Advanced Micro Devices, Under Armour, Immunomedics, GenMark and Co-Diagnostics highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 17, 2020 – Zacks Equity Research Shares of Advanced Micro Devices, Inc. AMD as the Bull of the Day, Under Armour, Inc. UAA asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Immunomedics, Inc. IMMU, GenMark Diagnostics, Inc. GNMK and Co-Diagnostics, Inc. CODX.
Here is a synopsis of all five stocks:
Advanced Micro Devices has been one of the biggest success stories in the semiconductor space over the last five years, with its stock up from under $2 per share to over $50. And it's not too late to buy because the company’s various offerings expose it to growth in data centers, gaming, and more.
AMD shares have cooled off recently, down around 3% in the last three months, as tech continues to climb. But AMD stock looks strong heading into its upcoming second quarter earnings release that’s due out on July 28.
AMD’s processor offerings service the gaming industry, as well as data centers, and the PC market. Its GPUs compete against the likes of Nvidia and other gaming giants and its CPUs challenge industry titan Intel. The firm’s ability to expand beyond the PC market into gaming and servers has helped catapult its sales and its stock price as it rides multiple secular trends such as cloud computing.
AMD’s revenue surged 50% in the fourth quarter and another 40% in Q1, despite the coronavirus. Last quarter’s sales growth was driven by its 7-nanometer Ryzen, Radeon, and EPYC processors. The company also posted its highest gross margin in eight years, at 46%, up from 41% in the year-ago period.
Investors should note that Apple is an AMD customer and the firm works with cloud giants such as Microsoft, Google and IBM, which have all announced new offerings utilizing AMD’s second generation EPYC processors.
CEO Lisa Su noted on her company’s Q1 earnings call in late April that it expects to benefit in the second half of 2020 as it helps support the holiday season launches of both the new PlayStation 5 and Xbox Series X consoles.
AMD stock is up nearly 3,000% over the last five years and the nearby chart shows that it outpaced chip standouts such as NVDA, Applied Materials and Micron over the last three years. AMD shares have also topped its industry in 2020, up 19% against 11%.
As we mentioned at the top, the stock is down around 3% in the last three months to trail the semiconductor market’s 17% climb. But the fact that AMD rests around 8% off its February 2020 highs at around $55 per share might set up a better buying opportunity.
Despite outclimbing NVDA stock over the last three years, AMD trades at a massive discount against its fellow industry star at 7X forward 12-month sales vs. 16X. AMD is also currently trading below its own 12-month highs of 8.1X.
AMD, unlike many big tech firms, provided full-year financial guidance in the face of pandemic uncertainty, which is a positive sign all of its own.
That said, our current Zacks estimates call for AMD’s second quarter revenue to jump 21%, with its full-year sales expected to surge roughly 25% to $8.39 billion. This growth would easily top FY19’s 4% top-line expansion and come in above FY18’s 23% and FY17’s 22%, which is impressive considering that AMD stock soared during that stretch.
Peeking even further ahead, its FY21 revenue is projected to climb another 19% higher to $10 billion. And the company’s bottom-line outlook appears even stronger, if you can believe that during these times.
AMD’s adjusted Q2 earnings are projected to skyrocket 100% to $0.16 per share, with its full-year 2020 EPS figure expected to surge 58% to $1.01 per share. The chip firm is then projected to follow up this adjusted earnings growth with another nearly 50% jump in 2021 to reach $1.49 per share.
AMD is currently a Zacks Rank #1 (Strong Buy) that has seen some positive earnings revisions in the last seven days.
Investors might want to wait for some updates when it reports its second quarter results at the end of July, before thinking about pulling the trigger. In the end, though, AMD appears to be worth considering as a longer-term buy.
Under Armour stock has been on a broader downward trend since 2015. UAA shares then fell off a cliff after the athletic apparel firm reported its fourth quarter results in February. And then the coronavirus hit.
The Quick Story
Under Armour rose to prominence on the back of its tight-fitting workout and athletic apparel designed to be worn under uniforms and other gear in both the heat and the cold. The company slowly expanded into a more traditional athletic apparel firm in an effort to try to compete against industry giants such as Nike and Adidas.
