Amazon.com has taken to the courts once again in a bid to get a $10 billion Pentagon contract that was awarded to Microsoft invalidated, according to Reuters.
In a redacted court filing from October 23rd that was unsealed yesterday, Amazon (AMZN) reiterated its stance that the awarding of the contract to Microsoft (MSFT) must be overturned because it was granted in bad faith and that President Donald Trump used his influence to manipulate the contract.
Trump has publicly criticized the company and Amazon head, Jeff Bezos in the past. Amazon has called the decision flawed and politically corrupt.
Amazon was a front-runner to win the contract and filed its initial lawsuit in November 2019, after the contract was awarded to Miscrosoft. A judge granted Amazon’s request to temporarily halt the deal from moving forward in February.
The Defense Department stated in a court-ordered re-evaluation in September that Microsoft’s proposal represented the best value for the government. Amazon responded on Tuesday saying that its cloud computing solutions are the lowest priced by tens of millions of dollars.
Microsoft retorted by saying, “career procurement officials at the DoD (Department of Defense) decided that given the superior technical advantages and overall value, we continued to offer the best solution.”
Neither the White House nor the Pentagon has offered any comment thus far. (See AMZN stock analysis on TipRanks)
Cowen analyst John Blackledge reiterated his Buy rating 2 days ago and raised his price target from $4,150 to $4,350 (37% upside potential). He named the shares a “Best Idea for 2021.”
Consensus among analysts is a Strong Buy based on 36 Buys and 1 Hold. The average price target of $3,825.60 implies a potential upside of around 21% over the next 12 months.
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Pfizer (PFE), Moderna (MRNA), AstraZeneca (AZN) and other key pharma players now have the COVID vaccine factored into their price. As stocks, they do seem to have some degree of upside potential. Pfizer, of course, has been around for 171 years and they are a successful growth company with many well-known products under their belt. So, the coronavirus vaccine isn’t the only thing it brings to the table. Pfizer is strong; it pays dividends, with its dividend yield currently standing at 2.8%, and has future growth prospects.
So why did Pfizer shares drop like rocks in the last 48 hours?
That’s because now the market is looking beyond a coronavirus vaccine, for right or for wrong. UK’s largest drug maker, AstraZeneca, a 21-year old company, with a portfolio of products for cancer, gastro issues and inflammation among others, recently announced that they are buying Alexion, a US biotech company that specializes in finding cures for rare diseases, in a $39 billion deal.
This represented the largest takeover in the pharma sector this year, and was especially big news given the fact that over six years ago, the UK Company was fighting off an unwanted bid from Pfizer. This takeover, as you would expect, caused AstraZeneca shares to drop on the news (-7%), showing that investors are not happy with this deal. They believe Alexion is not the right partner.
More surprisingly though, the takeover caused Pfizer shares to drop over 7%, implying that the market is taking factors other than a COVID-19 vaccine into account.
Turning to the analyst community, Pfizer boasts a Moderate Buy analyst consensus, based on 4 Buys and 9 Holds. With its average price target clocking in at $41.77, shares could surge 8% in the year ahead. (See Pfizer stock analysis on TipRanks)
BioTech is busy and worth looking at for 2021
So, what’s the best way to engage with Biopharma or Biotech companies? The fact is, it’s hard to know which of the many companies will come up with the next big thing, and new products in the pipeline can take years before they hit the market. They have to go through development, and three phases of trials first. What’s more, these stocks are riskier plays, given how reactive they are to any developments related to clinical activity or regulatory approvals.
Perhaps the best way to gain exposure to this area is through a Biopharma ETF like the iShares Nasdaq Biotechnology ETF (IBB), which trades on the Nasdaq. This ETF has performed extremely well in 2020 and has gained over 27% year-to-date, outperforming both the S&P 500, which is up almost 14% year-to-date, and the Russell 1000, which is up 15.93% year-to-date.
What is the IBB ETF?
The iShares Nasdaq Biotechnology ETF tracks the investment results of an index, which is built of biotechnology and pharmaceutical stocks that are listed on the Nasdaq. The index gives you exposure to equities in the US alone. Investing in this ETF will allow you to express a view across the entire industry, giving you the ability to diversify.
