Tag: first quarter that ended March 31

PDD Holdings' International Expansion: Can Temu Replicate Domestic Success Abroad?

Posted on by The INO.com Team

With a $204.04 billion market cap, PDD Holdings Inc. (PDD) is a leading Chinese e-commerce company. It surpassed revenue and earnings consensus estimates for the first quarter of fiscal 2024, powered by its international marketplace, Temu, and increasing consumer interest in its flagship discount e-commerce platform, Pinduoduo.

For the first quarter that ended March 31, 2024, PDD’s revenues increased 130.7% year-over-year to $12 billion. That surpassed analyst estimates of $10.58 billion. Revenues from online marketing services and others were $5.88 billion, up 56% from the prior year’s quarter, and revenues from transaction services rose 327% year-over-year to $6.14 billion.

The discount e-commerce giant’s non-GAAP operating profit grew 237.4% from the prior year’s period to $3.95 billion. Further, PDD’s non-GAAP net income attributable to ordinary shares rose 202% from the year-ago value to $4.24 billion. It posted non-GAAP earnings per ADS of $2.86, compared to the consensus estimate of $1.43, and up year-over-year.

“In the first quarter, we continued our investment in key areas critical to our high-quality development strategy,” said Ms. Jun Liu, VP of Finance of PDD. “Rather than focusing on short-term results, we prioritize long-term value creation and remain committed to further deepening our investments in the future.”

During the quarter, PDD’s cash inflows from operating activities came in at $2.02 billion, an increase of 1,474% year-over-year, primarily due to a surge in net income. As of March 31, 2024, the company’s cash, cash equivalents and short-term investments stood at $33.50 billion.

“We are committed to offering a trustworthy shopping environment for our users around the world,” commented Mr. Lei Chen, PDD’s Chairman and Co-Chief Executive Officer. “We will keep focusing on growing our long-term intrinsic value through investing in initiatives that bring sustainable impacts to our communities.”

PDD has gained market share with highly competitive prices at home and abroad. Shares of PDD have surged more than 115% over the past year.

PDD Holdings’ exceptional financial performance in the first quarter is mainly fueled by solid user growth and sales at its global marketplace, Temu. Let’s analyze Temu’s potential to drive the company’s growth in international markets by examining the competitive landscape, regulatory hurdles, and strategic moves.

Strategic Initiatives

Temu, an online marketplace operated by PDD Holdings, sells a variety of products from fashion to household, primarily made in China, for rock-bottom prices. Temu’s business strategy focuses on attracting customers via competitive pricing, social buying, heavy advertising, and an immersive technological design. Its business model has allowed it to gain immense popularity since its launch in 2022 in China and overseas.

Temu platform went live in the U.S. in September 2022, offering products across more than 15 categories. It was the first major overseas push of PDD Holdings and expanded in several countries, including Australia, New Zealand, France, Italy, Germany, the Netherlands, Spain, and the United Kingdom.

On January 17, 2024, Temu officially launched in South Africa, marking the 49th country the e-commerce marketplace had entered since 2022.

To drive robust growth in international markets, Temu has implemented several strategic initiatives. The cross-border e-commerce marketplace tailors its product selections to meet the preferences of local markets. It also collaborates with local suppliers, manufacturers, and logistics providers to ensure efficient operations, enhancing its market presence.

Moreover, Temu invests heavily in marketing to build brand awareness and attract customers, including digital advertising, social media campaigns, and localized promotional events. As per J.P. Morgan analysts, Temu invested around $1.7 billion in advertising in the past year, a figure anticipated to climb to $3 billion this year.

The international marketplace also utilizes advanced technologies to personalize shopping experiences, optimize product recommendations, and enhance customer service. Further, AI-driven insights help Temu in understanding evolving consumer preferences and trends.

Competitive Landscape

Temu faces fierce competition from established e-commerce rivals, including Shein, eBay, Alibaba Group’s (BABA) AliExpress, and Amazon.com, Inc. (AMZN) in the U.S. and other markets.

