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Square, Walmart, and Aurinia Pharmaceuticals



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RECAP OF LAST WEEK AND RESULTS:


r/Wallstreetbets vs. Hedge Funds: Last week, we saw the rally of Redditors slow down, there could be an uptick in its price as brokerages are allowing traders to buy GME and others that had skyrocketed. Here is the bubble prediction we made with GME. It was pretty accurate on the price range. GME sits at $66 per share now. The market seems to have shaken off the worries and is at all-time highs.


Disney: Disney was $169 per share, we called it to go above $172, and it is at $180 per share. We sent an email alert to our premium subscribers of an option play that netted over 100% returns. Here is a blog post discussing our thoughts. We still think it could go above $189 before earnings.


Airbnb: From its price of $183, We called this stock to move to $178 before going back up. They reached $195 per share this week. We called this perfectly as it went to $177.11 on Tuesday before running back upwards.


IN THIS ISSUE


Square

The pandemic has significantly increased the use of Square and expected earnings.  


Walmart

Earnings report on Feb 18th, plus the impact of their new subscription-based service. 


Aurinia Pharmaceuticals

Potential buyout could elevate the price to $45 a share. Long term hold. Risk has been taken away, and the company is on a fire sale.

Square: SQ

Square is a company that elevates small business and normal people to complete sales transactions. They take a small percentage of each transaction. They are expected to grow more with the number of users that have begun building their businesses in the pandemic.

Some of their services include Cash App, and they offer a point of sales registers that work with phones and for brick-and-mortar companies.


Traditional employment is becoming less of a reliable source of income as more individuals are exploring entrepreneurism. Growth will be large in the upcoming year as you see the small business startups succeed, you will see Square succeed as well. It is an impulse response situation where the impulse of new clients in effect will create an exponential response in Square’s growth. Square should see sustained growth, especially with peer-to-peer transactions becoming very common. Cash App dominates this space as well. We expect Square to crush earnings on February 23rd.

Price Forecast

Current Price: $240

One Week Target: $245

One Month Target: $265-280

One Year Target: $300


This is a buy in our opinion before earnings. We look to sell before earnings to reduce our risk.

Walmart: WMT

Walmart is a company that provides several different shopping centers across the world.

Walmart had a total of 4,756 stores throughout the United States as of January 31, 2020.” And that is just in the United States. They also own Sam's Club and many other stores in different countries.


Walmart will report their earnings on February 18th premarket and I expect them to shine. The 4th quarter earnings reports have been incredible for multiple companies even with a “struggling” economy. Companies like Amazon, Apple, Tesla, Pinterest, Peloton… we could list several more, the point we are trying to make is that there was a lot of money spent in the last quarter of 2020, and we expect Walmart to have received a good portion of it. Providing Food and gifts for the holidays should give WMT a great earnings report.


The price of the stock has steadily moved up over the past five years (119%), but very little in the last three months. The price hit $152 for a while and then actually moved down and is sitting at $144.36 currently. I expect the price of the stock to move up this week ahead of earnings and then stay there on a good earnings report.


Price Forecast

Current Price: $144.36

One Week Target: $151.40

One Month Target: $154

One Year Target: $175


Walmart released a service called Walmart+ which basically serves as an Amazon-like service. You can order online with this subscription-based service, get discounts in-store, get free shipping and receive discounts on fuel. Basically, competing with Amazon in the online delivery sector. This service launched on September 15th and this earnings report should give us some insight into how it is doing. If Walmart+ has a good following after operating for just six months I think this could move the stock even further up. Regardless they should have good earnings.


This is a buy in our opinion.

Aurinia Pharmaceuticals: AUPH

Aurinia is a company aiming to treat Lupus Nephritis. They recently had their first FDA approval of Lupkynis which is currently the best Lupus treatment and will be the new standard of care for the coming future. The company is currently on a mission to execute sales of the drug to doctors which will prescribe it to patients.


Price Forecast

Current Price: $15.75

One Week Target: $17

One Month Target: $35

One Year Target: $70


After the FDA approval, Aurinia’s stock price jumped from $15.50 to $22. It has since then been declining in value back to its pre-FDA approval. This company is going on an absolute fire sale. There are many positive catalysts in this company's future.


Here’s a list of some:

  • A perfect candidate for a buyout

  • They have one drug in their pipeline. This means they have a high risk of running out of cash flow in the future if they do not innovate on new drugs. It would make sense for a company in their position to get bought since they do have intellectual rights to their drug until 2037. The FDA rejection risk is now off the table and they have much room to grow. The simplicity of the company should make for a smoother buyout. One caveat of complexity is the licensing deal they made with Otsuka which is a company that plans to sell the drug to Europe and other countries around the world. Aurinia will make a 10-20% commission off the revenue.

  • Aurinia is a small company and has limited ability to leverage the sales and distribution of the Lupkynis. It would be wise for them to consider any buyout offers that they receive. I believe that they could be bought out for 6-8 Billion. They could make around 45 Billion all the way out to 2037.

  • Their current market cap of 1.7 Billion suggests they will only be making a few hundred million off of their drug every year. Aurinia tends to under commit and over perform. Many analysts think that the stock’s target price should be around $37 per share.

  • Biogen is a company that is very interested in looking for a company that can treat Lupus in general. Since Aurinia has the drug that is best in class for the subset of the disease Lupus Nephritis, it would be feasible for Biogen to buy out Aurinia. If a Buyout occurred, from our napkin math, we should see it bought out for a multiple of its forward projected earnings of 1 Billion to 2.5 Billion a year. Since Biogen has bought out a company before and the drug was rejected by the FDA, I think Biogen has the perfect opportunity to buy a company with a successful FDA approval.

  • We do think that Aurinia has been conservative with their numbers so that they will over achieve on their future earnings reports. We think if they could show a path to making over 1 Billion in these next two earnings reports. This would effectively double or triple the stock price to around $30-45 a share. We think the downside to holding shares in this stock in the long term has very low risk. We think there is a higher chance to double your money or even triple it. We should see some movement in the stock price as the script numbers come out. These are the total numbers of prescriptions sold.

Here is an idea we are acting on ourselves:

We think there is a small chance Aurinia could announce a buyout before February 19th. The call options for this are extremely inexpensive and could raise in value by 20x if the buyout were to happen. We are holding $19 call options, expiring February 19th.


We are holding stock and look to hold until buyout or until the stock reaches $45-60 a share.

Thanks for joining us. If you find this information helps you, please share it with someone else! It will help us out greatly.

Until next week,

Brad Mitchell

Colby McCoy

and the Optifinancial Team

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