Market 2017-10-26 (airlines, biotech, and more)
EU will reduce QE purchases from January 2018. At the post-ECB meeting press conference, Mario Draghi was sure to say rates will remain low long after QE ends. Europe markets finish strong today. It is quieter in US market except a brutal day for healthcare sector.
BWLD (+19.6%) ER benefited from bone-less wings.
Health insurer Aetna (AET +11.5%) spikes at the end of the trading hour on the news that CVS Health (CVS -2.9%) is in talks to buy the company.
F (+1.9%) ER beats.
Celgene (-16.4%) (along with BMY -4.8% MCK -5.2%) takes down the whole biotech sector (IBB -2.3%). It reported net income of $988M and diluted earnings per share (EPS) of $1.21 for 17Q3. For 16Q3, GAAP net income was $171M and diluted EPS was $0.21. Operating cash flow was $1.1B in 17Q3, compared to $770M for 16Q3. In 17Q3, Celgene purchased 0.9M of its shares at a total cost of approximately $114M. As of September 30, 2017, the Company had approximately $3.8B remaining under its stock repurchase program, with approximately $11.8B in cash, cash equivalents and marketable securities (Market Cap $78B). For 2017, adjusted operating margin 58.5%, adjusted EPS $7.30 to $7.35 --- P/E only 13 with >10% revenue growth rate.
2020 goals: lower new products/oncology, targeting $20-21B revenue and adjusted EPS >$12.5. This means EPS will increase 20%/year for the next 3 years. If stock price stays @ $100, P/E will be only 8.
Recent headwind: last week CELG shut down their pipeline for Crohn’s disease. Celgene had acquired the drug (mongersen, GED-301) from Nogra Pharma of Ireland back in 2014 for $710M. Stock price dropped 10% on the news.
Right after that frustration, CELG raised the price of Revlimid and Pomalyst by 9% (3rd time price hike in 2017)--- their two best selling drugs. Both are for MULTIPLE MYELOMA (blood cancer), total $1.6B sales in US in Q3 with organic growth rate of 18% and 32% respectively. Cowen's Eric Schmidt says the price hikes should more than offset the impact of the GED-301 flop in Crohn's.
Possible catalyst (no new drugs on FDA calender in the near future):
1. Ozanimod for MS, full data due tomorrow at ECTRIMS meeting;
2. More price hike in 2018;
3. M&A activities.
Summary: CELG pipeline shrink, growth rate is still appealing. EPS will be 20% for next 3 years. P/E is low. As the stock price drops to the level 3 years ago, I think it is a rare buying opportunity.
Meanwhile, IBB just experienced -8% correction from 10/6, which makes it a safer bet for biotech/big pharma bouncing back.
BIDU Q3 EPS of $3.89 beats by $1.85. Revenue of $3.53B (+27.9% Y/Y). -11.7% AH.
Amazon Q3 EPS of $0.52 beats by $0.49. Revenue of $43.74B (+33.7% Y/Y) beats by $1.6B. +8.3% AH.
MSFT Q1 EPS of $0.84 beats by $0.12. Revenue of $24.54B (+11.9% Y/Y) beats by $980M. +3.7% AH.
INTC Q3 EPS of $1.01 beats by $0.21. Revenue of $16.15B (+2.3% Y/Y) beats by $420M.
WDC Q1 EPS of $3.56 beats by $0.26. Revenue of $5.18B (+10.0% Y/Y) beats by $40M. -1.5% AH.
FSLR Q3 EPS of $1.95 beats by $1.11. Revenue of $1.09B (+60.0% Y/Y) beats by $223.2M. +5% AH.
EXPE Q3 EPS of $2.51 misses by $0.11. Revenue of $2.97B (+15.1% Y/Y) misses by $10M. -6.8% AH.
WYNN Q3 EPS of $1.52 beats by $0.11. Revenue of $1.61B (+45.0% Y/Y) beats by $50M.
GILD Q3 EPS of $2.27 beats by $0.14. Revenue of $6.5B (-13.3% Y/Y) beats by $110M. Updated 2017 Guidance: Net product sales: $24.5B - 25.5B from $24.0B - 25.5B; Non-HCV product sales: $16.0B - 16.5B from $15.5B - 16.0B; HCV product sales: $8.5B - 9.0B from $8.5B - 9.5B. -4% AH. Keep in mind that they will include the sale of new Kite Drug in next ER. After reading ER, their HIV sector is still growing slowly. HCV drops worldwide as expected. I may add more shares tomorrow.
MAT Q3 EPS of $0.09 misses by $0.50. Revenue of $1.56B (-13.3% Y/Y) misses by $260M. suspends dividend. -27% at one point AH. I got burned here by my 400 shares :(
Sold half long position NKE @ $57, NKE had a nice two-day run, I want to lock my profit and increase my cash reserve.
Winner
TWTR (+18.5%) ER beats, daily active usage +14% Y/Y. However, I don't think twitter can be a facebook story.BWLD (+19.6%) ER benefited from bone-less wings.
