TickerTalk Headlines for July 11th
In this newsletter:
Why Now Is the Perfect Time to Bite Into This Restaurant Stock
If you have watched Kura Sushi USA (NASDAQ: KRUS) and are waiting for a good time to buy, this is it. The company is a high-quality restaurant player, growing at a solid double-digit pace, but faces headwinds impacting the share price. The headwinds are cyclical and will recede; when they do, the company’s operating leverage will produce an accelerated rebound in the share prices. That’s if there isn’t a meme-quality short squeeze first.
The primary headwind is macroeconomic conditions related to inflation and higher interest rates. The FOMC is expected to reduce the headwind soon because inflation is cooling. The first cut may not happen as soon as the market hopes, but the odds are high that the committee will cut at least once this year and several times next. This means an economic pivot is at hand, and Kura Sushi’s rebound will quickly follow.
Kura Sushi Navigates Challenging Times and Grows Its Business
Kura Sushi’s results are mixed compared to the analysts' estimates but solid in light of the trends, and there is a catalyst for improvement in the macroeconomic outlook. The company reported $63.08 million in net revenue for a gain of 28.1%, as expected, and sustained at the pace of nearly 30% it has run for many quarters. The increase is due to the compounded effect of store count and comp sales, which grew by 0.6%. Store count rose by four in Q3, and the plan is for fourteen by year-end to bring the count to over 660. The company continues to target 20% annual store count growth in the long term.
Margin is the bad news. The company experienced rising costs despite an improvement in food and beverage costs. The 80 basis point improvement in F&B was offset by increased labor costs, ad spending, promotions, fees, and “other.” The net result is $4,000 in net profits or break-even results compared to last year’s profits. The guidance was another non-starter for the market. The company reiterated its outlook for revenue and earnings, including solid top-line growth but losses for the year.
Kura Sushi Trades at a Deep Value
The analysts' response to Kura Sushi’s results is negative and weighing on the market today, but it provides an opportunity down the road. The response was to cut their price targets, but the market’s reaction was overblown. MarketBeat.com tracks four revisions from eight analysts, each a price target reduction. The range includes a new low target of $64, well above the current action. The $64 target offers a 20% upside for the stock, and the consensus is another 3000 basis points higher.
Institutions can be expected to buy with shares near their current levels. The institutions bought this restaurant stock on balance in Q1 and Q2 and for eight of the last nine quarters, aligning with the uptrend in share prices. The uptrend is volatile, producing large swings, but that should be expected from low-float issues often plagued by lower trading volumes, reduced liquidity, and increased volatility. Kura Sushi’s float is little more than 50% of the share count.
Kura Sushi has High Short Interest and Is a Short-Squeeze Target
High short interest is one of the issues ailing Kura Sushi’s stock price. The short interest was over 25% in mid-June and is unlikely to have fallen since. This means the share price may remain under pressure until a catalyst emerges. The risk for bearish traders is that the market is in a buying zone now and may begin to rebound soon. In that scenario, short-covering will aid the upswing in price action and may result in a squeeze. If this market experiences a short squeeze, it could quickly rise to the consensus $87.
Trump Exposes Sinister conspiracy to Fed-Controlled Digital Currency. (Ad)
Donald Trump once again sounded the alarm against Fed-controlled digital currencies (CBDCs).
If these plans are implemented, it could mean the end of America as we know it.
3 Beaten Down Pharmaceuticals With Catalysts for Higher Prices
Trading volume spikes in beaten-down stocks often signal a bottom for prices investors can bank on. The problem is that beaten-down stocks are usually in that position for a good reason, so it helps if there is a catalyst for higher share prices in addition to the trading volume. The three biopharmaceutical stocks on this list have catalysts for higher share prices ranging from insider buying to product launches, their growth outlook, and analysts' sentiment. The question is whether they are worth buying today or if lower prices will come before the big rebound.
Aclaris Therapeutics Insider Buying Spikes
Aclaris Therapeutics (NASDAQ: ACRS) is a clinical-stage biopharmaceutical (biopharma) company working on novel therapies for immune-inflammatory diseases. It has several candidates in trials but is far from approval. The catalyst for this stock is insider buying, even though it is suspect. The insider in question is Braden Michael Leonard, a major shareholder and independent investor. He made numerous purchases in Q2, and the trend continued in Q3. His holdings top 13.4 million shares, or about 18% of the float, and may increase as the summer progresses.
The Q1 earnings report had some good news. The company is progressing its work and advancing at least one candidate into the Phase 2-A trials to test for effectiveness. Unlike some clinical-stage pharma companies, this one has a side business that helps sustain its operations. The company operates a contract research facility that brings in about $2.5 million per quarter.
Analysts are optimistic about the business and outlook and rate it a Hold. The lowest price target tracked by MarketBeat is more than 600% upside for the stock. The risk is that no revisions have been issued for several quarters, and a price gap is impairing the technical outlook. The market may increase to $6, but that level is at the top of the price gap and is a likely price point for significant market resistance.
CRISPR Therapeutics Has a More Substantial Catalyst for Share Prices
CRISPR Therapeutics (NASDAQ: CRSP) is focused on gene-editing treatments for major diseases. Its catalyst is the launch of Casgevy, the first FDA-approved treatment for sickle cell disease. The last report included an update on the launch, which is live at 25 centers globally. The first patients have been enrolled, and their treatments are being prepared. The launch will result in top-line growth this year and acceleration in F2025. Analysts expect revenue to grow more than 400% this year to next and may underestimate the potential.
