All three major U.S. stock indexes were in positive territory, with the Nasdaq, weighed by Tesla Inc, picking up the rear. "It speaks to how many investors have been trained to buy the dip," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. This was evidenced by the outperformance of small caps , chips and transports, economically sensitive stocks that stand to gain as the United States emerges from the pandemic recession.
(Bloomberg) -- Over and over again, Federal Reserve officials have advised that any pickup in inflation this year was bound to be transitory. Traders in financial markets, however, aren’t so sure.Even before the faster-than-forecast rise in U.S. consumer prices reported Wednesday, investors had become fixated on widespread signs of cost pressures as commodities like copper and lumber surged to records and the bond market’s expectation for inflation over the next decade climbed to an eight-year high. The focus is shaking up the stock market, sending the Cboe Volatility Index to the highest since March.The most-recent round of U.S. corporate earnings calls showed the word inflation was back in vogue, with its usage rising 800% from a year ago, according to Bank of America Corp. Even last week’s payrolls report, which showed the U.S. added only about a quarter of the jobs economists expected in April, is being viewed as a sign that companies will have to boost wages to entice more unemployed workers into the labor force.“Inflation risk is what we want to watch here,” Savita Subramanian, Bank of America’s head of U.S. equity and quantitative strategy, said on Bloomberg Television on Friday. “I don’t know if it’s going to be transitory.”The U.S. consumer price index for April boosted the bond market’s five-year inflation outlook on Wednesday to the highest since 2005. Month-over-month CPI came in at 0.8%, beating economists’ estimates of 0.2%. On a year-over-year basis, CPI rose 4.2%, above estimates of 3.6%. The figures pushed the 10-year Treasury yield up five basis points to 1.67%.The growing inflation fears are a political threat to President Joe Biden’s plans for vast new spending, particularly after a disappointing jobs report on Friday.But policy makers are standing their ground. Even known Fed hawks have chimed in over recent weeks to say that inflation is unlikely to get out of control despite unprecedented government spending in response to the coronavirus pandemic. Both Fed Chairman Jerome Powell and a top Biden administration economic adviser have said that the inflation now apparent in certain pockets of the economy is “transitory.”That description raises an important question: Just how long does “transitory” mean? The answer is probably unknowable at the moment, but past recessions provide some clues.Commodities After RecessionIf the latest rise in prices is largely commodity-driven, then it’s a matter of how long those input prices keep rising. Using the 2009 economic rebound as a road map, demand for raw materials -- and ergo their prices -- soared for two years and pushed up global inflation until commodity markets topped out.Those price increases were largely driven by a massive Chinese infrastructure package. This time, the U.S. may fill the role that China played more than a decade ago as the Biden administration proposes billions of dollars in spending. By this logic, “transitory” could mean two years.Computer-Chip ShortagesHowever, raw materials like lumber and copper aren’t the only factors that potentially will push up inflation. Computer chips used in everything from cell phones to cars and refrigerators are also playing a major role.Honda Motor Co., BMW AG and other automakers have been forced to halt production due to chip shortages. Given how crucial they are, it’s no surprise that the 30-member Philadelphia Semiconductor Index has a positive correlation with 10-year breakevens, a bond-market gauge of inflation expectations that’s based on the difference in yields between nominal Treasuries and inflation-protected securities. The two indexes have been trading in tandem over the past year.It doesn’t stop there.Used CarsThe headwind to new-vehicle manufacturing posed by the shortage of computer chips led to a 10% jump in prices for used cars and trucks in April, the CPI report showed Wednesday. Pent-up demand among those who can’t afford big-ticket items can be seen in the surge in prices of used cars, says Sebastien Galy, a senior macro strategist at Nordea Investment Funds SA in Luxembourg. The Manheim Used Vehicle Value Index, which measures prices at wholesale auctions, shows they’re now 20% higher since the end of last year.“It shows that if you can’t afford a lot, then replacing your car may be the way to splurge,” Galy said.BreakevensThe bond market has sniffed out all the pricing pressure, and the inflation expectations it reflects are influential in setting investor assumptions. Ten-year breakeven rates, a proxy for the inflation expected over the next decade, are near their highest since March 2013 at about 2.57%. Five-year breakevens rose as high as 2.82% on Wednesday, the highest since 2005.To be sure, not all market participants agree with the inflation signals coming from the bond market. Goldman Sachs Group Inc. and Pacific Investment Management Co. estimate that bond traders pricing in annual inflation approaching 3% over the next handful of years are overstating the pressures bubbling up.Read More: Goldman, Pimco Detect Irrational Inflation Mania in BondsWage PressuresMeanwhile, some investors, strategists and politicians have indicated that the real message of the well-below-forecast rate of job creation last month is that costs to entice more unemployed people back to work will rise. That’s in part due to added government unemployment benefits that make their former wages less appealing. Any pressure to increase wages could feed back into the prices of goods and services, further increasing the rate of inflation.“It’s not going to be that easy to pull 8 million people off their sofas and back to work without the price of doing that having to be higher than it was before,” said Mark Holman, chief executive officer at TwentyFour Asset Management. “This is inflation risk,” said Holman who is avoiding duration risk as a result and focused on corporate debt given the growth outlook is good and default risk is low.(Updates throughout with CPI data, market reaction)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
In breaking news, inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear.
