March 26, 2023 - Elite Stock Chat

VTRS – Viatris: The Value And The Value Trap

Written by Trapping Value on March 26, 2023. Posted in Stock Report, VTRS.

If you fell in love with Viatris (NASDAQ:VTRS), you are probably among those singing, “Baby, don’t hurt me, don’t hurt me, no more”. The stock which listed post spin-off in November 2020, has underperformed the broader S&P 500 (SPY) and the Health Care Select Sector SPDR ETF (XLV) by over 50%. It has also hugely underperformed Pfizer Inc. (PFE), the company which contributed assets to this spin-off.

Certainly not an outlook you would have envisioned for a company that listed at a P/E multiple of under 4.0X. We look at what has happened in context of the recently released Q4-2022 results and the 2023 guidance.

Q4-2022

The presentation slides appeared to highlight some positive aspects for the company’s results. Investors must have noted the big debt paydown and the start of the buybacks.

For 2023, VTRS has lined up $500 million of product launches. These are in the latter stages of development or approval, or have already been launched.

Hence there is a good amount of certainty that this will come to pass. Overall revenues will still be extremely lackluster adjusted for the Biosimilars sale.

The problem as always, is the base business erosion.

In fact the numbers call for a growth of only 0.6% and it is only by generous rounding do we reach 1%. The comparatives get far, far worse when you get into the adjusted EBITDA. Keep in mind that this is adjusted for the Biocan sale.

So on flat revenues the adjusted EBITDA will drop by about 8%. There are two drivers for this. The new product launches will have lower EBITDA compared to that lost on base business erosion. In addition the new Eye Care Division will have massive new costs. $275 million in selling and general and administrative expenses. We also have a “other” category with $100 million. So $375 million total in new expenses which are not even one-time. This comes after management spoke about capturing $250 million in synergies.

So all in all, there is a very solid erosion ahead of the earnings power of this company and there are good reasons why the stock continues to struggle.

The Walk Of Shame

The “next year” has always been the one in which VTRS promised to deliver. It is like the spider riddle where the creature travels half the distance it is supposed to, every day. The spoiler is that spider never makes it and for that matter, neither does VTRS. The company started the spin-off with adjusted EBITDA in the range of $7.0-$8.5 billion and comically assigned the possibility of a 14X multiple on top of that.

Here we are with 2023 a quarter way through and we are looking at $5.2 billion. Yes, $250 million of adjusted EBITDA was related to the Biocan sale, but even after that, we are nowhere in the ballpark of the $7.0 billion (low end) initial guidance. Even the much vaunted debt paydown is nothing to get excited about. Look at the slide below, which shows the $5.4 billion debt paydown.

Anything strike you as odd about it? No? We will help you out. That leverage ratio is backward looking and calculating on a trailing 4 quarters basis. If you take that $18.7 billion and apply the 2023 $5.2 billion in adjusted EBITDA, you are back up to 3.6X. That 3.6X is a micron away from the initial leverage. So that has been the cycle. Deleverage and talk about it as forward EBITDA numbers keep dropping. To maintain ratings they actually have to continue to deleverage. In fact, we expect at least $1.5 billion of additional debt payments in 2023. If they don’t rating agencies will start the downgrade process. This brings us to the “walk of shame”. We are referring to how earnings estimates keep coming down over time as analysts “walk-down” these numbers after every quarter. This is VTRS at around the time of the spin-off.

Nobody apparently had a clue of what the future held, so you see analysts slapping about the same number for 6 different years into the future. Those numbers have been walked down quarter after quarter. Here we are today with a number starting with “$4” completely MIA.

Verdict

Of course you can get excited about the P/E ratio of 3. Just as you would be with the P/E ratio of 3 when it started trading. Of course you can get excited about the $5.4 billion of debt paydown. Just as you will be when it pays another $1.5 billion in 2023. If you think this cycle of declining revenues and declining EBITDA creates value for you, well, good luck.

Our thinking is the same as before. At the low end of the range, you possibly can make some money as the market balances out probabilities of stabilizing revenues with the probabilities of a declining cash flow stream. That tactical trading aside, it is very difficult to call this a “value stock” based on fourth grader math relying on P/E ratios. This is about as perfect a value trap as one can find.

Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not. Investors are expected to do their own due diligence and consult with a professional who knows their objectives and constraints.

AMZN – Is Amazon Poised For A Q1 Turnaround? 4 Signs To Watch

Written by Bradley Guichard on March 26, 2023. Posted in AMZN, Stock Report.

Time is money concept — Rezus/iStock via Getty Images

The pandemic was a tremendous boon to Amazon (NASDAQ:AMZN) for a time. Product sales skyrocketed 51% from $160 billion in 2019 to $242 billion in 2021, and service sales blossomed by 90%, from $120 billion to $228 billion over this time.

Low interest rates and stimulus spurred spending in all areas. Amazon Web Services (AWS) was a beneficiary of massive B2B cloud infrastructure spending.

Fortunes quickly turned as several storms struck at once, including:

a historically tight labor market;
logistical bottlenecks;
stubborn inflation;
cratering consumer sentiment; and
rising interest rates.

But wait! There’s more. The US dollar (DXY) rose precipitously; Businesses began to pare spending; and Amazon’s extreme (but necessary) increase in CAPEX (purchases of fixed assets) pushed free cash flow deep into negative territory.

Amazon investors are patiently (or perhaps impatiently) waiting for signs of a turnaround. What is the expectation for the first quarter?

