Lantheus and GlobalFoundries have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 6, 2023 – Zacks Equity Research shares Lantheus LNTH as the Bull of the Day and GlobalFoundries GFS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on HIVE Blockchain Technologies Ltd. HIVE, Marathon Digital Holdings, Inc. MARA and Bitfarms Ltd. BITF.
Here is a synopsis of all five stocks:
Bull of the Day:
I last wrote about Lantheus as the Bull of the Day in March after their stunning Q4'22 report that caught Wall Street off-guard and moved estimates significantly higher.
Well the company just did it again with their Q1 report that delivered another beat-and-raise in May, and drove shares to new all-time highs.
In this report, I'll review those results and the new potential headwind that caused the stock to sell off from $100.
Lantheus is a $5.7 billion provider of medical imaging technologies (think nuclear agents) for the diagnosis of cardiovascular and other diseases. But their new blockbuster application is in prostate cancer detection.
Here's how the company, which was added to the S&P 400 Midcap Index in October, describes their business...
We are an established leader in the development, manufacture and commercialization of pioneering diagnostic and therapeutic products and artificial intelligence (AI) solutions. Our broad portfolio features:
**Precision Diagnostics that Find and Follow diseases in non-oncologic conditions
**Radiopharmaceutical Oncology diagnostic and therapeutic products that Find, Fight and Follow cancer
**Strategic Partnerships that empower precision medicine through the use of biomarkers, digital solutions and radiotherapeutic platforms
PYLARIFY® (piflufolastat F 18) injection (also known as 18F-DCFPyL or PyL) is a fluorinated small molecule PSMA-targeted PET imaging agent that enables visualization of lymph nodes, bone and soft tissue metastases to determine the presence or absence of recurrent and/or metastatic prostate cancer.
And here's how they describe the benefits for doctors in diagnosing their patients...
For men with prostate cancer, PYLARIFY combines the accuracy of PET imaging, the precision of PSMA targeting and the clarity of an F 18 radioisotope. This combination brings superior diagnostic performance in assessing patients with suspected metastasis for initial definitive therapy or suspected recurrence based on elevated PSA, allowing you to better assess your patients' disease status.
Beat and Raise, All-Time Highs
I own this maker of medical diagnostics in the Zacks Healthcare Innovators portfolio, so we keep a pretty close eye on the fundamentals and investor reaction.
The stock became a Zacks #1 again in June because they just keep raising guidance this year. In early May, Lantheus delivered Q2 earnings of $1.47 per share, beating the Zacks Consensus Estimate of $1.29 per share. This compares to earnings of $0.97 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 13.95%. A quarter ago, it was expected that this diagnostic imaging company would post earnings of $0.96 per share when it actually produced earnings of $1.37, delivering a surprise of 42.71%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Lantheus Holdings, which belongs to the Zacks Medical - Products industry, posted revenues of $300.78 million for the quarter ended March 2023, surpassing the Zacks Consensus Estimate by 7.17%. This compares to year-ago revenues of $208.88 million. The company has topped consensus revenue estimates four times over the last four quarters.
After these results and raised guidance, the analyst consensus for both top and bottom lines move higher. Full-year 2023 sales are projected to cross $1.25 billion, representing 34.6% growth.
And EPS estimates jumped over 10% from $4.95 to $5.60, for a 32.7% advance. All this optimism drove LNTH shares to all-time highs in May above $100.
Competition in PSMA PET Imaging
But LNTH sold off sharply in late May after a competitor got approval for a prostate agent similar to Pylarify. I think this drop back to the low $80s presents another chance for smart investors to get in.
Because from all I've read about sales projections, the TAM (total addressable market), and company market share, Lantheus should maintain the lead position in PSMA PET imaging, a procedure that is used to help find prostate cancer cells in the body. For this procedure, a cell-targeting molecule linked to a radioactive substance is injected into the body and travels through the blood.
PSMA stands for prostate-specific membrane antigen. And PET, you may know, is short for positron emission tomography.