(Bloomberg) -- Gold is set to snap its longest rally since January, hurt by gains in the dollar and Treasury yields after a higher-than-expected reading on U.S. inflation.U.S. consumer prices climbed in April by the most since 2009, according to Labor Department data Wednesday. Rising yields reduce the appeal of non-interest-bearing bullion, and a stronger dollar makes bullion more expensive for investors holding other currencies.Markets were already concerned that rising inflation amid surging commodity prices could prompt the Federal Reserve to boost rates earlier than expected. Gold had shrugged off that concern, rising to the highest in three months earlier this week after a report Friday showed a surprise slowdown in U.S. job growth, supporting the case for continued economic stimulus.“Gold is approximately 50% correlated with Treasuries, so it gets hit as interest rates rises,” said Jay Hatfield, president of Infrastructure Capital Management. “On top of that, the dollar is rallying. The stock market dipping on the inflation data showed that investors fear that the Fed may need to tighten soon.”Policy makers at the central bank have been unified in supporting the case for low interest rates.“The outlook is bright, but risks remain, and we are far from our goals,” Governor Lael Brainard told a virtual event Tuesday. Cleveland Fed President Loretta Mester and James Bullard of St. Louis voiced similarly dovish views.Spot gold fell 0.9% to $1,821.07 at 3:21 p.m. in New York. The metal gained for five straight sessions through Tuesday, the longest rally since Jan. 5.Futures for June delivery on the Comex declined 0.7% to settle at $1,822.80 an ounce. Spot silver, platinum and palladium slid.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Investors aren’t yet abandoning the view that inflation pressures will pass, even as the sticker-shock of the U.S. consumer prices report sends tremors across a broad range of assets.Market gauges of inflation expectations pulled back from initial spikes following the data, which showed the biggest monthly increase in core CPI since 1982 U.S. Treasury long-end yields are still shy of their year-to-date peak, with a sale of new 10-year notes meeting strong demand. After a third day of losses for major U.S. equity indexes, futures were marginally down in European trading hours. This moderation in market moves should reassure policy makers, who maintain that the acceleration in prices is temporary, due largely to supply bottlenecks as producers struggle to catch up with rebounding demand after the pandemic forced so much global activity to shut down.“It is not a question of whether inflation will normalize but when,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “The pre-pandemic secular trends like globalization, technological efficiencies, demographics should push inflation lower, but how long these distortions continue to push inflation higher is unclear.”Getting their call right on inflation is make or break for investors. Rising costs of living erode the value of their already low-yielding assets over time, and could force central banks to raise interest rates sooner than they’ve led markets to believe.The run-up in prices of real assets, from commodities to housing, highlights the need to have sturdy inflation hedges in place, according to Thomas Poullaouec, multi-asset portfolio manager at T. Rowe Price.“What they’re telling us is that there are different signs to suggest that higher inflation for longer than the market is pricing is a risk, and we definitely shouldn’t underestimate it,” he said.Poullaouec this year shifted to favor value stocks -- such as financials, industrials and materials and some consumer-related sectors -- over growth assets for the first time in a decade. He sees the economic recovery spurring this rotation, which he says is only half-complete.In fixed income, he is leaning into short-term inflation-linked bonds and bank loans, or even cash, to steer clear of the sort of long-dated, low-yield assets that are most vulnerable to higher borrowing costs.Longer-term measures still don’t suggest price pressures getting out of hand. The rate on the five-year, five-year forward swap contract for CPI is still around 2.5%. Adjusted for the typical gap between CPI and the Fed’s preferred measure -- personal consumption expenditures -- that means longer-run inflation is seen running only modestly above the 2% target despite April’s extraordinary surge in price gains.Even the bearish spike in equities bets -- reflected in the Cboe put-to-call ratio that tracks the volume of options tied to everything from single stocks to indexes -- may be a contrarian signal, according to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.It was likely affected by a dropoff in call purchases among retail traders, he said, noting that the S&P 500 has posted a median two-week