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Jazz Pharmaceuticals: Long-Term Prospects Jazz Up A Modest Upside (NASDAQ:JAZZ)

Jazz Pharmaceuticals: Long-Term Prospects Jazz Up A Modest Upside (NASDAQ:JAZZ)

Investment Thesis

Jazz Pharmaceuticals plc (JAZZ) has enjoyed an extended rally thanks to headline-grabbing announcements in the past few months. Once lifted in August, the company’s revenue outlook needs a further upgrade per our analysis of historical data in light of ongoing product launches. JAZZ’s liquidity is robust enough to weather the effect of declining cash flows even as the management expects the margins to come under pressure amid the ongoing product launches and clinical trials.

As generics make the market entry rivaling the company’s leading drug Xyrem, a new product launch is underway, targeting a swift conversion of the existing patient base. Meanwhile, moves are afoot to bolster the oncology franchise highlighting the attempts at revenue diversification. Our EBITDA forecasts for the year beat the consensus estimates, and with the current forward EV/EBITDA multiple, it indicates a modest undervaluation. Yet, despite a series of catalysts ahead, JAZZ continues to underperform the market on a YTD (year-to-date) basis, encouraging us to raise its outlook to a ‘Buy’.


Catalysts Spark a Rally

After the emerging competition and a failed late-stage clinical trial darkened its prospects in the first few months of the year, Jazz Pharmaceuticals has made a remarkable turnaround lately, forcing the management to roll back the dreary outlook they set earlier. Thanks to a series of catalysts and the upgraded guidance, the stock had made a swift comeback gaining ~41.3% in the past six months, outperforming the ~26.1% rise in the NBI (NASDAQ Biotechnology Index). In June, FDA signed off JAZZ’s Zepzelca (lurbinectedin) for adults with relapsed metastatic SCLC (small cell lung cancer) on or after platinum-based chemotherapy. One of the two types of lung cancers, SCLC has a poorer prognosis compared to NSCLC (non-small cell lung cancer), highlighting the importance of the development for an indication

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‘More to go on the upside’ for stock market

‘More to go on the upside’ for stock market

BlackRock Chairman and CEO Larry Fink told CNBC on Tuesday the stock market can continue to move higher, adding to the strong rebound in recent months after the coronavirus-driven sell-off earlier this year.

“I believe we still have more to go on the upside even in front of probably rising infection rates with Covid-19,” Fink said on “Squawk Box.” “We have a strong conviction that the average investor still is under-invested, and they’re going to have to be putting more and more money to work over the coming months and maybe even years.”

Fink also said the prevalence of low Federal Reserve interest rates for longer while the U.S. economy tries to dig out of the pandemic-induced hole will help stocks. Additionally, he expressed optimism that another fiscal stimulus package to support the recovery will eventually be approved, even if it doesn’t end up happening until early next year after the presidential election.

Another factor likely supporting continued strength in the stock market is the influx of more active individual investors, Fink said. 

“We are seeing a record amount of retail participation in the marketplace,” Fink said, contending it was more than just novice day traders using online brokerages such as Robinhood. “Across the board, the average investor is putting more and more money to work, which is a good outcome. I do believe that pandemic actually has created that fear of the future and a response is now a higher savings rates in America, a higher investment rate for the long term.” 

Fink’s comments Tuesday came shortly after the world’s largest asset manager reported strong quarterly earnings. BlackRock’s per-share earnings of $9.22 surpassed Wall Street expectations of $7.80. Revenues came in at $4.37 billion, topping forecasts of $3.93 billion.

BlackRock’s assets under management rose to nearly $7.81 trillion for

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A 100-year-old stock indicator just flashed a bullish signal suggesting further market upside

A 100-year-old stock indicator just flashed a bullish signal suggesting further market upside

A trader works on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 4, 2020. REUTERS/Brendan McDermid
  • The Dow theory — a financial theory named after the father of technical analysis, Charles Dow — just flashed a bullish signal suggesting more upside ahead for the broader stock market.
  • The theory is based on the relative price action of the Dow Jones industrial average and the Dow Jones transportation average, as traders look for a move in one to be confirmed by a move in the other.
  • On Wednesday, the Dow Jones transportation average closed at a record high. The theory would suggest that the Dow Jones industrial average will soon follow.
  • Visit Business Insider’s homepage for more stories.

Following the death of Charles Dow in 1902, hundreds of his editorials published in The Wall Street Journal (which he founded) were compiled and expanded on, giving rise to “Dow theory.”

Coined by S. A. Nelson and refined by William Hamilton and Robert Rhea, Dow theory is the study of the intermarket relationship between the Dow Jones industrial average and the Dow Jones rail average, now called the transportation average.

The general idea is that both averages, over time, should move in tandem, given that the transportation average represents companies responsible for the movement of goods across the country. For that reason, it should serve as a leading indicator.

Read more: Self-taught market wizard Richard Dennis took a $1600 loan and turned it into an estimated $200 million. He shares the 13 trading rules that turned his performance parabolic.

Put differently, both depend on each other: If the economy is thriving, transportation companies should also be thriving, as they are tasked with literally moving the economy.

Technical analysts look to Dow theory to confirm broad movements in the stock market. Specifically, traders look for confirmations and divergences between the two indexes.

A confirmation is when the transportation

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Stop Betting Against This Market. More Upside To Come For The Barstool Crowd

Stop Betting Against This Market. More Upside To Come For The Barstool Crowd

If you’re waiting for an entry point, just pull the trigger, already. This market has more upside. The Fed’s got your back, at least for the rest of this year.

Equity markets started the week in risk-off mood, but Wednesday had the S&P 500 up 1.74% and the MSCI Emerging Markets Index up 1.10%. MSCI China was right in linen, maybe up one bip more. Delayed fiscal stimulus and an ongoing public health crisis is not scaring Wall Street. When Mr. Market hides in the closet, he doesn’t last in there for long.

“Continued extraordinary global monetary support will enable markets to move higher over the medium term,” says UBS CIO Mark Haefele.

With that in mind, global-minded investors and the Barstool crowd should take three actions:

Investors large and small are going to have to take advantage of volatility, and buy on the down days. Put cash to work “right away” is nearly always the best strategy.

“Given the uncertainty of the outlook, some investors may prefer to build up longer positions using near-term volatility,” says Haefele, recommending investors buy the dips.

The Russell 2000 Index, which focuses mainly on mid-cap stocks, is underperforming the MSCI EM, mainly because that American index is loaded with companies facing economic restrictions, while the MSCI EM is loaded with China and large cap stocks that have been a favorite of investors since the pandemic was declared in March.

UBS’ Haefele thinks the next leg of the rally will reflect a return to “more normal” economic conditions, and that should benefit value and cyclical stocks

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