Strong Earnings Action for Two Hot Recent Picks: NASDAQ:AMRS And NYSE:SQ
We wanted to take a moment and update you as to recent action and catalysts for two of our June momentum picks: SQ and AMRS. Both stocks have shown us some very interesting things, and in each case, there’s a lot to consider, and most of it is very promising at this point.
Square Inc. (SQ)
We put out an alert on SQ back in June when the stock was trading at around $9.60. Today was a major move to crown the stock’s recent momentum, with the $12 level solidly hit on a giant high-volume breakout, taking traders as much as 27% in the money in a matter of weeks.
For a highly liquid and deep security, that’s a very satisfying type of move. Today was, in fact, the stock’s best day since its IPO.
As noted in today’s press out of Bloomberg, “In its second-quarter earnings report Wednesday, Square raised its forecast for full-year adjusted revenue and earnings before interest, taxes, depreciation and amortization. Its second-quarter adjusted revenue beat analysts’ estimates. Payment volume also surged 42 percent, in part driven by more transactions from larger sellers. While the company headed by Jack Dorsey reported a net loss of $27 million, narrowing losses from a year earlier by more than $2 million.
The results are an “emphatic answer” to investor doubts about the company’s ability to drive profitable growth and the ability of Square Capital, which provides loans to businesses, to attract investors to fuel growth, said Mark Palmer, an analyst at BTIG LLC, in a note.”
Hidden in those details is perhaps the most important point: Volume of Payments from larger retailers (arguably, SQ’s most important metric of all since it indicates to true scalability of the product) surged 61%, which is a huge number.
We would note, importantly, that this represents a path to true GAAP profitability, which should undergird the shares with substantial future investment credibility.
This is another stock we sent your way in June that’s given us many moments to appreciate, with several opportunities to book at least 20-30% in available gains.
The stock came out with earnings this afternoon, and we see some very strong validation of our interest in this story.
In a nutshell, it was the company’s best ever quarter in terms of newly signed collaborations that have already funded more than $20 million of payments this year and are expected to more than underpin the company’s full-year targets. That was the sentiment of the AMRS executive leadership, and we aren’t going to argue with them.
Here are the key points
Q2 2016 GAAP revenues of $9.6 million (non-GAAP revenues of $12.4 million), led by product sales growth of 47% over Q2 2015 without any fuel sales
Largest ever quarter for signing number of new collaborations, including agreements with Givaudan, Ginkgo Bioworks, the Bill & Melinda Gates Foundation, and Janssen Biotech, combined with the recently announced collaboration with Biogen. These collaborations have already delivered over $20 million in payments and are expected to significantly increase revenues in the second half of 2016
Reduced selling, general and administrative expenses by 21% quarter over quarter
The stock first dipped to hit some stops in reaction given that the breakeven point on earnings is still out in front of them. But we did see immediate support and a strong rally in reaction to hit an after-hours high of $0.40/share, which is a strong sign.
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