return of around 3% following the 10 highest put-call readings over the past 12 years.Credit Traders Bet on Central Banks Keeping Nerve Amid InflationYet rates markets aren’t ignoring inflation risks, which is underscored by the past month’s rise in breakeven rates, a market gauge of the inflation outlook derived from Treasury yields. The five-year rate, which is more influenced by the recent rebound in commodity prices, touched its highest level since 2005 before paring the move.There are some lingering doubts that the Fed will be as tolerant of rising inflation as it has promised.Eurodollars contracts are priced for roughly one 25-basis-point rate hike by the end of next year, and at least three by the end of 2023. The central bank’s latest guidance, from March, suggests policy makers see no increases over that whole period.(Updates on futures performance and Treasury sale in second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- A crack in a bridge over the Mississippi River has stranded more than 700 barges, cutting off the biggest route for U.S. agricultural exports when the critical waterway is at its busiest.The route is shut near Memphis while the Tennessee Department of Transportation inspects a large crack in a highway bridge spanning the river, according to the U.S. Coast Guard. A queue has expanded to 47 vessels and 771 barges, with 430 of those heading north and the rest going south, Petty Officer Carlos Galarza of the Coast Guard’s 8th District said Thursday afternoon by email.The Mississippi River is the main artery for U.S. crop exports, with covered barges full of grain and soy floating to terminals along the Gulf of Mexico, while crude oil as well as imported steel also travel through sections of the waterway. Any sustained outage would disrupt shipments out of the Gulf. Corn futures tumbled by the most allowed under CME Group rules partly on speculation that exports would back up.“The river is the jugular for the export market in the Midwest for both corn and beans,” said Colin Hulse, a senior risk management consultant at StoneX in Kansas City. “The length of the blockage is important. If they cannot quickly get movement, then it is a big deal. If it slows or restricts movement for a longer period it can be a big deal as well.”The stoppage along the Mississippi River is the latest calamity to upend the commodities world in recent weeks. Back in March, the Suez Canal was blocked by a giant container ship that got stuck sideways in the vital waterway for almost a week, paralyzing global shipping. And late last week, a cyberattack brought down the largest fuel pipeline in the U.S. for five days, leading to widespread gasoline shortages from Florida to Virginia.A lengthy halt on the Mississippi River could further roil crop markets, where soybeans and corn futures have hit multiyear highs amid adverse weather in Latin America and a buying spree from China. Corn futures fell Thursday by the exchange limit of 40 cents, or 5.6%, to $6.7475 a bushel in Chicago.As a workaround, traders could in theory also send some supplies on trains and divert to ports along the U.S. Pacific Northwest. Few grain and soy buyers were bidding for barges north of the river closure amid uncertainty on when vessel traffic would resume.The crack halting vehicle and waterway traffic is in the truss of the Interstate 40 Hernando DeSoto Bridge, which was found during a routine inspection, according to a Tuesday statement from the Tennessee Department of Transportation.“The timeline is still undetermined” for the waterway reopening, department spokeswoman Nichole Lawrence said Thursday morning by email.The Army Corp of Engineers could figure out a way to keep automotive traffic closed in order for water traffic to resume under the bridge, according to CRU Group analyst Josh Spoores. It may cause bottlenecks, but most consumers already used to waiting months for supplies to ship are probably fine with some added delays, he said.The New Orleans Port Region moved 47% of waterborne agricultural exports in 2017, according to the U.S. Department of Agriculture. The majority of these exports were bulk grains and bulk grain products, such as corn, soybeans, animal feed and rice. The region also supports a significant amount of edible oil exports, such as soybean and corn oils and even attracted 13% of U.S. waterborne frozen poultry exports in 2017.Some traders speculated that, based on past experience, the river might be partially opened for restricted movements while repairs are being done.“My sense is that it is not a big deal for river traffic as it will be a short-term disruption,” said Stephen Nicholson, a senior analyst for grains and oilseeds at Rabobank. “The good news is most of fertilizer has already come up river and soybean exports are at their low point. However, corn exports continue at a strong pace, so we may see a slight delay in corn barges reaching” New Orleans.It may be difficult for exporters to shift much volume to rail, as the capacity to unload trains outside of the New Orleans area is limited, according to Curt Strubhar, vice chairman and risk management consultant at Advance Trading Inc.