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mid-cap

Compelling Bets on These NASDAQ Listed Stocks - FOLD, ULBI

Jul 09, 2021 | Team Kalkine
Compelling Bets on These NASDAQ Listed Stocks - FOLD, ULBI

Amicus Therapeutics, Inc.

FOLD Details

Amicus Therapeutics, Inc. (NASDAQ: FOLD) is a biotechnology company specializing in the discovery, development, and commercialization of therapies for patients suffering from rare metabolic diseases, including gene disorders. The company is currently involved in the marketing of Galafold (also known as “migalastat”), the first approved oral medicine for patients living with Fabry disease, which is currently approved in the US, the UK, the European Union (EU), and Japan. FOLD’s pipeline also includes gene therapy programs in rare, neurologic lysosomal disorders (LDs), specifically: Pompe franchise, Fabry franchise, Batten franchise, as well as the next-generation program in Mucopolysaccharidosis Type IIIA (MPS IIIA) and CDKL5 Deficiency Disorder (CDD).

Product Pipeline (Source: Q1FY21 Results Presentation, May 10, 2021)

UK Watchdog Grants Early Access to Pompe Disease Therapy: On June 8, 2021, FOLD announced that the UK's Medicines and Healthcare Products Regulatory Agency (MHRA) has given AT-GAA, a new two-component therapy for the treatment of Pompe disease, a positive scientific opinion through the Early Access to Medicines Scheme (EAMS). Because of this favorable opinion, eligible persons with late-onset Pompe disease (LOPD) who have been using alglucosidase alfa for at least two years can now switch to AT-GAA before it is approved for use in the UK.

Q1FY21 Results: The company reported a 9.71% increase in net product sales to USD 66.40 million in Q1FY21 (ended March 31, 2021) as compared to USD 60.53 million in Q1FY20, primarily due to growth in the US, Europe, and Japan markets. FOLD reported a decline in the net loss to USD 65.66 million in Q1FY21 vs USD 88.95 million in Q1FY20. As of March 31, 2021, the company’s cash and cash equivalents balance (including investments in marketable securities) stood at USD 417.43 million, with a total debt of USD 389.79 million.

Key Risks: FOLD currently deals in a single commercial product (Galafold). Dependence on only one product could have a long-term impact on the company's revenue if new drugs and therapies fail to make it to the commercialization stage, which usually takes a long time.

Outlook: For FY21, FOLD expects its revenue from the sale of Galafold to be in the range of USD 300 million to USD 315 million, with non-GAAP operating expenses estimated to remain flat at USD 410 million to USD 420 million. The company also stated that it has sufficient cash to sustain itself without future dilutive financing.

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.

FOLD Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FOLD’s share price has declined by 60.88% in the past 6 months, and is currently leaning towards the lower band of the 52-week range of USD 8.68 to USD 25.39. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 41.69. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 11.06. On the technical chart, the next support level is USD 7.90. Considering the company’s growth prospects, strong product pipeline, grants for commercialization, and associated risks, we recommend a “Speculative Buy” rating on the stock at the current price of USD 9.34, up by 2.36% as of July 08, 2021, at 3:04 PM ET.

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

* All forecasted figures and industry information have been taken from REFINITIV.

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

Ultralife Corporation

ULBI Details

Ultralife Corporation (NASDAQ: ULBI) is engaged in providing products and services ranging from power solutions to electronic systems to government, defense, and commercial sectors worldwide. The company designs, manufactures, and installs communication systems including rechargeable and non-rechargeable batteries, charging systems and accessories, and engineering systems such as RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, etc. ULBI has sales, operations, and product development facilities across North America, Europe, and Asia, and generates its revenues from two segments i.e., Battery & Energy Products and Communication Systems.

Awarded Contract by the US Army: The US Army awarded ULBI a firm-fixed-price indefinite-delivery/indefinite-quantity (IDIQ) contract on May 17, 2021, for the purchase of wearable batteries worth up to USD 168 million over a three-year base award period, which can increase by up to an additional USD 350 million if the company elects to exercise the six one-year option periods. Ultralife was awarded the contract as part of a USD 1.25 billion multiple-award contract for wearable batteries developed under the Tactical Power Generation Program of the US Army.

Financial Metrics (Source: Investor Presentation, April 29, 2021)

Q1FY21 Results: The company reported a slight increase in revenues to USD 25.97 million in Q1FY21 (ended March 31, 2021) compared to USD 25.81 million in Q1FY20, driven by an increase in revenues from Battery & Energy products. However, the company’s operating income declined by 35.89% to USD 0.95 million in Q1FY21, primarily due to an increase in research and development expenses. In addition, ULBI reported a decline in net income to USD 0.68 million in Q1FY21 vs USD 1.07 million in Q1FY20. As of March 31, 2021, the company’s cash and cash equivalents stood at USD 13.66 million, and total debt amounted to USD 0.99 million.

Key Risks: The company's top two customers i.e., L3Harris Technologies and Thales Defense & Security, Inc., are both large defense contractors and accounted for 23% and 26% of the total revenues in FY20 and FY19. Such reliance on certain customers for business could harm the company’s financial operations in the long run. In addition, 42% and 44% of ULBI's revenues in FY20 and FY19, respectively, were derived from sales made directly or indirectly to the US and foreign militaries. Hence, any disruption or deterioration in its business relationship with these government bodies could adversely impact its revenue and business.

Valuation Methodology: EV/EBITDA 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.

ULBI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ULBI's share price declined by 13.30% in the past one month, and is currently trading at the mid-band of the 52-week range of USD 5.10 to USD 11.78. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 36.23. We have valued the stock using the EV/EBITDA multiple-based relative valuation method and arrived at a target price of USD 9.61. On the technical chart, the next support level is USD 6.72. Considering the company’s growth prospects, recent contract wins, current valuation, and associated risks, we recommend a “Speculative Buy” rating on the stock at the current price of USD 8.02, down by 0.12% as of July 08, 2021, at 12:05 PM ET.

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

* All forecasted figures and industry information have been taken from REFINITIV.

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