Ticker Reports for June 19^th

Outlook Therapeutics: Analysts Forecast Over 500% Stock Upside

Outlook Therapeutics (NASDAQ: OTLK) has gained attention, with analysts forecasting an upside of over 500% based on the consensus price target.

It’s essential to remember that low-float biopharmaceutical companies often experience volatility due to frequent breaking news and technical factors such as float size and short interest. While the bullish price target is noteworthy, it’s crucial to delve deeper into the company’s fundamentals and recent developments to understand what analysts might be seeing or missing.

Inside Outlook Therapeutics: Innovating Ophthalmic Solutions

Outlook Therapeutics is a clinical-stage biopharmaceutical company that develops and commercializes monoclonal antibodies for various ophthalmic indications. Its lead product candidate, ONS-5010, is an ophthalmic formulation of bevacizumab currently in Phase III clinical trials for treating wet age-related macular degeneration (AMD) and other retinal diseases.

The company has collaboration and license agreements with BioLexis Pte. Ltd. and Zhejiang Huahai Pharmaceutical Co., Ltd. A significant recent development came on May 28 when Outlook Therapeutics announced it had received European Commission Marketing Authorization for LYTENAVA™ (bevacizumab gamma) for treating wet AMD. This authorization applies automatically to all 27 EU Member States and, within 30 days, to Iceland, Norway, and Liechtenstein. The company plans to launch LYTENAVA™ in the EU in Q1 2025, supported by a strategic partnership with Cencora (formerly AmerisourceBergen).

Outlook Therapeutics’ Stock Performance: A Year in Review

Despite the positive developments, Outlook Therapeutics has significantly underperformed over the past year. Shares are down almost 80% over the year and 6% YTD, currently trading 80% below their 52-week high. This decline was exacerbated by news on August 30 last year, when the U.S. Food and Drug Administration (FDA) declined to approve its experimental eye disease drug due to manufacturing issues observed during pre-approval inspections.

Analysts Forecast Significant Upside for Outlook Therapeutics

Analysts have shown bullish sentiment towards Outlook Therapeutics, which is compelling given the stock’s recent struggles. Based on eight analyst ratings, the stock has a moderate buy rating, with seven analysts rating it as a buy and one as a hold. The consensus price target of $46.43 suggests a potential upside of 525%. Recent bullish actions by analysts include HC Wainwright reiterating its Buy rating with a $30 price target, forecasting an almost 300% upside. BTIG Research upgraded the stock from Neutral to Buy in March, with a $50 price target, predicting a nearly 500% upside.

Missed Earnings Estimates Add to Outlook Therapeutics’ Challenges

Despite the bullish analyst ratings, the stock has notable bearish sentiment. Outlook Therapeutics has an above-average short interest of 10%, an increase of almost 25% over the previous month. Net institutional activity has also been negative, with total inflows of $13.4 million compared to outflows of $79 million over the past twelve months.

Adding to the bearish outlook, the company’s recent earnings report missed consensus estimates. On May 15, 2024, Outlook Therapeutics reported an EPS of ($1.55) for the quarter, missing analysts’ consensus estimates of ($0.88) by $0.67. The company has generated ($11.41) earnings per share over the last year.

Considerations for Investors: Outlook Therapeutics’ Risks and Rewards

While the analysts’ forecasts for Outlook Therapeutics suggest significant upside potential, the stock’s recent performance and bearish sentiment highlight the risks involved. Investors should consider both the promising developments and the challenges faced by the company. Looking beyond the bullish price targets and understanding the broader context is crucial before making investment decisions in this volatile biopharmaceutical stock.

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Campbell Soup Co. Targets Fiscal Q4 Stock Recovery

Global food and beverage company Campbell Soup Co. (NYSE: CPB) reported solid earnings accompanied by raised guidance, but the market continued to sell off shares. However, clues were sprinkled throughout its earnings presentation that indicate a return of growth acceleration is coming in the second half of the calendar year. Prudent investors taking note of these developments may consider adding shares to their portfolio before full transparency materializes.

Campbell Soup operates in the consumer staples sector, competing with other food and beverage producers like General Mills Inc. (NYSE: GIS), Hormel Foods Co. (NYSE: HRL), and WK Kellogg Co. (NYSE: KLG).

