Globalstar Inc

Globalstar Inc (AMEX: GSAT) provides satellite solutions for individuals and businesses. It also provides customizable Satellite Commercial IoT Solutions for equipment monitoring, fleet asset tracking, and enabling business efficiencies beyond cellular.

Investment Highlights – WATCH at USD 1.87

• The short-term outlook is quite uncertain, considering its lossmaking position, change in consumer confidence, inflationary market conditions, and the sustainability of supply chains.
• The Covid-19 pandemic has reduced the volume of sales of subscriber equipment and has imposed significant credit risk as well.
• The loss from operations was worsened to US$19.3 million in Q1 FY21 from US$14.1 million in Q1 FY20.
• In terms of valuation multiples - EV/Sales, EV/EBITDA, and Price/Book are overvalued against the median of Telecommunication Services.
• From a technical standpoint, 14-day RSI (68.56) indicates an overbought stance at the current levels, share price retracement is expected in the short-term. Moreover, the stock price is hovering nearly at the upper standard deviation of the Bollinger Bands.

Key Risks

• GSAT is exposed to the uncertainties related to frequent changes in technology, regulations pertaining to spectrum usage, unstable geopolitical and business conditions, and industry consolidation.
• Volatility in the financial market could also impact the Company's ability to raise external funds.

Recent News

Partnership: On 19 May 2021, Globalstar’s wholly owned subsidiary, SPOT LLC partnered with Desert Vets Racing, to provide communication and driver safety while off-roading.

Financial Highlights (for the quarterly period ended 31 March 2021, as on 6 May 2021)

 (Source: Company Website)

• During Q1 FY21, total revenue declined 16%, primarily due to the timing of engineering service revenue.
• Similarly, due to lower Duplex and SPOT subscribers, Subscriber-driven revenue streams also decreased.
• However, lower foreign exchange losses and interest expenses somehow offset the lower revenue generation. Hence, net loss was decreased by US$1.9 million in Q1 FY21.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Following the subdued revenue generation in Q1 FY21, Globalstar has witnessed signs of recovery in the Commercial IoT sales channel. The Company's sales pipeline is also robust and expects to return to pre-COVID sales levels by the end of H2 FY21. However, GSAT still reports loss from operations and its growth trajectory depends upon external financial resources at acceptable terms. Moreover, it is a penny stock exposed to volatile movement and seems overbought post a whopping return of ~499% in the past year. Given the uncertainties regarding the financial guidance amid macroeconomic turbulence, we do not recommend investing in this stock at the current levels. The stock made a 52-week High and Low of USD 2.98 and USD 0.292, respectively.

Based on a lossmaking history, uncertain outlook, macroeconomic instabilities, we have given a “WATCH” stance on Globalstar Inc at the closing price of USD 1.87 (as on 28 June 2021), while we look forward to reviewing its performance post lockdown easing.

Vyne Therapeutics Inc

Vyne Therapeutics Inc (NASDAQ: VYNE) focuses on developing proprietary and differentiated therapies in dermatology.

Investment Rationale – WATCH at USD 3.64

• As of 31 March 2021, the Company had an accumulated deficit of US$ 7 million with an outstanding debt of US$35.0 million.
• During Q1 FY21, revenue almost doubled, while the net loss nearly halved against Q1 FY20. However, the Company still has substantial losses and require significant additional funding to manage commercialization and manufacturing efforts.
• From a technical standpoint, the MACD line is trading below the centreline and not forming a clear positive crossover with the signal line. Meanwhile, the stock sustained below the 20-day EMA (USD 3.77), indicating bearish momentum.
• Vyne has delivered a negative return of over 49% in the past year, reflecting a sizeable underperformance against the benchmark, Nasdaq Composite Index.

Risk Assessments

• The Company has negative cash flows since its inception. Moreover, there is a likelihood of significant delays in the clinical trials and supply chain disruption for raw materials due to the Covid-19 pandemic. It can further impact the Company's financial conditions and operating results.
• It is also exposed to uncertainties related to failure in obtaining requisite approvals, unfavourable results in the clinical trial, and availability of adequate liquidity.

Financial Highlights for the quarter ended 31 March 2021 (as on 6 May 2021)

(Source: Company Website)

• During Q1 FY21, Vyne received approval for AMZEEQ® (minocycline), and unveiled a new candidate FMX114 for the treatment of atopic dermatitis.
• The phase 2a clinical study in atopic dermatitis is expected to begin in Q3 FY21.
• The Group also raised US$73.1 million through an equity offering program.
• During the first quarter, it also executed a 1-for-4 reverse stock split.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Although Vyne is rapidly progressing well in the Dermatology market, there are uncertainties regarding the market adoption (regarding a favourable pricing and acceptance by patients or physicians) of AMZEEQ, and ZILXI, if approved. Moreover, Vyne has substantial debt levels and raising equity at a low price can permanently dilute shareholdings. The stock has been showing bearish momentum, while the Company is still into significant losses. In the absence of sufficient growth catalyst amid an uncertain outlook, we do recommend punting on this penny stock. The stock made a 52 week High and Low of USD 13.20 and USD 3.11, respectively.

Based on the weak fundamentals, bearish technical stance, recent stock split, we have given a “WATCH” stance on Vyne Therapeutics Inc at the closing price of USD 3.64 (as on 28 June 2021) while we look forward to reviewing the market acceptance of AMZEEQ. 

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

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