Defining the turnaround

Getting out in front of this many headaches will take time, but there will be signs of improvement.

First, we should define what exactly constitutes a turnaround. Here are a couple of items to look for.

Return to positive free cash flow.
Return to operating profit in the North America segment, and limited losses internationally.
Stem the slowdown in AWS growth.
Continue driving advertising sales.

Will free cash flow return?

Amazon’s trailing twelve months (TTM) free cash flow peaked in 2020 at over $31 billion and looks to have troughed in Q2 2022, as shown below.

Amazon free cash flow — Data source: Amazon. Chart by author.

Several factors, many of which were bulleted in the opening section, caused net income to drop. Skyrocketing CAPEX was also a huge factor, as shown below.

Amazon CAPEX — Data source: Amazon. Chart by author.

CAPEX spending is normalizing and should begin to come down. It didn’t come up on the Q4 2022 earnings call, but CFO Brian Olsavsky offered clues in Q3.

And then CapEx is a big driver. We had…very high CapEx the last two years. You’ll see that we’ve lowered CapEx year-over-year. We probably cut about one-third of our budget from what we originally thought for 2022 while still focusing our capital dollars really on the AWS business and increasing customer demand or capacity for increasing customer demand in our stores business.

We’ve taken steps to alter our forward plan and take CapEx out… A lot of the CapEx we spend in any given year is feeding future years’ capability. And we’ve tightened that up. We feel good about the arc of demand versus supply that we have in our fulfillment and transportation area.

–CFO Brian Olsavsky.

Watching for:

A noticeable decline in CapEx; and
Continued uptrend in TTM free cash flow.

Turning the tide in the North America and International segments

Amazon is transforming from a product-based company to a service-based company as service-based revenue outpaced product sales for the first time in 2022. This will eventually be terrific for profitability, but the North American and International segments (everything not named AWS) produced heavy losses in 2022.

North America

Net sales in North America rose a respectable 13% in 2022, but the segment swung from a 2021 operating profit of $7.3 billion to a loss of $2.8 as operating expenses jumped.

However, the Q4 loss narrowed to just $240 million despite several large one-off charges, such as asset impairments and employee severances.

Some of the severances will hit the books in Q1, and another round of layoffs has been announced. Amazon has announced 27,000 layoffs recently, representing about 1.8% of the workforce. This should improve the cost structure but comes with up-front costs.

Watching for: Amazon to eke out an operating profit in North America.

International

Amazon’s international business was crushed by the strong dollar last year. Sales were down 8% year over year (YOY) in Q4 but would have risen 5% were it not for the exchange rate.

This should normalize in Q1 as the dollar has come back to Earth, as shown below.

Watching for: A significant reduction in operating losses and break-even unadjusted sales.

AWS

A slowdown in AWS is a given as companies look to cut costs. The question is how much. You could almost hear traders rushing to push the “sell” button when Amazon mentioned AWS growth was just in the mid-teens for the first month of 2023 (growth was 20% in Q4). This signals that companies have trimmed budgets even more and are being very cautious about their data usage.

Amazon is making a concerted effort to help customers lower costs, which will hurt in Q1, but is intelligent in the long run. Would you rather help customers lower costs during an economic slowdown or lose them outright to competitors?

AWS… we’re going to help our customers find a way to spend less money. We are not focused on trying to optimize in any one quarter or any one year, we’re trying to build a set of relationships in business that outlast all of us. And so if it’s good for our customers to find a way to be more cost-effective in an uncertain economy, our team is going to spend a lot of cycles doing that.

-CEO Andy Jassy on Q4 earnings call (author’s emphasis).

Watching for:

Amazon to maintain margins and produce $5 billion in Q1 operating profits amidst the slowdown.
Will some investors panic if we see just 15% growth?

Advertising sales

Advertising was the fastest-growing revenue stream other than AWS last year and is a force in the industry. Sales have nearly doubled in two years, as shown below.

Advertisers have limited budgets, and Amazon makes a compelling case for their dollars. Sponsored products and display ads are highly effective since they reach consumers who are ready to buy. Even so, this segment is not immune to the economy.

Watching for: Maintaining 20%+ YOY growth in digital advertising will be a huge win.

Will we see a Q1 turnaround?

It comes down to timeframe and expectations. Management gave several hints last quarter that Q1 results will be tempered. Amazon needs to be as efficient as possible, but not to the detriment of long-term goals.

We’re going to continue to invest. We’re going to be very thoughtful about how we streamline our costs, and I think you see a lot of that, but we’re also going to continue to invest for the long term. – CEO Andy Jassy on Q4 earnings call.

This is the correct strategy for long-term investors and the company. But it could shock unprepared investors.

Long-term investors can take solace that Amazon has over 200 million Prime members, a stranglehold on the US eCommerce and global cloud market, a burgeoning advertising business, and an iron in the fire with Buy with Prime.

UNP – Union Pacific becomes second railroad to drop push for one-person crews

Written by Associated Press on March 26, 2023. Posted in Stock Report, UNP.

OMAHA, Neb. — Union Pacific
UNP,
+1.24%
has become the second major freight railroad in the past week to back away from the industry’s longstanding push to cut train crews down to one person as lawmakers and regulators increasingly focus on rail safety following last month’s fiery derailment in Ohio.

The Omaha, Nebraska-based railroad said in a statement Saturday that it had reached an agreement with the union that represents conductors to drop its proposal to take those workers out of the cabs of locomotives just months after it was pressing to test out the idea of stationing conductors in trucks in parts of its 23-state network. Norfolk Southern
NSC,
+0.42%
made a similar announcement several days earlier.

