“Things don't have to change the world to be important.” – Said Co-Founder of Apple Steve Jobs
Mad Hedge Technology Letter
June 17, 2020
Fiat Lux
Featured Trade:
(WHY VEEVA HAS MORE TO RUN),
(VEEV), (CRM)
I am going to revisit a call I made last October 2019 on a tech stock that has outperformed mightily this year, and for good reasons.
There isn’t a tech stock more relevant today than Veeva Systems (VEEVA) because of the wave of health spending transcending the world.
Find me a country that is spending less on healthcare today!
I recommended this stock last October and the shares keep climbing over itself to reach all-time highs over and over again.
The one-sentence answer to why buy this stock is that Veeva’s latest earnings showed quarterly total revenue growing 37.7% year-over-year and EPS surging 32% year-over-year.
If I stopped here, that would most likely be enough to convince readers about this spectacular company.
Read on to understand more about this health cloud upstart positioned at the intersection of healthcare and cloud technology.
Veeva provides cloud-based CRM, data storage, and analytics services for life science and pharmaceutical companies.
It was co-founded by the former senior VP of technology at Salesforce, and its services are seamlessly integrated into Salesforce's platforms.
Veeva's tools help companies keep track of customer relationships, clinical trials, government regulations, prescribing habits, and other data in real-time.
I guess you could call it the Salesforce of cloud healthcare.
It enjoys a first-mover's advantage in the space and services an all-star lineup of top pharmaceutical companies like GSK and Novartis.
The first-mover advantage is critical because Microsoft announced a copycat version of Veeva’s services just a month ago.
To read about Microsoft heading into the health cloud business, click here.
Demand for Veeva's services has surged over the past few years, thanks to vicious competition between drugmakers and the need for real-time data.
The health crisis will also generate tailwinds for Veeva as leading drugmakers scramble to develop treatments and vaccines.
The company hasn’t been quiet, rolling out new products this year.
In May 2020, the company announced MyVeeva for clinical trials.
It is software built to enable clinical research sites to interact remotely with their patients easing the burden on in-clinic visits.
In March 2020, the company commercially launched Veeva Data Cloud, a robust technology platform constructed for the development and delivery of large-scale patient data and analytics.
The coronavirus is the catalyst that is forcing our healthcare industry to digitize rapidly and modernize.
The data backs up this trend.
The healthcare IT Market is forecasted to be valued at $511.06 Billion by 2027, growing at a CAGR of 13.8%.
To read more about this trend, click here.
Veeva analytics showed us that monthly doctor visits were halved in February compared to April before the widespread lockdown.
Teleconference doctor calls have skyrocketed increasing 30% year-over-year in April, compared with less than 1% in February.
Remote meetings between pharmaceutical companies and doctors increased more than 30 times and email communications doubled from February to April.
Veeva's management wholeheartedly believes it will reach its goal of generating $3 billion in revenue by 2025.
Their goals are impressive with an expectation of year-over-year growth rate of 26% at the midpoint.
Veeva loves to overdeliver, and if one thing is clear from the Q1 scorecard, health cloud computing services are more critical than ever to the life sciences and healthcare industries.
The company also has a pristine balance sheet with $1.38 billion in cash and short-term investments (nearly three years of cash operating expenses at the Q1 run rate) and zero debt.
Moving forward, I firmly believe that Veeva Systems will fetch a growing premium to the overall market.
The stock has zoomed from the March lows of $133 and is now trading at a robust $223 and the path of least resistance is up.
“Study hard so that you can master technology, which allows us to master nature.” – Said Argentine Revolutionary Che Guevara
Mad Hedge Technology Letter
June 15, 2020
Fiat Lux
Featured Trade:
(DON’T TAKE YOUR EYES OFF BIG TECH SHARES),
(GOOGL), (AAPL), (MSFT), (NFLX), (FB), (AMZN), (IBM), (CSCO)
There is literally no possible scenario in a post-second-wave lockdown where the 7 tech stocks of Facebook, Google, Apple, Microsoft, Netflix, Facebook, and Amazon don’t shoot the lights out unless the world ceases to exist.
25,891 – that is the number of new coronavirus cases registered in the U.S. on June 13th, 2020 which is about in line with the recent near-term peaks of total daily U.S. coronavirus cases.
Why is this important?
Traders are calculating whether a “second wave” will possibly rear its ugly head to crush the frothy momentum in tech stocks.
That is where we are at now in the tech market.
Tech stocks could possibly ride another magnificent ride up in share appreciation if the reopening of the economy can kick into second gear.
Skeptics are sounding the alarms that this is not even the “second wave” and we still in the latter half of the first wave.
Consensus has it that this could be just a head fake.
The jitters are real with recent dive in tech shares.
The five biggest tech companies burned more than $269 billion in value last Thursday - the worst day for U.S. stocks since March and the 25th worst day in stock market history.
Nasdaq stocks ended the day largely 5% in the red with Microsoft shedding $80 billion in market cap in just one day.
Larger drops were led by IBM who lost 9% and Cisco who lost 8%.
It was a dreadful day at the office, to say the least.
We are teetering on a knife's edge and the tension is running high in the White House with Treasury Secretary Steven Mnuchin already announcing that the U.S. can’t afford another lockdown.
It’s not up to him in the end, it’s about how consumers will assess the confronted health risks.
Tech will undoubtedly be dragged down with the rest on the next lockdown sparing few survivors.