The image below shows the top 10 components of this ETF. Most of these names you will have come across in the last few months.
Disclaimer: The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Shares of Dish Network dropped 4.7% in Wednesday’s pre-market trading session as the US satellite TV provider announced a plan to sell $2 billion in aggregate principal amount of convertible notes.
According to the offering, Dish Network (DISH) expects to grant to the initial purchaser an option to buy up to an additional $300 million in aggregate principal amount of the notes to cover over-allotments. The net proceeds of the offering are intended to be used for general corporate purposes, including 5G network buildout costs, the company said.
The offered notes will be unsecured obligations and Dish will settle any conversion in cash, shares of its Class A common stock, or a combination of cash and shares. The interest rate, the initial conversion rate, and other terms and conditions of the notes will be negotiated between Dish and the initial purchaser of the notes.
Earlier this year, Dish completed its $1.4 billion acquisition of wireless carrier Boost Mobile. The deal resulted from the T-Mobile-Sprint (TMUS) merger that required an agreement from Sprint to divest its subsidiary Boost Mobile.
Guggenheim analyst Mike McCormack this month cut the stock’s rating to Hold from Buy, casting some doubt on Dish’s recent business strategy.
"While we had hoped asset value would have been realized through either a sale of spectrum, or a partnership with a deep-pocketed tech firm, those scenarios are seemingly becoming much less likely," McCormack wrote in a note to investors. "In our view, attacking a wireless industry with deeply entrenched competitors with a starting point of less than 10 million prepaid subscribers and a lengthy and costly build ahead isn't a strategy we can endorse.”
“While something may still materialize, we see the buildout process unfolding and do not see upside to shares as an operating company," the analyst summed up. (See DISH stock analysis on TipRanks)
Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 2 Holds. With shares up less than 1% this year, the average price target stands at $47.67 and implies upside potential of about 34% to current levels.
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Eli Lilly & Co. has inked an agreement to snap up Prevail Therapeutics for a total consideration of up to $1.04 billion, as the US drugmaker seeks to broaden its gene therapy pipeline. Lilly shares closed 6% higher on Tuesday, while Prevail exploded 82%.
According to the terms of the deal, Lilly (LLY) will pay $22.50 per share in cash to Prevail shareholders, which translates into an 80% premium to the stock’s Monday close. The transaction also includes one non-tradable contingent value right worth up to $4 per share in cash, following the first regulatory approval of a product from Prevail's pipeline.
Prevail is a biotechnology company developing potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. As a result of the acquisition, Lilly will develop a gene therapy program that will be based on Prevail's portfolio of clinical-stage and preclinical neuroscience assets, which includes potential therapies for patients with Parkinson's disease and Alzheimer's disease.
"Gene therapy is a promising approach with the potential to deliver transformative treatments for patients with neurodegenerative diseases such as Parkinson's, Gaucher and dementia," said Mark Mintun, vice president of pain and neurodegeneration research at Lilly. "The acquisition ofPrevail will bring critical technology and highly skilled teams to complement our existing expertise at Lilly, as we build a new gene therapy program anchored by well-researched assets.”
The transaction, which is not subject to any financing condition, is expected to close in the first quarter of 2021.
In a separate statement, Lilly provided financial guidance. For 2021, the drugmaker expects revenue to be between $26.5 billion and $28 billion, topping analysts’ expectations of $26.47 billion. The company sees growth to be driven by key products, including Trulicity, Taltz, Verzenio, Jardiance, Olumiant, Cyramza, Emgality, Tyvyt, and Retevmo. In addition, it expects to generate between $1 billion to $2 billion of sales from its COVID-19 therapies.
Following the updates, Mizuho analyst Vamil Divan reiterated a Hold rating on the stock with a $156 price target, saying that he is looking for more details on both announcements.
“The Prevail deal checks the boxes for what Lilly was looking for, and we believe makes strategic sense at a reasonable price,” Divan wrote in a note to investors. “The financial guidance is perhaps a little better than what investors were expecting.” (See Eli Lilly’s stock analysis on TipRanks).