Moreover, PDD’s value-for-money positioning and the remarkable growth of its Temu marketplace have enabled the company to maintain its leadership position in China’s e-commerce market. PDD Holdings’ outstanding first-quarter results sparked a significant surge in its stock price, propelling its market capitalization past that of its competitor, Alibaba.

“We think Temu’s profitability will improve faster than previously estimated due to its introduction of the half consignment model, under which logistics costs will be borne by merchants,” Morningstar said in a note.

“We also believe PDD’s domestic platform will be able to defend its position given the strong consumer perception of its value-for-money positioning,” said Morningstar analyst Chelsey Tam, adding that PDD Holdings comes up top in their preferences, while JD.com and Alibaba are in second and third spots, respectively.

In line, Goldman Sachs increased PDD’s rating to “buy” from “neutral,” citing the company’s continued growth momentum in advertising revenue in the first quarter and Temu’s potential.

This stock upgrade comes “on the back of its adtech capabilities combined with China’s cost-competitive suppliers/merchants /supply chains alongside favorable risk-reward, with the current market cap implying no valuation ascribed to Temu,” stated Goldman Sachs analyst Ronald Keung.

According to Earnest Analytics, Temu had acquired approximately 17% of the U.S. online discount store market as of last November.

In addition to leading the Chinese e-commerce arena and successfully expanding into Western markets, Temu has overtaken Shein by staying at the top of shopping app rankings in Japan and South Korea for a longer period. The emerging e-commerce app is focused on selling cheap goods to international customers.

Regulatory Issues

Chinese e-commerce retailers have faced rising scrutiny on handling content on their platforms. On May 31, 2024, the European Union (EU) announced adding Temu to its list of platforms facing the bloc’s highest level of digital scrutiny. By September this year, the online marketplace must adhere to the DSA’s most strict rules and obligations, including assessing and mitigating “systemic risks.”

“Temu must put in place mitigation measures to address risks, such as the listing and sale of counterfeit goods, unsafe products, and items that infringe on intellectual property rights,” the EU, the 27-nation bloc’s executive arm, said in a press release.

The company acknowledges the European Commission’s decision. “We are fully committed to adhering to the rules and regulations outlined by the DSA to ensure the safety, transparency, and protection of our users within the European Union,” PDD Holdings added.

Bottom Line

Established in 2022, Temu is PDD’s e-commerce marketplace aimed at expanding the company’s footprint beyond China. It has started entering international markets just in the past two years. And it has since grown in immense popularity by offering affordable products, ranging from apparel to home products, shipped down from China.

Since its initial launch in the U.S., Temu has rapidly expanded its operations to 49 countries, with South Africa being the latest. PDD’s value-for-money positioning and outstanding growth of its Temu platform have helped the company lead China’s e-commerce market.

The marketplace aims to replicate the company’s success in China by offering attractive deals and localized products to international customers. Temu’s unique business model focuses on attracting customers by offering products at prices below the industry norms, aggressive marketing, and technological innovation.

Although Temu faces stiff competition from established e-commerce rivals across America and other markets, it leverages strengths in PDD’s social commerce, cost-effective, efficient supply chain management, and competitive pricing to gain market and expand its global footprint.

PDD beat first-quarter 2024 revenue and earnings analyst estimates, primarily driven by significant growth of its international marketplace, Temu, and surging consumer interest in its flagship discount e-commerce platform, Pinduoduo.

This year, the company aims to deepen the execution of its high-quality development strategy, where it will put efforts into improving the overall consumer experience, strengthening supply chain capabilities, and fostering a healthy platform ecosystem.

Analysts expect PDD’s revenue and EPS for the second quarter (ending June 2024) to increase 93.1% and 92.9% year-over-year to $13.86 billion and $2.77, respectively. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 66.3% and 82.5% year-over-year to $57.19 billion and $11.79, respectively.

