“Mentorship Program” Recommendations
- Week Beginning -
Monday, August 20, 2018

by Ian Harvey

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Option Trade – Celgene Corporation (NASDAQ: CELG) Calls

Thursday, August 30, 2018

** OPTION TRADE: Buy the CELG OCT 19 2018 100.000 CALL at approximately $1.20 TO $1.40. Place a pre-determined sell at $2.40.

Also include a protective stop loss of $0.50.

Biotech stocks are hot and have rallied by 13% as measured by the iShares Nasdaq Biotechnology ETF (IBB) since late May.

And Celgene Corporation (NASDAQ: CELG)'s stock is doing even better as it continues its rise and is now up 20% from its lows at the end of May. Shares may be about to surge an extra 17% from its current price of almost $94. CELG stock is pressing tightly against a key moving average and a push above it could see more buyers come to play.

The next level of resistance for Celgene comes around $97. Should the stock rise above that price, it then has room to increase to $110.

Another bullish sign is the relative strength index (RSI), which has been trending higher. It suggests bullish momentum continues to move into the stock. The RSI has been rising since it bottomed at oversold levels well below 30 in November.

About Celgene….

Celgene is a biopharmaceutical firm that primarily specializes in cancer, along with other immune, inflammatory conditions. CELG has earned a notable reputation in within the industry. Its corporate website claims that over 300 clinical trials integrate Celgene-produced compounds.

Factors Affecting the Stock ……

Celgene has many very promising treatments under development. Celgene expects to launch 10 blockbuster drugs over the next few years. Half of those could generate peak annual sales of $2 billion or more. In total, Celgene could add another $16 billion or more in peak revenue through 2030 just with these 10 pipeline candidates.

Despite the earlier stumble with ozanimod, Celgene plans to file for approval again in early 2019. The drug should have a really high chance of winning approval based on its clinical results. Positive results from phase 3 studies of luspatercept also bode well for success.

Additionally, Celgene's got four other potential blockbuster approval decisions coming by the end of 2020. Earlier this year, it acquired rights to fedratinib, a myelofibrosis drug it plans to submit for approval by the end of 2018. The company also acquired rights to the cancer gene therapy liso-cel earlier this year, and it could win an FDA go/no-go decision in 2019. An application is expected next year for luspatercept, a beta thalassemia and myelodysplastic syndromes drug that Celgene thinks could be a billion-dollar blockbuster, and collaboration partner bluebird bio (NASDAQ: BLUE) could win an FDA OK for the multiple myeloma gene therapy bb2121 in 2020.

Celgene has also made some changes to its executive team following the ozanimod blunder. Celgene CEO Mark Alles stated a couple of months ago that there is "a more accountable structure" in place now.

Celgene remains confident that it will be able to protect its intellectual property for its top drug Revlimid, and intends to make sure any future settlements are favorable to the company.

Celgene expects its revenue to increase at a compound annual growth rate of 14.5% through 2020 with adjusted earnings-per-share growth of around 19% annually. That earnings projection is right in line with what Wall Street expects.

Celgene is now attractively valued as a result of the big sell-off over the past year. Celgene stock now trades at less than 8.7 times expected earnings. Its price-to-earnings-to-growth ratio is a super-low 0.53.

Moving Forward…..

CELG’s next earnings release is expected to be October 25, 2018. On that day, CELG is projected to report earnings of $2.22 per share, which would represent year-over-year growth of 16.23%. Meanwhile, the latest consensus estimate is calling for revenue of $3.81 billion, up 15.8% from the prior-year quarter.

Looking at the full year, our Consensus Estimates suggest analysts are expecting earnings of $8.76 per share and revenue of $15.09 billion. These totals would mark changes of +17.74% and +16.1%, respectively, from last year.

Analysts….

BidaskClub raised Celgene from a “sell” rating to a “hold” rating in a report on Tuesday, July 10th.