“There aren’t many rail unloaders South of the issue,” he said, adding that New Orleans “port elevators aren’t equipped to handle a sharply higher share of rail unloads either.”Of agricultural supplies that floated on barges north of Memphis, about 84% was corn and about 13% was soybeans, according to Mike Steenhoek, executive director of the Soy Transportation Coalition, citing USDA data. Overall shipments of corn and soy during the week ended May 8 were 18% higher than a year ago.Agricultural co-operative Growmark’s St. Louis port, which sends corn and soybeans south to New Orleans for export mostly to China and receives fertilizers, will likely close Friday, according to Matt Lurkins, executive director of the firm’s grain division.“Freight was already tight,” Lurkins said in a phone interview. “Then this kind of sent us over the edge.”If the pause drags on, he said, Growmark could send more grain to processors rather than loading it on barges for export.Small volumes of crude and partly refined oil are shipped by barge on the river as well. In February, 2.85 million barrels moved from the Midwest to the Gulf Coast via barge and tanker, according to government data.Imported steel on barges will be delayed as long as traffic is halted. About 25% of imported steel travels through at least a section of the Mississippi River, according to Wood Mackenzie analyst Cicero Machado, though he said newly arriving foreign steel to ports in New Orleans or Mobile, Alabama can be diverted onto rail cars or trucks.The river also is a major artery for steel shipments within the U.S. and delays could become an issue for automakers in the South that depend on high-strength steels produced in the Midwest, he said.“At this stage the big question is: is this going to last?” Machado said. “The issue is not actually in the river, it’s in a bridge over the river -- so perhaps they’re going to find a way to manage the traffic there.”(Adds Coast Guard update in second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The Tesla CEO sent the price of Bitcoin and other cryptocurrencies plummeting. But he may be aiming to turn crypto-mining green in ways that benefit Tesla.
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(Bloomberg) -- ETF traders are increasingly wary of the corporate bond market as inflation anxiety boils over.Short interest in the $41 billion iShares iBoxx $ Investment Grade Corporate Bond exchange-traded fund (ticker LQD) is now 21.5% of shares outstanding, the highest on record, according to data from IHS Markit Ltd.The onslaught of bearish sentiment comes as price pressures threaten to send U.S. long-dated yields higher -- a worry that only intensified after April’s surprise jump in consumer prices. Already LQD investors have been yanking cash out by the billions: the fund has seen $11.3 billion in outflows so far this year, after absorbing nearly $15 billion in 2020.Higher yields puts LQD and funds like it in a particularly vulnerable position, given its duration -- or sensitivity to interest-rate changes -- clocks in at a relatively hefty 10 years. With Treasury yield curves poised to steepen, that should spell trouble for LQD, Academy Securities said.“We could see some pressure on bonds, especially LQD as people are afraid of the rate risk. LQD has a very long duration,” said Peter Tchir, the firm’s head of macro strategy. “The yield risk is greater than the spread risk for me.”LQD has dropped 6% so far in 2021, after rallying 8% last year as the Federal Reserve’s credit market backstop to blunt the pandemic’s impact spurred a rush of issuance and inflows. However, with central bank policy makers insistent that post-lockdown price pressures are transitory, LQD has been selling off alongside Treasury bonds.Even if the inflation anxiety is overblown, there’s better places to find value in the fixed-income market than investment-grade credit, said Seema Shah, chief strategist of Principal Global Investors.“Perhaps some of the fears are overdone if the Fed remains resolutely accommodative even in the face of elevated inflation, as they have indicated,” Shah said. “Overall though, with spreads already so tight and bond yields likely on an upward trajectory given the inflation path, there are other parts of the fixed income market, such as high yield or emerging markets, which will outperform.”(Updates in 6th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The Walt Disney Co. blew away earnings expectations with a Thursday report, but shares still fell in late trading as the pandemic-fueled growth of its streaming services slowed down.
