A Misunderstood Opportunity?

Sea Limited (SE) , a leading global consumer internet company, recently reported its third-quarter earnings. Despite robust revenue growth and improvements in EPS compared to the previous year, the stock experienced a significant downturn, primarily due to a miss in earnings projections and EBITDA estimates.

Earnings Report Highlights

• Earnings Miss: Sea Limited reported an EPS loss of $0.26, missing Wall Street’s expectations of a $0.03 EPS.
• Revenue Growth: The company achieved $3.45 billion in revenue, an 18% year-over-year increase, surpassing the Zacks Consensus Estimate.
• Year-over-Year Improvement: Despite the earnings miss, the EPS loss of $0.26 per share is an improvement from last year’s $0.66 per share loss.
• Investment Focus: The company expressed intentions to prioritize business investments, signaling a long-term growth strategy.
• E-commerce Competition: Increased competition in e-commerce is seen as a challenge, yet the company’s revenue growth suggests resilience.

Analysis and Opportunities

The stock decline following the earnings report may present a misunderstood opportunity for investors. The revenue growth and improvement in EPS year over year indicate underlying strength. Sea Limited’s strategic focus on long-term investment and resilience in a competitive market are promising signs for future growth. Investors looking beyond the short-term earnings miss may find potential in the company’s long-term prospects.

Follow @highflyinvest

Summary

Novocure is a global biotechnology company that developed and commercializes the Tumor Treating Fields (TTFields) therapy, an innovative treatment for solid tumor cancers. TTFields therapy uses electric fields to disrupt cell division, slowing or stopping cancer growth. The therapy is approved for the treatment of glioblastoma, a rare and aggressive brain cancer, and is being studied in other solid tumor cancers.

Changes

On September 22nd, Novocure (NVCR) announced that its Chief Medical Officer, Ely Benaim, will step down and leave the company. Novocure did not give a reason for the departure of Benaim, but the company has already appointed Piet Hinoul, currently Senior Vice President & Head of Global Medical Affairs, as the interim Head of Medical to ensure continuity during the search for a new CMO.

In addition to the CMO position, Novocure also announced changes to several other executive roles. Pritesh Shah, currently chief commercial officer, will transition into a new executive role as chief growth officer. In this role, Shah will have worldwide responsibilities for product and portfolio strategy, brand management, establishing a global framework for new launches and will also be responsible for new indications in the US. Uri Weinberg, currently chief science officer, will transition into a new role as chief innovation officer. In this role, Weinberg will be responsible for expanding the innovative potential of Tumor Treating Fields therapy. Moshe Giladi, currently senior vice president, Preclinical Research, will take up the role of chief science officer.

Impact

The departure of Benaim and the changes in other executive roles may raise some uncertainty among investors. However, the company has already taken steps to ensure continuity in leadership and has outlined specific plans for the new roles, which could be seen as a positive sign for the company’s future growth potential. It will be important to keep an eye on the company’s progress in filling the CMO position and how the new executive team performs in their new roles.

Follow @highflyinvest

Introduction

SoFi Technologies Inc (SOFI) is scheduled to report its Q4 earnings on January 30. Investors will be closely watching how SoFi’s revenue gets impacted in the current recessionary environment. But, in addition to tracking the headline financial figure, investors must also pay close attention to SoFi’s liquidity ratios, its member count, product sales, segment financials, and management’s outlook for Q1. These items will provide more color on the company’s operational positioning and are likely to influence where its shares will head next in the coming weeks.

Rapid Growth Despite Fears

Despite some fears, SOFI has continued to grow quite rapidly. If we extrapolate this growth with a slowdown for the next 5-6 years, then SoFi can be valued as a traditional bank with an upside potential of about 30-50%. If we separate its Technology Platform segment, then the upside potential of the “fair value” can be more than 50%, with a small premium to the implied price-to-sales ratio of the industry average.

Risks to Consider

There are a number of obvious risks to consider when looking at the potential of SoFi Technologies. First, a non-classical approach to cash flow calculation is used - it is impossible to value a bank using FCFF, so ROE and asset growth are primarily looked at. If the share of common equity as a percentage of total assets falls faster than expected and ROE stops growing at around 10%, the end result will not show the undervaluation currently being considered.

