Mad Hedge Biotech & Healthcare Letter
March 11, 2021
Fiat Lux
FEATURED TRADE:
(THE TESLA STOCK OF GENETIC TESTING)
(NVTA), (CRSP), (TDOC), (RHHBY), (ILMN), (ABT), (DGX), (ROKU), (SQ), (SHOP), (TSLA)
Invitae (NVTA) is one of the biggest, albeit erratic, movers in 2020, but only a handful of investors know about the stock.
In March 2020, the stock was trading at $7.43 per share only to shoot to a whopping $61 by mid-December.
A year since then, Invitae stock sits somewhere at $40—a price that could go right up again in the months to come.
Despite the volatility, Invitae continues to generate excitement among its investors.
In fact, Invitae, which has $7.6 billion in market capitalization, is grouped in with bigger healthcare and biotechnology companies like CRISPR Therapeutics (CRSP), valued at $9.36 billion, and Teladoc Health (TDOC), valued at $28.7 billion.
Its potential is even said to match the likes of up-and-coming tech stocks such as Roku (ROKU), Square (SQ), and Shopify (SHOP), which have market capitalizations of $45.7 billion, $103.07 billion, and $134.6 billion, respectively.
Given its growth in the past months and its impressive 226.8% three-year revenue increase, the projections for Invitae look well-grounded.
In fact, I think it’s reasonable to say that Invitae could be the Tesla (TSLA) of the genetic testing industry.
The genetic testing market is estimated to be worth over $21 billion by 2027, growing at a compound annual growth rate of 10% until then.
In 2020, Invitae reported a 29% year-over-year increase in revenue at $279.6 million.
The company also saw a rise in its testing volume by roughly 41% to reach 659,000 billable units—this, despite the headwinds brought about by the COVID-19 pandemic, when the demand for genetic tests took a back seat to make way for COVID-19 diagnostic and other related medical concerns.
Although some of the tests offered by Invitae are covered by insurance carriers, those that are not covered can be availed for as low as $99 for services like noninvasive prenatal screening and $250 for diagnostic, carrier, or proactive testing.
To put things in perspective, people nowadays are more than willing to shell out at least $100 to discover their ancestry, which in most cases is something they already have an idea about.
So, why would these people be reluctant to spend a bit more than $100 to check if they have to take particular precautions to keep themselves safe from diabetes or heart disease?
In the future, Invitae is well-positioned to offer high-quality genetic tests at more affordable prices as well as cater to higher volumes.
One of the most notable moves by Invitae so far is buying ArcherDX for $1.4 billion in cash and stock in October 2020.
This is a telling move for Invitae in terms of its plans for the future.
ArcherDX is another genetic testing company, which specializes in oncology.\
Specifically, ArcherDX focuses on personalized cancer monitoring as well as liquid and tissue biopsy analysis.
Simply put, ArcherDX specializes in developing tests that determine the most suitable drugs to use for cancer treatments.
To date, there’s already a growing number of competition in the genetic testing market, making Invitae’s acquisition of ArcherDX is a smart move.
Most of them are bigger companies like Roche (RHHBY) with a market cap of $269.57 billion, Illumina (ILMN) with $58.28 billion, Abbott (ABT) with $205.28 billion, and Quest Diagnostics (DGX) $15.6 billion.
Invitae, which only has a market capitalization of $7.6 billion, is considered as one of the minor players.
With the addition of ArcherDX in its portfolio, Invitae’s growth could be fast-tracked as the combined companies could ramp up sales on top of queuing additional genetic tests in their current lineup.
Invitae’s shares have jumped by almost 100% in 2020 but saw an over 25% fall last month. Although it has yet to turn a profit since its creation in 2013, Invitae remains an attractive investment thanks to its top-line growth.
Digging into their numbers, Invitae has actually managed to cut down on its cash burn by roughly $20 million from the first quarter of 2020 through the last quarter, excluding the ArcherDX deal.
That’s a notable improvement for a company and indicative of its capacity to veer towards the right direction.
Invitae has a very strong cash position at the moment, with a massive equity offering just last January. Right now, the company’s stockpile is nearly $800 million, which could carry them for quite some time.
Looking at its path of profitability, the company is also projected to be on track for a 50% to 60% growth in the next few years.
For 2021, Invitae is looking at over $450 million in annual revenue, which is 61% higher than 2020.
At this point, Invitae offers an attractive purchasing opportunity for those who want to get in on the industry before it explodes.
Global Market Comments
March 11, 2021
Fiat Lux
Featured Trade:
(HOW TO FIND A GREAT OPTIONS TRADE)
Mad Hedge Technology Letter
March 10, 2021
Fiat Lux
Featured Trade:
(2 FINTECH BETS TO JUMP ON)
(PYPL), (SYF), (V), (MA)
I cannot overstate the importance of digital financial innovation to the success of PayPal (PYPL) and Synchrony Financial (SYF).
