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RECAP OF LAST WEEK AND RESULTS:
KBR: This plastics and engineering company based out of Houston recently jumped a bunch as they are proving to be a valuable company that pays dividends with much more growth in revenue. They were at $37 last week and reached a high of $38.64. We think they will be at $40 within the next 3 weeks. Selling a call credit spread on this company could be an excellent way to profit as they are slowly moving their share price up over time.
Vanguard Total Stock Market Index Fund ETF: At $206 a share last week we think they could fall down a bit within a month. We projected they will hit 202 within 3 weeks. They currently rest at $209 per share. We do think they will continue in the long-term to go upwards.
XPeng: This electric vehicle developer and manufacturer was projected to be a winner by Motley Fool and we think that this is true. At 32.51 last week, they reached our target of $35 quickly and topped out at $38.71. This stock did really well last week. We expect a continuation in share price increase as they continue their growth in the EV space.
IN THIS ISSUE
A biotech we have covered in the past at a higher share price. This company has a very large catalyst coming up for the reveal of sales for their new drug.
Beneficiary of Biden’s infrastructure plan.
Aurinia Pharmaceuticals: AUPH
This company is aiming to produce a best in class oral drug that treats a variant of Lupus called Lupus Nephritis. Their drug was approved recently by the FDA and they are currently working on distribution and sales. They are estimated to make peak sales of 1 Billion to 3 Billion a year which is a very wide range. This could be an excellent opportunity for market arbitrage if they are able to take most of the market share of the Lupus Nephritis patients. Each patient would net around $65,000 annually. The average time a patient would be on the drug is around 1 to 2 years. Lupus Nephritis is a rare disease so there are many estimates on how many people have this disease in the US, however there is no standard method to find how many people there are exactly. The estimate of patients in the US has ranged from 60,000 to 100,000 a year.
After the FDA approval, the company stock price popped up to $21 a share and since then have been hammered down to a low of $12 a share. Aurinia currently rests at $13.14 a share and has reversed its price direction in the short term. We think there are many reasons why they have trended down, but the main reasons are profit-taking from institutions and the risk of Aurinia Pharmaceuticals failing to have a successful product launch. We think large investors have lost confidence since they decided to launch their drug by themselves. Historically the rate of small biotechs succeeding in product launches is low. The CEO Peter Greenleaf has bolstered repeatedly that they are going to have the top product launches of the decade.
Another reason for the downward price action is the non-transparency with the actual prescription numbers. Each prescription can be equated to $65,000 and since investors do not have this information, this is making it difficult to price the company correctly. Again, we think this is an excellent opportunity to seize some shares before they disclose the prescriptions that have been written by doctors for their drug. Another edge that we have found is that another company has gotten their IV drug approved for Lupus Nephritis a month before Aurinia. They have had their scripts shown publicly and as soon as Aurinia was approved by the FDA, their script numbers started falling. This shows that Aurinia may be taking some market share of their only competitor.
The reasons Aurinia is probably going to be the leader in the LN market is because they have an oral drug that is easy to take, they also have a quicker complete response time for the drug to work and their regimen weans patients off of steroids much quicker. This is very important in the health of the patient as they are able to protect their kidneys much faster and more conveniently than any existing drugs on the market.
Expecting a run-up in price before they release their prescription numbers in May.
Current Price: $13.14
One Month Target: $18
One Year Target: $35
Two Year Target: $40
Buying shares and holding will return you 2-3x what you put into after 6 months to 2 years out.
We think a leaps call option would be a good idea. This company could be bought out and buying a long-dated call option would return ~ 4-6x and also have little decay while waiting for a year.
NextEra Energy: NEE
Let's talk about a stock that will benefit from Biden’s infrastructure plan. “NextEra Energy Resources delivers clean energy across much of North America, helping provide sustainable solutions to meet evolving energy needs. We develop, construct and operate power projects to produce electricity.” A lot of companies will benefit from Biden's proposed infrastructure plan, but we looked at energy specifically. We also expect the EV sector to benefit heavily from this plan, but we wanted something a little different.
NextEra Energy had impressive earnings per share until the 4th quarter in 2020. They will be reporting earnings for Q12021 April 22nd premarket so that is something to keep an eye on. However, the infrastructure plan could push for more usage from renewable sources and this will boost NextEra’s future earnings up quite a bit.
“Achieved adjusted EPS of $2.31, up ~10.5% from prior year
Deployed more than $14 B in capital; largest capital program in our history
Over the past 10 years, we have delivered compound annual growth in adjusted EPS of ~8%
Highest among all top 10 power companies, who have achieved, on average, less than 3% over the same period”
This is a stock that we expect will slowly increase in value Current Price: $75.80 One Month Target: $80 One Year Target: $95 Two Year Target: $130
This stock could benefit greatly from Biden's infrastructure plan, but even without it, the stock has proven to stand out. As we move forward, the push for renewable energy will be greater and greater. NextEra energy has shown they can excel. They have a great business model and have gone up 41% over the last year.
Within a year, we will see this company head higher as long as they can keep their promises with their schedule.
A put credit spread might be good here as they could start trending upward slowly while the Biden infrastructure plan is in the works.
All stocks talked about we have invested in, and do not intend to give advice nor recommend acting upon the information.
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Until next week,
and the Optifinancial Team
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