Second, the assessment of the Technology Platform segment is also quite subjective, as the sample companies used for comparison and the P/ ratio premium set are personal choices. There may be bias in this assessment.

The third point concerns the risk of a recession and, as a result, sustained inflation in the valuations of high-growth companies. Strong multiple contraction and concerns about the sustainability of the company’s business model led SoFi Technologies, along with other high-growth, unprofitable companies, to lose more than 77% of its market capitalization on the stock market since November 2021 (~80% from all-time highs). This poor price action may continue in the future if (SPY) bounces off its new resistance level and starts testing a new low shortly - by analogy with 2008.

Conclusion

Despite all the risks, however, SoFi Technologies seems to be an interesting growth company for a long-term investment. Even with a natural slowdown in current growth rates - which we see against the backdrop of an already turbulent global economy - SoFi’s intrinsic value is already higher than what one has to pay for it.

Follow @highflyinvest

All Star Parent

As investors, we’re always looking for ways to secure a better future for ourselves and our loved ones. And as parents, we know that raising happy and healthy children is one of the most important investments we can make. But, let’s be honest, being a parent can be overwhelming. With so many sources of information out there, it can be hard to find the advice and support we need to make the most of our parenting journey. That’s where All Star Parent comes in.

All Star Parent is a one-stop-shop for all your parenting needs. They collect, organize, and present valuable information that will save you time and energy as you navigate the challenges of parenthood. With their easy-to-digest content, you’ll be able to learn important parenting insights in just minutes, rather than hours. And with a wide range of topics covered, from education and health to discipline and development, you’ll always be able to find what you’re looking for.

But All Star Parent isn’t just a resource, it’s a community. As a parent, you know that you’re never alone in your struggles, and All Star Parent understands that. They foster a supportive environment where parents can connect, share their experiences, and learn from one another. And with a team of experienced and knowledgeable parenting experts, you can trust that the information you receive is accurate and reliable.

Investing in our children’s future is one of the most important things we can do as parents. And investing your time to be an All Star Parent is one of the best ways to ensure that we have the tools and support we need to raise happy and healthy children. So, if you’re looking for a way to make the most of your parenting journey, head over to All Star Parent today.

Introduction

ARK Innovation ETF (ARKK) is an exchange-traded fund (ETF) managed by Cathie Wood’s Ark Investment Management. The fund tracks companies that are at the forefront of innovation, such as those involved in the development of cutting-edge technologies like artificial intelligence, robotics, and biotechnology.

Recent Performance Challenges

ARKK has faced significant challenges in the past year, losing 68% in 2022 and is down 81% from its February 2021 peak. This underperformance has raised questions about the fund’s investment strategy and management.

A Long-term Perspective

In a year-end letter to investors, Wood acknowledged the tough market environment but emphasized that the fund has a long-term investment horizon. She noted that “fear of the future is palpable these days, but crisis historically has created opportunities” and that “in hindsight, both of those times were terrific opportunities to put funds to work in highly differentiated ways.”

A Focus on Disruptive Innovation

ARKK’s portfolio is focused on companies that are driving disruptive innovation, which can lead to higher volatility and short-term underperformance. However, Wood believes that these companies are well-positioned for growth in the long-term, as they are solving problems and gaining traction during difficult times.

Active Management

ARKK is actively managed, which means that the fund’s portfolio is constantly being adjusted to reflect the changing dynamics of the market. This active management approach allows the fund to capitalize on new opportunities as they arise and to avoid sectors that are no longer attractive. The fund’s managers have a strong track record of identifying and investing in innovative companies that are well-positioned for growth.

Analysis

weather short-term market fluctuations, buying into disruptive innovation at near lows can lead to significant long-term returns. As investors, it is important to have a clear understanding of the risks involved in investing in a fund like ARKK, but also to have faith in the ability of the fund’s management team to navigate a tough market environment.

