|Bid||8.40 x 3200|
|Ask||8.48 x 1400|
|Day's Range||8.31 - 8.66|
|52 Week Range||1.50 - 60.00|
|Beta (5Y Monthly)||5.63|
|PE Ratio (TTM)||N/A|
|Earnings Date||Nov 05, 2020 - Nov 09, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||1.00|
Kodak (NYSE:KODK) is pledging to move ahead with making Active Pharmaceutical Ingredients (APIs) for generic drugs, even though the company has not received assurances that it will obtain government funding for that business. Unfortunately for the company, investors don’t seem to be enthused about the venture; as of this writing, Kodak stock is down 17% over the last 30 days. Source: Katherine Welles / Shutterstock.com To recap, this summer Kodak submitted a “letter of interest” for a $765 million loan that would enable the company to manufacture APIs for generic drugs. Kodak stock, which was long left for dead, soared on the news. However, Kodak immediately was hit by allegations of insider trading.InvestorPlace - Stock Market News, Stock Advice & Trading Tips But there’s a bigger problem with this narrative. As investors begin to digest the actual substance of the news, the story doesn’t get better. Kodak has institutional knowledge of chemical manufacturing. But pharmaceutical manufacturing? Not so much. And that makes me wonder if Kodak is committed to this latest venture or if it’s just a hobby that may lead to the company making an acquisition. Either way, I can’t recommend the stock, but I’ll let you decide. 7 Airline Stocks to Buy on Pelosi Stimulus Hopes Globalism Versus Nationalism To understand why the U.S. government offered Kodak this opportunity in the first place, you have to consider the current national debate between globalism and nationalism. Since the 1980s, the United States has been outsourcing American jobs to cheaper, overseas markets. As a result, the U.S. became heavily dependent on these nations for our energy, other commodities, many manufacturing goods, etc. President Donald Trump, for better or worse, took a wrecking ball to globalism. Even before the pandemic, the Trump administration had been focusing on bringing supply chains back to America. According to the nationalists, this is a matter of national security as well as a benefit to the economy. Can Kodak Make America Great Again? With that as a backdrop, the Kodak deal at least makes a smidgen of sense. For years, generic drugs have been produced offshore. The reality is that many of the major manufacturers of U.S. generic drugs are not wholly located in America. For example, Teva Pharmaceuticals (NYSE:TEVA) has dual headquarters in Israel and the U.S. The same is true for Mylan (NASDAQ:MYL) which has offices in the United Kingdom and the Netherlands, as well as a “global center” in Pennsylvania. From a 50,000-foot view, this seems to be the reason that Kodak was considered for this loan. Trump and White House Trade Director Peter Navarro made a point to refer to Kodak as a great American company. And the Wall Street Journal recently confirmed at least the broad outline of this line of reasoning. “Trump administration officials said the Kodak alliance would help expedite domestic production of drugs that can treat a variety of medical conditions and loosen U.S. reliance on foreign sources in countries such as China and India.” Of course, this also means that the loan will not be approved if Trump is defeated. In fact, Kodak said as much when it unveiled its “Letter of Interest” (LOI) for the loan. To be clear, Kodak does have limited experience as a chemical manufacturer. But that doesn’t necessarily translate into the company manufacturing pharmaceuticals on a large scale. The Bottom Line on Kodak Stock Were you one of the investors who jumped on Kodak stock at the end of July? If so, congratulations, you’re sitting on a gain of nearly 400%. And that’s why it may be time to sell the shares before you commit the cardinal sin of losing your gains. Kodak is attempting to reinvent itself by breaking into a business in which it has little experience. And it’s a field that’s well-established with several significant players, including a number in the U.S. Nevertheless, the re-election of Trump would go a long way towards ensuring that the company does receive the $765 million dollar loan. Otherwise, I don’t think there’s a good chance of this deal being finalized. And without that funding, it appears that Kodak has a hobby, not a business. And I don’t believe in making investments based on hobbies. On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for InvestorPlace since 2019. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company The post Stay Away From Kodak Stock Until Its Hobby Is a Business appeared first on InvestorPlace.
Here's why the one-time camera giant is unlikely to find redemption via the pharmaceutical industry.
