The most conservative market cap is 4 times 2016 revenue. That is $2B market cap or $33 per share.
Most biopharma companies go from 8 to 10 times revenue.
Even with calculating debt, at 4 time 2016 rev, the price is $25.
A reasonable calculation is 6 times 2016 rev or $3B then subtract debt and add cash, $2.5 B is fair value. Now add bonds to shares and put total shares at 75 M and still the price is $2.5B/75m = $33.3 per share.
Knowing AAPL, this will be a secret and even CRUS CEO may not Know all the story.
However, if CRUS is guiding higher revenue for current quarter, that is the only indication that shareholders may relay on. Either TV, wearable or other new Apple products, CRUS has some targets to be busy with.
By the way, 18% of CRUS rev came from Samsung in the last quarter, it is something to watch too instead of be all Apple.
Axovant IPO sparks talk of a biotech bubble.
Well, this says it all:
" A biotech company with a single unproven drug candidate and a 29-year old chief executive went public this week and already has a stock-market value of close to $3 billion, raising some concerns the sector may be in a bubble."
This fact scares some investors that punished stock like DEPO. All it needed a few people with 300k shares to damage DEPO by about 4%.
First, DEPO market cap is $1.2B. Nucynta purchased price plus purchase costs was around $1.1B. It is like to say that DEPO without Nucynta only worth $100m.
The sector should not be punished by someone who bundles all the companies in the sector as the same.
Nucynta will generate $500m rev per year if not higher for at least 7 years. At 75% margin, it generates $375m of profit per year in average. DEPO can pay off the Nucynta debt in less than 2 years and then enjoy huge profit for many years to come.
After all, DEPO has 4 more drugs that are generating good profit.
Having 6 drugs in the market is not the same as a company with one unproved drug in phase 1 that trades 3 times DEPO.
Sentiment: Strong Buy
You may notice that in January 2015, CRUS short interest reached its peak, even higher than the current number. In addition, you may notice that January 2015 was the month that CRUS broke out of its low $20s range to high 20s range.Then the same shorts contributed to CRUS high prices of $30s in following months.
I see a blind side on the short hat is reactionary in contrast to what it used to be meticulous shorting.
Bottom line is that I do not see any real logic behind the increase but momentum players who are trying to ride a wave but they may end up to be in a bad accident.
Since the last big drop, DEPO held fine ( 20 trading days) and inched up from low $20 to current prices around mid and high $21.
Investors thinks that the current prices are bargain and price will go higher. The reason is that DEPO held very well in spite of market volatilities while volume have been above average. Institutions and investors added to their positions since DEPO traded mostly positive during this time frame.
However, this is beginning for DEPO to fill the gap first, go to its previous high second, and then record new highs third. It may happen this year or by early next year but DEPO will be between $30 to $40 if not higher.
DEPO is down with low volume in a red market. Probably too much reaction and this has created to add more shares.
DEPO value does not change and time is in favor of the stock.
Nucynta will rock eventually. $60m to $65m per quarter is easy for Nucynta. However, the rev will rise significantly in 2016 and average to $100m/Q for Nucynta.
I think some short sellers are taking advantage of low volume and they have pushed it this low with only few hundred thousand shares. Good opportunity to get the shares this low.
Well, the following are my revenue calculation for DEPO. I anyone asks, I put the details but the summery is
Q1 = $32.2m, already reported and it is not included any PDL royalty that misled some investors.
Q2 = $90m
Q3 = $102m
Q4 = $109m
Total for the year = $334m
For 2016, the average revenue per quarter will be $120m to $125m however, DEPO will do at least one more acquisition or deal which will add $20 to $50m revenue. So, one way or another, 2016 revenue will be above $500m.
At an average 5 times revenue, assuming 2016 revenue of $500, the market cap will be $2.5B and PPS of $41.
I tell why DEPO logic is an excellent move.
Lets look at minimum income from Nucynta in one of 2015 quarter.
Nucynta generated $44m revenue in Q1 2015 and was assume the worst case scenario that 275 reps did not do better than JNJ marketing team and the same number of prescription were filled.
With the same prescription number as Q1 and with 44% price increase, the revenue for a quarter will be will be $63.36.
Now if cost of revenue plus loyalties are calculated at high percentage of 25% then the net income of Nucynta for the quarter will be $47.5m. If in a quarter, DEPO pays $3m extra for new reps and $15m more for interest then it will have $29.5m of profit.
Not a bad deal at all. You have to spend money to earn money.
Now, Nucynta average revenue per quarter will $100m in 2016 but interest and marketing stay almost the same while margin will go up significantly.