Pylarify PSMA PET/CT Scan is a cutting-edge nuclear medicine that has been proven to be exceptionally sensitive for detecting prostate cancer using PET imaging exams. PYLARIFY® combines accurate PET imaging, precise PSMA targeting, and clarifying Fluorine-18 (F-18) to improve prostate cancer assessment.
Here was recent commentary from the analyst team at Truist after they attended the Society of Nuclear Medicine & Molecular Imaging in Chicago last week. The conference has a heavy focus on the use of PET imaging in oncology, and PSMA PET was a major focus.
"We came away from the conference incrementally positive on PSMA PET volumes into 2Q and on the continued runway for imaging TAM expansion. Feedback we received from docs on POSLUMA, Bracco's (Private) recently approved imaging agent, was mixed, and we continue to feel that our forward market share assumptions, where Pylarify roughly splits the F-18 segment of the market, may be overly conservative."
The Truist team also believes that LNTH, at current levels, is not getting adequate investor attention for the collective value of its business segment opportunities, which they see worth $125 per share and higher "on a probability-weighted basis."
They also think the new F-18 competition from Bracco is already well-contemplated in their base case estimates -- "we may even give Bracco too much share capture credit in our 2024-2026 base case assumptions."
Even if Bracco were to secure 40%+ share in an expanding F-18 PSMA PET imaging market over the next 3 years, the Truist team still thinks Pylarify and Lantheus are undervalued, especially with the stock under $85.
Bottom line on LNTH: The last time the bears discounted the sales potential of Lantheus, the stock bit back with a 100% move from $50 to $100. I'm not expecting those kinds of fireworks again, but I think the risk/reward is very attractive near $80, given the Truist market analysis and $125 price target.
Bear of the Day:
GlobalFoundries is the third largest semiconductor foundry in the world behind Taiwan Semi and Samsung. Recent company updates scaled back immediate growth prospects, and that's why the stock is a Zacks #5 Rank.
GFS offers its customers specialized foundry manufacturing processes, a library with thousands of qualified circuit-building block designs (IP blocks), and differentiated transistor and device technology.
They also are based in the US, which has become an important differentiator since the trade and technology "wars" of the past few years.
What Does GlobalFoundries Do?
GFS manufactures complex, feature-rich integrated circuits that are pervasive throughout a variety of end-markets, including digital, analog, mixed-signal, radio frequency (RF), ultra-low power, and embedded memory solutions that connect, secure, and process data and efficiently power the digital world.
Ironically, the creation of GFS was borne in 2008 of a spin-off where AMD decided it didn't want to do the foundry work anymore on its own chip designs.
While GPU makers like NVIDIAand AMD keep the reliable off-shore foundries busy, the competition for US-based GFS may be one factor in EPS estimates being taken down about 10% for this year and next.
According to a Wedbush note in early May... "GFS management attributed the softer Q2 and 2H outlook to generally more difficult than expected end markets resulting in a slower than expected workdown in excess inventories, with both of these factors now expected to weigh on the pace of expected revenue recovery through 2023."
The Foundry-WFE Landscape
One of my favorite semiconductor analysts is Mark Lipacis from Jefferies. He helped me see in 2018 the potential for NVIDIA gaming GPUs to be supplanted by the data-center demand for those same workhorses of "massively parallel architectures."
Here's what he wrote recently as he saw the new upward momentum in foundry WFE (wafer fabrication equipment) demands...
"We revise our 2023 WFE to $81bn vs. prior $75bn as we layer in spending of Analog and MCU players in our bottom-up model. We think the Street is underestimating demand for Trailing Node capacity, which we estimate will account for 46% of 2023 WFE spend. We forecast a WFE recovery in 2024 as semi company revenues snap back after shipping below consumption in 2023 to clear the channel of excess inventories. AMAT, NVMI and ONTO are our top Trailing Node plays."
What is the Trailing Node?
Nodes in semiconductor manufacturing indicate the features that a node production line can create on an integrated circuit, such as interconnect pitch, transistor density, transistor type, and other new technology.