Cowen reissued a “buy” rating and issued a $150.00 price target on shares of Celgene in a report on Tuesday, July 10th.

Zacks Investment Research raised Celgene from a “sell” rating to a “strong-buy” rating and set a $102.00 target price for the company in a report on Wednesday, August 1st.

Cantor Fitzgerald set a $112.00 target price on Celgene and gave the stock a “hold” rating in a report on Thursday, May 24th.

Finally, Mizuho reaffirmed a “buy” rating and set a $129.00 target price on shares of Celgene in a report on Tuesday, July 31st.

Two equities research analysts have rated the stock with a sell rating, twelve have assigned a hold rating, twenty-one have assigned a buy rating and two have assigned a strong buy rating to the stock. Celgene has a consensus rating of “Buy” and a consensus price target of $121.85.

Summary

Celgene stock has a market capitalization of $63.25 billion, a PE ratio of 13.45, a price-to-earnings-growth ratio of 0.54 and a beta of 1.32. Celgene Co. has a 52-week low of $74.13 and a 52-week high of $147.17. The company has a debt-to-equity ratio of 5.76, a current ratio of 1.52 and a quick ratio of 1.40.


Option Trade – Yext Inc (NYSE: YEXT) Calls

Tuesday, August 28, 2018

** OPTION TRADE: Buy the YEXT OCT 19 2018 30.000 CALL at approximately $1.10. Place a pre-determined sell at $2.20.

Also include a protective stop loss of $0.45.

Yext Inc (NYSE: YEXT), a knowledge engine platform that lets businesses manage their digital knowledge in the cloud in North America and Europe, is expected to be released its earnings report on August 30, 2018. Wall Street expects a year-over-year increase in earnings on higher revenues when Yext reports results for the quarter ended July 2018.

This software developer is expected to post quarterly loss of $0.11 per share in its upcoming report, which represents a year-over-year change of +15.4%.

Revenues are expected to be $53.67 million, up 31.6% from the year-ago quarter.

The stock has moved higher by 21.6% in the past month, while it is also above its 20 Day SMA too. This combination of strong price performance and favorable technical, would suggest that the stock may be on the right path.

Last year, Yext generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion.

Shares of Yext soared by 15% on Friday, after the company announced a partnership with Amazon.com (NASDAQ: AMZN). Yext's Digital Knowledge Management (DKM) platform will be integrated directly into Amazon's massively popular virtual assistant, Alexa.

Yext's DKM platform allows businesses to manage their listings across over 100 digital services, including apps, search engines, online directories, social networks, virtual assistants, and more, making it easier for consumers to find accurate and up-to-date information about the business across the internet.

Alexa users will soon be able to simply ask the virtual assistant for details about businesses and know that they will be getting accurate responses.

Factors Affecting the Stock ……

For the last reported quarter, it was expected that Yext would post a loss of -$0.12 per share when it actually produced a loss of -$0.11, delivering a surprise of +8.33%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

At its core, Yext is a hyper-growth technology company that provides solutions to help other enterprises manage digital information that is relevant to their brand. A big tailwind for this business is AI. Consequently, as AI matures over the next several years, Yext's growth should remain robust.

Yext is a data analysis company with a very practical approach for businesses. Nowadays, almost every prospective customer researches their target retailer using the internet. But what is the "internet reputation" of that retailer? Do customers see varying information when they utilize different web platforms?

Yext answers these and many other questions, ultimately enabling their clients to become supremely net-savvy. This isn't just about spitting data and convoluted metrics at people. Instead, Yext converts the litany of numbers and figures into actionable advice for its clients. Essentially, the company combines the megatrends of big data, AI, and IoT into a user-friendly format.

Analysts…

Several analysts have recently commented on the company…..