Given PDD’s robust financial performance, accelerating profitability, and bright growth outlook primarily attributed to Temu’s successful international expansion, investors could consider buying this stock now.

Fiserv (FI): The Hidden Blue Chip Gem in Fintech

Posted on by The INO.com Team

With a $90.21 billion market cap, Fiserv, Inc. (FI) provides payments and financial technology services globally. Over the past few years, the broader fintech sector has struggled due to banks’ reluctance to experiment and interest rate hikes impacting payment volumes.

However, Fiserv stands out as a strong performer as the company has long-standing contracts with major banks. FI’s stock has surged more than 80% over the past five years. Moreover, the stock has gained nearly 25% over the past six months.

Further, the fintech company has secured significant attention from institutions lately. Institutions own around 92.5% of FI. JPMorgan Chase & Co, Vanguard Group Inc, Nuveen Asset Management, LLC, Charles Schwab Investment Management Inc, Envestnet Asset Management Inc, Scharf Investments, LLC, DSM Capital Partners LLC, and UBS Group AG bought more FI stock. 

Institutional investors generally conduct in-depth research and analysis before investing, which can be viewed as a vote of confidence in FI’s potential. They are known to have the resources and specialized knowledge for extensively researching investment opportunities that are not open to retail investors.

So, the increasing buying activity from several institutions reflects an optimistic sentiment toward FI’s performance and growth outlook.

Let’s analyze FI’s latest earnings report and other factors driving institutional interest in this payment processing company.

Robust First-Quarter 2024 Results

For the first quarter that ended March 31, 2024, FI’s revenue increased 7.4% % year-over-year to $4.88 billion. The company’s processing and services revenue rose 8.9% year-over-year. Its adjusted operating income was $1.63 billion, up 13.4% from the previous year’s quarter.

In addition, Fiserv’s adjusted net income and earnings per share came in at $1.12 billion and $1.88, increases of 12% and 19% year-over-year, respectively. Further, as of March 31, 2024, the company’s total current assets stood at $37.09 billion, compared to $34.81 billion as of December 31, 2023.

During the first quarter, the company repurchased 10.2 million shares of common stock for $1.5 billion.

Regarding outstanding financial performance, Frank Bisignano, Chairman, President, and Chief Executive Officer of Fiserv, added, “We continued to execute on our resilient business model by improving productivity, delivering innovative products and services, and cross-selling into our diverse and high-quality client base.”

Upbeat Full-Year 2024 Outlook

For the fiscal year 2024, FI affirmed the organic revenue growth outlook of 15% to 17%. The company also raised its earnings per share guidance to $8.60 to $8.75, representing a growth of 14% to 16% for 2024.

“Fiserv remains committed to our virtuous cycle of investment, revenue growth, operating leverage, capital return and re-investment for further growth, reinforced with a focus on clients, operational excellence, and a strong balance sheet,” stated CEO Frank Bisignano.

He added, “This proven model, along with our strong first quarter results, led us to raise our 2024 adjusted earnings per share outlook for the full year.”

Favorable Analyst Estimates

Analysts expect FI’s revenue to increase 8.2% year-over-year to $4.88 billion for the second quarter ending June 2024. The consensus EPS estimate of $2.10 for the ongoing quarter indicates an improvement of 16% year-over-year. Moreover, Fiserv has surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Furthermore, FI’s revenue and EPS for the fiscal year (ending December 2024) are estimated to grow 7.5% and 15.6% year-over-year to $19.39 billion and $8.70, respectively. For the fiscal year 2025, Street expects the company’s revenue and EPS to increase 8.7% and 16% from the previous year to $21.08 billion and $10.09, respectively.

Recent Strategic Partnerships and Product Launches

On May 8, FI announced that WaFd, Inc. (WAFD) selected its CashFlow CentralSM to bolster its small business banking offerings. This move will allow WaFd Bank small business customers to access a full range of capabilities to handle incoming and outgoing payments through their digital banking relationship, streamlining their financial management and saving them time.