Furthermore, it is important to note that innovation is the future and it is important to have a portion of one’s portfolio invested in companies at the forefront of new technologies and ideas. The world is constantly changing and evolving, and companies leading the charge in innovation are likely to be the ones shaping our future.

In conclusion, while ARKK has faced challenges in the past year, it is important to consider the long-term potential and the fund’s focus on disruptive innovation. As always, it is important to conduct thorough research and to consult a financial advisor before making any investment decisions.

Follow @highflyinvest

DermTech, Inc.(DMTK) is a medical technology company that is revolutionizing the way melanoma is diagnosed. The company’s genomic tests provide a differentiated approach to examining and diagnosing melanoma, an otherwise complex task. The company’s pigmented lesion division is its clear differentiator within the domain, and its DermTech Melanoma Test is a breakthrough in the market.

Despite the company’s innovative approach and differentiated growth prospects, DMTK’s stock performance in both 2021 and 2022 has been disappointing. DermTech’s management has blamed this on limited commercial payer coverage for the company’s skin genomics tests. The company hasn’t reported its full-year 2022 revenue yet, but CEO John Dobak warned in November that it’s likely to come in below the previous guidance range. Dobak attributed this to “growth in utilization with certain customers is tempered because of typical payor tactics to impede our adoption momentum.”

However, DermTech started off the new year with some positive news. On January 5, 2023, DermTech announced positive coverage decisions from four Blue Cross Blue Shield plans, which added roughly 13 million covered lives for DermTech’s melanoma test. Five days later, DermTech announced that its melanoma test had been recommended for coverage by Tricare, a federal healthcare program for armed services members, retirees, and their families that covers around 9 million people. This brought DermTech’s total covered lives to 113 million, a 24% increase from the end of 2022 and nearly doubled the number of non-Medicare covered lives.

Dobak stated in DermTech’s Q3 update that the company could add between 30 million and 40 million covered lives by the end of 2023 Q1. These recent developments suggest that he may be right.

DermTech is targeting a melanoma testing market of around $2.5 billion per year and is well-positioned to capture a significant share of this market. The company’s melanoma tests are 17 times less likely to miss a melanoma diagnosis, don’t require incisions, and are more cost-effective than surgical biopsies. However, the melanoma market is just the tip of the iceberg. DermTech believes that there’s a $10 billion annual opportunity in screening and assessing risk for more types of skin cancer. The company is testing a product called Luminate that evaluates damage from ultraviolet rays and assesses skin care risk, which could significantly expand DermTech’s addressable market.

While DermTech has a long way to go to achieve impressive commercial success, gaining government and private-payer coverage is a good start. The company must now convince more doctors to use its skin genomics tests and help patients and providers navigate the hurdles that insurers sometimes put in place. However, investors should recognize that DermTech could be years away from profitability. It’s important that the company be more niggardly with their spending as they are not yet profitable. But for those willing to take a chance on the company, the potential rewards could be significant. DermTech’s unique approach to melanoma diagnosis may be just what the market needs, and the company’s potential for growth in the future is undeniable.

Follow @highflyinvest

Introduction

Sea Limited (SE) is a Singapore-based company that operates in the digital entertainment, e-commerce, and digital financial services industries in Southeast Asia. The company has been on an upward trajectory in recent years, and its growth prospects continue to be promising.

Digital Entertainment

Sea Limited’s digital entertainment division, Garena, is the leading digital entertainment platform in Southeast Asia, with over 300 million active users. The division operates a variety of online and mobile games, as well as e-sports and live streaming services. Garena’s strong portfolio of popular games and its leadership position in the region make it a key driver of the company’s growth.

E-Commerce

Sea Limited’s e-commerce division, Shopee, is the leading e-commerce platform in Southeast Asia. Shopee has a strong presence in countries such as Indonesia, Vietnam, and the Philippines, and is expanding rapidly in other markets. The division’s focus on mobile commerce and its strong logistics capabilities have been key to its success.

Digital Financial Services

Sea Limited’s digital financial services division, SeaMoney, provides digital payment and financial services to consumers and businesses in Southeast Asia. The division has a strong presence in countries such as Indonesia and Vietnam, and is expanding rapidly in other markets. SeaMoney’s focus on mobile payments and its strong partnerships with local banks have been key to its success.