Shares of LLY have advanced 27% this year and Wall Street analysts have a cautiously optimistic Moderate Buy consensus on the stock. That’s with an average analyst price target of $173.60, indicating 3.7% upside potential lies ahead over the coming year.
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Freehold Royalties announced on Dec. 15 that the company is raising its monthly dividend per share by 33.3% to C$0.02 from the C$0.01 previously paid.
Freehold Royalties (FRHLF), which is an oil and gas royalty company based in Calgary, will also pay a dividend equivalent payment of $0.02 to the recently issued subscription receipt holders.
The annual dividend of an equivalent of $0.192 per share now reflects a dividend yield of 4.4%.
The dividends are payable on Jan. 15 to the shareholders and subscription receipt holders, respectively, of record at the close of business on Dec. 31.
On Nov. 24, Freehold company announced the acquisition of a US multi-basin royalty package for $58 million. The transaction was financed via a combination of a bought deal treasury offering of subscription receipts worth $43 million, private placement of subscription receipts of $13.4 million, and the remaining from its existing credit facility.
The acquired assets have the potential to produce funds from operations of $12 million in 2021, the company had said. Freehold estimated a production volume between 10,000-10,500 barrels of oil equivalent per day for 2021.
On Dec. 10, National Bank analyst Travis Wood upgraded the stock's rating to Buy from Hold and raised the price target from $3.54 to $5.88 (34% upside potential).
According to Wood, the acquisition will present compelling upside prospects apart from “being accretive on several fronts”. The analyst considers the company to be well-positioned for liquidity post-acquisition with a potential for further “incremental, opportunistic deals.”
Meanwhile, FRHLF shares have lost 21.2% YTD and are trading at a premium of 41% to their 52-week high. (See FRHLF stock analysis on TipRanks)
From the rest of the Street, the stock scores a Strong Buy analyst consensus based on 8 Buys including Wood’s and 1 Hold. The average price target of $5.31 implies upside potential of 21.2% to current levels.
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Ollie’s Bargain Outlet announced that its Board of Directors has authorized a $100 million increase in its share buyback program, bringing the aggregate limit to $159.6 million.
The new authorization plan includes the $59.6 million remaining limit under the previously announced repurchase program that expires on March 26, 2021. As per Ollie’s (OLLI), the authorization of the additional $100 million expires on January 13, 2023.
Commenting on the enhanced repurchase limit, CEO John Swygert stated, “We are very pleased to be increasing our share buyback program and continuing to increase shareholder value. Our strong financial performance and cash flow, combined with our confidence in our future growth outlook, enabled us to increase this program while leaving us with ample liquidity to continue to execute our long-term strategy.” (See OLLI stock analysis on TipRanks)
Meanwhile, on Dec. 7, Citigroup analyst Paul Lejuez lowered his price target on Ollie's Bargain to $78 from $91 and reiterated a Sell rating following the company's 3Q results. Lejuez stated that the new target reflects slower growth in future years and a lower terminal multiple as the business is slowing faster than anticipated.
The Street has a cautiously optimistic outlook on Ollie’s, with 5 Buys, 4 Holds and 2 Sells adding up to a Moderate Buy analyst consensus. The average price target stands at $95.45, suggesting an upside potential of 20.6% from current levels. Shares have already risen 21.3% so far this year.
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2020 saw some notable tech names opt for a public listing despite the COVID-19 disruptions. One such company is data analytics provider Palantir Technologies, which started trading on the NYSE in September via direct listing instead of the traditional IPO route. Founded in 2003, Palantir has been in the news due to some controversial contracts with government agencies.
We will use the TipRanks Stock Comparison tool to pit Palantir against another SaaS (software as a service) stock, Verint Systems, and select the one offering better returns.
Palantir Technologies (PLTR)
Palantir provides data analytics software and services to public and private organizations with complex and sensitive data environments. More than half of the company’s revenue comes from government contracts. Critics often draw attention to some of the company’s controversial contracts, like the one to track undocumented immigrants, which have resulted in protest from social and political activists.