CashFlow Central, developed by Fiserv in collaboration with prominent B2B payments-as-a-service platform provider Melio, is a unified digital payment and cash flow management platform. This solution enables small businesses to send electronic invoices, accept payments via ACH transfers or credit cards, digitize supplier invoices, and make payments to billers and suppliers via bank accounts or credit cards.

Also, on April 17, FI launched the Clover Kiosk and an enhanced Clover Kitchen Display System to enable restaurants to streamline operations and improve the customer experience. Designed for seamless integration with each other and additional Clover software and hardware, these solutions facilitate end-to-end order management with up to 40% lower cost of ownership than competitive offerings.

In February, Fiserv partnered with Genesis Bank, one of the two diverse multiracial Minority Depository Institutions (MDIs) in the nation, to boost economic empowerment and create an optimistic impact in local communities. Under this collaboration, small businesses, mainly in low-to-moderate income (LMI) communities served by Southern California-based Genesis Bank, will have access to customized technology packages.

These bundles, specifically designed to tackle these businesses' challenges, offer access to select Clover point-of-sale (POS) technology from Fiserv with no or low entry costs and discounted subscription fees.

Solid Profitability

FI’s trailing-12-month EBITDA margin of 42.20% is 85.2% higher than the 22.80% industry average. Similarly, the stock’s trailing-12-month levered FCF margin of 20.34% is 15.7% higher than the industry average of 17.58%. Its trailing-12-month CAPEX/Sales of 7.56% is significantly higher than the industry average of 1.94%.

Additionally, the stock’s trailing-12-month ROCE and ROTA of 11.01% and 3.50% favorably compared to the industry averages of 10.58% and 1.05%, respectively.

Bottom Line

FI extended its robust revenue growth and margin expansion into 2024, resulting in a 19% year-over-year earnings per share growth during the first quarter. Following an outstanding financial performance, the company raised its adjusted EPS outlook to $8.60-$8.75 for 2024.

Fiserv maintains its resilient business model by enhancing productivity, introducing innovative products and services in areas such as account processing and digital banking, payments, and merchant acquiring and processing, and expanding sales opportunities within its diverse and high-quality client base.

Moreover, FI was named one of Fortune® America’s Most Innovative Companies for the second consecutive year. This designation highlights organizations leading the way in innovation in the U.S. Each pillar, including product innovation, process innovation, and innovation culture, contributed equally to the overall innovation score.

According to Statista, the digital payments market’s total transaction value is expected to reach $3.07 trillion in 2024. Digital Commerce will be the market’s largest segment, with a projected total transaction value of $2.26 trillion this year. Further, the total transaction value is estimated to show a CAGR of 10.7%, resulting in a total of $4.62 trillion by 2028.

The digital payments industry’s promising outlook should bode well for FI.

In addition, analysts are bullish about Fiserv’s growth trajectory. Citigroup analysts raised the price target for FI stock from $171 to $180 while maintaining a Buy rating. Also, TD Cowen adjusted the price target to $175 from $167, reaffirming a Buy rating on the stock. In line, analysts at UBS Group maintained a Buy rating while increasing the price target from $170 to $185.

Several factors, such as solid financial performance, leading position in the fintech industry, and bright growth prospects, have driven a strong level of institutional interest in FI, as reflected by the fact institutions own more than 92% of the stock.

Given this backdrop, it could be wise to invest in this stock for substantial gains.

Neurocrine Biosciences (NBIX) Nears Buy Point Amid Rising Enthusiasm

Posted on by The INO.com Team

Neurocrine Biosciences, Inc. (NBIX), a leading neuroscience-focused biopharmaceutical company, approaches the buy point amid growing market enthusiasm. The stock has surged more than 19% over the past six months and nearly 42% over the past year.