Consumers are rapidly adopting technologies that enable contactless commerce and expect engagement along their digital purchase journeys.
These fintech firms are leveraging robust digital assets and continuously investing to ensure their partners are well-positioned in this rapidly evolving dynamic.
These investments include the capabilities to empower SaaS and seamless integration with partners' digital assets, enable customer choice at the point of sale, enhance contactless experiences, facilitate a seamless and easy application process, bring the in-store experience to a customer's digital devices for applications and payment, and integrate financing office throughout the entire digital shopping experience.
They also continue to make headway in digital penetration of all aspects of the customer journey.
Lockdown requirements and 14-day quarantine are forcing consumers to resort to online transactions for payment networks, online lending, money transfers, business-to-business payments, personal finance, banking, and more.
The key factor driving the growth of the fintech market is high investments in technology-based solutions by banks and other financial institutions. In addition, infrastructure-based technology and APIs (application programming interface) are reshaping the future of fintech.
The behavioral changes induced by the pandemic, such as online shopping and cashless payments, are here to stay and will continue to propel fintech’s growth this year and beyond.
PYPL is one of the most entrenched digital payment operating technology platforms that enables digital and mobile payments on behalf of consumers and merchants worldwide.
It has more than 361 million active users globally and is available in more than 200 markets around the world, enabling consumers and merchants to receive money in more than 100 currencies.
The overperformance of late is not a fluke, in just the last quarter, PYPL added more than 15.2 million new accounts. Its top-line has increased 25% year-over-year to $5.46 billion.
The company is now doing total payment volume (TPV) of $247 billion, growing 38% from the year-ago quarter.
Profitability is another check off the list with EPS for the third quarter coming in at $0.86, rising 121% year-over-year.
The company has been propelled by a spike in e-commerce sales and is one of the preeminent fintech stocks in the U.S.
A less entrenched name but worth a speculative look is Synchrony Financial (SYF).
SYF delivers a wide range of specialized financing programs as well as innovative digital banking products across key industries including retail, home, auto, travel, and pet care.
They have a private labeled credit card business with around 60% of SYF applications done digitally during the fourth quarter and grew 18% in mobile channel applications. In Retail Card, 51% of total sales occurred online. Finally, approximately 65% of payments were made digitally.
Synchrony is the 10th-largest credit card issuer in the U.S., with a roughly 2% market share.
But unlike other issuers, Synchrony primarily issues store credit cards, which offer users rewards and benefits.
Synchrony offers more than 100 of these store cards, including the Amazon.com Store Card, which can only be used for Amazon purchases, as well as cards from Lowe's, Banana Republic, Ashley Furniture, and Sam's Club.
Synchrony also offers about 30 store-branded cards that can be used on the broader Mastercard (MA) or Visa (V) network. Among them are the Nissan Visa card and the PayPal Cashback Mastercard.
Synchrony saw earnings plummet to $286 million in the first quarter, down from $731 million in the fourth quarter of 2019. Then, earnings dropped to a low of $46 million in the second quarter before climbing back up to $313 million in the third quarter.
But they rebounded in the fourth quarter of 2020 with earnings surging to $738 million signifying an expansion from pre-pandemic performances.
The Venmo card is also a huge growth opportunity and the possibility of linking up with other fintech groups to create attractive products.
Synchrony added 25 new relationships in 2020, including two major deals that should drive growth in 2021 and beyond.
One was with PayPal to launch the Venmo credit card fueled by Visa.
Venmo is PayPalʻs hugely popular mobile app to send and receive money.
The Venmo credit card, which can be used virtually, provides Venmo users with cashback on purchases and comes with a QR code that allows contactless payments.
Synchrony also signed two other major credit card deals with Walgreens and Verizon.
The Walgreens relationship gets Synchrony into the health space, which allows people to pay for health and wellness expenses at some 225,000 different healthcare providers.
The company also acquired Allegro Credit, a provider of point-of-sale consumer financing for audiology products and dental services, to be part of the growing CareCredit network.
The other big move last year was launching the Verizon Visa card, which offers benefits and discounts for Verizon customers.
Synchrony and PayPal are dynamic fintech companies with savory futures.
PayPal is the bigger and safer bet of the two, but Synchrony will benefit more if their risks turn out well because the law of large numbers isn’t counting against them yet.
“I am not trying to chase what other people are doing.” – Said Softbank Founder and CEO Masayoshi Son
Global Market Comments
March 10, 2021
Fiat Lux
Featured Trade:
(WHY GLOBALIZATION WORKS)
Global Market Comments
March 9, 2021
Fiat Lux
Featured Trade:
(THE CODER BOOM)
(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD)
(AAPL)
Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux
FEATURED TRADE:
(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)