Growing Market

The Southeast Asian market is expected to continue growing in the coming years, with increasing internet penetration and rising incomes driving growth in the digital entertainment, e-commerce, and digital financial services industries. Sea Limited’s leadership position in these industries, combined with its strong growth prospects, make it a bullish investment opportunity.

Conclusion

Sea Limited’s strong growth prospects, diverse business lines, and leadership position in Southeast Asia make it a bullish investment opportunity. The company’s digital entertainment, e-commerce, and digital financial services divisions are all well-positioned to capitalize on the growing Southeast Asian market, and the company has a strong track record of execution.

Ford Motor Company Weighing a Spinoff of its EV Vehicle Unit on the Success of its 2022 Lineup:

Ford Motor Company (F) is considering a spin-off of its electric vehicle division in an attempt to unlock the type of market valuation that has given EV market leader Tesla (TSLA) a market value close to $1 trillion. Newcomers all electric car companies Rivian (RIVN) is worth $60 billion and Lucid(LCID) nearly $45 billion, with both just in their first year of production vehicles. Ford, the legacy car maker with over a century of automaking experience is currently valued at just over $70 billion.

The Mustang Mach-E, the Detroit automaker’s biggest bet on EVs, beat out Tesla’s Model 3 as Consumer Report’s “Top Pick” for the 2022 electric vehicle of the year. The F-150 Lightning, an electric version of the industry’s best-selling pickup, already has some 200,000 deposits.

EV sales have been forecast to comprise 34.2% of new US auto sales by 2030. If Ford can raise funds with an EV IPO and ramp production of its electric pickup line, shareholders could be in a good position to realize some value in the case of a spinoff of the EV division.

Follow @highflyinvest

As WSJ reported this past Friday Amazon(AMZN) is amongst a number of other companies are in talks to potentially buy Peloton(PTON). Since new reports have emerged on Nike(NKE) and Apple(AAPL). Would an Apple acquisition of Peloton make sense?

Strategic Fit

Late in 2020, Apple launched Apple Fitness+ which offers home workouts via their products. In the latest earnings call’s Apple CEO Tim Cook announced some new features for the company’s Fitness platform.

While Apple has made several smaller acquisitions over the years, the largest hardware acquisition in the company’s history was in 2014 when the company purchases Beats. At the time Apple was focusing on their music subscription business and the Beats purchase helped bring renewed attention to Apple’s music offering.

Now that Apple is investing in the growth of their fitness business, an acquisition such a Peloton may make a lot of strategic help, similar to how Beats helped their music subscription service gain traction.

Apple consistently holds one of the largest piles of cash on hand out of any corporations. At the end of January, they were sitting on reserves of $195.57 billion. To put that in perspective, Amazon, one of the leading contenders for a Peloton takeover, had “only” $68.4 billion in reserves at their last quarter end.

Additionally, Apple could bring their strong music platform to Peloton, broadening the artists and songs offered in classes. As a Peloton user, one area I believe they’ve always needed to improve on was their music library.

Follow @highflyinvest

Microsoft Metaverse Merger

Microsoft (MSFT) to acquire Activision/Blizzard (ATVI) for 68.7 billion for $95 per share in cash. That’s a 45% premium from where the stock was trading before the deal — but still below it’s all time high price. The deal is expected to close in 2023

Activision makes gaming titles such as Call of Duty, Crash Bandicoot, Guitar Hero, Tony Hawk, World of Warcraft, StarCraft, Diablo, Hearthstone, Heroes of the Storm, Overwatch, and Candy Crush Saga

Bobby Kotnick would will remain in charge of the Activision division, as least in the near term future. The company has recently been battling sexual harassment allegations, and some employees signed a letter to remove Kotnick for not doing enough on the matter.

Microsoft is likely looking to boost it’s gaming division and give itself a headstart for the much anticipated metaverse. “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft CEO Satya Nadella stated.

Follow @highflyinvest