Nonetheless, the US government sector remains a primary area of focus for Palantir. In 3Q, it won a $91 million contract from the US Army and a $36 million contract from the National Institutes of Health (NIH). Earlier this month, the company was awarded a $44.4 million, three-year contract with the US FDA.
Palantir shares have exploded about 161% since the beginning of November, with the company’s stellar 3Q revenue growth being one of the reasons for the spike. Third-quarter revenue grew 52% year-over-year to $289 million. However, net loss increased substantially in 3Q due to stock-based compensation expenses related to the company's direct listing. Palantir continues to be positive about its prospects in both the government and commercial spaces and sees more than 30% revenue growth in 2021.
Earlier this month, Morgan Stanley downgraded its rating on Palantir to Sell from Hold with a price target of $17 (the previous target was $15), marking the second downgrade by the investment firm in less than a month. (See PLTR stock analysis on TipRanks)
Writing for Morgan Stanley, 5-star analyst Keith Weiss pointed to the staggering rise in the stock since its listing “with very little change in the fundamental story, the risk/reward paradigm shifts decidedly negative for the shares.” The analyst indicated that the company’s valuation is more than double that of the average SaaS stock.
Weiss also noted that Palantir’s strong 3Q results highlighted sustained momentum in the government vertical, accelerating growth in the enterprise business and record margins of over 25%, thus representing a slight fundamental “uptick” versus initial expectations. That said, he stated, “We believe much of incremental move since 3Q20 results (shares +75% over the past 2.5 weeks) are likely related to factors outside of fundamentals, including strong retail long-interest squeezing strong institutional short-interest.”
The Street is sidelined on Palantir, with the Hold analyst consensus based on 1 Buy, 4 Holds and 1 Sell. Given the recent surge, the average price target of $13.83 suggests a possible downside of 47.7% over the coming year.
Verint Systems (VRNT)
Verint provides customer engagement as well as data mining and intelligence solutions to government and enterprise clients. Last December, the company announced its intention to split into two independent publicly traded entities, one comprised of its Customer Engagement solutions business, and the other consisting of its Cyber Intelligence solutions segment. The spin-off of its Cyber Intelligence business is expected to be completed after the end of the current fiscal year (ending January 2021).
The company boasts a clientele base of over 10,000 organizations in over 180 countries and government agencies worldwide. Verint’s on-premises business took a hit in recent months due to the impact of the COVID-19 pandemic. However, last week, Verint saw an improvement in 3Q, with revenue rising 1% to $328 million on strength in cloud solutions and the recovery in the on-premises revenue. Adjusted EPS rose 8.5% to $1.02.
Following the 3Q earnings release, Needham analyst Ryan MacDonald reiterated a Buy rating on Verint and increased the price target to $66 from $64 on “increased confidence in the trajectory of growth and profitability in each business segment post-split.”
MacDonald noted that the company’s Customer Engagement and Cyber Intelligence businesses showed signs of recovery in 3Q. He stated “In CE, Verint experienced strong momentum in its cloud business. In CI, strong execution led to healthy gross margin expansion.” (See VRNT stock analysis on TipRanks)
“The separation of the two businesses remains on track to occur after the completion of FY21 and management provided a 3-year framework for revenue growth in each business that will see 30%+ for CE cloud and 10%+ growth for CI. When combining this with the expectation of post-split synergies, we are confident that Verint can deliver accelerating growth and margin expansion,” summarized MacDonald.
Looking ahead, Verint expects to benefit from rapid digital transformation, cloud migration and automation adoption. It anticipates its cloud revenue growth to accelerate to about 30% next year, driven by strong software bookings and SaaS conversions. It also expects the percentage of its recurring software revenue to increase to 85%, up 500 basis points year-over-year.
For now, the rest of the Street is also bullish on Verint with a Strong Buy analyst consensus. The average price target stands at $69, reflecting an upside potential of 14.5% in the months ahead. Shares have risen 8.9% year-to-date.
