RGEN Reports, EVH Moves to Sell and Earnings Expectations Across Portfolio
Evolent Health (EVH) is selling off (again) today and we’re jumping ship. The first shoe to drop was a few weeks ago when it was disclosed that EVH would lose some business from Bright Health Group (BHG). My analysis suggests that news in and of itself isn’t a huge deal (though not great), but with the stock moving below its 200-day line with conviction today, and to a new multi-week low, we can’t afford to be passive. This is especially true with the Fed coming up tomorrow afternoon (while I think they will signal a slowing pace of hikes there are no guarantees on their verbiage and/or market reaction) and EVH earnings on deck tomorrow too. Bottom line here is that, in an ideal world, selling EVH now is a terrible mistake but one that we’ll more than make up for (both near and longer-term) through price appreciation with the rest of our portfolio and the new position to be added this Thursday. SELL
Repligen (RGEN) reported this morning with Q3 results that surpassed expectations. Revenue of $201 million was up 12.6% (19% at constant currency, a $9.2 million beat, while adjusted EPS of $0.77 beat by $0.09 and was a penny shy of EPS in the year-ago quarter. In Q3 base business contributed 83% of revenue while COVID-related sales were 14%. This meshes with the “Repligen is moving past COVID reliance” rhetoric we’ve heard from management and analysts over the last couple of quarters. Updated full-year 2022 revenue guidance has been tightened by $5 million to a range of $795 – $805 million versus $790 – $810 million previously, or 19% to 20% versus 18% to 21%. Base business (excluding COVID) is seen up 33% to 34%, up from previous guidance of 31% to 33%. Adjusted EPS is seen about as expected, in the range of $3.15 to $3.20 versus $3.13 to $3.20 in prior guidance. I listened to much of the conference call and Q&A and my takeaway is that Repligen is going through some bumps as the bioprocessing market moves away from COVID and supply/demand imbalances true up, but that management is mostly focused on the coming years and executing on the still very large potential they have to grow. It’s probably going to be another quarter or two before things smooth out. For now, RGEN remains a hold. We’ll look for the stock’s reaction (short-term) and initial 2023 guidance in February (longer-term) to guide us. It remains at a depressed valuation. HOLD
Estimates
Below is a table of our current portfolio positions and expected quarterly results and full-year 2022 results. Hopefully, this can serve as a quick reference during this earnings season. Note that due to the way data providers pull these numbers there may be some minor differences (especially among the calculated growth rates) between this data and that provided by whatever platforms you use.