Run the same numbers for $100m rev per quarter:
25% for cost of revenue or $25m.
$15m cost of interest per quarter.
$4m cost of new reps and marketing per quarter ( assume each is paid at $120k per year) .
Total cost per quarter in 2016 based on $100m rev is $44m.
Net profit will be $56m per quarter in 2016 just from Nucynta.
it is an excellent deal and this extra money will either pay off debt or acquires new drugs and income will go higher in either case. That is why DEPO is a growth company.
Good timing. When opportunity knocks, don't pass it. Today is first day and it will continue the trend for many more days.
While Nucynta IR in US has only 0.3% of the market.
However, most parties from FDA to others are pushing for a safer and less abuse drug.
This is where Nucynta comes to picture.
Doctors should go for Nucynta more than other painkillers. They more happy patients with less lawsuits.
And happy DEPOers (investors, employees, patients...) and whoever deals with DEPO directly or indirectly.
Exciting future is ahead of DEPO with Nucynta sales in full swing starting July and Q3 2015.
Now Q1 which had accounting changes and Q2 with non-recurring expenses are behind us. With strong cash flow, DEPO is panning its next acquisition. Strong cash flow becomes the engine of the DEPO growth. At minimum, the accumulated cash can reduce the debt and increase the income but using the cash for another small acquisition in range of $100m to $200 in 2016 is the best use of the cash.
Both are tied together because of the recent deal but there is room for more profit with MWE.
MWE investors get (MPLX * 1.09 + $3.37) at current MPLX PPS of $61.02, that will be
$61.02 * 1.09 + $3.37 = $69.88.
However, MPLX was oversold after the deal was announced. It will gain back some of its losses.
If MPLX reaches $65 then MWE investors will get:
$65 * 1.09 + $3.37 = $74.22
So MPLX gains $4 while MWE gains $5. With todays MWE price, its investors gain $5.20.
The norm is 2.5 to 4.5 revenue for semi and closer to 4 and higher if the company is growing.
CRUS is growing alright and it had 2 acquisition in over last 14 months (Wolfson and Opalum) paid with cash.
It is also cash-debt positive.
With all above, 3.5 average of rev of $1.3B is not far from reality.
The price tag for CRUS is about $4.55 B with diluted shares of 66 m, the price per share is around $69.
It will be a good addition to NXPI and any other interested company like TXN.
RFMD and Triquent merged and the next merger may be CRUS and ....may be SWKS.
CRUS follows both AAPL and the market somehow. However, CRUS low float and low volume makes it more volatile. At some points, it seems that it drops or gains more than others in the sector.
Market has noise and all stocks are affected but this will pass.
Bottom line is that CRUS is on right track, increasing revenue/income, putting a good chunk of money in R&D and it did 2 acquisitions in past 12 months. Since Q1, CRUS has started to increase cash, decrease debt. They have about $50m left for buyback shares too.
DepoMed (DEPO) PT Bumped to $26.50 at Janney Capital
June 11, 2015 6:24 AM EDT
Janney Capital analyst Chiara Russo reiterated a Buy rating and bumped her price target on DepoMed Inc (NASDAQ: DEPO
"The money can be used elsewhere in stocks already going much higher."
You may say this for today but next day is not a sure bet.
DEPO held very fine in past few days that the market was down. Of course some traders took the money somewhere else to ride the market wave but they will come back again to park their money in a stable stock . Other small cap biopharma in the sector are doing the same. This is an opportunity and smart investors buy at these prices for near future.
The FDA has for years been urging makers of painkillers to do everything they can to discourage abuse, spurring efforts to make pills more difficult to crush, melt or dissolve as the rates of deadly overdose rise around the U.S (a writer indicated).
Well, Nucynta is the answer.
Well, DEPO drop was based on unrelated noises, the noise from the market, Greece and Europe. DEPO does not do business outside of US at this time and it should not be affected by outside noises.
As other posters indicated, DEPO is on a new path with high potential of sharp rise in rev/income. Besides, DEPO may do more deals and financials to acquire other drugs or even merges with other companies in its sector. Basically, it is switching from a small cap to mid cap and it will be recognized as one of top players in its sector. Goo future is waiting for this company and its shareholders.
So what, short interest of many companies have been increased recently since shorts expect the market, Greece and other issues would affect stocks and they can fish in these muddy waters. How ever, Greece became an old news now. It might affect financial sector but pharma and especially companies that only do business in US should ignore the noise.
Just to let you know that you are barking at wrong tree. If you did not cover on Monday or even today then you are in trouble. DEPO will continue to perform and it will leave the shorts in the dust.
Better to swim with waves instead of against them.