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Qorvo, Nikola, BMY, MyoKardia and Geron as Zacks Bull and Bear of the Day

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·12 min read
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For Immediate Release

Chicago, IL – November 2, 2020 – Zacks Equity Research highlights Qorvo QRVO as the Bull of the Day and Nikola NKLA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bristol-Myers Squibb Company BMY, MyoKardia, Inc. MYOK and Geron GERN.

Here is a synopsis of all five stocks:

Bull of the Day:                                                 

Qorvo is a chip powerhouse striving to digitally connect the world. The global pandemic has forced society online, and today we are more connected than ever before through the world wide web. The impending 5G revolution, combined with the pandemic's digitally inclined tailwind, has made Qorvo more valuable than ever before. Analysts have been raising their EPS estimates on this stock and pushed QRVO into a Zacks Rank #1 (Strong Buy).

The Business

Qorvo is a radio frequency (RF) technology leader: the driving force behind the internet of things (IoT) and the 5G revolution. This next generation of mobile connectivity is anticipated to connect everything around us. Smart cities are on the horizon, and Qorvo's next-generation RF chips are going to be integral in its build-out.

The RF solutions market is expected to explode over the next 5 years as the 5G technology rolls out. The RF market is estimated to expand at a compounded annual growth rate (CAGR) of 14%, reaching $45 billion by 2025, according to Grand View Research.

We are only at the dawn of the 5G revolution. This technology is just beginning to take hold of the mobile world, and its implications are beginning to ripple across all sectors. Qorvo is well-positioned to heavily profit from this exciting industry’s rapid growth.

Upcoming Earnings

Qorvo is releasing its September quarter results on Wednesday, November 4th, and analysts predict it will be showing-off its best quarter as a public company.

Management was very optimistic in its last earnings report 3 months ago, increasing its mid-point revenue guidance for its September quarterly report from $940 million to $1.015 billion and a 13% EPS increase to $2.14. It would make it a record quarter if it can deliver, and I do not doubt that it will with the company illustrating 9 consecutive quarters of top and bottom-line beats.

QRVO Technical Levels

QRVO is trading 9.5% off its all-time highs, which it hit less than a month ago with the rest of the semiconductor sector. The recent pre-election jitters and the uptick in COVID cases have brought the whole market down a notch in the past few weeks, and QRVO was no exception to this trend.

QRVO just dipped below its 50-day moving average (blue line) around $130 a share, and it looks like this old support level has become a resistance, but it is something that I have no doubt QRVO will be able to break through once the market turbulence subsides. Look for its 200-day moving average (orange line) to provide support around $110 if the stock were to experience a deeper decline, at which point I wouldn't hesitate to buy (under the assumption that nothing systemic about the enterprise has changed).

Right now, QRVO is teetering in oversold territory. QRVO's stochastic dip indicates that this could be an opportunity to jump into these shares before they jump back up to new highs.

Final Thoughts

With the recent spike in market volatility and one of the most controversial US elections only a day away, uncertainty couldn't be higher in the stock market. But remember the old Warren Buffett proverb, "be greedy when others are fearful."

I can't promise that QRVO doesn't have choppy waters ahead (at least in the short run). However, I am confident that this RF chip powerhouse will play a critical role in the budding 5G Revolution. 15 out of 18 analysts are calling these shares a buy today with no sell ratings. QRVO is a stock for your portfolio of the future.

Bear of the Day:

Nikola bulls have gotten their face ripped off these past few months, with the start-up's survival being put into question. Since NKLA's ostentatious rally out of the public market gates in early June, the share price has plummeted over 80%.

Following Hindenburg Research's (appropriately named) strongly-worded report about Nikola misleading investors, "Tesla Wannabe's" CEO, Trevor Milton, stepped down on September 21st.

This 'tactical' move by Nikola almost felt like an admission of guilt. Get the one responsible for this ostensible felonious securities fraud out so that the company can keep itself together.

Since Hindenburg Research's stock crushing report, NKLA has capitulated 57%, likely blowing out many retail investing bulls' trading accounts. This stock looks to be headed further into the depth of negative returns. Unless its new leadership can change the narrative on this pipe dream of a company, it will not survive much longer.

Analysts have been increasingly pessimistic about this company's future, dropping their long-term estimates and pushing NKLA into a Zacks Rank #5 (Strong Sell).

Losing Critical Relationships

Hindenburg's accusation, combined with Milton's "early retirement," has many of Nikola's potential partners questioning the business's legitimacy. Relationships with energy enterprises like BP to build hydrogen-refueling stations are crucial to this alt-energy automotive start-up's future success. Now conversations with these potential partners have halted.

If Nikola were to lose its key hydrogen-refueling relationships, it could spell the end for this alternative energy-driven automotive start-up.

Apprehension From The Beginning

I had been very apprehensive about NLKA shares since they surged past Ford's valuation. How can a company that hasn't sold a single car be more valuable than a 117-year-old automotive giant?

