eGain Corp (NASDAQ: EGAN) automates customer engagement with an innovative Software as a service (SaaS) platform, powered by deep digital, Artificial intelligence (AI), and knowledge capabilities. It provides its products to industries such as financial services, telecommunications, retail, government, healthcare, and utilities. 

Key highlights 

• Fiscal 2022 financial guidance: On the back of an improving economy and increasing customer number, the company forecasts consolidated sales for FY2022 to be in the range of USD 89.0 – 90.5 million, representing a Y-o-Y increase of 14% to 16%. Moreover, it is an increase from its previous annual revenue guidance of USD 88.2 million to USD 89.8 million. On the bottom line the company expects to be on a breakeven or book a loss of USD 1 million.

• Increasing SaaS Revenues: The company believe SaaS revenue better reflect the business momentum and it is transitioning itself to a SaaS only business model. SaaS revenue represented 89% of total revenue for the three months ended September 30, 2021. This represented an increase by 20% to USD 19.1 million against USD 15.9 million in the previous corresponding period. On a brighter note, the company expect its SaaS revenue to increase on a year over year basis.

• Higher cash from operations: On the back of healthy operations and prudent management the company clocked elevated cash from operations in the reported period, which stood at USD 7.1 million against USD 5.7 million in the previous corresponding period.
  

Risks associated with investment: The company’s business depends substantially on clients renewing their agreements, purchasing additional products, or adding additional users. If customers do not renew their contracts with them or reduce the services purchased, their revenue will decline, and their business, operating results, and financial condition may be adversely affected. 

Financial Overview of Q1 2022 (Expressed in 000 of USD)

Source: Company Filing

• In Q1 2022, the company registered a growth in its revenue at USD 21.4 million compared to USD 19.0 million in the previous corresponding period. The rise in revenue was mainly due to healthy performance from subscription services.
• On the back of higher revenue and lower cost of revenue, the company improved its gross profit to USD 16.1 million against USD 14.4 million in pcp.
• Total expenses increased to USD 15.4 million in Q1 2022, against USD 12.0 million in pcp, mainly due to higher sales and marketing cost and higher R&D cost. As a result, an income from operations fell to USD 0.6 million compared to USD 2.3 million in pcp.
• Net income in the reported period stood at USD 0.5 million compared to USD 2.0 million. The decline in net income was mainly due to the above-stated reasons.

Valuation Methodology (Illustrative): EV to Sales

Analysis by Kalkine Group 

Stock recommendation 

The company is off to a good start to the new fiscal year, delivering record total revenue with double digit growth. With expanding sales coverage, the company look forward to continuing the positive momentum and growing market share this fiscal year. In addition, the firm provided sales and net income forecast for FY2022, which appears to be positive. Therefore, based on the rationales discussed above and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 10.10 on January 18, 2022.

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.

One-Year Technical Price Chart (as on January 18, 2022). Source: REFINITIV, Analysis by Kalkine Group

AcelRx Pharmaceuticals, Inc

AcelRx Pharmaceuticals, Inc. (NASDAQ: ACRX) is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings

Key Updates:

• Recent acquisition update: On January 10, 2022, the company acquired Lowell Therapeutics, Inc. at a purchase consideration of 9,009,538 common shares of AcelRx along with cash amount of USD 3.5 million. Additionally, Lowell's lead product, Niyad™ was granted FDA approval. This medicine has the potential to derive ~USD 200 million annual revenue due the limited options within the anticoagulation of the dialysis circuit segment.
  

• Company’s product DSUVIA® reported impressive results: Recently, the group reported encouraging response from one of its products, sufentanil sublingual tablet 30 mcg (SST; DSUVIA®) which is used for the treatment of Total Joint Replacement Surgery. The above study reported impressive results and has lowered the time required for the patient to stay in the hospital.
  

• Reported higher liquid investments: At the end of Q3FY21, the company reported its cash balance of USD 13.271 million and short-term investments of USD 35.428 million, which is equivalent to USD 48.699 million, higher than USD 42.886 million in Q4FY20. This is likely to improve the company’s liquidity level.
  

Risks: The products are subjected to regulatory approvals, while a delay might impact the planned commercialization of the product. 

Q3FY21 Financial Highlights:

• In Q3FY21, total revenue surged to USD 1.862 million from USD 1.368 million in pcp. The growth was primarily due to higher income from Contract and other collaboration segment.
• Total operating costs and expenses stood at USD 10.495 million, slightly higher than USD 10.405 million in pcp, due to a higher Research and development cost and an increase in the selling, general and administrative expense, partially offset by lower cost of goods sold.
• Net loss stood lower at USD 8.375 million, as compared to a net loss of USD 8.930 million in pcp. This was partially supported by a lower interest expense.

Q3FY21 Income Statement Highlights (Source: Company Report) 

Valuation Methodology (Illustrative): EV to Sales based

Analysis by Kalkine Group 

Stock Recommendation:

With the acquisition of Lowell Therapeutics, Inc., the company might witness first movers advantage within the renal replacement therapy (i.e Niyad), used for acute kidney injury patients and might lead to improved prospects for the company in the coming period.

We have valued the stock using the EV to Sales-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered industry (Biotechnology & Medical Research) median on an NTM basis. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of ACRX at closing price of USD 0.525 on January 18, 2022.

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.

One-Year Technical Price Chart (as on January 18, 2022). Source: REFINITIV, Analysis by Kalkine Group 

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.