While Virgin Galactic remains a compelling story from the perspectives of near-term catalysts toward first revenue flights, leading market position, strong incremental margin potential, and the scarcity value of the investment opportunity, we find ourselves no longer able to recommend its shares after about a 185% run this year (through Feb. 25) and commensurate expansion in the stock’s multiple (now around 21 times 2024 enterprise value/earnings before interest, taxes, depreciation, and amortization—undiscounted).

Though there could be upside to our estimates, we see this as constrained, owing to the relatively limited scalability of the business model; the expected build time of a mature SS2 rocket (SS2-4 and SS2-5) is 24 months, and the cost is in the tens of millions. Thus, with more limited estimated upside (outside of a significant positive pricing surprise or lower costs—both highly uncertain at this stage), further near-term share appreciation depends largely on incremental multiple expansion. Price target: $25.

Etsy^[1]

ETSY-Nasdaq
Buy Price $56.30 on Feb. 27

by Canaccord Genuity

Etsy’s fourth-quarter results came in ahead of expectations and guidance, as continued platform enhancements drove strong holiday performance. The company will be refreshing its seller ad offerings by launching Offsite Ads, which will include advertising on behalf of sellers on Google,

Facebook^[2],

Instagram, and other platforms, while continuing to offer internal promotions through Etsy Ads. We are raising our estimates, and our price target to $72 from $70, based on about 7.2 times (up from seven times) our 2021 revenue estimate.

JPM^[3]

organ ChaseJPM-NYSE
Outperform Price $126.26 on Feb. 26

by RBC Capital Markets

[At its recent investor day], JPMorgan provided updated financial targets, which were mostly unchanged from last year’s investor day. Under the leadership of Jamie Dimon, JPM has developed into the premier global bank, with best-in-class profitability. The challenge for JPM over the next two to three years will be to maintain the current level of profitability. We recommend that long-term investors continue to buy the stock, as JPM has demonstrated that it drives long-term shareholder value. Price target: $145.

Acadia Pharmaceuticals^[4]

ACAD-Nasdaq
Buy Price $40.22 on Feb. 27

by H.C. Wainwright

[On] yesterday’s earnings call, Acadia reported continued positive Nuplazid traction, with $339.1 million in full-year 2019 net sales, representing 52% year-over-year net sales growth. [Nuplazid is a medication for treatment of hallucinations and delusions associated with PDP–Parkinson’s disease psychosis.]

The sales performance falls at the high end of the company’s provided fiscal 2019 Nuplazid revenue guidance of $330 million to $340 million. For fiscal 2020, we estimate $466 million in net sales.

With Nuplazid’s market share currently in the high teens in the treatment of PDP, the growth opportunity remains far from saturated for this patient population. We additionally believe that the momentum is further enhanced [by] expanding opportunity in the potential treatment of dementia-related psychosis, or DRP, patients, adjunctive treatment in major depressive disorder, or MDD, and treatment of negative symptoms in schizophrenia patients. We maintain our Buy rating and $60 price target.

Wells Fargo^[5]

WFC-NYSE
4 Stars (out of 5) Price $47.34 on Feb. 20

by

Morningstar^[6]

Undervalued. Wells Fargo has reached a settlement with the Department of Justice and the Securities and Exchange Commission [for its false-account scandal]. The bank will make payments totaling $3 billion as part of the settlement. According to the press release, Wells Fargo had already fully accrued for this amount as of Dec. 31. This means that the $1.5 billion legal charge it took in the fourth quarter, and the previous charges it had taken, will cover the settlement. We will wait to see what number the bank discloses in its 10-K for the high end of the range of possible legal losses in excess of those accruals. If this number drops significantly, it will be a very good sign. The DOJ and SEC [investigations] were the last remaining major government probes into Wells Fargo over its past sales practices.

The comeback of Wells Fargo will still take more time to play out. The road ahead remains beset with difficulty, but it appears that another positive step forward has occurred. As this was already part of our thesis, we do not plan to make any changes to our current fair value estimate of $56 a share.