When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
April 15, 2021
Fiat Lux
Featured Trade:
(CYBERSECURITY IS ONLY JUST GETTING STARTED),
(PANW), (HACK), (FEYE), (CSCO), (FTNT), (JNPR), (CYBR)
Mad Hedge Technology Letter
April 14, 2021
Fiat Lux
Featured Trade:
(A 2021 TECH DARLING)
(UBER), (LYFT)
Uber (UBER) is a solid tech investment for the remainder of 2021, and this is me saying that when I don’t even like their company business model.
The biggest gap up in shares usually occurs when a company goes from flat-out terrible to the level just above that and that’s what is happening to Uber in 2021.
Why have they been so bad lately?
Uber’s Mobility gross bookings, or ride-sharing revenue, was $6.8 billion, which was down 47% year on year and revenue of only $1.5 billion.
Uber was never profitable, to begin with, not even close, and for COVID to gut their main business in 2020, investing in shares became even less appetizing.
Or were they?
Ironically enough, the California ride-sharing company was able to compensate during the pandemic by delivering food, a very non-tech type of business.
Delivery revenue of $1.4 billion, up 220%, significantly outpaced gross bookings growth and delivery revenues take rate was 13.5%, up 391 basis points year on year and up 21 basis points quarter on quarter.
Not only did the delivery revenue become almost equal to its ride-sharing revenue in such a short time span, but their “take rate” nudged up which is measured as the percentage of what they accrue from each $1 in delivery.
The momentum allowed Uber to triple its shares from March 2020 lows on the back of a reinvigorated delivery service, trillions of printed money, and a broad-based rally that swept up Uber.
Trust me, Uber doesn’t own any worthwhile intellectual property that is going to differentiate itself from the competition, but they are part of a duopoly with Lyft (LYFT) that makes 2021 so intriguing.
Reading the 2021 tea leaves, it's hard not to love this company as tourism, outdoor mobility, and intercity mobility will reverse and people will start paying uber for rides to go to bars and house parties.
Uber indicated just that with a teaser report before the real earnings come out showing that total gross bookings as of March 2021 reached the highest monthly level in the company's nearly 12-year history.
Mobility posted its best month since the pandemic started in March 2020, passing a $30B annualized gross bookings run rate. Average daily gross bookings were up 9% month-over-month.
Delivery set another all-time record, crossing $52B annualized gross bookings run rate in March, up over 150% on the year.
Uber says the rideshare business recovery and continuing Eats demand have customers outpacing the number of drivers and couriers.
The company ended the Form 8-K on a down note, letting investors know that after a court order, Uber must reclassify UK drivers as employees.
The company expects to record a “significant accrual” due to higher British employment costs in Q1 with the majority expected to reduce total and mobility revenues and revenue take rates but will be excluded from adjusted EBITDA results.
I must say that it’s quite irresponsible of management to just slide this “significant accrual” off the balance sheet as it could turn into something major if other big markets similar to London force Uber to reclassify workers as employees.
This is by far the biggest risk moving forward in 2021, but I doubt that other European locales will have the balls to say no to Uber.
Management reiterated that they remain on track to turn the EBITDA profitable in 2021, but then again, the EBITDA is quite substantial which is a management trick that needs to be banned in corporate America.
I believe that management keeps moving the goalposts by trying hard to please the incremental investor with alternative metrics, but that doesn’t take away from the immense potential of the back half of 2021.
Uber is poised to seriously outperform as people have been quarantined inside for over a year now and are waiting to explode out of their front door.
The company has burnt through over $15 billion in cash since 2019 and the stock has tripled, after stripping out a decline in food deliveries later this year, I believe the strength in rideshare revenue will end up with Uber having some quite rosy numbers.
Call it a net positive after you minus out the delivery revenue which is poised to shrink in the latter half of the year.
Thus, I will stamp Uber with a short-term and medium-term conviction buy, but a long-term sell because I just don’t see a pathway yet to become a heavy hitter, and Uber’s accounting gimmicks are a red flag.
