AerSale Corporation

ASLE Details

AerSale Corporation (NASDAQ: ASLE) is an integrated, diversified global leader in aviation aftermarket products and services. Its operating segments include 1) Asset Management Solutions (AMS), which deals in the sales and leasing of aircraft, engines, and dissembled spare parts to passenger and cargo airlines and Original Equipment Manufacturers (OEMs); and 2) Tech Ops, which offers the sale of engineered solutions, aircraft modification, and Maintenance, Repair, and Overhaul (MRO) services.

Q2FY21 Results: The company reported YoY growth of 102.67% in the total revenue to USD 91.92 million in Q2FY21 (ended June 30, 2021) compared to USD 45.36 million in Q2FY20. AMS segment, representing 65.60% of the total revenue in Q2FY21, expanded by 189.19% YoY, whereas the Tech Ops segment registered an improvement of 29.04% YoY. ASLE reported a net income of USD 16.55 million in Q2FY21 vs. a net loss of USD 7.94 million in Q2FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 41.81 million and no outstanding debt.

Key Risks: ASLE operates in the commercial aviation industry and faces direct competition from more prominent domestic and international players with higher financial and operational resources at their disposal, which could cause pricing pressure for the company. Should this trend continue, it could harm the financials of the company.

Outlook:  For FY21, ASLE forecasts its revenue to be in the range of USD 340 - 360 million, with adjusted EBITDA to the tune of USD 60 - 70 million. ASLE's guidance rides on the anticipated revenue from the converted passenger-to-freighter (P2F) Boeing 757 aircraft and strong demand for MRO services at the airports. Due to the strong demand for cargo conversion aircraft, ASLE expects to monetize most of its available aircraft in FY21.

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.

ASLE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ASLE's stock price increased 11.16% in the past one and three months and is currently close to the lower-band of the 52-week range of USD 8.68 to USD 18.35. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 63.30. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 14.47. Considering the uptick in the stock price, a surge in the top and bottom line, no long-term debt, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 13.25, up 1.15% as of August 20, 2021, 12:41 PM ET.

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

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

PetMed Express, Inc.

PETS Details

PetMed Express, Inc. D/B/A 1-800-PetMeds (NASDAQ: PETS) is a pet pharmacy in the US that markets prescription and non-prescription pet medications and other healthcare products for dogs and cats, direct to the consumer. Its product line consists of approximately 3,000 Stock Keeping Units (SKUs) of pet pharmaceuticals, health items, and supplies. In addition, PETS markets its products through promotional campaigns to increase awareness of its '1-800-PetMeds' and the 'PetMeds' brands. As of August 20, 2021, the company's market capitalization stood at USD 551.87 million.

Q1FY22 Results: The company reported a 17.56% decline in sales to USD 79.31 million in Q1FY22 (ended June 30, 2021) compared to USD 96.20 million in Q1FY21. Reorder Sales, which represented 89.44% of the total revenue in Q1FY22, decreased 11.80% YoY, whereas the New Order Sales reported a YoY decline of 46.92%. Net income for the company reduced to USD 4.43 million in Q1FY22 vs. USD 7.78 million in Q1FY21. As of June 30, 2021, the company had cash and cash equivalents of USD 111.79 million and no outstanding debt.

Key Risks: In FY21, customers in California, Florida, Texas, New York, Pennsylvania, North Carolina, Georgia, and Virginia accounted for ~51% of PETS' net sales. Hence, any suspension or revocation of the company's license to operate a pharmacy in these areas or if the company is no longer able to operate in these critical markets could harm its financials. In addition, PETS' business is subject to strict federal and state regulations, non-observance of which could lead to recall or even suspension of its pharmacy license.

Outlook: PETS expects to incur ~USD 1.5 million in capital expenditures in the remainder of FY22. It also anticipates growth in Reorder Sales in H2FY22 owing to an increase in renewed prescriptions.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PETS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: PETS' stock price decreased 24.30% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 24.75 to USD 57.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.22. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 32.57. Considering the significant correction in the stock price, balance sheet strength, encouraging outlook, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 26.66, down 1.70% as of August 20, 2021.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.