Analysts are less bullish on this stock, but the rating has more conviction. MarketBeat tracks 18 CRSP analysts and nearly two dozen revisions this year. They’ve lowered their sentiment rating from Moderate Buy to Hold, but the price target is rising. The $75 consensus target assumes about 35% upside for the stock, and the revisions are leading to the range's high end or another 50% or more upside.
Outlook Therapeutic Launches Product in the EU and UK
Outlook Therapeutics (NASDAQ: OTLK) received approval for its first-ever product, expected to launch in Q1 2025. The takeaway is that revenue will go from $0 to $10 million quickly, and the estimates may be cautious. The treatment is for wet AMD, which has a drug-market value of nearly $9 billion.
Analysts are very bullish on this stock, and their sentiment is a reasonable level of conviction. MarketBeat.com tracks eight analysts covering this stock, with six revisions issued this year. They rate the stock as a Buy and see it advancing over 450% at the consensus. The consensus is down from last year, but even the low target is 160% upside.
The risk is that Outlook Therapeutics investors face dilution. The share count increased more than 10% on average over the past year, and more sales are expected. Although the company’s balance sheet is capitalized, losses were significant in FQ2. Accounting for warrant-related expenses, the cash burn is sufficient to wipe out reserves quickly, even with the expected revenue gain in 2025. Because warrants are still in play and adequate shares are available to sell, additional dilution is expected.
Nvidia's Quiet $1 Trillion Pivot (Ad)
Nvidia recently added $277 billion in market cap …
IN ONE DAY.
Apple Stock: Missed Opportunity or Just Getting Started?
With the rush to invest in AI stocks, Apple Inc. (NASDAQ: AAPL) remains a powerful contender with significant growth potential. Apple stock is Warren Buffett’s largest holding, even after a 12.8% trim in the past quarter. The reduction was likely made with the intention to invest in other promising companies rather than indicating a change in Buffett's sentiment. Investors often focus on artificial intelligence stocks like NVIDIA Co. (NASDAQ: NVDA), pushing its valuation to $3.3 trillion, while sometimes overlooking Apple's enduring strength.
Apple boasts one of the strongest brand moats globally, now considered social currency. This brand strength and innovative edge position Apple for continued growth. One analyst on Wall Street is willing to bet his career on publishing his view, which could see Apple becoming a $4 trillion company. As market dynamics shift, it's crucial for investors to recognize Apple's value and potential in the evolving landscape.
Apple's Global Dominance: Still Going Strong
The United States faces rising geopolitical tensions against China, particularly regarding technological advancements and semiconductor equipment. Embargoes and repercussions have dominated the arena during 2024, and not even Apple was safe from this chip war.
Chinese firms attempted to ban iPhone usage by their employees. Chinese officials followed suit in their views on government employees. While that caused a steep selloff in Apple stock during 2023, shedding off as much as $200 billion in market capitalization, an unlikely player stepped into Apple's defense.
Microsoft Co. (NASDAQ: MSFT) recently issued a memo to its employees in China. To their surprise, these employees were expected to keep their iPhone usage, rather than Androids or even China's very own Huawei. The reasoning behind these demands is wrapped in cybersecurity.
Microsoft thinks that by using Apple devices when logging in and working inside the firm, employees won't be subject to hackers and other intellectual property leak risks. This shows investors that not even the biggest perceived risk, China, can put a cap on Apple's potential upside.
There are two ways investors can break down the potential path in Apple stock. The first is taking Buffett's view of only considering Apple's financials and its current return on capital as a gauge, and the other way is to look at Apple from the opposite end, as a technological play.
Two End Analysis Concludes One Thing: Apple Stock Is Going Higher
From the fundamental view, investors should focus on one beginning metric to set the benchmark. Over 50% in return on invested capital (ROIC) rates will be the main driver in compounding an investment into Apple stock, as annual stock price performance tends to match the long-term ROIC through a business cycle.
So, what drives ROIC at Apple? A gross margin of 45.6% gives way to a 26.3% net margin, leaving enough room for management to reinvest capital at these desirable rates. Investors should remember that as Apple becomes a bigger software-as-a-service (SAAS) player, its margins will expand aggressively.
It is more common to experience an Apple sales representative attempting to pitch customers on subscription programs and other pre-packaged software services. Some of these include streaming and entertainment, Apple Care (insurance), iCloud storage (which has become a commodity these days), and much more.
That leads investors into the technological side of things, where a Wedbush analyst quoted the new iPhone 16 and its artificial intelligence capabilities to act as a major catalyst. Investors burned on product release disappointments before may be wary of this pitch, but this time, it’s different.
Why? Apple recently announced a partnership with OpenAI, one of Elon Musk’s latest ventures into the space. This new access to leading artificial intelligence will be integrated into the new iPhone and all other Apple devices.
Analysts and Shareholders Show Confidence in Apple’s Future
It looks like Apple will do more than upgrade the camera this time around, leading other analysts to publish their own views. Those at Needham & Company boosted their price targets on Apple stock to $260 a share, up from $220 a share, daring the stock to rally by 12.5% from where it trades today.
More than that, DNB Asset Management (one of Apple’s largest shareholders) recently boosted its stake by 16.7% as of July 2024. This increase would bring the asset manager’s investment up to $894 million today, a vote of confidence in that $4 trillion goalpost.
Alex's "Next Magnificent Seven" Stocks (Ad)
Today Alex Green is releasing his new breakdown of AI's "Next Magnificent Seven."
So please make some time to watch it.
TickerTalk is your daily email briefing covering top stories influencing the stock market. Stay informed, stay ahead.
MarketBeat Media, LLC dba TickerTalk
345 N Reid Place, Suite 620, Sioux Falls, SD 57103.
contact@tickertalk.com
没有评论:
发表评论