For Immediate Release
Chicago, IL – December 28, 2022 – Zacks Equity Research shares Mesa Labs
MLAB
as the Bull of the Day and Eldorado Gold
EGO
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Adaptimmune Therapeutics
ADAP
, Kamada Ltd.
KMDA
and Zymeworks, Inc.
ZYME
.
Here is a synopsis of all five stocks:
Bull of the Day
:
Mesa Labs
is a small-cap medical provider of quality control monitoring and validation instruments serving niche markets in healthcare, industrial, pharmaceutical, medical and food processing applications.
MLAB delivered a big 107% earnings beat in early November that compelled analysts to significantly raise estimates for this year and next, thus pushing the stock into the upper realms of the Zacks Rank.
Mesa reported EPS of $2.88 per share, beating the Zacks Consensus Estimate of $1.39. This compares to earnings of $1.87 per share a year ago. These figures are adjusted for non-recurring items.
Upward Revisions
This snap-back was a welcome sign for investors after the prior quarter, where it was expected Mesa would post earnings of $1.95 per share when it actually produced EPS of only $1.17, delivering a negative surprise of -40%.
During the most recent stock correction in October, MLAB shares fell below $120. They then rallied sharply back above $180 on the big earnings beat.
For the full fiscal year 2023 (ends in March) analysts boosted the EPS consensus for Mesa a whopping 39% from $6.57 to $9.15, representing 29% annual growth.
Even more encouraging is that the EPS consensus for fiscal 2024 (begins in April) jumped 21% from $7.62 to $9.23.
Organic and Acquisitions Growth
Mesa has been able to push organic growth to over 10% as the company expands within 4 major verticals: Sterilization & Disinfection Control, Biopharmaceutical Development, Calibration Solutions, and the newest arena of Clinical Genomics.
The company has also made over 12 acquisitions in the past ten years, which have driven 5-year CAGR to 17%.
Here’s what I wrote about their newest strategic play in late 2021…
MLAB Adds a Clinical Genomics Division
On 9/14/21, Mesa Laboratories announced that it has entered into a definitive agreement to acquire Agena Bioscience for a cash purchase price of $300 million. Headquartered in San Diego, Agena is a leading molecular diagnostics tools company that develops, manufactures, and supplies highly sensitive, low-cost, high-throughput, genetic analysis solutions to clinical labs and development partners globally.
Peter Dansky, CEO of Agena, will join Mesa to lead the new Clinical Genomics Division.
Excluding the impact of COVID-19 related revenues, Agena is expected to add between $63 million to $67 million of revenues — about a 50% increase — during the first 12 months of ownership, deliver high single digit organic revenues growth over the next several years and excluding the impact of purchase accounting, generate gross profit percentages in the mid to high 60’s.
Additionally, excluding the impact of COVID-19 related revenues, purchase accounting and integration expenses, Mesa expects adjusted operating income as a percentage of revenues to approach 20% for the same first 12 months of ownership.
Bottom line on Mesa Labs:
While MLAB has yet to return to its 2019 EPS peak above $6, topline growth of nearly 24% this year to $228 million is making new records. As the stock trades at only 3.8 times sales with a market cap of $870 million, that growth in key lifesciences arenas could make it a desirable acquisition target itself. I would always be a buyer on dips under $150 as I have recommended since I first profiled the company in 2018.
Bear of the Day
:
Eldorado Gold
is a $1.5 billion Canadian miner with gold producing and exploration assets in Brazil, Turkey, and a new development in Greece.
EGO shares fell over 50% from around $12 down to $5.30 as its yellow metal dropped 20% from highs above $2,000 earlier this year.
The good news is that EGO rallied back above $8.65 as gold made a triple bottom at $1,620 in September and October and climbed back to $1,800 while inflation stalled and interest rates fell.
The bad news is that earnings estimates have deteriorated further since a big EPS miss for the Sep quarter. And in the last two months, the profit consensus for the current year fell from 8-cents to zero.
Worse, next year has seen EPS projections drop 41.7% from $0.72 to $0.42. And that’s why EGO is in the cellar of the Zacks Rank.
Expansion in Greece
Part of the lowering of expectations revolves around new investment in Greece that was announced by the company on December 15.
On Dec 20, Canaccord metals analyst Carey MacRury downgraded Eldorado Gold to Hold from Buy with a price target of C$12, up from C$10.50, after Eldorado announced a EUR 680 million project financing package to complete construction of the Skouries project in Greece and a board decision to proceed with the project.
While MacRury views Skouries as potentially positive in the medium term and the financing terms as “reasonable,” he views the risk/reward for Eldorado as more balanced going forward with several years of negative free cash flow now potentially ahead.
Cuban Clobbers Gold Bugs
My thesis for years has been that gold is indeed the “barbarous relic,” especially in the age of permanent fiat systems and new digital currency innovations.
My most recent summary of these views can be found in this Zacks Ultimate report…
Why Gold Is Headed to Zero
(email [email protected] if you don’t have access and tell ’em Cooker sent you)
Another gold bear, billionaire Mark Cuban, just opined this week in much more “colorful” language.