But a lot has changed since Under Armour reached its high of nearly $50 a share 2015. The main problem became that consumers focused on clothing and footwear that could be worn to the gym and as casual attire. The athleisure market, which has seen the likes of Target and others try to emulate lululemon’s success, has largely passed Under Armour by.
The company’s revenue in its key North American market has slipped in recent years, which isn’t good since it accounts for roughly 70% of sales. Under Armour has now tried to zig while others zag, in attempting to focus on the performance market that made it famous. But neither that shift or its restructuring efforts have proved enticing enough for many on Wall Street—even though it did mount a comeback.
In an effort to shake things up at his struggling company, founder Kevin Plank announced that he would step down as CEO back in October of 2019. Patrik Frisk officially took over in January, but then the coronavirus disrupted the broader retail space.
UAA’s first quarter sales slipped 23%, with wholesale revenue down 28% and direct-to-consumer revenue off 14% from the year-ago period.
The nearby chart shows just how bad things have been for Under Armour over the last five years, with the stock down nearly 80%. This decline came as Nike jumped 70% and Lululemon skyrocketed 400%.
Looking ahead, Under Armour’s second quarter revenue is projected to plummet 54% to $549.30 million, based on our current Zacks estimates. This is expected to push its full-year 2020 sales down by nearly 24%. And the bottom end of the income statement appears even worse.
UAA’s adjusted Q2 loss is projected to expand from -$0.04 per share in the year-ago period to -$0.38 a share. The firm is then expected to tumble from +$0.34 per share in fiscal 2019 to an adjusted loss of -$0.46 per share in 2020.
Under Armour’s earnings estimates have turned far worse over the last 90 days. This negativity helps UAA earn a Zacks Rank #5 (Strong Sell) at the moment, alongside its “F” grades for both Value and Growth in our Style Scores system. And Under Armour is part of a space that rests in the bottom 9% of our more than 250 Zacks industries.
3 Inexpensive MedTech Gainers for 2H20
The first half of the year has been a tumultuous one with the COVID-19 pandemic wreaking havoc across the medical device space. In fact, the pandemic has put a halt on R&D operations with many non-coronavirus and non-emergency-line innovations stuck or delayed owing to the lockdowns.
In fact, the impact doesn’t end there as the coronavirus-induced crisis took a heavy toll on several MedTech companies in the first half of the year. While the first quarter was impacted in a minor way, the second quarter bore the brunt of the crisis. Notably, most of the companies withdrew, suspended or lowered their guidance, a testament to the grim scenario. Meanwhile, companies heavily dependent on elective and non-critical procedures took a severe hit in the first half.
Nevertheless, every cloud has a silver lining. The coronavirus pandemic emerged as a boon to a section of Medtech. Companies involved in telemedicine, diagnostic testing and chronic disease management not only appeared resilient to the crisis but also capitalized on the same.
Promising Second Half for MedTech?
Despite apprehensions regarding a resurgence of coronavirus cases and stalled reopening plans, the stock market saw an encouraging start to the second half with major indices exhibiting mostly positive results and a new closing highs. The positive stock market performance culminated in the best third quarter in more than two decades driven by decline in unemployment rate and positive trial results for a potential coronavirus vaccine from Pfizer and partner BioNTech.
It comes as no surprise that MedTech too has gained from the positive sentiment. Particularly, the sub domains mentioned earlier are expected to deliver stellar second-half performances riding on strong first-half momentum.
Stocks Capitalizing on COVID-19
Already, a lot has been discussed by market watchers regarding the lucrative opportunities of the companies, which are involved in the non-elective critical care equipment or testing sub domains. Unfortunately, the sector bigwigs are the only ones that have come under the limelight.
For instance, a lot has been discussed about Thermo Fisher, which sports a Zacks Rank #1 (Strong Buy). This company has taken significant strides with respect to diagnostic testing, which has helped it to gain from the pandemic-induced market volatility. In the first half of March, Thermo Fisher successfully attained Emergency Use Authorization (EUA) from the FDA for its diagnostic test to be used by the high-complexity laboratories under Clinical Laboratory Improvement Amendments (CLIA) in the United States. The test has been developed for the detection of nucleic acid, exclusively from SARS-CoV-2. Year to date, the company gained 20.9%, compared with the industry’s growth of 6.9%.