  • SunTrust Banks started coverage on Yext in a report on Monday, August 13th. They issued a “buy” rating on the stock.
  • Morgan Stanley raised their target price on Yext from $14.00 to $15.00 and gave the company an “equal weight” rating in a report on Friday, June 1st.
  • KeyCorp raised their target price on Yext from $16.00 to $18.00 and gave the company an “overweight” rating in a report on Thursday, May 31st.
  • Finally, Piper Jaffray Companies reissued a “buy” rating and set a $25.00 price objective on shares of Yext in a report on Wednesday, July 25th.

Three investment analysts have rated the stock with a hold rating and four have issued a buy rating to the company’s stock.

Summary

Yext Inc has a twelve month low of $10.58 and a twelve month high of $26.49. The firm has a market cap of $2.45 billion, a P/E ratio of -29.60 and a beta of 0.41.


Option Trade – Canopy Growth Corp (NYSE: CGC) Calls

Monday, August 27, 2018

** OPTION TRADE: Buy the CGC SEPT 21 2018 55.000 CALL at approximately $1.05 TO $1.15. Place a pre-determined sell at $2.20.

Also include a protective stop loss of $0.45.

On October 17, Canada will officially lift the gate on recreational marijuana sales to adults. Once legal, sales are expected to soar, with the industry pulling in up to $5 billion in added annual sales when fully ramped up. The expectation of billions of dollars in added revenue into marijuana stocks is expected. One company that will benefit from this situation is Canopy Growth Corp (NYSE: CGC).

Canopy Growth Corporation, the largest marijuana stock of all, was making waves earlier this year when it was nipping at a nearly $4 billion valuation -- an almost unthinkable market cap without knowing if the Cannabis Act would be passed in Canada. Yet, as of market close on August 20, Canopy Growth had a market cap of $8.4 billion.

Though much of its recent surge in market cap is a result of Corona and Modelo beer owner Constellation Brands taking an additional equity stake of $3.8 billion in the company at a 51% premium to the closing price prior to the investment announcement, the fact of the matter is, Canopy Growth is now larger than a number of time-tested companies.

This wasn't Constellation's first foray with Canopy Growth, either. In late October 2017, it acquired a 9.9% equity stake for roughly $190 million. Then in June, it gobbled up a third of Canopy's 600 million Canadian dollars (just over $450 million) convertible note offering. Convertible notes give the holder the option of turning their debt into shares of common stock.

By purchasing these convertible notes, Constellation Brands gave itself the opportunity to further build its equity stake in Canopy Growth. Plus, with the 139.7 million warrants Constellation received as part of its newest equity investment, it could eventually push its stake to over 50% if these warrants are exercised.

The duo should be working together on a number of projects, one of which likely will be cannabis-infused beverages. Canopy Growth obviously understands the ins and outs of pot production, while Constellation can bring its marketing and distribution expertise to the table to expand the reach of Canopy's products.

Moving Forward…..

Constellation bought its shares directly from Canopy, rather than on the open market, which means Canopy will see a $4.5 billion cash injection as a result of the purchase.

The company plans to use this cash to increase overseas operations. In a recent announcement, the company said: This investment, the largest to date in the cannabis space, will provide funds that Canopy Growth will deploy to strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries.” Increased global infrastructure could help bring Canopy’s operating costs down. The company could, for example, build production facilities onsite in countries it serves. This would lower costs related to shipping and storage. $4.5 billion is an enormous sum–more than 10 times Canopy’s current cash holdings–and the infrastructure/R&D possibilities are unlimited.

Analysts….

Canopy Growth was upgraded by equities research analysts at Canaccord Genuity from a “hold” rating to a “buy” rating in a report issued on Thursday, August 16th.

Separately, ValuEngine upgraded Canopy Growth from a “hold” rating to a “buy” rating in a research report on Wednesday, May 2nd.

Summary

Canopy Growth has a 12 month low of $6.97 and a 12 month high of $45.92. The company has a debt-to-equity ratio of 0.01, a current ratio of 12.80 and a quick ratio of 9.10.