This is especially important as the "leading edge" of chip design focuses on the sub-10 nanometer transistor architecture that also places new demands on the "trailing edge" that has to be able to "connect and keep up!"
In May of 2021, as supply chain issues were intensified by the pandemic shutdown, Tim Bajarin wrote this in Forbes...
"In the last few months, much has been said about the shortage of chips developed on leading edge manufacturing nodes of 7nm, 5nm, etc. While there are some shortages in chips using these advanced manufacturing processes, it turns out the semiconductor industry's other issue is at the trailing edge. The leading edge gets all the attention because it is the most exciting."
Bajarin had a good grasp at the time that the "leading edge" of chips powers the supercomputers in the cloud, advanced servers, desktops, and laptops, and even the computers in our pockets. But he explained that computing devices are not just made up of leading edge microprocessors...
"The vast majority of other components are made up using legacy nodes. Quite often many mainstream processors, especially those created for the autos, medical monitoring equipment, and a multitude of other products are created using much larger nodes in what is called the trailing edge."
These are the semiconductors chips and systems that still need to be able to "talk" to each other regardless of proprietary platforms, sub-10nm, or AI integrations on the "leading edge."
WFE Demand Historically Driven By Leading Edge and Memory
Lipacis goes on to describe the industry dynamics, even in the midst of AI-GPU mania that exceeded his expectations (but not mine, where we were heavy buyers of NVDA near $120 during the October bear market nadir)...
"Historically, WFE demand was primarily driven by leading-edge logic chips like CPUs in PCs, processors used in datacenters or application processors and modems used in cellphones, led by more advanced logic and increasingly smaller and cheaper memory solutions. Consequently, ~80% of WFE spend was driven by leading edge logic and memory."
But Trailing Node is a New Driver of WFE, Driven by an IoT Computing Era
"We've argued that the industry has entered the '4th Tectonic Shift to an IoT Computing Era,' where for the first time in history, the volume computing device, IoT, requires trailing nodes instead of the leading-edge chips required by previous computing eras, like handsets and PCs."
The Lipacis team estimates that this IoT Computing Era is rapidly growing to 10s of billions of devices annually, which is driving demand for trailing node WFE. They estimate that trailing node CapEx will increase from 22% of WFE historically to 46% of WFE spend in 2023 and believe the Street is underestimating the importance of Trailing Node CapEx.
They also believe that increased tensions between the US and China will lead US and European-based semiconductor companies and OEMs will shift sourcing to domestic players, ultimately translating to faster revenue growth. This works for GFS as they have EU fabs too.
Meanwhile, Raymond James analysts reiterated their Outperform rating on Global Foundries and adjusted their price target down to $75 following March quarter results...
"While the updated full-year outlook now assumes a slower than expected inventory correction across multiple end markets, the dynamics are consistent with broader industry trends, and improving mix is driving expected sequential growth through the year."
Bottom line for GFS: As the US shifts more Semi manufacture to the home base, GFS will benefit, especially as they dial in to serve the most picky customers from NVDA and AMD to INTC and MSFT. When these downward estimate revisions bottom out, you want to be a buyer of GFS. The Zacks Rank will let you know.
Additional content:
3 Crypto Stocks On a Roll as Bitcoin Tops $31,000
The crypto market took a beating at the end of last year. The bankruptcy of FTX amid an alleged fraud dragged the prices of cryptocurrencies, including Bitcoin, to multiyear lows. However, Bitcoin dismissed regulatory scrutiny and more than doubled this year from the trough of last year.
An improved economic environment coupled with new institutional participation in the crypto market encouraged investors to pile into the world's numero uno cryptocurrency, resulting in a price surge that exceeded gains in the stock market.
And as market pundits expect Bitcoin's epic run to continue in the second half of this year, stocks such as HIVE Blockchain Technologies Ltd., Marathon Digital Holdings, Inc. and Bitfarms Ltd. are poised to gain.
