Baker Hughes Company

BKR Details

Baker Hughes Company (NYSE: BKR) is an energy technology company that provides a wide range of products and services to consumers in the energy and industrial value chains. Its operating segments are 1) Oilfield Services (OFS), 2) Oilfield Equipment (OFE), 3) Turbomachinery & Process Solutions (TPS), and 4) Digital Solutions (DS). With operations in over 120 countries, it principally provides products and services in the upstream, middle, and downstream sections of the oil and gas sector. As of January 12, 2022, the company's market capitalization stood at USD 28.11 billion.

Latest News:

• Key Commercial Contract: On December 16, 2021. BKR was awarded a contract by Santos, Australia's top natural gas producer, to supply turbomachinery equipment for the Moomba Carbon Capture and Storage (CCS) project. The project will serve a gas processing plant and permanently store 1.7 million tonnes of CO2 in depleted natural gas reservoirs in South Australia's onshore Cooper Basin. BKR will deliver gas turbine, compressor, and heat recovery steam generator (HRSG) technology (CO2) to compress the carbon dioxide.

Q3FY21 Results:

• Flat Topline Growth: The company witnessed YoY growth of 0.87% in total revenues to USD 5.09 billion in Q3FY21 (ended September 30, 2021) compared to USD 5.05 billion in Q3FY20, driven by increased volumes in Oilfield Services, Turbomachinery & Process Solutions, and Digital Solutions segments, partially offset by Oilfield Equipment.
• Improvement in Net Income: In Q3FY21, net income attributable to shareholders was USD 8.0 million, compared to a net loss of USD 170 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 4.33 billion and total debt of USD 6.76 billion.

Key Risks:

• Input Risk: BKR's manufacturing operations rely on having enough raw materials, components, and manufacturing capacity to meet its production goals at a reasonable cost and with minimal inventories. Failure to manage the manufacturing process can affect the company's ability to accomplish its goals and revenue projections and prevent raw material shortages or oversupply.

Outlook:

• Positive Outlook: BKR expects sustained signs of global economic recovery in Q4FY22 and FY22, resulting in increased demand for oil and natural gas. It also anticipates a return to normalcy in offshore markets, and it remains bullish on LNG and natural gas markets in the long run.

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.

BKR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

BKR's stock price has increased 31.35% in the past nine months and is currently leaning towards the higher band of its 52-week range of USD 18.75 to USD 27.66. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 66.61. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 24.49.

Considering the uptick in the stock price, technical indicators, 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 closing price of USD 26.73, down 0.85%, as of January 12, 2022.

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

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

Sage Therapeutics, Inc.

SAGE Details

Sage Therapeutics, Inc. (NASDAQ: SAGE) is a biopharmaceutical company that develops and markets therapies to treat illnesses of the central nervous system. It generates revenue by selling ZULRESSO (brexanolone), an injectable used to treat postpartum depression (PPD). It is also working on treating brain illnesses and disorders, specifically depression, neurology, and neuropsychiatry.

Latest News:

• Encouraging Results from Zuralone: On December 08, 2021, SAGE and Biogen, a pioneer in neuroscience, released new findings from the LANDSCAPE clinical development program (CDP) of Zuranolone in Major Depressive Disorder (MDD). Patients in the WATERFALL study of the LANDSCAPE CDP who received zuralone 50 mg showed rapid improvements in depression and anxiety symptoms as early as the first recorded timepoint, with average benefits continuing through the study's end (Day 42).

Previously on December 01, 2021, SAGE and Biogen announced positive one-year Zuranolone 50 mg data in Patients with MDD in the ongoing open-label SHORELINE study. Zuranolone 50 mg was generally well tolerated, with an overall adverse event profile comparable with previous data and a 6.5% discontinuation rate due to adverse events.

Q3FY21 Results:

• Contraction of Topline: The company reported a YoY decline of 12.14% in total revenues to USD 1.44 million in Q3FY21 (ended September 30, 2021) from USD 1.64 million in Q3FY20, on account of less product revenue from ZULRESSO.
• Increase in Net Losses: Its net loss increased to USD 130.17 million in Q3FY21 vs. USD 105.74 million in Q3FY20.
• Robust Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 1.84 billion and no outstanding debt.

Risks:

• Product Concentration Risk: SAGE's future will be impacted by the success of its two major projects, Zuranolone (SAGE-217) and Brexanolone, both of which are in Phase 3 clinical trials.  It has invested significant resources into its development.  As a result, any failure to get regulatory approvals or establish an effective manufacturing and distribution system could harm the company's financials.
• Third-Party Dependence: SAGE doesn't have a manufacturing facility of its own it relies on third-party suppliers to produce ZULRESSO. It could endanger its ability to meet product demand and impair the company's overall performance.

Outlook:

• Cash and Cash Equivalents Guidance: SAGE estimates its cash, cash equivalents, and marketable securities to be over USD 1.7 billion at FY21 end.

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.

SAGE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

SAGE's stock price increased 10.82% in the past month and is currently leaning towards the lower end of its 52-week range of USD 36.13 to USD 98.39. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 56.38. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 39.31.  

Considering the uptick in the stock price, current valuation, and technical indicators, 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 43.54, down 0.07%, as of January 12, 2022, at 12:57 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.