The Feb. 3 derailment of a Norfolk Southern train that forced the evacuation of roughly half the town of East Palestine near the Ohio-Pennsylvania border after officials released and burned toxic chemicals is what sparked the renewed interest in railroad safety. A bipartisan bill that’s gaining support in Congress would require railroads to maintain two-person crews and make several other changes designed to reduce the chances of future derailments. And regulators, who are also pushing railroads to make reforms, were already considering a rule that would require two-person crews.

The major freight railroads have long argued that technological advances — particularly the automatic braking system they were required to install in recent years — had made it unnecessary to have a second person in every locomotive. And railroad executives had said they believed that moving conductors off of trains would improve their quality of life by giving them more predictable schedules and keeping them from going on the road.

But the Transportation Division of the International Association of Sheet Metal, Air, Rail and Transportation Workers union and the other rail unions have long refused to agree to reducing the size of train crews because they believe train conductors play a crucial safety role and they want to preserve jobs.

The unions say conductors help monitor track conditions and radio communications while ensuring that engineers remain alert and respond to any emergencies or mechanical problems on the train. In the case of a derailment or collision, conductors are the first ones to respond before any additional help can arrive and they provide emergency responders key details about what a train is hauling.

Union Pacific Executive Vice President Beth Whited said the railroad will now focus on other ways to address the concerns about demanding schedules that workers expressed during last fall’s difficult contract negotiations. The rail industry reached the brink of a strike that could have crippled the economy before Congress intervened in December and imposed a contract to prevent a walkout.

“We are pleased that Union Pacific is focusing on quality of life for our conductor workforce,” said Jeremy Ferguson, president of SMART-TD.

Railroads have also been under pressure over the past year to improve their service because they were struggling to handle all the shipments companies want them to deliver. And the industry has been defending its safety record after eliminating nearly one-third of all railroad jobs over the past six years as railroads overhauled their operations. Unions say all those cuts have left workers spread too thin and made it more difficult to keep up with all the inspections and maintenance that are needed.

The railroads maintain that they remain the safest way to transport hazardous chemicals and all kinds of other cargo across land because nearly every shipment arrives intact, but the East Palestine derailment reinforced just how devastating even one derailment involving dangerous chemicals can be.

FE – MEDIA ADVISORY: Updated Restoration Numbers for FirstEnergy Customers

Written by admin on March 26, 2023. Posted in FE, Stock Report.

AKRON, Ohio, March 26, 2023 /PRNewswire/ — FirstEnergy Corp. (NYSE: FE) utilities continue restoration efforts for customers affected by yesterday’s wind storm.

An earlier news release reflected the number of customers restored at each FirstEnergy electric company rather than those that remain without power. Corrected information as of 3:00 p.m. follows:

The Illuminating Company: Approximately 78,500 customers in northeast Ohio lost power due to the storm, and 20,900 customers remain without service. Service is expected to be restored to the majority of customers by 4 p.m. Tuesday, March 28.
Ohio Edison: Approximately 152,900 customers in northern and central Ohio lost power due to the storm, and 53,300 remain without service. Service is expected to be restored to the majority of customers by 4 p.m. Wednesday, March 29.
Penn Power: Approximately 54,900 customers in western Pennsylvania lost power due to the storm, and 13,000 remain without service. Service is expected to be restored to the majority of customers by 11 p.m. Tuesday, March 28.
Penelec: Approximately 52,400 customers in northern and central Pennsylvania lost power due to the storm, and 14,200 remain without service. Service is expected to be restored to the majority of customers by 11 p.m. Tuesday, March 28.
West Penn Power: Approximately 52,600 customers in western Pennsylvania lost power due to the storm, and 7,900 remain without service. The majority of West Penn Power customers are expected to have service restored by 11 p.m. on Monday, March 27. Customers in the hardest hit area of Butler County are expected to have service restored by 4 p.m. on Tuesday, March 28.
Mon Power: Approximately 46,500 customers in West Virginia lost power due to the storm, and 13,900 remain without service. The majority of customers are expected to have power restored by 3 p.m. Tuesday, March 28.

Customers who are without power can call 1-888-LIGHTSS (1-888-544-4877) or text OUT to 544487 to report their outage or click the “Report Outage” link on www.firstenergycorp.com.

SOURCE FirstEnergy Corp.

CGNT – ROSEN, A GLOBALLY RESPECTED LAW FIRM, Encourages Cognyte Software Ltd. Investors to Secure Counsel Before Important Deadline in Securities Class Action – CGNT

Written by admin on March 26, 2023. Posted in CGNT, Stock Report.

NEW YORK, March 26, 2023 /PRNewswire/ —

WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of securities of Cognyte Software Ltd. (NASDAQ: CGNT) between February 2, 2021 and June 28, 2022, both dates inclusive (the “Class Period”), of the important May 1, 2023 lead plaintiff deadline.

SO WHAT: If you purchased Cognyte securities during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement.

WHAT TO DO NEXT: To join the Cognyte class action, go to https://rosenlegal.com/submit-form/?case_id=12578 or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] or [email protected] for information on the class action. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than May 1, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.

WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources or any meaningful peer recognition. Many of these firms do not actually handle securities class actions, but are merely middlemen that refer clients or partner with law firms that actually litigate the cases. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered hundreds of millions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs’ Bar. Many of the firm’s attorneys have been recognized by Lawdragon and Super Lawyers.