The housing market might actually go down as well as the initial push to the suburbs will dissipate and fresh forbearances will explode higher.
Consumers might not even have the cash to pay for their monthly Apple phone service or internet bill if the worst-case scenario manifests itself.
The health scare has already dented new software purchases by small and medium businesses (SMBs) and tech companies in industries such as travel, retail, and hospitality; online ad spending by the likes of automakers and online travel agencies; and smartphone, automotive and industrial chip purchases.
Small business has held off on reducing their tech software spending too much on the expectation that macro conditions will perform a V-shaped recovery.
Numerous tech firms have cited “demand stabilization,” but it’s not guaranteed to last if we revert to another lockdown.
If a lockdown happens again, it will be another referendum on Fed’s enormous liquidity impulses versus the drop in real earnings or flat out losses to tech business models.
Even with the media’s onslaught of vicious fearmongering campaigns, I do believe this is the time for long-term investors to scale into the best of tech such as Amazon, Apple, Google, Microsoft, Facebook, Netflix.
If you thought these 7 companies had anti-trust issues before, then look away.
We could gradually head into an economy where up to 40% of the public markets comprise of only 7 tech stocks which is at a mind-boggling 25% now.
Never waste a good crisis – tech is following through like no other sector!
Bonds don’t make money anymore and hiding out now means putting your life savings into these 7 premium tech stocks.
In the short-term, this is a good opportunity for a tactical bullish tech trade.
“Microsoft isn't evil, they just make really crappy operating systems.” – Said Finnish-American software engineer Linus Benedict Torvalds who is the creator Linux, Android, and Chrome OS
Mad Hedge Technology Letter
June 12, 2020
Fiat Lux
Featured Trade:
(TESLA’S EXPANDING LEAD IN EVS),
(TSLA)
As Tesla (TSLA) pushes above and beyond $1,000, let’s remind readers why this tech stock is so brilliant and why it outperforms even amid a backdrop of haters that taint the stock on a daily basis.
No doubt that Tesla has benefited from the “re-open trade” with risk-on sentiment mesmerizing equity markets amid positive data points that reignited Tesla with vehicle sales in China.
Then there is the rampant speculation taking place buoyed by the Fed pouring trillions into the capital markets.
The outcome is tech stocks leading the way with many reaching all-time highs.
Specifically, for Tesla, a sanguine optimism is coalescing around the popularity of Teslas in China.
Tesla seems to have triumphed over the pandemic with a momentous “snapback” in demand for Model 3s in China.
Tesla delivered 11,000 Model 3 vehicles to Chinese customers in May, which is 7,000 more Teslas sold in China than April.
The telltale signs are there hinting this is the beginning of a voracious ramp-up in Tesla sales not only in China but throughout the Asian regions, including Southeast Asia.
The bumper sales seen in Tesla’s China numbers coincide with the building of their monster battery factory in Shanghai, coined Giga 3.
The news in China dovetails nicely with Tesla’s commitment to deliver more than half a million vehicles this year, which has raised some eyebrows on Wall Street.
One persisting issue remains – margins.
Musk has slashed prices on Models S, X, and 3, decreasing the marginal profit on these models ahead of the Model Y cannibalizing them.
Tesla’s bestselling car Model Y avoided a price cut.
Some of the premium add-ons have been upped in price to compensate price cuts such as Full Self Driving (FSD) increasing by $1,000 to penalize customers who desire more personalization.
An unfortunate headwind caused by the pandemic is that Tesla ended Q1 with bloated inventory because the supply chain was crippled by a delivery bottleneck and factory stoppages.
When Tesla drops prices, it harms legacy car companies far more because it raises the competition bar in EVs creating an environment where it will be awfully hard for legacy car companies to ever outdo Tesla with an inferior product.
For example, GM burns through $7,000 per Chevy Bolt sold at a time when the industry is forced to go all-electric as the pandemic effectively pulls forward EV demand to today.
Tesla’s headstart on the traditional car circuit is giving them ample time to turn the screws on them hoping a few of them drop like flies before they can ever get close to becoming competitive.
Eventually, gas guzzlers will be banned by governments and EVs will be universal.
Tesla is in a golden position to produce the optimal EV while tirelessly working to make them cost-effective for buyers in a lower income bracket.
I believe that Tesla will mix and match premium and basic models to cater to every price point so that every buyer will gravitate towards Tesla.
Musk keeps pushing the envelope with new divisions as well.
He continues his vision uninterrupted by proclaiming that the company's Nevada factory would likely produce the new semi-truck's battery and powertrain, with the remaining work done in other locations around the country.
“It's time to go all out and bring the Tesla Semi to volume production," Musk said.
The semi-truck is planned to price at around $150,000 for the 300-mile model and around $180,000 for the longer 500-mile model.
This division could grow into a $3-5 billion revenue driver in the next few years.
This is yet another example of Musk staying one step ahead of the traditional carmakers.
To understand more about the Tesla semi-truck, click here.
Another project Musk is working on is the Blade Runner influenced cyber-truck.
The cyber-truck is a consumer truck that Musk is working on that he tested out with TV comedian Jay Leno.
To watch that clip, click here.
The future has never looked brighter for Musk and Tesla as the demand of the future has repurposed itself to today and only Musk can deliver on such high expectations.
Do not day trade this stock because the volatility will blow investors up. This is a buy and hold long term story.
“Land on Mars, a round-trip ticket - half a million dollars. It can be done.” – Said Founder and CEO of Tesla Elon Musk