Health insurer Aetna (AET +11.5%) spikes at the end of the trading hour on the news that CVS Health (CVS -2.9%) is in talks to buy the company.
F (+1.9%) ER beats.
Losers
Airlines (except SKYW SAVE) have a wild swing from green (AAL and LUV delivered good earnings before open) to red after Southwest Airlines warns on its post-earnings conference call that unit costs will be flat or slightly higher next year as it faces pricing pressure in some markets.Celgene (-16.4%) (along with BMY -4.8% MCK -5.2%) takes down the whole biotech sector (IBB -2.3%). It reported net income of $988M and diluted earnings per share (EPS) of $1.21 for 17Q3. For 16Q3, GAAP net income was $171M and diluted EPS was $0.21. Operating cash flow was $1.1B in 17Q3, compared to $770M for 16Q3. In 17Q3, Celgene purchased 0.9M of its shares at a total cost of approximately $114M. As of September 30, 2017, the Company had approximately $3.8B remaining under its stock repurchase program, with approximately $11.8B in cash, cash equivalents and marketable securities (Market Cap $78B). For 2017, adjusted operating margin 58.5%, adjusted EPS $7.30 to $7.35 --- P/E only 13 with >10% revenue growth rate.
2020 goals: lower new products/oncology, targeting $20-21B revenue and adjusted EPS >$12.5. This means EPS will increase 20%/year for the next 3 years. If stock price stays @ $100, P/E will be only 8.
Recent headwind: last week CELG shut down their pipeline for Crohn’s disease. Celgene had acquired the drug (mongersen, GED-301) from Nogra Pharma of Ireland back in 2014 for $710M. Stock price dropped 10% on the news.
Right after that frustration, CELG raised the price of Revlimid and Pomalyst by 9% (3rd time price hike in 2017)--- their two best selling drugs. Both are for MULTIPLE MYELOMA (blood cancer), total $1.6B sales in US in Q3 with organic growth rate of 18% and 32% respectively. Cowen's Eric Schmidt says the price hikes should more than offset the impact of the GED-301 flop in Crohn's.
Possible catalyst (no new drugs on FDA calender in the near future):
1. Ozanimod for MS, full data due tomorrow at ECTRIMS meeting;
2. More price hike in 2018;
3. M&A activities.
Summary: CELG pipeline shrink, growth rate is still appealing. EPS will be 20% for next 3 years. P/E is low. As the stock price drops to the level 3 years ago, I think it is a rare buying opportunity.
Meanwhile, IBB just experienced -8% correction from 10/6, which makes it a safer bet for biotech/big pharma bouncing back.
AH Earnings
Google Q3 EPS of $9.57 beats by $1.24. Revenue of $27.8B (+23.8% Y/Y) beats by $600M. +4.2% AH.BIDU Q3 EPS of $3.89 beats by $1.85. Revenue of $3.53B (+27.9% Y/Y). -11.7% AH.
Amazon Q3 EPS of $0.52 beats by $0.49. Revenue of $43.74B (+33.7% Y/Y) beats by $1.6B. +8.3% AH.
MSFT Q1 EPS of $0.84 beats by $0.12. Revenue of $24.54B (+11.9% Y/Y) beats by $980M. +3.7% AH.
INTC Q3 EPS of $1.01 beats by $0.21. Revenue of $16.15B (+2.3% Y/Y) beats by $420M.
WDC Q1 EPS of $3.56 beats by $0.26. Revenue of $5.18B (+10.0% Y/Y) beats by $40M. -1.5% AH.
FSLR Q3 EPS of $1.95 beats by $1.11. Revenue of $1.09B (+60.0% Y/Y) beats by $223.2M. +5% AH.
EXPE Q3 EPS of $2.51 misses by $0.11. Revenue of $2.97B (+15.1% Y/Y) misses by $10M. -6.8% AH.
WYNN Q3 EPS of $1.52 beats by $0.11. Revenue of $1.61B (+45.0% Y/Y) beats by $50M.
GILD Q3 EPS of $2.27 beats by $0.14. Revenue of $6.5B (-13.3% Y/Y) beats by $110M. Updated 2017 Guidance: Net product sales: $24.5B - 25.5B from $24.0B - 25.5B; Non-HCV product sales: $16.0B - 16.5B from $15.5B - 16.0B; HCV product sales: $8.5B - 9.0B from $8.5B - 9.5B. -4% AH. Keep in mind that they will include the sale of new Kite Drug in next ER. After reading ER, their HIV sector is still growing slowly. HCV drops worldwide as expected. I may add more shares tomorrow.
MAT Q3 EPS of $0.09 misses by $0.50. Revenue of $1.56B (-13.3% Y/Y) misses by $260M. suspends dividend. -27% at one point AH. I got burned here by my 400 shares :(
My Trades Today
Bought CELG @ $95.4, sold half position @ $99.6 as daytrade.Sold half long position NKE @ $57, NKE had a nice two-day run, I want to lock my profit and increase my cash reserve.
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