DETAILS OF THE CASE: According to the lawsuit, defendants throughout the Class misled investors and/or failed to disclose that Cognyte created, distributed, and provided reconnaissance tools and services that violated community standards and terms of service of communication network sources and technologies, such as Facebook, exposing the Company to significant financial and reputational risk. When the true details entered the market, the lawsuit claims that investors suffered damages.

To join the Cognyte class action, go to https://rosenlegal.com/submit-form/?case_id=12578 mailto:or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] or [email protected] for information on the class action.

No Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor’s ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.

Follow us for updates on LinkedIn: https://www.linkedin.com/company/the-rosen-law-firm, on Twitter: https://twitter.com/rosen_firm or on Facebook: https://www.facebook.com/rosenlawfirm/.

Attorney Advertising. Prior results do not guarantee a similar outcome.

Contact Information:

      Laurence Rosen, Esq.
      Phillip Kim, Esq.
      The Rosen Law Firm, P.A.
      275 Madison Avenue, 40th Floor
      New York, NY 10016
      Tel: (212) 686-1060
      Toll Free: (866) 767-3653
      Fax: (212) 202-3827
      [email protected]
      [email protected]
      [email protected]
      www.rosenlegal.com

SOURCE Rosen Law Firm, P.A.

FE – FirstEnergy Crews Making Repairs Following Widespread Rain and Wind Storm

Written by admin on March 26, 2023. Posted in FE, Stock Report.

AKRON, Ohio, March 26, 2023 /PRNewswire/ — Service has been restored to approximately 293,000 of the more than 454,000 FirstEnergy Corp. (NYSE: FE) customers who lost power due to powerful rain and wind storms that swept across the region on Saturday.

Strong winds with gusts exceeding 60 mph in many places began battering Ohio, western Pennsylvania and West Virginia late yesterday morning. The winds followed periods of significant rain totaling more than two inches in some areas that began late in the week, saturating the ground and increasing the probability for trees to fall from the heavy winds. Parts of eastern Ohio and western Pennsylvania also experienced severe thunderstorms yesterday.

FirstEnergy began monitoring and preparing for the weather early in the week. Nearly 2,000 line crews, hazard responders, forestry contractors, and safety and other support personnel have been involved in responding since the inclement weather hit, and additional resources are being deployed today to assist the restoration effort. Due to the extent of damage, restoration activities are expected to continue into the work week.

Since the storm began, repairs have been made at hundreds of locations, and crews are working to assess damage and restore service to the customers who remain without power. Though downed trees, localized flooding and road closures can slow progress, crews will continue to work around the clock to safely make repairs and ensure service to all customers has been restored.

Current company updates as of 12:30 p.m. today include:

The Illuminating Company: Approximately 78,500 customers in northeast Ohio lost power due to the storm, and 42,300 customers remain without service. Service is expected to be restored to the majority of customers by 4 p.m. Tuesday, March 28.
Ohio Edison: Approximately 152,900 customers in northern and central Ohio lost power due to the storm, and 90,700 remain without service. Expected restoration times will be set later today as the damage is fully assessed.
Penn Power: Approximately 54,900 customers in western Pennsylvania lost power due to the storm, and 37,700 remain without service. Service is expected to be restored to the majority of customers by 11 p.m. Tuesday, March 28.
Penelec: Approximately 52,400 customers in northern and central Pennsylvania lost power due to the storm, and 32,700 remain without service. Expected restoration times will be set later today as the damage is fully assessed.
West Penn Power: Approximately 52,600 customers in western Pennsylvania lost power due to the storm, and 42,300 remain without service. The majority of West Penn Power customers are expected to have service restored by 11 p.m. on Monday, March 27. Customers in the hardest hit area of Butler County are expected to have service restored by 4 p.m. on Tuesday, March 28.
Mon Power: Approximately 46,500 customers in West Virginia lost power due to the storm, and 29,200 remain without service. The majority of customers are expected to have power restored by 3 p.m. Tuesday, March 28.

How to Report Power Outages and Downed Lines

Customers who have experienced a service interruption due to the storm are encouraged to report their outage if they have not already done so by calling 1-888-LIGHTSS (1-888-544-4877), texting OUT to LIGHTS (544487) or clicking the “Report Outage” link on www.firstenergycorp.com.

FirstEnergy customers can sign up to receive email and text message alert notifications for updates after they’ve reported a power outage. Customers can also use two-way text messaging to report outages, request updates on restoration efforts and make other inquiries about their electric accounts. More information about these communication tools is available at www.firstenergycorp.com/connect.

The high winds have brought down trees and branches onto power lines. Customers should assume all downed or low-hanging power lines are energized and dangerous. Stay at least 30 feet away and use extra caution where downed lines are tangled in trees or other debris. Report downed lines ASAP by calling 911.

For updated information on the company’s current outages, the company’s storm restoration process and tips for staying safe, visit FirstEnergy’s 24/7 Power Center at www.firstenergycorp.com/outages.

Operate Backup Generators Safely

Emergency power generators offer an option for customers needing or wanting uninterrupted service. To ensure the safety of the home’s occupants as well as that of electric company employees who may be working on power lines in the area, the proper generator should be selected and installed by a qualified electrician.

When operating a generator, the power coming into the home should always be disconnected. Otherwise, power from the generator could be sent back onto the power lines, creating a hazardous situation for company workers. Locate the generator outside of your home and far away from windows, doors and vents. Never locate a generator inside your home.

View additional generator safety information.