Even by the standards of a wild market year, Kodak (NYSE:KODK) stock still stands out. Why is Kodak stock noteworthy, you might ask? Source: Rizhka Nazar / Shutterstock.com Well, the company came into the year strong, with an over 30% rally in the last three trading sessions of 2019. In the first four sessions of 2020, the stock promptly gave back those gains, and then some, as it neared $3. By the lows of the March sell-off, Kodak stock had lost another 50% plus. The stock recovered somewhat, but closed at $2.10 on July 24. Then the insanity started.InvestorPlace - Stock Market News, Stock Advice & Trading Tips KODK stock rose 25% the following trading day on July 27, for reasons that weren’t immediately clear. But the reason soon came out the next day: Kodak climbed 203% after announcing it had received a $765 million government loan. The loan aimed to back a new Kodak business which would produce ingredients for generic drugs. On July 29, the rally continued. At one point, the stock hit $60 — which represented gains of more than 2,900% in just two and a half sessions. 7 Stocks to Buy to Finish 2020 With a Bang And then the bottom fell out. The rally started to fade on its own accord. Then politics got in the way. Allegations of insider trading began to proliferate (owing at least in part to the July 27 rally). As a result, the agency making the loan put the agreement on hold. The company lost half of its value in a few sessions, falling back below $10. It’s traded mostly sideways — albeit in a volatile fashion — since. Yet, after that intense roller-coaster ride, KODK has actually managed to have a decent year. It’s gained over 90%. But I’m skeptical those gains will hold. Kodak Stock and the Legacy Business For all the hype over the pharmaceutical efforts, that’s not actually a business yet. What Kodak is now is a version of the long-running, well-known, photography business. And that’s simply not a very good business. In 2012, Kodak famously went bankrupt. Now the reorganized business is heading in the wrong direction. Revenue declined 6% year-over-year in 2019. EBITDA (earnings before interest, taxes, depreciation and amortization) even at the segment level was just $12 million, about 1% of sales. Put simply, there just doesn’t seem to be a lot of value in the business. It’s not growing. It’s not particularly profitable. And neither of those problems seems likely to get fixed. Most of the company’s revenue comes from printing, where demand was receding even before the novel coronavirus pandemic. And with the pandemic accelerating adoption of technologies like e-signatures and online shopping, that trend is likely to get worse. Kodak has tried to find growth. For instance, it attempted to develop KodakCoin with a partner. And while I’m a bull on cryptocurrencies, KodakCoin unsurprisingly hasn’t found adoption. Kodak has a 3D printing offering as well. But investors shouldn’t pin their hopes on that effort: it generated just $3 million in revenue in 2019. The business was folded into a larger segment this year, but there’s no sign performance has improved. Again, KODK traded at $3 at the start of the year. It had a market value under $150 million. Looking at the numbers, and the outlook for the business, even that value for the legacy business looks potentially aggressive. Can Generics Save Kodak? Yet Kodak now has a market capitalization over $650 million. That’s because convertible bondholders exchanged their notes for shares, which boosted the share count to roughly 75 million outstanding. It’s up to the pharmaceuticals business to support that valuation. And, to be fair, there has been some good news on that front. Just this week, CEO Jim Continenza said at a Wall Street Journal conference that the company would move forward with or without the loan. Last month, an internal review by an outside law firm also found that Kodak employees committed no wrongdoing, though errors were made. So there’s hope — perhaps. But there are problems, too. The first is whether even a successful pharmaceutical business has all that much value. Generic drugs are not a hugely profitable business. The second is the political climate. Kodak reportedly was going to make ingredients for hydroxychloroquine, a potential Covid-19 treatment long touted by President Donald Trump. But many doctors are more skeptical, and a change in the White House could undercut optimism toward the drug. Meanwhile, some Democrats aren’t even completely sold on the results of the internal review. It’s not clear who’s right. But from an investment standpoint, “right” isn’t really what matters. What matters is that the company has become a political football weeks ahead of what will be enormously contentious elections. That’s not a good place to be. Yet Kodak stock seems to be ascribing roughly $500 million in value to a business whose prospects rely on at least some government help. Kodak may move forward with pharmaceutical ingredients, but $180 million in cash on hand is not enough to go full-bore into that business. After all, if the opportunity was that attractive, and if that cash was enough, Kodak would have gone in the drug direction on its own. The fact that it didn’t suggests investors should proceed with caution, now that it has to enter pharmaceuticals alone. On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article. Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. More From InvestorPlace Forget The Election… Pick These Stocks for the Win in 2021 Why Everyone Is Investing in 5G All WRONG America’s #1 Stock Picker Reveals His Next 1,000% Winner Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company The post Despite 2020’s Wild Ride, Kodak May Have More Downside Ahead appeared first on InvestorPlace.