Bottom Line
Though Palantir is winning some big contracts in the government as well as private markets, the stock’s valuation currently looks quite lofty, especially given that the company isn't profitable yet. Taking into account 4 unanimous Buys and the upside potential in the months ahead, Verint stock seems to be a better pick than Palantir.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment
Cardtronics on Tuesday has entered into a definitive agreement to get acquired by funds affiliated to Apollo Global Management and Hudson Executive Capital in a deal worth $2.3 billion. The transaction is likely to be completed in the first half of 2021.
Cardronics (CATM) said that shareholders will get $35 in cash for each share held. Shares rose less than 1% to $35.77 on Tuesday. Notably, the purchase price is 12.9% higher than the first proposal of $31 per share made on Dec. 9 by Apollo and Hudson. (See CATM stock analysis on TipRanks)
Cardtronics CEO Ed West said, “This announcement represents an exciting milestone for Cardtronics and is a testament to the strength and value of our company.” He further commented, “Following a comprehensive process and review of alternatives, which included discussions with strategic buyers and financial sponsors, the Board determined that this transaction is in the best interest of the Company and our shareholders.”
On Dec. 10, Wells Fargo analyst Timothy Willi raised the stock’s price target to $40 (11.8% upside potential) from $35 and reiterated a Buy rating. In a note to investors, Willi had said that the $31 per share offer was just a starting point and expected that the bid could go higher if other bidders emerge or the company pushes back the offer.
Overall, the rest of the Street is sidelined on the stock. The Hold analyst consensus is based on 3 Holds, 1 Buy and 1 Sell. The average price target stands at $37.50 and implies upside potential of about 4.8% to current levels. Shares have dropped by 19.9% year-to-date.
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Shares of Vroom jumped 5.3% on Tuesday after the online automotive retailer announced the acquisition of CarStory, through the purchase of its parent company Vast Holdings, in a cash and stock deal worth $120 million.
Vroom (VRM) believes that the acquisition of CarStory, which provides artificial intelligence (AI) powered used car information, will “strengthen and extend the reach” of its automotive e-commerce platform.
Per the agreement, Vroom will pay 60% of the deal amount in cash and the remaining 40% in the form of its common stock. The transaction is expected to be completed in January 2021. The company anticipates the transaction to have a neutral impact on 2021 financial results.
Vroom CEO Paul Hennessy said, “At Vroom, we’ve built a platform made for scale and driven by data. As car buyers and sellers across the country increasingly turn to ecommerce solutions, CarStory will strengthen and extend the reach of our digital retailing platform, and together we will accelerate the transformation of the massive used auto industry.” (See VRM stock analysis on TipRanks)
Following the deal announcement, Wells Fargo analyst Zachary Fadem said, “While the NT (near term) benefits of the deal are difficult to quantify, we note CVNA’s (Carvana Company) Propel AI acquisition in 2018 clearly improved the company’s operating efficiencies, sourcing capabilities, and customer service levels. We see similar benefits for VRM during a time where the company’s website “bells and whistles” can certainly improve, and customer service bottlenecks appear to be constraining NT sales.” Fadem reiterated his Buy rating and price target of $55 (47.3% upside potential).
Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 11 Buys, 1 Hold and 1 Sell. The average price target stands at $57.50 and implies upside potential of about 54% to current levels. Shares have dropped 22.1% since the stock's public listing on Jun. 9, 2020.
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GoDaddy announced the acquisition of payments processor, Poynt, for $365 million. The transaction is expected to close in the first quarter of 2021.
Per the deal, GoDaddy (GDDY), an internet domain and web hosting company, "will pay $320 million in cash" and "$45 million in deferred cash payments subject to certain performance and employment conditions over three years."
Poynt offers a wide range of payment processing products for small businesses and is used by more than 100,000 merchants. The combination of Poynt with GoDaddy's Websites + Marketing (W+M) and WordPress commerce services will thus help small businesses to grow their sales and boost customer satisfaction, the company said.
GoDaddy’s CEO Aman Bhutani commented, “Commerce is critical to our customers and we continue to invest in building seamlessly intuitive experiences that enable small businesses to sell everywhere.” He added, “Poynt accelerates our strategy to provide a complete suite of commerce and payment services to address this critical customer need and focus on a large addressable market opportunity.” (See GDDY stock analysis on TipRanks)
Last month, GoDaddy reported better-than-expected 3Q results. Sales rose 11% to $844.4 million and exceeded analysts’ expectations of $835.2 million. The company’s EPS declined 10% year-over-year to $0.38 but came ahead of the Street’s estimates of $0.34.