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation’s largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company’s transmission subsidiaries operate approximately 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Visit FirstEnergy online at www.firstenergycorp.com and follow FirstEnergy and its operating companies on Twitter: @FirstEnergyCorp, @ToledoEdison, @IlluminatingCo, @OhioEdison, @MonPowerWV, @JCP_L, @Penn_Power, @Penelec, @Met_Ed, @PotomacEdison, @W_Penn_Power.

SOURCE FirstEnergy Corp.

AADI – Aadi Bioscience Presents Clinical Data from PRECISION 1 and AMPECT Trials at the Society of Gynecological Oncology (SGO) Annual Meeting on Women’s Cancer

Written by admin on March 26, 2023. Posted in AADI, Stock Report.

LOS ANGELES, March 26, 2023 /PRNewswire/ — Aadi Bioscience, Inc. (NASDAQ: AADI), a commercial-stage biopharmaceutical company focused on developing and commercializing precision therapies for genetically-defined cancers with alterations in mTOR pathway genes, today announced that it presented data from its PRECISION 1 and AMPECT trials in two posters at the Society of Gynecological Oncology (SGO) Annual Meeting 2023, taking place March 25-28, 2023, in Tampa, FL.

“We are pleased to present additional data with nab-sirolimus from our AMPECT trial and highlight our PRECISION 1 trial at SGO 2023, which is the premier medical meeting focused on advancing research for gynecologic cancer,” said Loretta Itri, MD., Chief Medical Officer of Aadi Bioscience.

The details of the poster presentations are below:

Title: “Phase 2, multicenter, open-label basket trial of nab-sirolimus for patients with malignant solid tumors harboring pathogenic inactivating alterations in TSC1 or TSC2 genes (PRECISION I)“
Date and Time: Sunday, 3/26/2023, 2:00-3:00 PM
Session: Poster Session 1
Poster Number: 401

Title: “Response to treatment with nab-sirolimus among patients with primary uterine PEComa: A sub analysis from AMPECT”
Date and Time: Sunday, 3/26/2023, 2:00-3:00 PM
Session: Poster Session 1
Poster Number: 327

The Society of Gynecological Oncology Annual Meeting on Women’s Cancer is the premier educational and scientific event for those who treat and care for women with gynecologic cancer. Abstracts and full session details are available through the SGO Annual Meeting planner: Annual Meeting on Women’s Cancer | SGO.

The SGO posters are available on the investor relations page of the Aadi website at www.aadibio.com

About Aadi Bioscience, Inc.

Aadi is a commercial-stage biopharmaceutical company focused on precision therapies for genetically defined cancers to bring transformational therapies to cancer patients with mTOR pathway driver alterations. Aadi received FDA approval and has commercialized FYARRO® for the treatment of adult patients with locally advanced unresectable or metastatic malignant perivascular epithelioid cell tumor (PEComa).

Aadi has also initiated PRECISION 1, a Phase 2 tumor-agnostic registration-intended trial in mTOR inhibitor-naïve malignant solid tumors harboring TSC1 or TSC2 inactivating alterations. More information on the Company’s development pipeline is available on the Aadi website at www.aadibio.com and connect with us on Twitter and LinkedIn.

Cautionary Note Regarding Forward-Looking Statements

This press release contains certain forward-looking statements regarding the business of Aadi Biosciences that are not a description of historical facts within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the Company’s current beliefs and expectations; anticipated future growth; the potential commercialization of FYARRO in the tumor agnostic oncology market; expectations regarding management performance following the leadership transition; and the Company’s potential as a commercial precision oncology company. Actual results could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, those associated with uncertainties associated with the clinical development and regulatory approval of FYARRO in additional indications, including potential delays in the commencement, enrollment and completion of clinical trials for additional indications; the risk that unforeseen adverse reactions or side effects may occur in the course of commercializing, developing and testing FYARRO; and risks related to collaborations with third-parties.

Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included in Aadi’s Quarterly Report on Form 10-Q filed November 9, 2022, and elsewhere in Aadi’s reports and other documents that Aadi has filed, or will file, with the SEC from time to time and available at www.sec.gov.

All forward-looking statements in this press release are current only as of the date hereof and, except as required by applicable law, Aadi undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement. This cautionary statement is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Contact:
Marcy Graham
[email protected]

SOURCE Aadi Bioscience

SNOW – Here’s How Snowflake Is Sustaining Revenue Growth by Tripling Its Market Opportunity

Written by Jon Quast on March 26, 2023. Posted in SNOW, Stock Report.

Data company Snowflake (SNOW -2.87%) went public in September 2020. At the time, management said it had a market opportunity of $81 billion. But nowadays, just 2.5 years later, management says its market opportunity is $248 billion.

The story of how Snowflake’s market opportunity tripled in under three years is worthy of investors’ attention. It shows how the company can sustain mind-blowing revenue growth and why this is a great business.

Snowflake is creating its own demand

Snowflake is trying to solve the “data-silo” problem. In traditional infrastructure, parts of enterprise data are isolated from the rest of the business, prohibiting broad insights and collaboration. Therefore, Snowflake came to market with its Cloud Data Platform, providing a way to onboard and store enterprise data all in one place.

Snowflake has a usage-based business model. When businesses try to gain insight from their data, Snowflake generates revenue from the usage. This is what management believed was an $81 billion opportunity in 2020.

However, Snowflake’s management shifted its focus to address a new problem. As it turns out, the company’s customers didn’t really know how to best use their data sets. Therefore, while growth was outstanding, it wasn’t living up to its full potential. Customers would logically use the platform more if they fully knew what they could do.