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(Bloomberg) -- The states suffering from the most acute gasoline shortages should start to feel relief this weekend after the nation’s largest fuel pipeline resumed operations.Fuel will begin flowing immediately but will require an armada of tanker trucks to ferry product from endpoint gasoline terminals to retail stations emptied by panicked drivers during the Colonial pipeline’s shutdown. Earlier this week, the Biden administration waived some trucker restrictions to help with the replenishment.Panicked drivers lined up for gasoline at stations across the Southeast after a ransomware attack forced the Colonial Pipeline system to shut its operations late last week. Georgia, Virginia and the Carolinas were among the most affected by empty pumps. The rush to fill up sent the national average gasoline price above $3 a gallon for the first time in six years.The most immediate effect of the pipeline’s restart may be psychological, calming fears of dwindling supplies and persuading motorists to hold off from topping up tanks, said Angela Holland, president of the Georgia Association of Convenience Stores.“Folks that get up in the morning, and they’ve got three-fourths of a tank of gas, are not going to feel like they need to top off tomorrow,” she said. Some of the association’s members reported selling three to four times their usual daily amount during the pipeline system’s shutdown.North Carolina, the first state to declare a state of emergency in the wake of Colonial’s shutdown, should register a significant change by this weekend, said Gary Harris, executive director of North Carolina Petroleum & Convenience Marketers.Major branded stations will get fuel first since they are under contract with suppliers, said Harris. “People will have to be running trucks a lot to just catch up because so much is out at this time,” he said.Waivers for weight load and driving-hours restrictions for truck drivers will help speed gasoline deliveries to retail stations. “The weekend should give people a chance to get caught up with their distributors and dealers,” said Michael O’Connor, president of the Virginia Petroleum & Convenience Marketers Association. Consumers will see a difference by Monday, he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The company that operates America's biggest fuel pipeline has reportedly paid a ransom of nearly $5m (£3.5m) to hackers who shut down the facility last week triggering fuel shortages and price hikes across the East Coast. Colonial Pipeline paid the extortion fee on Friday, Bloomberg reported, despite reports that it had no plans to do so and concerns that paying a ransom simply encourages hackers. The pipeline is not yet back at full force following the cyberattack on Friday, when the criminal gang Darkside locked computers controlling the pipeline. The pipes transport 2.5m barrels a day of diesel, petrol and jet fuel across 5,500 miles of pipelines linking refiners on the Gulf Coast to the eastern and southern US. The shutdown triggered fuel shortages from Virginia to Florida and panic buying, with the national US gasoline price rising above $3 a gallon and jumping as much as 11 cents in a day in some areas.