Campbell Soup’s Portfolio Goes Beyond Soup

With a name like Campbell Soup Co., it would be easy to mistake the company for solely a soup maker. Campbell is an iconic name and brand, but it has diversified its portfolio of brands way beyond soup into two divisions: Meals & Beverages and Snacks.

The Meals & Beverages division manages popular brands like Prego, Swanson frozen entrees, V8, Pace salsas, Campbell’s soups and sauces, Pacific Foods, and SpaghettiOs.

The Snacks division manages popular brands like Goldfish, Lance, Synder’s of Hanover, Pepperidge Farm, Late July, and CAPE COD and KETTLE potato chips.

Expansion of Campbell’s Portfolio through Sovos Brands Acquisition

Campbell has continued to expand its portfolio by completing its acquisition of Sovos Brands. They make Rao’s pasta sauces, Michael Angelo’s frozen entrees, and Noosa yogurt products. Campbell added a new unit called Distinctive Brands under its Meals & Beverages division to manage the Sovos products. The company has noted it may actually consider selling Noosa since it’s not part of its core food categories.

CPB Stock is Attempting to Break Out of a Bearish Descending Triangle

The daily candlestick chart for CPB displays a potential descending triangle breakout pattern. The descending trendline formed at the $46.97 top on May 16, 2024, capping bounce attempts at a lower high until meeting the flat-bottom lower trendline support at $42.23. The Q3 2024 earnings release could muster the strength even to test the descending trendline as shares had to coil back up off the lower trendline. CPB is attempting to break out above the descending trendline at $43.53. The daily relative strength index (RSI) is rising to the 48-band. Pullback support levels are at $41.67, $40.77, $39.65, and $37.94.

Campbell’s Solid Earnings Results for Fiscal Third Quarter 2024

On June 5, 2024, Campbell Soup Co. reported fiscal Q3 2024 EPS of 75 cents versus 70 cents consensus estimates, indicating a 5-cent beat. Adjusted EPS rose by 10% YoY. Revenues rose 6.3% YoY to $2.37 billion, beating $2.34 billion consensus analyst estimates. Adjusted gross margins rose 30 bps YoY, supported by cost savings initiatives, supply chain productivity enhancements, and a favorable mix.

Positive Impact of Sovos Brands on Campbell’s Fiscal Q3 2024 Results

Sequential net sales growth and volume and mix improvements helped to drive double-digit growth in adjusted earnings before interest and taxes (EBIT) and adjusted earnings per share (EPS).

Organic net sales stabilized while volumes improved sequentially. Campbell indicated that its Meals & Beverages division showed stable performance while Snacks had some pressure, reflecting the pace of the consumer recovery.

The Snacks division is on track to meet the fiscal 2024 operating margin target of 15%, driven by improving consumer demand over the next several quarters. The addition of Sovos Brands has progressed well, adding noticeable growth to the headline results for fiscal Q3 2024.

Consumers are Focused on Stretching Meals, Playing Right into Campbell’s Wheelhouse

Campbell believes the consumer’s focus on stretching meals is benefiting its soups portfolio, fueling sustained demand in its Meals & Beverages division. Inflation pressures keep uncertainty elevated as higher prices can cause consumers to trade down Campbell’s premium brands for private-label substitutes. However, Campbell’s portfolio, especially with the addition of Sovos brands, is holding up well enough to raise its guidance.

The Sovos Brands Acquisition Drives Campbell’s Raised Guidance

Campbell Soup provided upside guidance for the fiscal full-year 2024 EPS of $3.07 to $3.10 versus $3.04 consensus analyst estimates. It sees fiscal full-year 2024 revenues growing 3% to 4% to $9.64 billion to $9.73 billion versus $9.6 billion consensus analyst estimates. The growing success of Sovos brand products definitely helped raise the guidance. Organic sales growth is tracking between 0% and 1%, matching the pace of the consumer recovery.

Dilution from the acquisition of Sovos Brands is expected to impact EPS by 1 to 2 cents. Campbell Soup Co. expects to build momentum in the fiscal Q4 2024 (next quarter) with continued stabilization of its YoY volume growth and double-digit growth for Q4 adjusted EBIT and adjusted EPS.

Campbell Soup CEO Mark Clouse commented, ”It is exciting to see the positive impact on the business from adding Sovos Brands. In Q3, on a pro forma basis, we see a 200 basis point improvement in top-line volume and mix growth. Looking at the now combined Campbell’s, we would rank among the fastest volume-driven growth companies in the food sector over recent periods. As integration progresses, we expect to realize further top-line and bottom-line benefits.“

Campbell Soup analyst ratings and price targets are at MarketBeat. Consensus price targets indicate 5.28% upside to $46.31.

