Experts are currently saying a realistic timeframe for widespread vaccination is spring 2021, and investors are beginning to wonder what their portfolios should look like in a post-pandemic world.
Given the magnitude of the vaccine news it makes sense to make some incremental portfolio changes now. Here are two small-cap growth stocks worth considering:
Cryoport (CYRX) specializes in end-to-end supply chain solutions for the life sciences industry and cell and gene therapy market. Solutions span protection, monitoring, logistics, storage (including cold storage) and chain of compliance.
In short, Cryoport moves and stores everything from stem cells and embryos to vaccines, tissues, and biologics.
If you’re wondering if it will play a role in distributing COVID-19 vaccines, the answer is “maybe.” It depends on how the distribution contracts fall. Management doesn’t yet know details. One thing is for sure, however – COVID-19 vaccine distribution is going to require many companies all over the globe, for an extended period of time. This isn’t a one- or two-company effort. It seems likely that Cryoport will be involved in some way.
Cryoport has primarily served the biopharmaceutical market in the past, and also offers exposure to the IVF and animal health markets. However, on October 1 management announced it had closed on two significant acquisitions – CRYOPDP and MVE Biological Solutions.
CRYOPDP is a France-based supplier of temperature-controlled supply chain solutions, serving clinical research, pharma and cell and gene therapy markets. It helps Cryoport get deeper into both the EMEA and APAC regions, roughly doubles revenue, and is accretive to earnings.
MVE was a part of Chart Industries (GTLS) and specializes in vacuum insulated products and cryogenic freezer systems for the life sciences industry, especially the cell and gene market. With 2019 revenue of $83 million this acquisition roughly doubles Cyroport’s revenue again. It is also accretive to earnings, and comes with a $275 million investment from Blackstone, which helped fund the acquisition.
The net effect of these two acquisitions is that Cryoport is now positioned as a major contender in providing global supply chain solutions for the cell and gene therapy market, which is seen growing by 40% a year through 2025.
While results in the first half of 2020 were impacted by the pandemic, which paused 56 trials that Cryoport supports, only three trials were paused as of the end of Q2. In addition to trials, Cryport continues to support commercial agreements with Gilead’s YESCARTA, Novartis’ KYMRIAH, Bluebird Bio’s ZYNTEGLO and Kite’s TECARTUS.
In Q3, reported on November 5, revenue was up 17% to $11.2 million. Following that report current consensus estimates suggest 2020 revenue will rise 106% to $70 million while 2021 revenue goes up 186%, to $200 million. Adjusted EPS this year is seen near -$0.64, then turning positive to $0.20 in 2021.
The stock has jumped since the vaccine news as investors look to company’s that offer logistics solutions and which could help distribute COVID-19 vaccines. Cryoport, while not having disclosed anything publicly yet, should be right in the mix.
Cardlytics (CDLX) is a $2.9 billion market cap company that has developed a purchase intelligence platform that is in the early innings of being adopted by financial institutions in North America and the U.K.
The platform pulls in and analyzes trillions of dollars of raw purchase data (debit, credit, ACH, bill pay, etc.) from millions of accounts at thousands of financial institutions. That data is then run through a machine learning technology which spits out a view of where and when consumers are spending their money. Advanced analytics are applied to the anonymized purchase data to turn it into something of value that Cardlytics can sell to marketers.
These marketers, which include brands we’re all familiar with across the retail, restaurant, subscription service, travel, grocery, luxury and e-commerce channels, use the data to identify, reach and influence huge numbers of potential buyers with customized offers.
The distinguishing attribute of the platform, and major source of competitive advantage relative to other marketing platforms, is that Cardlytics reaches consumers directly through their online banking platforms and mobile banking apps. Cardlytics first landed Bank of America, then Chase and Wells Fargo. Most recently U.S. Bank became a customer.
Banks win because they get reliable revenue – roughly 50% of revenue is shared with the banks – and have more active and engaged customers. Customers win because they save on everyday purchases that they would have made anyway and, other than clicking on the offer while logged in to their banking app or website, they don’t need to change their behavior. Marketers win by reaching engaged and receptive audiences, and they can measure the results of their efforts.
Last year Cardlytics’ revenue was up 40% and the stock was on fire, until the pandemic hit. Consumer spending, which accounts for 70% of U.S. GDP, has been especially hard hit in areas like travel and dining. Cardlytics has significant exposure to both.
When management reported Q3 results on November 2 they said revenue fell by 18% to $46 million. That result beat expectations by $7.3 million. Adjusted EPS of -$0.16 also beat, by $0.12. Management said monthly average users are now nearly 162 million as the Wells Fargo launch continues and that average revenue per user was $0.29, roughly $0.05 better than expected.
The business is continuing to benefit from the economic recovery as advertisers come back to the platform and emerging strength in direct-to-consumer and eCommerce helps fill in around the edges. That’s in the U.S. Overseas, the story isn’t as good as the U.K. remains extremely weak (down 52% versus down 15% in the U.S.). Management’s Q4 guidance was light, reflecting the current state of the pandemic.
The stock’s reaction to the report was relatively muted. But it has jumped higher since news of the vaccine breakthrough. Ultimately, I think this stock goes much higher once the economy can open again and consumers are released into the wild to spend as they wish. That will still be a while, but if you want to get positioned now Cardlytics should be on your list.