Therefore, Snowflake’s business model evolved to become an applications platform. The company now provides application programming interfaces (APIs) so that developers can build and deploy apps that do more with the data already stored on Snowflake’s platform.

The genius of this evolution is that Snowflake started a new business that creates demand for its core business — the company facilitates the creation of applications that create new use cases for data, which drives usage. And as usage goes up, so does Snowflake’s revenue, since the model is usage-based.

For CFO Mike Scarpelli, it’s more than just genius. At the Morgan Stanley Technology Media and Technology conference, he said, “It’s actually a beautiful model.” [emphasis added]

How visionary leadership can sustain top-line growth

To be clear, Snowflake’s progress as an applications platform is recent. In March 2022, the company acquired Streamlit to make it easier for developers to build apps. Then in June, it launched its Native Application Framework so apps could be built, monetized, and deployed. And in November, it began supporting Python — a coding language popular with developers.

Because Snowflake’s pivot is recent, it’s not yet showing up in financial results.

If investors are only looking at Snowflake’s recent financial results, there’s reason for alarm. The company’s revenue growth has been outstanding. But its growth rate has steadily plummeted, as the chart below shows.

SNOW Revenue (Quarterly YoY Growth) data by YCharts.

Snowflake expects to generate $10 billion in annual product revenue six years from now. This works out to be about a 32% compound annual growth rate (CAGR) from the end of its fiscal 2023, which ended in January.

For perspective, Snowflake grew its product revenue by 70% in fiscal 2023. But for fiscal 2024, management is guiding for just 40% year-over-year growth. This means the company’s growth rate is declining at an alarming rate if it’s going to sustain revenue growth of over 32% for the next six years.

The company’s pivot to becoming an applications platform may be the key to sustaining Snowflake’s long-term revenue growth above the guided threshold. In the conference call to discuss financial results for the fourth quarter of the company’s fiscal 2023, CEO Frank Slootman said that 20% of customers have now tinkered with Python since it became available. Eventually, the experimentation happening in applications should lead to higher usage of Snowflake’s platform.

Slootman believes increased usage as the result of apps will happen in the second half of the company’s fiscal 2024 (the fiscal year started in February). Therefore, perhaps Snowflake’s slowing revenue growth rate isn’t as concerning as it seems. Management appears to be visionary, developing a way to become more relevant to its customers over time, which could reaccelerate growth.

I believe that Snowflake stock will struggle to outperform the stock market average, even if it hits its revenue goal of $10 billion because its valuation is so high already. That’s why it remains a stock I wouldn’t invest in today.

However, I’m not avoiding Snowflake stock because I believe it to be a bad business. To the contrary, this article showed how strong of a business Snowflake is and why management believes its model is “beautiful.” Indeed, the company exhibits many favorable traits and is one I’d love to invest in if the price was right.

T – AT&T: Are Your Dividends Safe?

Written by Bohdan Kucheriavyi on March 26, 2023. Posted in Stock Report, T.

AT&T Advises Its Over 200,000 Workforce To Work From Home, As Coronavirus Continues To Spread — Ronald Martinez

Shortly after Intel Corporation (INTC) decided to cut its dividends to have more resources to execute a turnaround, concerns were raised about whether other companies like AT&T Inc. (NYSE:T) would do the same thing given the higher cost of servicing debt due to the rising interest rates. However, AT&T’s relatively decent performance in Q4 shows that the business is likely to successfully navigate through the current challenging market environment as various fiber and 5G opportunities could help the company to thrive and create additional shareholder value in the post-Warner Media era. At the same time, there are all the reasons to believe that AT&T would stick with its current dividend policy and won’t decide to cut the payments to shareholders to decrease the company’s debt levels due to the company’s ability to generate substantial levels of free cash flow that more than cover the dividend payments and help grow the business. As such, it’s safe to say that AT&T continues to be a relatively safe blue-chip stock for passive investors with a long-term horizon that once again trades at relatively attractive levels.

Thriving In The Post-Warner Media Era

It’s been nearly three years since John Stankey assumed the role of the CEO of AT&T and began the transformation of the business which included the spinoff of the Warner Media, LLC assets which was completed last year via Warner Bros. Discovery, Inc. (WBD). The focus of the management all those years was to stick with growing AT&T’s core business, and it seems that so far things are going pretty well for the company. The latest earnings report showed that AT&T’s revenues in Q4 increased by 0.7% Y/Y to $31.3 billion while its non-GAAP EPS of $0.61 was above the street estimates by $0.04. At the same time, Q4 was the 10^th consecutive quarter of postpaid phone net adds, as AT&T managed to increase its postpaid phone base by almost 7 million to nearly 70 million subscribers by the end of December.

Going forward, there are reasons to believe that AT&T would continue to improve its overall performance, which would ensure that the business is growing and is able to cover its interest and dividend payments at the same time. Last year alone, AT&T managed to increase the number of its mid-band 5G points-of-presence to 150 million, significantly above its initial targets that were set at the beginning of the year. On top of that, AT&T has been consistently adding over 1 million fiber net adds, and it’s safe to assume that it will continue to do so in the future, as the demand for fiber internet is increasing and the number of its fiber subscribers already outnumber non-fiber DSL subscribers.

