid fundamentals, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 81.77, down 2.40% as of July 20, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

CuriosityStream Inc.

CURI Details

CuriosityStream Inc. (NASDAQ: CURI) is a media and entertainment business that provides premium factual video content, including science, history, society, nature, lifestyle, and technology. The CURI content library contains over 3,100 non-fiction programs (including >1,000 original / jointly produced documentaries), with a production value of ~USD 1 billion. It generates income through six different lines of businesses via subscription and license fees, namely 1) Direct to Consumer (DTC), 2) Partner Direct Business (PDB), 3) Bundled Distribution (BD), 4) Programs Sales (PS), 5) Corporate & Association Partnerships (CAP), and 6) Sponsorships. DTC and CAP business segments account for the majority of its revenue.

Now Available on PlayStation 4 Console: On July 12, 2021, CURI announced that all of its video content, including movies and series, will be accessible on PlayStation 4 consoles, providing gamers with quick access to the company's entertainment content. Because the PlayStation community has a large and active audience, integrating CURI's content with the PlayStation is expected to benefit the firm.

Acquisition of One Day University: Under the terms of an Asset Purchase Agreement, CURI completed the acquisition of One Day University on May 10, 2021, which provides access to over 500 engaging lectures from the best teachers at more than 150 colleges and universities in the US, for an aggregate consideration of USD 4.5 million.

Q1FY21 Results: The company reported a sharp uptick of 33.06% in revenues to USD 9.94 million in Q1FY21 (ended March 31, 2021) compared to USD 7.47 million in Q1FY20, due to an increase in both subscription and license fees revenues. However, CURI reported an increase in net losses to USD 18.76 million in Q1FY21 vs. USD 11.79 million in Q1FY20, due to a 108.72% increase in general and administrative expenses and a USD 3.79 million downward change in fair value of warrant liability. As of March 31, 2020, the company’s cash and cash equivalents stood at USD 96.52 million with no outstanding debt.

Topline and Volume Growth (Source: Investor Presentation, Q1FY21)

Key Risks: The company’s top three customers collectively contributed 41% and 35% to the total revenues during FY20 and FY19, respectively. Such excessive reliance on specific clients for business might be detrimental to the company's financial health in the long run.

Outlook: For FY21, the company expects its revenue to be approximately USD 71 million, representing an 80% YoY growth. Its capital expenditure is estimated to increase as it intends to acquire more content assets and purchase property and equipment during the year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CURI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CURI’s share price has declined 45.30% in the past six months and is currently trading in the lower-band of the 52-week range of USD 7.44 to USD 24.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 33.19. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 13.41. Considering the company's improved cash position, strategic acquisitions, various initiatives to monetize digital content, decent fundamentals, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 10.89, down 0.64% as of July 20, 2021, 1:17 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.