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Wall Street Analysts are Bullish on Lyft Stock: Here’s Why

It is one thing when a single Wall Street analyst decides to boost a price target on a stock; investors may or may not want to pay attention to that single view. However, it is a different trend when several analysts come together to boost a stock. Today, Wall Street’s best choice is to land on shares of Lyft Inc. (NASDAQ: LYFT) to reward it with a higher valuation.

It’s interesting to see how none of these rating houses went to Lyft’s arguably more famous competitor, Uber Technologies Inc. (NYSE: UBER). Investors would benefit from trying to uncover the main reasons behind this preference. One reason stems from trying to find the best deals in today’s potentially overvalued marketplace.

What comes next is a broader overview of the U.S. economy and how its post-COVID trends are helping stocks like Lyft become more of a commodity than a luxury in today’s world. More than that, it would be wise to dig into Lyft’s financials and compare them against Uber’s in the most recent financial quarter, where the conclusion may be that Lyft is potentially undervalued.

Wall Street Delivers a Wave of Upgrades for Lyft Stock

Among the many that boosted Lyft stock’s valuation, a few rating houses stand out. Those at Morgan Stanley, Goldman Sachs, Piper Sandler, Bank of America, and Barclays all sent out a range of $18 to $24 a share for Lyft’s valuation.

To prove these analysts right, the stock would need to rally anywhere from 29.5% to 72.7% from today’s price. Compared to today’s consensus price targets for Uber stock, which only implies a 20.4% upside, Lyft stock looks like the better deal for investors.

Even though Uber offers economies of scale and a much bigger market capitalization of $146.3 billion, Lyft’s smaller $5.6 billion valuation gives it an open field to catch up with the industry.

Investors can find a similar story when comparing Cava Group Inc. (NYSE: CAVA) to Chipotle Mexican Grill Inc. (NYSE: CMG), as the newcomer attempts to match the scale of its predecessor. Now, what is Lyft actually doing to close this gap against Uber?

How Lyft’s Fast Growth is Steering it Into Profitable Territory

With the company’s leading key performance indicators (KPIs) and gross bookings, investors can note that Lyft delivered faster growth than Uber in the first quarter of 2024.

Lyft saw gross booking growth of 21% over the year, while Uber pushed 20%. While not a landslide, it is still a significant achievement, considering how much smaller Lyft is compared to Uber. Because of this growth, Lyft’s revenue jumped by 28% in the same period, while Uber’s revenue only advanced by 15%.

Driving this growth is Lyft’s recent expansion into Canadian markets, where management quotes up to double the ride amount in the region and more than double new rider activations and driver hours. Slowly, it seems Lyft is starting to achieve the type of economies of scale that allowed Uber to become the behemoth it is today.

What matters most for investors is Lyft’s free cash flow (operating cash flow minus capital expenditures), which is now positive compared to last year. 2023 saw an outflow of over $100 million compared to this recent quarter, which brought over $120 million in free cash flow.

Achieving profitability on a free cash flow basis is the building block for rising earnings per share (EPS), which could be one of the reasons why analysts are boosting the stock’s price target. The Vanguard Group, Lyft’s largest shareholder, saw fit to boost its stake in the stock by 2.4% in the past quarter, bringing its net investment up to $636.6 million today.

Asset managers like Vanguard only buy these stocks if they are cheap enough, so here’s how Lyft compares to the rest of the Business Services sector.

Lyft Stock is Discounted in All Ways That Matter

On a price-to-sales (P/S) ratio, Lyft stock’s 1.2x valuation comes well below the industry’s 3.0x multiple, roughly 60% below. But that’s not the only way Lyft stock offers investors a discount today.

Lyft stock trades at only 67% of its 52-week high price. In comparison, Uber remains at 85%, offering minimal incentive for those looking to buy a dip. More than that, taking analyst EPS projections for the next 12 months, Lyft is also discounted on a forward P/E basis.

Though only 13.9x today, Lyft stock shows a discount of up to 57% to Uber’s 32.3x forward P/E. Considering Lyft’s fast growth pace, these valuation multiples may start reflecting the growth potential the stock’s financials carry.