Bitcoin Witness a Remarkable Surge
The price of Bitcoin, has recently breezed past the psychological threshold of $31,000 and established a solid support level. Notably, the price of Bitcoin notched its best first half of a year since 2019. The price of the largest-digital asset even surpassed the tech-laden Nasdaq's best first-half gains in four decades.
Moreover, on Jul 4, Bitcoin's trading volume soared 47.2% in 24 hours, a clear indication of investors' interest in the digital asset. Bitcoin's price, by the way, continues to hover above the 200-day simple moving average, indicating further upswing.
What's Behind the Bitcoin Rally?
Bitcoin is zooming up, and it's partly because of the Federal Reserves' pause in interest rate hikes in its last policy meeting held in the month of June. Needless to say, an increase in interest rates was always a headwind in 2022, as higher rates weighed heavily on high-risk assets such as digital coins and tech stocks.
Meanwhile, the banking sector turmoil in March 2023 that heightened worries about an impending recession was also a blessing in disguise for Bitcoin. This is because, during such a crisis, many investors saw the digital asset as a safer investment than some of the regional banks.
But most importantly, it's the renewed interest among large traditional financial institutions in crypto, including Bitcoin, that drove its prices northward. Financial bigwig BlackRock, Inc (BLK), has applied, urging regulators to create a Bitcoin ETF. If the proposal gets accepted by the supervisory body, retail participation will increase and open opportunities for more institutional backing.
Similarly, financial heavyweights such as The Charles Schwab Corporation (SCHW), Citadel Securities and Fidelity Digital Assets, to name a few, backed a new crypto exchange called EDX Markets. The exchange allows the trading of Bitcoin along with other prominent digital assets.
Crypto Stocks to Make the Most of the Bitcoin Rally
From an investment perspective, if you are looking to make money from Bitcoin's current upsurge, it would be judicious to approach it in a roundabout way, by keeping an eye on companies that make use of Bitcoin and technologies that support it, like blockchain.
First on the list is HIVE Blockchain, which is one of the traded Bitcoin miners. As a thumb rule, miners do have negative margins when the price of Bitcoin falls below $20,000. But now, since the price is above this threshold, HIVE Blockchain's profit margins are positioned to improve.
The Canadian Bitcoin mining company posted solid financial results in June, while its shares have surged 248.7% so far this year, backed by the Bitcoin rally. In comparison, the broader S&P 500 Index has gained 17.1% in the same period.
HIVE Blockchain's expected earnings growth rate for the current year is 54.2%. The Zacks Consensus Estimate for HIVE's current-year earnings has moved up 6.6% over the past 60 days.
HIVE Blockchain has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
Another Bitcoin mining company, Marathon Digital, is experiencing exponential growth this year. This is because Bitcoin miners' shares have a direct relationship with the price of Bitcoin. The profitability of Marathon Digital's mining operation will improve banking in the value of Bitcoin.
Shares of Marathon Digital outperformed the S&P 500 Index year to date, by gaining a whopping 348%.
Marathon Digital's expected earnings growth rate for the current year is 113.7%. The Zacks Consensus Estimate for MARA's current-year earnings has moved up 525% over the past 60 days. Marathon Digital has a Zacks Rank #3 (Hold).
Also, Bitfarms specializing in mining Bitcoin, is expected to witness growth momentum soon. Its shares may have gained less than MARA stock, but it has reduced its debt considerably and has increased its mining capacity, which makes it all the more enticing for investors.
Bitfarms shares have skyrocketed 270.5% so far this year, thereby easily outdoing the S&P 500 Index.
Bitfarms' expected earnings growth rate for the current year is 86.1%. The Zacks Consensus Estimate for BITF's current-year earnings has moved up 48.4% over the past 60 days. Bitfarms has a Zacks Rank #1.
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HIVE Blockchain Technologies Ltd. (HIVE) : Free Stock Analysis Report
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Lantheus Holdings, Inc. (LNTH) : Free Stock Analysis Report
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GlobalFoundries Inc. (GFS) : Free Stock Analysis Report