One factor fueling this optimism is NBIX's flagship product, INGREZZA®, which targets tardive dyskinesia, a movement disorder associated with certain antipsychotic medications, and its diagnosis rates have been rising. INGREZZA’s launch in 2017 has brought attention to this lesser-known condition.

Moreover, Neurocrine's early-stage initiatives targeting muscarinic receptors in the brain have captured investor interest. This research could potentially lead to new treatments for various movement disorders, schizophrenia, and other central nervous system conditions.

Now, let’s delve deeper into NBIX’s fundamentals and growth prospects:

Promising Recent Developments

On May 8, NBIX announced the initiation of its Phase 1 first-in-human clinical study to assess the safety, tolerability, pharmacokinetics, and pharmacodynamics of investigational compound NBI-1117567 in adult participants. NBI-1117567 is an oral, investigational, M1/M4 (M1 preferring) selective muscarinic agonist for the potential treatment of psychiatric and neurological disorders.

On April 30, NBIX announced that the FDA approved INGREZZA® SPRINKLE capsules, introducing a new oral granules version of INGREZZA® capsules prescribed for treating adults with tardive dyskinesia and chorea linked to Huntington's disease. INGREZZA SPRINKLE offers an alternative option, particularly beneficial for individuals experiencing dysphagia or having difficulty with swallowing.

Also, Neurocrine reported positive topline data for its Phase 2 SAVITRI™ study on April 23. This was a randomized, double-blind, placebo-controlled dose-finding trial designed to evaluate the efficacy and safety of NBI-1065845 in adults with major depressive disorder (MDD).

NBI-1065845 is an investigational alpha-amino-3-hydroxy-5-methyl-4-isoxazole propionic acid (AMPA) positive allosteric modulator (PAM) for the potential treatment for patients with MDD who have not responded adequately to at least one antidepressant during their current episode of depression.

Furthermore, in the same month, NBIX and Sentia Medical Sciences Inc. extended their research collaboration to discover novel, long-acting corticotropin-releasing factor (CRF) receptor antagonist peptide therapeutics.

The partnership will continue to leverage Sentia’s proprietary peptide-based platform and Neurocrine’s drug development expertise in CRF biology to develop, manufacture, and commercialize medicines with the potential to treat various hypothalamic-pituitary-adrenal (HPA) axis-modulated diseases.

In March, Neurocrine announced the initiation of its Phase 1 clinical study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of the investigational compound NBI-1065890 in healthy adult subjects.

NBI-1065890 is a next-generation, highly potent, internally discovered, oral, selective vesicular monoamine transporter-2 (VMAT2) inhibitor for the potential treatment of certain neurological and neuropsychiatric conditions.

Moreover, NBIX is well-poised to become a leader in neuroscience, with the recent New Drug Application submissions for crinecerfont and optimistic Phase 2 results for NBI-'845 (a potential first-in-class medication for major depressive disorder).

Solid First-Quarter 2024 Financial Results

For the first quarter that ended March 31, 2024, NBIX’s revenues increased 22.6% year-over-year to $515.30 million. That surpassed the analysts’ estimate of $512.01 million. Its net product sales rose 22.7% year-over-year to $509 million, and INGREZZA net product sales were $506 million, up 23% from the prior year’s quarter.

The year-over-year growth in INGREZZA product sales was driven by solid underlying patient demand and improvement in gross-to-net dynamics. In addition, Neurocrine’s non-GAAP net income and earnings per share were $124.80 million and $1.20, compared to non-GAAP net loss and loss per share of $49.50 million and $0.51 in the first quarter of 2023, respectively.

Furthermore, as of March 31, 2024, the company’s total cash, cash equivalents and marketable securities came in at $1.91 billion, compared to $1.72 billion as of December 31, 2023.

Optimistic Analyst Expectations

Analysts expect NBIX’s revenue to increase 20.9% year-over-year to $547.13 million for the second quarter ending June 2024. The consensus EPS estimate of $1.49 for the current quarter indicates an improvement of 19.3% year-over-year. Moreover, Neurocrine has topped consensus revenue and EPS estimates in three of the trailing four quarters, which is remarkable.