One of AT&T’s biggest advantages is the fact that it’s part of an oligopoly that has high barriers to entry, which makes it possible for the business to constantly expand at a small but predictable rate with little competition. At the end of 2022, AT&T already had 24 million fiber locations passed and it’s currently on track to increase that number to 30 million by the end of 2025. There are two ways how AT&T is likely to achieve that target.

First of all, AT&T’s management has stated numerous times that it’s interested in participating in the federal BEAD program, which was passed as a part of the Infrastructure Bill in 2021 and has a budget of $42.45 billion that’s expected to be funneled to telecom network operators this year to bring connectivity to millions of additional households. BEAD program alone could help AT&T fund the construction of broadband networks in parts of the country where it has a limited presence. At the same time, AT&T’s deal with BlackRock, Inc. (BLK) could help the company to deploy fiber to 1.5 million additional locations and cut the costs of the expansion, as BlackRock is expected to provide funding as well.

Considering all of this, it’s safe to say that AT&T is on track to continue to expand its business and thrive in the post-Warner Media era, especially since the cooling of the inflation in the U.S. gives reasons to be optimistic about the business’s future in the current environment.

Dividends Are Here To Stay

The biggest downside of AT&T without a doubt is the high debt level, as the company had $132.9 billion in long-term debt and only $3.7 billion in cash at the end of December. However, despite all the chatter about how the rising interest rates could lead to the cutting of dividend payments to decrease debt, there are reasons to believe that that’s not going to happen anytime soon.

First of all, AT&T has a much better debt profile than in the past. If in 2021 its interest expense was $6.7 billion, then in 2022 it was only $6.1 billion despite the increase in rates in recent quarters. At the same time, AT&T managed to reduce its net debt by ~$24 billion last year, while in 2022 its net debt to adjusted EBITDA ratio was 3.19x, down from 3.56x in 2021. The management continues to aim for the 2.5x net debt to adjusted EBITDA ratio by early 2025 even in the current environment, which implies that the debt could become much less of a threat in the foreseeable future.

On top of that, with an interest coverage ratio of 3.71x, the company generates more than enough funds to cover its obligations and reward its shareholders at the same time. Considering that during the latest conference call AT&T’s management once again reiterated its commitment to stick with an attractive dividend policy, it becomes obvious that it’s unlikely that we’ll witness a cut in dividend payments anytime soon. Unlike Intel Corporation, which generates negative free cash flow (“FCF”) and can’t sustain paying dividends over the long-term, AT&T is in a much better position. Despite high debt levels, the management expects to generate $16 billion in FCF in FY23, which would be more than enough to reward its shareholders and cover its commitments at the same time. As such, it’s safe to say that dividends are here to stay.

In addition to that, there’s a case to be made that AT&T’s stock is undervalued and could potentially grow further in the foreseeable future, which would make it possible for shareholders not only to benefit from generous dividends but also from the potential growth of the share price. I’ve recently updated my DCF model, which initially was published before the Q4 results came in and showed AT&T’s fair value to be $19.68 per share, by adding new assumptions that better reflect the company’s growth opportunities.

In the updated model below, the revenue assumptions are mostly in-line with the street estimates, while EBIT as a percentage of revenue is capped at 25%. The tax rate is decreased to 15%, as there’s a case to be made that various subsidies and government programs could help the business pay less than previously expected. At the same time, the 15% rate is still above the FY22 rate of 12.8%. The D&A as a percentage of revenue in the future is the average rate of the previous few years, while CapEx in FY23 increases and is closely in-line with the management assumptions after which it gradually decreases. The change in NWC as a percentage of revenue is capped at 2%, which is in-line with the previous model, as the Time Warner-related changes would no longer be present in the following years since the spinoff is now completed. The WACC in the model stays at 9.5% while the terminal growth rate stands at 3%.

AT&T's DCF Model — AT&T’s DCF Model (Historical Data: Seeking Alpha, Assumptions: Author)

The updated model shows AT&T’s fair value to be $20.19 per share, which is above the current market price of ~$18.5 per share.

Considering that the street expects an even higher upside and gives the company a consensus price target of $21.25 per share, it makes sense to believe that AT&T’s shares still have more room for growth.

AT&T's Consensus Price Target — AT&T’s Consensus Price Target (Seeking Alpha)

The Bottom Line

While the debt issue will continue to haunt AT&T Inc. for years to come, it’s highly unlikely that the management decides to cut or fully eliminate the dividends and use the available resources to substantially decrease the company’s debt levels. The company’s performance in 2022 shows that the business is able to grow, cut its debt levels, and reward its shareholders at the same time, and there are no reasons to believe that that won’t be the case in the future, as the expected $16 billion in FCF in FY23 are likely to more than cover AT&T’s commitments and obligations. As such, AT&T Inc. remains a decent stock to own, especially since there are reasons to believe that it still has a decent upside even at the current levels.

AMH – American Homes 4 Rent: A Great Catalyst, But At A Not-So-Great Price

Written by Daniel Jones on March 26, 2023. Posted in AMH, Stock Report.

Young couple just aquired a new property — LeoPatrizi

From my experience, it’s rare that you come across a company whose name describes exactly what it does. But one such example where this is the case involves a business called American Homes 4 Rent (NYSE:AMH). As its name suggests, the company is a REIT that acquires, develops, renovates, leases, and manages homes as rental properties. In particular, it focuses on single-family homes. With its footprint spread across 21 different states, and 58,993 homes under its belt, American Homes 4 Rent is a massive player in its market. Recently, financial performance achieved by the company has been rather robust. On top of this, the company also has some appealing catalysts to push revenue, profits, and cash flows all higher in the years to come. In the long run, I suspect that the business would do just fine for itself and its investors. Though I do maintain that the stock is not yet cheap enough to warrant a meaningful vote of optimism. Given this, I would still rate the business a ‘hold’ as opposed to anything more bullish than that.

