Ocuphire Pharma: Keep Your Eye on this Stock

Ocuphire Pharma (OCUP) is a biopharmaceutical company that operates at the clinical stage. Its primary focus is developing and selling eye disorder therapies. The main value for OCUP comes from Read More... The post Ocuphire Pharma: Keep Your Eye on this Stock appeared first on TipRanks Financial Blog.

Ocuphire Pharma: Keep Your Eye on this Stock

Ocuphire Pharma (OCUP) is a biopharmaceutical company that operates at the clinical stage. Its primary focus is developing and selling eye disorder therapies.

The main value for OCUP comes from its pipeline of highly potential therapies which the company hopes will turn into massive cash flow streams in the future. Its leading candidate at the moment is Nyxol eye drops, which are in Phase 3 clinical trials. These drops have the potential to help with dim light and night vision disturbances as well as mydriasis stemming from pharmacological inducement. They would need to be used only once a day and use zero preservatives, making Nyxol an attractive and potentially highly effective way to treat these eye conditions.

APX3330 is another major therapy that OCUP is working on, as it tries to maximize its effectiveness and profitability. The treatment is a twice-a-day oral tablet that is used to treat retinal and choroidal vascular diseases by targeting relevant pathways. (See Ocuphire Pharma stock chart on TipRanks)

Inherent Risks

While these products have had positive results thus far, and appear to be promising therapies with a reasonable chance of generating strong returns for investors at current prices, there are obviously still risks here.

First and foremost, until these products are being sold to the public and bringing in profits, they remain highly speculative investments. They must still prove themselves in clinical trials and then obtain necessary approvals before being effectively marketed and sold.

Secondly, the company is burning cash. Last quarter alone it burned nearly $6 million in cash, leaving Ocuphire with just $10.6 million in cash on hand. While its current ratio is very safe at 5.24x, it is clear that the company will need to raise cash soon. That cash is needed to tide it over until its products can begin generating cashflow for the company.

Given the uncertainty attached to its future cash flow stream, Ocuphire might have a difficult time raising debt on attractive terms. Additionally, its equity has sold off aggressively in recent months, meaning that any new equity issuances would be dilutive to shareholders.

Valuation Metrics

That said, if OCUP is able to secure a partnership and/or some other form of creative financing to avoid severely diluting shareholders and to tide it over until its products hit the market, shareholders should reap rich rewards.

The company’s market cap is under $85 million and its leading therapies have the potential to bring in many multiples of that, in cash flow, over their effective lives.

Wall Street’s Take

From Wall Street analysts, OCUP earns a Strong Buy analyst consensus based on 3 Buy ratings in the past 3 months. Additionally, the average analyst Ocuphire price target of $24.67 puts the upside potential at an incredible 395.4%.

Summary and Conclusions

OCUP is a risky investment, given its small cash pile compared to its cash burn rate. Additionally, its future profitability is dependent upon several factors, including its leading therapies making it successfully through clinical trials. Additionally, the therapies will have to receive necessary regulatory approvals, and then effectively produced, marketed and sold.

In the meantime, management will have to creatively raise capital, as the company's access to the debt markets are likely limited and its equity does not trade at a particularly attractive valuation.

That said, if the company's therapies deliver and it can avoid massive shareholder dilution, investors should reap massive rewards relative to current share prices, as the consensus analyst price target implies.

Overall, this stock might make for an attractive speculative buy given its enormous upside potential, but investors should consider keeping their position size small to account for the high risk.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

The post Ocuphire Pharma: Keep Your Eye on this Stock appeared first on TipRanks Financial Blog.

Source : Tip Ranks More   

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NIO: Great Business, But Valuation Is Sky-High

NIO Inc. (NIO) designs and manufactures high-tech electric vehicles in China. As a major player and innovator in connectivity, autonomous driving, and artificial intelligence technologies, it competes directly with Tesla Read More... The post NIO: Great Business, But Valuation Is Sky-High appeared first on TipRanks Financial Blog.

NIO: Great Business, But Valuation Is Sky-High

NIO Inc. (NIO) designs and manufactures high-tech electric vehicles in China. As a major player and innovator in connectivity, autonomous driving, and artificial intelligence technologies, it competes directly with Tesla (TSLA).

The main value for NIO comes from its competitive positioning in the luxury electric vehicle market (especially SUVs) in China, stemming from its comparable technology combined with its cheaper price point.

Furthermore, as a leading local manufacturer and innovator in high-priority cutting edge technology fields, the Chinese government has a vested interest in NIO’s continued growth and success. This should not only lead to continued financial support through difficult times, but may also lead to the government-controlled media stirring up popular opinion against its main competitors, as it has done with TSLA recently. (See Nio stock chart on TipRanks)

The company is expected to continue generating strong growth on the back of the re-opening of the global economy following the COVID-19 outbreak, as well as the continued robust growth of the Chinese middle class. Moreover, as its advanced automotive technologies continue to emerge and take a greater share of the overall global automobile market, demand for its products and technologies should grow.

That said, the company also has numerous challenges with which to contend. First and foremost, it already faces significant competition from larger companies, such as TSLA, that possess powerful innovative capabilities and strong brand images. Additionally, as a Chinese company, it faces significant political risk (as Alibaba (BABA) recently learned the hard way), accounting risk, and execution risk. The latter risk is due to the fact that it is still a smaller scale business that has to deliver on aggressive growth expectations.

Valuation Metrics

Despite these challenges, NIO still possesses a strong position in the space, giving it a significant edge to leverage in terms of industry-specific consumer data and network. However, its valuation remains elevated. The forward price to cash flow is a whopping 95.6x, and the company is not profitable yet on a GAAP basis, while simultaneously bleeding cash.

The good news is that revenue is expected to triple over the next two years and the business should finally be profitable on an EBITDA basis in 2022, though the EBITDA margin will still likely be razor thin at just 2.3%.

Between its backing from the Chinese government and its $47.2B cash and short-term investments stockpile, it should have the financial backing it needs to fund its ambitious ventures and reach profitability within a few years. However, it remains highly speculative given that it must deliver on massive growth expectations in a short period of time, against significant challenges.

Wall Street’s Take

From Wall Street analysts, NIO earns a Strong Buy analyst consensus based on 8 Buy ratings in the past 3 months. Additionally, the average analyst Nio price target of $61.91 puts the upside potential at 31.98%.

Summary and Conclusions

NIO is a highly speculative investment right now, as it has a very elevated valuation. Therefore, it must deliver on sky-high expectations in the face of numerous risks in order to deliver long-term investors a respectable return.

That said, it still has a lot going for it. Nio is strengthened by its status as a domestic leader in high-priority cutting edge technologies and a high visibility global industry. The Chinese government is likely to continue assisting the company directly and indirectly moving forward, and the strong tailwind from China’s growing middle class should also boost Nio significantly.

Overall, the business is likely to continue growing and analysts remain bullish on the shares here. That said, given its lofty valuation and steep climb to achieve profitability in the face of top-tier competition from the likes of TSLA, the stock remains a risky bet. Investors might be prudent to take that into account before establishing a position.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

The post NIO: Great Business, But Valuation Is Sky-High appeared first on TipRanks Financial Blog.

Source : Tip Ranks More   

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