(Bloomberg) -- Fisker Inc.’s existing agreement to develop an electric vehicle with Foxconn Technology Group will now include a factory in the U.S., the companies said in a statement Thursday.The joint project -- codenamed Project PEAR -- is targeting a start of production in the U.S. by the fourth quarter of 2023. The companies said they’re considering multiple sites around the world to support eventual global manufacturing capacity of 250,000 units a year. The partners plan to unveil a prototype of their jointly developed car later this year.Los Angeles-based Fisker’s shares rose as much as 22% to $12.13 in late trading in New York. The stock is down 32% this year through Thursday’s close. Hon Hai Precision Industry Co., the main listed arm of Foxconn, is up 12% for the year in Taipei.Electric vehicles have risen in prominence in recent months, with everyone from established automakers like Geely to smartphone purveyor Xiaomi Corp. making big investments in the category. Foxconn has an EV platform that will be used to launch two light vehicles in the fourth quarter of this year, Chairman Young Liu said in February. The company has also inked a manufacturing deal with Chinese startup Byton Ltd. and been among a coterie of suppliers and assemblers linked with a potential Apple Inc. car.Read more: IPhone Maker Foxconn to Help Launch Electric Cars This YearFisker is one of a wave of startups to go public via a special purpose acquisition company, or SPAC, and seek a fast-track challenge to Tesla Inc. in the EV market. It’s also the second battery-powered-car venture founded by its namesake founder and chief executive officer, Henrik Fisker, a longtime auto designer. Fisker’s first venture, Fisker Automotive, filed for bankruptcy in 2013.China Tech Giants Bet $19 Billion on Global Electric Car FrenzyUnder the agreement, Fisker and Foxconn will jointly invest in Project PEAR -- short for Personal Electric Automotive Revolution -- with each company taking proceeds if the launch is successful. Foxconn has said it will decide between Mexico and Wisconsin for the site of its first electric-car plant this year. The companies didn’t disclose any specifications of the vehicle they’re developing.The companies said the jointly developed vehicle will be priced below $30,000. Taiwan-based Foxconn, best known for assembling iPhones, is the second major manufacturer with which Fisker has announced a partnership since reaching a deal to go public last year. In October, the EV startup said Magna International Inc. would help it build its debut model. The Ocean electric SUV is scheduled to start production in late 2022 at a Magna facility in Graz, Austria.(Updates with other Foxconn EV projects in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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Investing is all about profits, and part of generating profits is knowing when to start the game. The old adage says to buy low and sell high, and while it’s tempting just to discount cliches like that, they’ve passed into common currency because they embody a fundamental truth. Buying low is always a good start in building a portfolio. The trick, however, is recognizing the right stocks to buy low. Prices fall for a reason, and sometimes that reason is fundamental unsoundness. Fortunately, Wall Streets analysts are busy separating the wheat from the chaff among the market’s low-priced stocks, and some top stock experts have tagged several equities for big gains. We’ve used the TipRanks database to pull up the data and reviews on three stocks that are priced low now, but may be primed for gains. They’ve been getting positive reviews, and despite their share depreciation, they hold Buy ratings and show upwards of 80% upside potential. Vapotherm, Inc. (VAPO) First up, Vapotherm, is a medical device manufacturer, specializing in heated, humidified, high-flow nasal cannulas. These are therapeutic breath aids, designed to deliver oxygenated air directly to the patient’s nose. Heating and humidifying the air reduces the discomfort of delivering dry oxygen. As can be expected, during a pandemic of a respiratory illness, Vapotherm saw high sales in recent months – but the share price has pulled back since early February. Paradoxically, the two events are related. First, on the positive side, Vapotherm’s 1Q21 financial results were solid. The company’s revenue, at $32.3 million, was up 69% year-over-year, and worldwide, installations of the Precision Flow base unit was up 73% over the same period. The company’s net loss in the quarter, $5.2 million, was an improvement from the $10.2 million loss in the year-ago quarter. On the negative side, VAPO shares are down from their early-February peak. The drop is substantial; the stock has fallen 50% from its peak, and is down 34% year-to-date. The fall in share value reflects concerns that the company’s flagship product is oversold, that customers, fearful of COVID-related respiratory emergencies, bought more units that would be needed in ordinary times. This is the case made by Piper Sandler analyst Jason Bednar. “Shares have meaningfully underperformed since early February as many investors have questioned utilization dynamics for the bolus of Precision Flow systems that were sold into hospitals last year… We understand the logic here, particularly for those investors with a shorter time horizon, but with much of that concern seemingly already reflected in the stock at current levels we do believe the upside opportunity meaningfully outweighs the risk of further downside,” Bednar noted. The analyst added, "It’s also our view that investors who wait for utilization trends to bottom out will ultimately miss an initial move higher that could come as HVT 2.0 begins