Abbott Laboratories

ABT Details

Abbott Laboratories (NYSE: ABT) is a healthcare corporation that develops, manufactures, and sells various products. Its products are primarily sold to retailers, wholesalers, hospitals, healthcare institutes, laboratories, doctors' offices, and government agencies worldwide. The company's four operating segments are 1) Established Pharmaceutical Products, 2) Nutritional Products, 3) Diagnostic Products, and 4) Medical Devices.

Latest News:

• Increase in Dividends: ABT announced an increase in its quarterly common dividend on December 10, 2021, marking its 50th consecutive year of dividend increases. Since 1924, ABT has paid a quarterly dividend for 392 straight quarters. The cash dividend will be paid on February 15, 2022, to shareholders registered on January 14, 2022, at the close of business.
• Share Repurchase Program: ABT also announced the repurchase of up to USD 5 billion of the company's common shares on December 10, 2021. This new authorization is in addition to ABT's October 2019 authorization for the unused portion of the previous program. The acquisitions could be undertaken regularly, depending on market conditions and legal considerations.

9MFY21 Results:

• Expansion in Topline: Due to increased sales across all divisions, ABT's net sales climbed by 32.21% to USD 31.61 billion during 9MFY21 (ended September 30, 2021), compared to USD 23.91 billion during 9MFY20.
• Rise in Bottomline: The company's net income increased to USD 5.08 billion during 9MFY21, up from USD 2.33 billion during 9MFY20.
• Leveraged Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short term investments) of USD 9.69 billion and total debt of USD 18.40 billion.

Key Risks:

• Exchange Rate Fluctuation Risk: ABT has business in various currencies besides the US dollar, putting it at risk of currency fluctuations. As a result, any change in the exchange rate would harm the company's bottom line.
• Global Operational Risk Sales outside the United States accounted for over 62% of net sales in FY20. As a result, any negative influence on economic conditions in the company's operating locations may harm the company's overall performance.

Outlook:

• FY21 Estimates: On October 20, 2021, ABT announced that its diluted EPS from continuing operations under GAAP for FY21 is estimated to be about USD 3.55-3.65. It also forecasts adjusted diluted EPS from continuing operations to be about USD 5.00-5.10, up 38.4% at the midpoint from the prior year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ABT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ABT's share price has surged 22.37% in the past six months and is currently trading towards the higher end of its 52-weeks range of USD 105.36 to USD 139.27. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 62.37. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 130.31.

Considering the uptick in the stock price and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 135.78, up 0.60%, as of December 21, 2021, at 9:34 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

Fulgent Genetics, Inc.

FLGT Details

Fulgent Genetics, Inc. (NASDAQ: FLGT) is a genetic testing company that specializes in oncology, infectious and rare disorders, and reproductive health. FLGT has integrated next-generation sequencing (NGS) into its technological platform, allowing single-gene testing to include whole gene sequencing and deletion/duplication analysis.

Latest News:

• Launch of HelioLiver: On December 06, 2021, FLGT and Helio Health, an AI-driven healthcare company, co-jointly announced the commercial launch of HelioLiver. It is a multi-analyte blood test that includes cell-free DNA (cfDNA) methylation patterns and serum protein markers to detect hepatocellular carcinoma (HCC), the most common type of liver cancer.
• Easing the Detection of Omicron Variant: On December 01, 2021, FLGT has confirmed that its RT-PCR test for SARS-CoV-2, the virus that causes COVID-19, can detect its recently discovered Omicron variant. Furthermore, FLGT is sure that their COVID-19 Next Generation Sequencing (NGS) assays will correctly identify the variant.

Q3FY21 Results:

• Surge in Topline: The company's revenues expanded 124.02% YoY to USD 227.87 million in Q3FY21 (ended September 30, 2021) from USD 101.72 million in Q3FY20.
• Strong Bottomline Performance: Net income increased 162.71% YoY to USD 122.52 million in Q3FY21 vs. USD 46.64 million reported in Q3FY20.
• Robust Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 469.98 million, with total debt amounting to USD 21.10 million.

Key Risks:

• Customer Concentration Risk: In Q3FY21, FLGT's top two customers accounted for 31% and 11% of total revenue, respectively. As a result, losing any of these critical customers could harm the company's top line.

Outlook:

• Q4FY21 Estimates: FLGT forecasts to clock total revenue of ~USD 189 million, along with core revenue of ~USD 32 million, representing YoY growth of 166%.
• FY21 Estimates: FLGT expects to generate ~USD 930 million in revenues and core revenue of USD 115 million, thus realizing a YoY growth of 215%. EPS is expected to be USD 15.50 and USD 16.00 on GAAP and non-GAAP basis.

 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FLGT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FLGT's stock price has surged 26.00% in the past week and is currently trading close to the mid-band of its 52-week range of USD 42.51 to USD 189.89. The stock is currently trading far above its 50 and 200 DMA levels, and its RSI Index is at 70.05, indicating an overbought zone. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 95.16.

Considering the significant uptick in the stock price in a short span and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 107.24, up 2.13% as of December 21, 2021, at 9:30 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.