Recent financial performance is encouraging

The last article that I wrote about American Homes 4 Rent was published in July of last year. Back then, I acknowledged that the company was doing well from a fundamental perspective, with pretty much all of its important metrics showing growth year over year. At that time, however, shares of the company looked a bit lofty. This, combined with growing economic uncertainty, caused me to take a more cautious approach to the business, ultimately resulting in a ‘hold’ rating. Since then, however, shares have taken something of a tumble, generating a loss for investors of 14.5% while the S&P 500 is up 3.6%.

Given this return disparity, you might think that the fundamental condition of the company was worsening. But that has not in fact been the case. Consider how the business performed during the final quarter of its 2022 fiscal year. This is the final quarter for which data is available. During that time, sales came in at $380.9 million. That represents an increase of 12.7% over the $338.1 million reported only one year earlier. Some of this increase can be attributed to the fact that the occupancy rate of its properties inched up from 95.7% to 95.8%. However, the company also benefited significantly from a rise in the number of properties in its portfolio from 57,024 to 58,993. This excludes the 659 properties that the company held for sale at the end of 2021 and the 1,115 that were held for sale at the end of last year.

For the most part, this rise in revenue brought with it improved profits. The one exception involved operating cash flow. During the quarter, this metric was $68.7 million. That’s down from the $97 million reported one year earlier. If we look at other metrics, however, we see that the picture has mostly improved. Core FFO, or funds from operations, expanded from $143.9 million to $160.5 million. On an adjusted basis, FFO expanded from $130.8 million to $143.8 million. Another metric, called NOI, or net operating income, grew from $192.4 million to $216.4 million. And finally, EBITDA for the business expanded from $180.8 million to $204 million.

The final quarter of 2022 was not the only time in which the company saw expansion. As you can see in the chart above, results for 2022 as a whole were better than they were in 2021. In addition to this, management seems to think that core NOI this year will be between 3% and 5% higher than it was in 2022. On the other hand, core FFO per share should weaken, dropping from $1.77 last year to between $1.58 and $1.64 per share this year. This bottom line weakness should come even as the company anticipates between 2,200 and 2,400 deliveries for 2023.

Trading Multiples — Author – SEC EDGAR Data

Despite this weakness, the company does still look to be in solid condition. But this doesn’t necessarily mean that it makes sense to buy into at this time. Consider, for instance, the chart above. In it, you can see various pricing metrics for the company for both 2021 and 2022. And in the table below, you can see how the company is priced using two of those metrics compared to five similar businesses. On a price to operating cash flow basis, these companies have trading multiples of between 13.4 and 35.6. Two of the five firms were cheaper than American Homes 4 Rent. Meanwhile, using the EV to EBITDA approach, we get a range of between 15.8 and 25. In this case, three of the five firms were cheaper than our target.

Company	Price / Operating Cash Flow	EV / EBITDA
American Homes 4 Rent	18.3	22.0
Equity LifeStyle Properties (ELS)	20.9	24.1
Sun Communities (SUI)	22.0	20.8
Invitation Homes (INVH)	17.6	18.9
UMH Properties (UMH)	35.6	25.0
Essex Property Trust (ESS)	13.4	15.8

An attractive catalyst for future growth

Although I acknowledge American Homes 4 Rent as a quality company that should continue to grow in the long run, I also believe that the stock is not cheap enough to warrant all that much consideration from value-oriented investors. At the same time, I can also understand why some investors would be drawn to the firm. The fundamental data aside, the company does have some really great things going for it. For instance, right now, the national existing home inventory is quite low. In fact, it’s lower than at any point between 2011 and the present day. For perspective, back in 2011, roughly 2.8 million homes were counted in housing inventories. Today, that number is around 900,000.

In addition to there being a rather tight market, there also is not much in the way of single-family permits. After bottoming out in 2011, at around 400,000 permits, the number began to increase year after year, eventually hitting nearly 1.2 million in 2021. But as you can see in the chart below, that trend was broken in 2022 and looks set to fall further this year and over the next few years. What this suggests, when coupled with a continuously growing population, is that demand for housing should still rise while supply remains constrained. This should, in theory, push the cost of buying properties up even more, which could prove to be a boon for property owners that rent out.

Based on the data available, at least when it comes to the top 20 markets in which American Homes 4 Rent operates, we are already seeing some benefit that should accrue to the business. As you can see in the chart below, it is now cheaper to rent in those markets than it is to own a home. When coupled with the other data I already mentioned, this implies that companies like American Homes 4 Rent should be able to raise their prices further without experiencing any decrease in their occupancy rates.

Takeaway

Fundamentally speaking, American Homes 4 Rent looks to be in really solid shape. Long term, I suspect the company will continue to grow and I believe that it should ultimately increase in value for shareholders unless something materially changes. The company currently has a positive catalyst that should help to push revenue and cash flows higher. And even though the market for single-family properties is constrained, the business continues to grow its portfolio. These all spell a recipe for success. But I just can’t get behind the company yet because of the price at which shares are trading. If the stock falls further, perhaps another 10% or 15%, I believe that I could get around to rating it more highly. But until that comes, I believe that there are better opportunities that can be had and that this business warrants a ‘hold’ rating.

Day: March 26, 2023