“Once a new technology rolls over you, if you're not part of the steamroller, you're part of the road.” – Said Writer Stewart Brand
Global Market Comments
April 13, 2021
Fiat Lux
Featured Trade:
(A NEW THEORY OF THE AMERICAN ECONOMY)
Mad Hedge Biotech & Healthcare Letter
April 13, 2021
Fiat Lux
FEATURED TRADE:
(MEGA CAP PHARMA UP FOR GRABS)
(MRK), (ABMD), (ILMN), (ALGN), (JNJ), (GILD), (PAND), (ALKS), (IMV)
Since the great 2007 financial crisis, many companies have been coping to recapture their former glory. The healthcare industry is not spared of this struggle.
This makes the continuous growth of Merck (MRK) all the more impressive, with the company reaching $195 billion in market capitalization and sustaining its rise for over 130 years.
Curiously, Merck’s share price is still in the mid-$70s.
Meanwhile, other large-cap biopharmaceutical companies that offer similar products and services are trading higher.
For instance, the share price for Abiomed (ABMD) is over $330 while Illumina (ILMN) is nearly $400, and Align Technology (ALGN) is at a whopping $600.
Like Merck, investors gravitate towards Abiomed, Illumina, and Align because of their capacity to generate long-term sustainable revenues and boost earnings.
Notably, though, none of them hold the same depth or even breadth of products and services that Merck offers.
Recently, Merck disclosed some of its initiatives to boost the company’s earnings in the near- and long term.
One of the most visible efforts is its collaboration with Johnson & Johnson (JNJ) to help with the manufacturing of JNJ-78436735, in which Merck received federal funding.
While JNJ is one of the biggest healthcare companies across the globe, with a market capitalization of roughly $425 billion, joining forces with Merck will substantially boost its vaccine manufacturing capacity.
For context, JNJ’s goal prior to Merck’s help is to deliver 100 million doses by the end of the second quarter of 2021.
With Merck’s assistance, JNJ can now realistically manufacture up to 3 billion doses in 2022 alone.
This means that JNJ can implement a massive vaccination drive in the next two years since its manufacturing capacity ensures that it can deliver shots to over one-third of the population.
This is obviously good news for everyone as it means that the virus will be contained, but the enhanced manufacturing capacity also means profit accretion for both JNJ and Merck.
This partnership with JNJ is possibly a key factor in Merck’s move to invest heavily in the vaccine business.
Merck recently announced its plans to allocate $20 billion to expand its global vaccine manufacturing network from 2021 to 2024. This would mean an annual investment of $5 billion.
Part of this global vaccine plan is Merck’s acquisition of Pandion Therapeutics (PAND) in 2020.
Another recent initiative of the company is its joint effort with Gilead Sciences (GILD) to develop long-lasting HIV treatments.
Gilead will be in charge of the US market, while Merck will handle the EU and the rest of the international markets.
For starters, the companies will focus on a combination of Merck’s Islatravir and Gilead’s Lenacapavir to create a long-lasting and well-tolerate HIV treatment.
Outside these partnerships, Merck has been working on strengthening its oncology segment.
In fact, its top-selling drug, Keytruda, can be used to medicate an extensive range of indications, which include colorectal, esophageal, and even lung cancers.
At this point, Keytruda is generating north of $16 billion in sales every year and exhibiting roughly 30% growth annually.
Since the drug continues to gain approvals for additional indications, it looks like its growth runway is definitely far from over.
Keytruda is poised to reach $24 billion in annual sales in a few years’ time, which puts it on track to become the best-selling drug in the world by 2023.
Although Keytruda will be under patent protection until 2028, Merck remains active in expanding its oncology pipeline.
By then, Merck is projected to have multiple immunotherapy staples in its portfolio not only derived from its own R&D but also via partnerships like its 2020 collaboration with Alkermes (ALKS) to work on an ovarian cancer study and Immunovaccine (IMV) to cooperate on a blood cancer study.
The total oncology market is estimated to be $200 billion annually, with over 30 million cases projected to be added by 2040.
Overall, Merck is a well-oiled company that continues to deliver good results thanks to strategic acquisitions and partnerships neatly tied up together in a particular domain.
While its rival biotechnology and pharmaceutical companies become hot properties in the market and pose higher price tags, Merck silently moves forward in the shadows of sustainability and familiarity.