Cuban appeared on the Bill Maher podcast Club Random over the weekend and got into a discussion about Bitcoin.
When the host said he’s “very anti-Bitcoin” and believed in the value of gold, the Dallas Mavericks owner replied “I want Bitcoin to go down a lot further so I can buy some more.”
He added, “If you have gold, you’re dumb as [a rock… or something like that].”
Maher retorted that gold “never goes away” and that it’s “like a hedge against everything else.”
Cuban’s response comparing gold vs. crypto in terms of their inflation hedging and “store of value” attributes wasn’t that articulate.
But then he said something I found of value…
“You don’t own the gold bar, and if everything went to hell in a handbasket and you had a gold bar, you know what would happen? Someone would beat the [rock] out of you or kill you and take your gold bar.”
According to Steve Mollman writing in Fortune online on December 24…
Cuban has slammed gold investing before. In 2019, for instance, he said in a Kitco News interview, “I hate gold. Gold is a religion.”
When discussing the recent FTX implosion, Mollman observed the Shark Tank figure-head still believes in crypto’s potential, noting these apt comments from Cuban…
“Separate the signal from the noise,” he suggested. “There’s been a lot of people making a lot of mistakes, but it doesn’t change the underlying value.”
Bottom line: Neither Cuban or myself knows when the right time to buy Bitcoin will appear. But we both agree that gold and its miners’ days are numbered as profitable investments. The beauty is that we all get to vote with our own dollars.
Additional content:
3 Under-$10 Drug Stocks Wall Street Analysts Recommend
The year 2022 has been a mixed ride for the Medical sector, which played a pivotal role in getting the global economy on track following the COVID-19 pandemic by making successful vaccines and medicines.
Current Market Dynamics of the Medical Sector
The current year started off on a high note as the COVID-19 pandemic started to lose its steam thanks to high vaccination and immunization rates. As the pandemic eased out, demand for key drugs normalized and the focus shifted to developing new drugs and pipelines. However, the demand for COVID-19 treatments declined, impacting the top line of the companies that had immensely benefited from the same in the last year.
The supposed transition to pre-pandemic behavior also exposed the world to several macroeconomic headwinds, like rising inflation and currency rate fluctuations, all leading toward signs of a recession in the near future. Moreover, COVID-19 cases have again started to rise in the United States and China, increasing the chances of another mass coronavirus outbreak.
As we approach a New Year and the current market is highly volatile, it is a good idea to invest in low-priced stocks with the potential for a healthy return. One of the safest options to capitalize on money-making opportunities is to adhere to Wall Street recommendations and follow their experts’ advice.
Our Choices
We have chosen three small biotechs priced below $10 with solid Zacks Rank and robust average broker ratings. We have taken the help of the
Zacks Stock Screener
to select the stocks. Below is a list of three such low-priced stocks in random order.
Adaptimmune Therapeutics
is a biotech company that develops novel cell therapies for cancer patients. The company does not have any marketed drugs. It has three key pipeline candidates in several mid to late-stage studies. Last week, Adaptimmune announced that it had initiated a rolling BLA submission with the FDA seeking marketing approval for its TCR T-cell therapy afami-cel to treat advanced synovial sarcoma. Management plans to complete this filing by mid-2023.
Adaptimmune currently sports a Zacks Rank #2 (Buy). In the past 60 days, estimates for Adaptimmune’s 2022 loss per share have narrowed from $1.15 to $1.10. Currently, ADAP has an average brokerage recommendation (ABR) of 1.80 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock. Based on these analyst projections, we expect an average price target of $6.25, suggesting a 359.56% upside to the current closing price of $1.36.
You can
see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Kamada Ltd.
, an Israel-based biotech company, focused on developing specialty plasma-derived therapeutics. The company has multiple marketed products in its portfolio and a late-stage pipeline candidate for treating Alpha-1 Antitrypsin deficiency (AATD). For the full year 2022, Kamada expects to record total revenues in the range of $125-$135 million, a 20-30% year-over-year growth.
The company currently has a Zacks Rank #1. In the past 60 days, estimates for Kamada’s 2022 loss per share have narrowed from 14 cents to 7 cents. Kamada has an ABR of 1.00. Based on analyst estimates, we expect a 180.61% upside to the current closing price of $3.92, indicating an average price target of $11.00.
Zymeworks, Inc.
is a clinical-stage biopharmaceutical company focused on developing next-generation multifunctional biotherapeutics. Last week, partner Jazz Pharmaceuticals exercised an exclusive option and now holds exclusive development and commercialization rights to Zymeworks’ lead pipeline candidate, zanidatamab, in all territories except in Asia/Pacific territories. In consideration for exercising the option, Jazz will pay an upfront payment of $325 million to Zymeworks in fourth-quarter 2022.
Zymeworks currently carries a Zacks Rank #2. In the past 60 days, estimates for Zymeworks’ 2022 earnings per share have improved from a loss of $1.96 per share to a profit of 9 cents. The company has an ABR of 1.73. Based on these analyst projections, we expect an average price target of $12.86, indicating a 59.95% upside to the current closing price of $8.04.
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