Following the upbeat 3Q results, Rosenblatt Securities analyst Mark Zgutowicz raised the stock’s price target to $100 (16.5% upside potential) from $96 and maintained a Buy rating on Nov. 5. The analyst said, “GoDaddy delivered another clean quarter across the board including a repeat record 400k net sub additions. While the sub momentum likely takes a breath in the next quarter or two, we expect W+M pricing to begin to balance unit dynamics.”
The rest of the Street has a form bullish outlook on the stock with a Strong Buy analyst consensus. The average price target stands at $97 and implies upside potential of about 13% to current levels. Shares have gained 26.4% year-to-date.
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Shares of Tilray jumped 23.8% in Tuesday’s extended market trading after Bloomberg reported that the company is in advanced merger talks with Aphria (APHA).
A deal could be announced as early as this week, Bloomberg has learnt. Per the report, the combined company is expected to retain the Tilray (TLRY) name while Aphria’s CEO Irwin Simon is likely to be appointed as CEO of the new company. If the deal goes through, the combined company will hold a 19% share in the Canadian recreational cannabis market with annual revenue of C$930 million.
The merged company will relocate its headquarters to the United States, according to the report. Moreover, the merger is likely to save up to C$100 million as a result of annualized cost synergies of the combined company. (See TLRY stock analysis on TipRanks)
Following the report, MKM Partners analyst William Kirk reiterated his Hold rating and a price target of $8.50 (8% upside potential). Kirk listed some benefits of a potential merger including increased sales, access to European markets and balance sheet improvement. The analyst also highlighted reasons against the deal including overstated synergy expectations, unaddressed inventory surplus, and consolidation of top players in Canada could be difficult.
Overall, the Street is sidelined on the stock. The Hold analyst consensus is based on 5 Holds, 1 Buy and 2 Sells. The average price target stands at $9.01 and implies upside potential of about 14.5% to current levels. Shares have dropped by 54.1% year-to-date.
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Unity Software announced the acquisition of RestAR, an Israel-based computer vision and deep learning company. However, the financial terms of the deal were not disclosed.
Commenting on the deal, Unity (U), a video game software developer, said, “RestAR will extend the power of interactive RT3D (real-time 3D) technology to marketers of all types by generating a digital twin of any product or object in 3D.”
Unity's Dave Rhodes, noted “With the acquisition of RestAR, Unity is giving massive power to brands, retailers, and consumers by democratizing digital marketing for almost any product.”
He added, “What was once out of reach for those outside of large manufacturers and consumer products companies, is now available to businesses of any size looking for a tangible, effective way to market their products. We fundamentally believe anyone should be able to leverage Unity’s products and this acquisition is another step in that direction.”
The deal comes after Unity last month reported its first earnings since IPO. The company posted an adjusted loss of $0.09 per share in the third quarter, which narrowed from the year-ago loss of $0.67 per share. Meanwhile, revenue jumped 53.3% year-over-year to $200.8 million.
Shares have gained 111.5% since the stock was listed on NYSE on Sept. 18, 2020. (See U stock analysis on TipRanks)
On Nov. 30, Oppenheimer analyst Andrew Uerkwitz downgraded the stock from Buy to Hold, citing its expensive valuation. The analyst thinks that the stock has significantly outperformed its software-as-a-service peers and it is time for investors to book profits.
In a note to investors, Uerkwitz said, “we love Unity and firmly believe the creative market will see exceptional expansion over the long term.” “Moreover, we see several paths to near-term beat/raises,” he added. However, he believes, “in every scenario the vast majority of upside to our price target would come from the terminal value and more robust assumptions. We can’t stretch any further on valuation.”
Overall, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 7 Buys and 4 Holds. Following the recent share rally, the average price target stands at $107.56 and implies downside potential of about 25.6% to current levels.
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