Virgin Galactic Holdings, Inc.

SPCE Details

Q3FY20 Highlights for the Period Ended 30 September 2020:  Virgin Galactic Holdings, Inc. (NYSE: SPCE) is a vertically integrated aerospace company, pioneering human spaceflight used for private individuals and researchers. SPCE recently declared its quarterly results, wherein the company posted a net loss of $77 million as compared to a loss of $63 million in Q2FY20. Selling, general, and administrative expensive stood at $31 million as compared to $26 million reported in the previous quarter. Adjusted EBITDA loss came in at $66 million as compared to $54 million reported 2QFY20. At the end of the quarter, the company had a cash balance of $742 million. During the quarter, the company inked a deal with NASA and the Southwest Research Institute to fly global scientist Dr. Alan Stern on SpaceShipTwo vehicle.

Key Q3FY20 Income Statement Highlights (Source: Company Reports)

Key Growth Strategies: Fast advancing technologies, reducing costs, open innovation models with increased access to technology and better availability of capital have propelled significant growth in the commercial space market. Consequently, these positive trends will aid the company to build a robust economic value and future growth.

Key Risks: On the flip side, the company has incurred significant losses since its inception. Furthermore, for the second straight quarter, the company did not generate any revenue. SPCE continues to witness ongoing delays to its business and operations due to COVID-19 led global disruptions and is likely to continue through the 4QFY20 and in 2021. Further, increased operating expenses and future negative cash flow due to higher investment in acquiring future astronauts or expanding its operations may dampen financial aspects of the company.

Stock Recommendation: The stock of SPCE closed at $20.45 with a market capitalization of ~$4.3 billion. The stock is trading at the lower band of its 52-week trading range of $6.90 and $42.49. The stock has generated a negative return of 4.4% in the last one month. On the technical analysis front, SPCE has a support level of ~$16.95 and an immediate resistance level at ~$24.27. The company is yet to deliver a positive bottom-line, however, it is progressing well in its spaceship segment and looking to provide trips to space to the astronauts. Current ratio of the company stood at 3.66x in June’2020, higher than the industry median of 2.16x. Hence, considering the current trading levels, and decent business prospects, we give a ‘Buy’ recommendation on the stock at the closing price of $20.45, up by 7.46% as on 9 November 2020.

SPCE Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Pfizer, Inc.

PFE Details

PFE Purchase Shares of Homology: Pfizer, Inc. (NYSE: PFE) is a research-based, global biopharmaceutical company that applies science and global resources to improve lives through the discovery, development, manufacture, and distribution of healthcare products, including innovative medicines and vaccines. In a recent update, PFE has agreed to buy 5,000,000 of Homology’s common stock at $12.00 per share. The move is in line with PFE’s breakthrough growth initiative. The purchase by Pfizer is likely to close on November 10, 2020.  

Pfizer and BioNTech Announces Vaccine Participant Against COVID-19 Virus: PFE and BioNTech have recently announced their vaccine candidate, BNT162b2, was found to be more than 90% effective in avoiding COVID-19 in participants, without sign of previous SARS-CoV-2 infection in the initial interim efficacy analysis.

3QFY20 Key Financial Highlights: During the quarter, total revenue of the company witnessed a slight decline over the previous period and stood at $12.1 billion, down 4% year over year, due to COVID-19 led uncertainties. In the same time span, adjusted earnings per share of the company stood at $0.72, down 3% year over year. During the first nine months of 2020, the company paid $6.3 billion of dividends to its shareholders.

Quarterly Performance (Source: Company Reports)

Outlook: For FY20, the company expects revenues to be in the range of $48.8 to $49.5 (previously $48.6 to $50.6 billion). Adjusted R&D expenditure is expected to be in the range of $8.8 to $9.1 billion (previously $8.6 to $9.0 billion).

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 is inclined towards its 52-week high of $41.99. The stock gave a return of 2.1% in the past three months and a return of 8.2% in the last one month. On the technical analysis front, PFE has an immediate support level of ~$38.91 and a resistance level at ~$41.88. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target upside of high single-digit (in percentage terms). For the purpose, we have taken peers like Eli Lilly and Co (NYSE: LLY), Abbvie Inc (NYSE: ABBV), Johnson & Johnson (NYSE: JNJ), to name a few. Considering the current trading levels, positive long-term outlook and positive results for mRNA-based Vaccine, we recommend a ‘Hold’ rating on the stock at the closing price of $39.20, up by 7.69% on 9 November 2020.

PFE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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