Additionally, NBIX’s revenue and EPS for the fiscal year (ending December 2024) are expected to grow 17.7% and 54.8% year-over-year to $2.22 billion and $5.98, respectively. For the fiscal year 2025, Street expects the company’s revenue and EPS to increase 14.4% and 22.9% from the previous year to $2.54 billion and $7.34, respectively.

Pharma Industry’s Favorable Trends And Dynamics

The growing population worldwide, aging demographics, and increasing prevalence of chronic diseases are boosting the demand for pharmaceutical products and healthcare services. Furthermore, regulatory agencies are increasingly implementing expedited review pathways and flexible approval processes to accelerate innovation and access to new treatments.

According to Statista, the revenue in the pharmaceuticals market is projected to reach $1.16 trillion in 2024. In global comparison, the U.S. is expected to generate the highest revenue of $636.90 billion this year. Looking ahead, the revenue in this sector is expected to grow at a CAGR of 6.2% from 2024 to 2028, resulting in a market volume of $1.47 trillion by 2028.

Moreover, biopharmaceutical advancements, growing adoption of precision medicine approaches, increasing investments in specialty drugs targeting specific diseases or patient populations, and orphan drugs for rare diseases are key trends shaping the pharma sector.

As per IQVIA, U.S. medicines spending is projected to grow 4 to 7% through 2028. This growth will be fueled by the adoption of newly launched innovative products, with an average of 50-55 new medicines launching per year over the next five years, such as those in oncology or with orphan status, alongside a few traditional therapies in diabetes, neurology, and obesity.

Accelerating Profitability

NBIX’s trailing-12-month gross profit margin of 68.54% is 21.7% higher than the 56.34% industry average. Likewise, the stock’s trailing-12-month EBIT margin and levered FCF margin of 23.73% and 36.29% are significantly higher than the industry average of 0.53%, respectively.

Moreover, the stock’s trailing-12-month net income margin of 18.65% compared to the industry average of negative 5.52%. Its trailing-12-month ROCE, ROTC, and ROTA of 18.16%, 12.36%, and 10.65% favorably compared to the respective industry averages of negative 40.87%, negative 20.89%, and negative 29.54%.

Bottom Line

Neurocrine reported outstanding first-quarter 2024 results, with revenue exceeding analyst expectations. The neuroscience-focused biopharmaceutical company’s INGREZZA® net product sales were a significant contributor, posting a 23% year-over-year growth, driven by solid patient demand and improvements in gross-to-net-dynamics. 

NBIX’s CEP, Kevin Gorman, Ph.D., highlighted the continued need for treatment for patients with tardive dyskinesia, expressing confidence in the company's lead product, INGREZZA.

For the fiscal year 2024, the company expects INGREZZA net product sales to range from $2.10 to $2.20 billion.

Moreover, Neurocrine is actively pursuing strategic initiatives to develop medicines to alleviate the burden of debilitating diseases and disorders. This includes their ongoing research and development (R&D) efforts to create new effective treatments for neurological, neuroendocrine, and neuropsychiatric conditions.

Wells Fargo analyst Mohit Bansal maintained a Buy rating on NBIX, with a price target of $170. Mohit Bansal has given a Buy rating due to several factors indicating a solid business foundation and bright future developments for Neurocrine. The company’s flagship product, INGREZZA, has been a robust performer, contributing to operating margin expansion and serving as a solid base for the business.

Furthermore, according to the analyst, Neurocrine is actively preparing to launch crinecerfont, its upcoming new drug, with management expressing confidence in its chances for priority review by the FDA. Bansal also highlights the company's proactive approach to ensuring study quality, which bodes well for future clinical trials.

Considering these factors, it could be wise to scoop up shares of NBIX for potential gains.