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mid-cap

Should You Consider These Beaten Down Stocks – NBIX, TPC

Feb 01, 2022 | Team Kalkine
Should You Consider These Beaten Down Stocks – NBIX, TPC

Neurocrine Biosciences, Inc.

NBIX Details

Neurocrine Biosciences, Inc. (NASDAQ: NBIX) is a neuroscience-focused biopharmaceutical company engaged in researching and developing innovative therapies for patients with severe neurological, endocrine, and psychiatric disorders. The company's commercial products include INGREZZA (for the treatment of tardive dyskinesia), ONGENTYS (for Parkinson's disease), ORILISSA (for severe pain associated with endometriosis), and ORIAHNN (for uterine fibroids). NBIX developed ORILISSA and ORIAHNN in collaboration with AbbVie Inc. As of January 31, 2022, the company's market capitalization stood at USD 7.28 billion.

Latest News:

  • Encouraging Results from Valbenazine: On December 07, 2021, NBIX announced positive top-line results from its Phase 3 KINECT-HD study, which looked at the efficacy, safety, and tolerability of valbenazine, a selective vesicular monoamine transporter 2 (VMAT2) inhibitor being studied as a once-daily treatment for adults with chorea associated with Huntington disease (HD). The trial's primary endpoint was a reduction in the severity of chorea, the cardinal motor feature of Huntington disease, as defined by the change in the Total Maximal Chorea (TMC) score from baseline to the average score at weeks 10 and 12.
  • Key Appointments: On November 30, 2021, NBIX announced the appointment of Dr. Jude Oniya, PhD, as its Chief Scientific Officer. Dr. Oniya carries the experience of over 25 years in the pharmaceutical industry and is tasked with boosting and expanding the company's therapeutic candidate pipeline. 

9MFY21Results:

  • Flat Revenues: NBIX witnessed a slight growth of 2.94% YoY in its total revenues to USD 821.5 million in 9MFY21 (ended September 30, 2021) compared to USD 798.0 million in 9MFY20, attributable to increased demand and growth in commercial activities.
  • Surge in Net Income: The company recorded a net income of USD 96.9 million during 9MFY21 vs. USD 59.4 million during 9MFY20.
  • Healthy Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including debt security investments) of USD 765.9 million and total debt of USD 330.7 million.

Key Risks:

  • Customer Concentration Risk: NBIX's two largest clients accounted for over 85% of sales and most of its accounts receivable balances in 9MFY21. As a result, a company's long-term financial health may be jeopardized if it places too much reliance on a small number of clients.
  • Product Concentration Risk: Product sales account for a significant portion of INGREZZA's revenue and earnings, putting the company in danger of product concentration.

Outlook:

  • FY21 GAAP Estimates: As of Q3FY21, NBIX stated that its total GAAP R&D and SG&A costs for FY21 are expected to be about USD 895-915 million.
  • FY21 Non-GAAP Estimates: It also anticipates combined non-GAAP R&D and SG&A costs in the range of USD 760-780 million. 

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.

Stock Recommendation:

NBIX's stock price has fallen 25.61% in the past three months and is currently trading around the lower band of its 52-week range of USD 71.88 to USD 119.99. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 93.70.

Considering the company's growth prospects, solid track record, favourable results from valbenazine, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 79.02, up 2.98% as of January 31, 2022.

Three-Year Technical Price Chart (as of January 31, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

 

Tutor Perini Corporation

TPC Details

Tutor Perini Corporation (NYSE: TPC) provides private and public general contracting, construction management, and design-build services. The firm builds and restores transportation infrastructure, water-treatment facilities, and various buildings. It organizes and plans the people, equipment, materials, and subcontractors needed for a project. TPC has three operating segments: civil, building, and specialist contractors, with the civil business accounting for the most revenue. As of January 31, 2022, the company's market capitalization stood at USD 619.00 million.

Latest News:

  • New Projects to the Backlog: TPC announced on December 2, 2021, that its subsidiary, Black Micro Construction Corp., had been awarded a firm-fixed-price contract worth USD 161.82 million by the Naval Facilities Engineering Systems Command, Pacific Division, for the development and construction of an aircraft parking apron and taxiway at Tinian International Airport in Tinian. The initial mobilization to the island will begin in April 2022, starting in June and ending in October 2025. This project will be added to the company's backlog in the fourth quarter of 2021.

 Q3FY21 Results:

  • Decline in Topline: The company reported an 18.30% decrease in revenues to USD 1.18 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.44 billion in Q3FY20, owing to reduced project execution activities in the Building segment, as various projects have been completed or are nearing completion, and newer projects that have recently been awarded have yet to contribute to revenue.
  • Strong Backlog: TPC reported a total backlog of USD 8.41 billion as of September 30, 2021, with the addition of USD 3.67 billion as new contracts.

Key Risks:

  • Operates in Schedule driven Industry: The majority of TPC's contracts have strict completion deadlines. Failure to satisfy the contractual timeline requirement could result in liquidated expenses and harm to the company's reputation.
  • Dependence on Government Projects: TPC relies on federal, state, and local governments for civil construction projects. As a result, any decrease or delay in government investment for such projects could negatively influence the company's financial performance.

Outlook:

  • EPS Estimates: TPC announced in its Q3FY21 earnings announcement that it expects EPS in the range of USD 1.70 - 1.85 in FY21, based on a robust backlog.

Valuation Methodology: EV/EBITDA 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.

Stock Recommendation:

TPC's stock price has declined 31.21% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 11.00 to USD 20.24. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 42.90. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 14.70.

Considering the correction in the stock price in the past nine months, recent commercial contracts, robust backlog, fostering outlook, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 11.90, down 1.82% as of January 31, 2022.