The valuations looked stretched out of the gates with FOMO ridden retail investors driving the bid to seemingly no end when it went public in early June. The shares even IPO'd in a very precarious way, through a special purpose acquisition company (aka SPAC).

A SPAC is a company that goes public on nothing but the promise to purchase a business at some point in the future. This year, more than $33 billion has been raised through SPACs, which, in my mind, signals over optimism in the equity markets.

These SPACs seem to be a cesspool for overzealous retail investors, which can be exemplified with the surge in Virgin Galactic and its eventual drop-off. DraftKings is also a 2020 SPAC IPO that has recently fallen off its high horse after hitting insane valuations. DKNG has dived 45% since it peaked a month ago.

Final Thoughts 

NKLA appears to have been a double whammy of disaster with an enormously stretched valuation from overexcited investors & traders combined with what seems to be a mounting securities fraud situation that has halted its ability to conduct business.

Nikola may happen to come out of the ashes of this disastrous start in the public market. The business is yet to even display a functional vehicle, and with its partnerships looking to be in shambles, I would not risk an investment in NKLA.

Additional content:

Is a Beat in the Cards for Bristol Myers (BMY) on Q3 Earnings?

Bristol-Myers Squibb Companyis scheduled to report third-quarter 2020 results on Nov 5, before market open.

The company’s shares have lost 9.8% in the year so far compared with the industry's decline of 6.3%.

The company has delivered an earnings surprise of 8.02%, on average, in the trailing four quarters. In the last reported quarter, the company delivered an earnings surprise of 11.64%.

Let’s see how things are shaping up for the upcoming announcement.

Why a Likely Positive Surprise

Our proven model predicts an earnings beat for Bristol-Myers this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: The company’s Earnings ESP is +0.44%.

Zacks Rank: It currently carries a Zacks Rank #3.

Factors Driving Growth

Bristol-Myers’ blood thinner drug, Eliquis, was one of the top revenue generators in the previous quarter with sales of $2.2 billion, up 6% year over year. This trend has most likely continued in the to-be-reported quarter, propelled by market share increases. The Zacks Consensus Estimate for Eliquis revenues is pegged at $2.1 billion.

Sales of Bristol-Myers’ key immuno-oncology drug, Opdivo, were down 9% in the previous quarter. It remains to be seen how the drug fared in the to-be-reported quarter amid stiff competition. The drug, which is approved for multiple indications, generated sales of $1.6 billion in the last reported quarter.

Nevertheless, several label expansions in the previous quarters might have driven the drug’s sales in the to-be-reported quarter. In May, the FDA approved Opdivo plus Yervoy (ipilimumab) given with two cycles of platinum-doublet chemotherapy for the first-line treatment of adult patients with metastatic or recurrent non-small cell lung cancer (NSCLC) with no EGFR or ALK genomic tumor aberrations.

The FDA also approved Opdivo plus Yervoy for the first-line treatment of adult patients with metastatic NSCLC whose tumors express PD-LI>1% as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations. The Zacks Consensus Estimate for Opdivo revenues stands at $1.7 billion.

In November 2019, Bristol-Myers acquired Celgene Corporation. The acquisition added oncology drug, Revlimid, to Bristol-Myers’ portfolio. Revlimid was the top revenue generator in the previous quarter with sales of $2.9 billion and the trend is likely to have continued in the to-be-reported quarter as well.   Pomalyst too is likely to have boosted the top line in the quarter.

Arthritis drug, Orencia, raked in sales of $750 million in the last reported quarter and similar levels of contribution are likely to have been witnessed in the third quarter.

In April, the FDA approved Reblozyl for the treatment of patients with anemia failing an erythropoiesis-stimulating agent and requiring two or more red blood cell (RBC) units over 8 weeks in adults with very low- to intermediate-risk MDS-RS or with myelodysplastic/myeloproliferative neoplasm with ring sideroblasts and thrombocytosis.

In March, the FDA also approved Zeposia (ozanimod) for the treatment of adults with relapsing forms of multiple sclerosis (RMS), including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease. The top line is likely to have got a boost from the incremental contributions of these two drugs.

However, overall sales are likely to be affected by lower demand resulting from reduced new patient starts and fewer patient visits to physicians during the pandemic.

Operating expenses are likely to have increased in the third quarter due to costs associated with the broader portfolio, resulting from the Celgene acquisition.

Key Recent Developments

Earlier in the month, Bristol Myers announced that it will acquire clinical-stage biopharmaceutical company, MyoKardia, Inc., for $13.1 billion, or $225.00 per share in cash. MyoKardia is developing targeted therapies for the treatment of serious cardiovascular diseases. An update on the same is expected during the call.

Geron has an Earnings ESP of +6.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Bristol Myers Squibb Company (BMY) : Free Stock Analysis Report
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Nikola Corporation (NKLA) : Free Stock Analysis Report
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