to contribute with a rollout later this year and as market expanding opportunities for HVT 2.0 in 2022 begin to take on a more defined shape (particularly EMS and home-based care)." To this end, Bednar rates VAPO an Overweight (i.e. Buy), and his $32 price target implies a robust upside of 81% in the year ahead. (To watch Bednar’s track record, click here) Overall, the unanimous Strong Buy consensus rating on this stock, supported by 4 recent analyst reviews, makes it clear that Bednar is not alone in his bullish view. The average price target here, $39, is even more optimistic, suggesting an upside of ~122% from the current trading price of $17.65. (See VAPO stock analysis on TipRanks) Emergent Biosolutions (EBS) The next stock we’re looking at, Emergent, is a biopharmaceutical company. The company has multiple products on the market, including a NARCAN nasal spray for use on opioid overdose patients, and vaccines against smallpox, anthrax, and other diseases. Emergent’s development pipeline includes a pediatric cholera vaccine, Vaxchora, currently in a Phase III trial. Several programs, including an anthrax vaccine candidate, a Chikungunya vaccine, and a seasonal flu shot, have all completed Phase II and are in preparation for Phase III. One of Emergent’s most important programs is in its Contract Development and Manufacturing service, a service extended to other pharmaceutical companies to manufacture vaccines which they have developed. Under a CDMO plan, Emergent is part of Johnson & Johnson’s manufacturing chain for a COVID-19 vaccine. That last is a key point. The J&J vaccine has been linked – at least in some reports – to serious adverse events, particularly blood clots in otherwise healthy recipients. That has caused a hold in manufacturing of the vaccine, and consequently a delay in receiving payments from J&J. Which, in turn, impacted the company’s 1Q21 financials, resulting in lower revenues and earnings than expected. Investors are concerned, and the stock has fallen 33% year-to-date. Despite the setback, Benchmark analyst Robert Wasserman keeps a Buy rating on EBS shares, along with a $120 price target. If correct, the analyst’s objective could deliver one-year returns of 101%. (To watch Wasserman’s track record, click here) "EBS remains solidly profitable, and even with the lowered expectations for J&N and AZ vaccine contracts, is expected to show solid revenue growth for this year. These shares remain a bargain in our CDMO/bioprocessing group and could offer significant upside for value-oriented investors if circumstances turn around or new business can be garnered in the near-term," Wasserman opined. Overall, the Street currently has a cautiously optimistic outlook for the stock. The analyst consensus rates EBS a Moderate Buy based on 3 Buys and 2 Holds. Shares are priced at $59.59, and the average price target of $89.67 suggests an upside potential of ~50% for the next 12 months. (See EBS stock analysis at TipRanks) Haemonetics Corporation (HAE) For the last stock on our list, we’ll stick with the medical industry. Haemonetics produces a range of products for blood and plasma collection and separation, as well as software to run the machines and service agreements for maintenance. In short, Haemonetics is a one-stop shop for blood donation centers and hospital blood banks. Blood products is a $10.5 billion market in the US alone, with plasma accounting for 80% of that, and Haemonetics has made itself an integral part of that business. Haemonetics had been recovering steadily from a revenue dip at the height of the corona crisis, and its 3Q fiscal 2021 earnings showed a solid results: top line revenue of $240 million and EPS of 62 cents. While the revenue was down 7.3% yoy, EPS was up 6.8%. Even with that, however, the stock dropped sharply between April 15 and April 20, losing 42% of its value in that short time. The reason was simple. One of Haemonetics’ largest customers, CSL Pharma, announced that it does not plan to renew its contract with HAE. That contract, for supply, use, and maintenance of Haemonetics’ PCS2 plasma collection system, was worth $117 million and made up approximately 12% of the company’s top line. The cancellation comes with a one-time charge of $32 million in other related losses. Fortunately for HAE, the CSL contract does not expire until June of 2022, giving the company time to plan and prepare. Covering the stock for JMP Securities, analyst David Turkaly noted: “The advance notice gives HAE some time (~15 months) to prepare for the expiration, and we note that management has consistently strengthened its financial position using levers such as complexity reduction and product optimization to derive significant cost savings, and more of these will likely be employed ahead to help offset the customer loss.” The analyst continued, "While this disappointing decision could impact HAE's plasma positioning with other fractionators, we continue to believe that giving customers the ability to collect more plasma in less time is a very compelling value proposition - and HAE still has contracts and maintains significant market share with many of the most relevant plasma players." Accordingly, Turkaly rates HAE an Outperform (i.e. Buy), and sets a $110 price target. This figure implies an upside of 86% from current levels. (To watch Turkaly’s track record, click here) All in all, HAE has a Moderate Buy consensus rating, based on 7 reviews that break down 5 to 2 in favor the Buys over the Holds. The stock is trading for $59.02 and carries an average price target of $108.67, which suggests ~84% one-year upside. (See HAE stock analysis at TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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