Similarly, the Zacks Rank #2 (Buy) RedMed exhibited impressive performance amid this crisis scenario. Given a significant surge in demand for its critical care products, the company has been ramping up production of ventilators, masks and other respiratory devices since March, thereby benefiting from the crisis. In the first quarter, the company produced more than 52,000 non-invasive ventilators, including bilevels and invasive ones. Year to date, the company gained 27.5% against the industry’s decline of 7.2%.
Riding on the back of the momentum experienced in the first half of the year and strong fundamentals, both these companies are expected to impress investors in the second half as well. For 2020, the Zacks Consensus Estimate for earnings for Thermo Fisher is pegged at $12.73, indicating an improvement of 3.1% from the prior period, while for ResMed the consensus mark for fiscal 2020 stands at $4.48, suggesting growth of 23.1%.
Moreover, both these companies have similarities including management structure, low-debt level and capital deployment policy, which make them safe bets for investors.
Nonetheless, despite their stellar first-half gains, there lies a major reason that might make an investor hesitant in picking these two stocks, which is their exorbitantly high prices. As of Jul 15, Thermo Fisher closed at $392.70, while ResMed closed at $197.55.
Three Stocks to Consider Beyond TMO and RMD
In light of the above discussion, we have shortlisted three stocks that have outperformed both Thermo Fisher and ResMed since the beginning of 2020 and are inexpensive compared to these stalwarts. These stocks with Zacks Rank #1 or #2 have outperformed Thermo Fisher and ResMed on a year-to-date basis and have the potential to continue their bull run in the second half as well. You can see the complete list of today’s Zacks #1 Rank stocks here.
Immunomedics, Inc.: Despite COVID-19 pandemic, the company’s manufacturing capability and supply chain globally continues to progress smoothly with minimal impact from the crisis. Also, patient enrollment into the Phase 3 TROPiCS-02 study of Trodelvy in hormone receptor-positive, human epidermal growth factor receptor 2-negative metastatic breast cancer, has been resumed at approximately 20 clinical sites as of mid-May, with additional sites continuing to open. With uninterrupted manufacturing process and aforementioned positive development, the company performed well amid such a challenging period and is likely to do so in the second half as well.
On a year-to-date basis, the Zacks Rank #2 stock has gained an impressive 94.5%, compared with the industry’s growth of 7.8%. For 2020, the Zacks Consensus Estimate for revenues stands at $88.7 million, representing significant growth from the year-ago period. As of Jul 15, the stock closed at $41.16.
GenMark Diagnostics, Inc.: GenMark — a leading provider of automated, multiplex molecular diagnostic testing systems, delivered excellent progress in the first half as strong COVID-19 demand continued to drive additional ePlex placements, which provides the foundation for future recurring testing revenues across the company’s broader menu. Also, in the second quarter, the company submitted a EUA to the FDA for the ePlex Respiratory Pathogen Panel 2 (RP2 Panel), which is one of the first rapid-result multiplex panel tests that can identify 21 respiratory pathogens including SARS-CoV-2. This is going to have a positive impact on the company’s performance. The company carries a Zacks Rank of 2.
Year to date, the stock has gained a whopping 275.5% compared with the industry’s growth of 6.9%. For 2020, the Zacks Consensus Estimate for revenues stands at $126.3 million, indicating an improvement of 43.5% from the year-ago period. As of Jul 15, GenMark closed at $18.08.
Co-Diagnostics, Inc.: Co-Diagnostics Logix Smart COVID-19 test, which is currently available to all clinical laboratories certified under CLIA and authorized for utilization to detect the virus, proved beneficial for the company. Its first-half performance rode on the back of impressive COVID-19 test sales and we expect this robust momentum to continue in the coming quarters.
The stock, sporting a Zacks Rank #1, gained 1872.8% on a year-to-date basis, against the industry’s decline of 0.8%. For 2020, the Zacks Consensus Estimate for earnings stands at $1.92 per share, representing a whopping growth of 633.3% from the year-ago period. As of Jul 15, the stock closed at $17.66.
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