Top US Stocks: Chubb, Tesla and Allogene

Chubb expands in Asia through deal with Cigna, Tesla moves HQ, Allogene’s cancer drug trial is put on hold, Quidel sees demand for its tests rise, Japan orders more Pfizer vaccines, Ford struggles to source materials, and Oatly is upgraded following a heavy selloff.

Chubb and Cigna Corp

Insurance outfit Chubb has agreed to buy Cigna Corp’s division that provides accident, health and life insurance across seven markets across Asia Pacific for $5.75 billion.

The operations being bought include Cigna’s A&H and life business in Korea, Taiwan, New Zealand, Thailand, Hong Kong and Indonesia, as well as an interest in a joint venture in Turkey. Together, these operations generated around $3 billion in net premiums written in 2020.

‘This highly complementary transaction advances Chubb's strategy to expand its presence in the Asia-Pacific region, a long-term growth area for the company, and adds to an already sizable A&H business while expanding the company's Asia-based life insurance presence. Upon completion of the transaction, Asia-Pacific's share of Chubb's global portfolio will increase from approximately $4 billion to $7 billion in premium and represent approximately 20% of the company (excluding China),’ said Chubb.  

The deal is expected to provide a boost to Chubb’s earnings and return on equity in its 2023 financial year. The deal should be completed in 2022. Cigna said it will continue to operate its international health businesses in markets such as the Middle East, Europe, China, India and elsewhere.

 

Tesla

Tesla CEO Elon Musk has revealed the electric carmaker is moving its headquarters from California to Texas.

The company joins the likes of Oracle, HP and Toyota in moving from California to Texas due to lower taxes and living costs, with Musk citing the high price of housing in the Bay Area as one reason for the move. Still, the company remains committed to California, with plans to raise capacity at its Fremont plant in the state and the one in Nevada by 50%.

Musk also revealed a buoyant outlook on the chip crisis following Tesla’s record deliveries in the third quarter, stating it hopes to maintain the momentum so long as it can get its hands on the chips it needs. However, supply chain woes have prompted rumours that production of Tesla’s next new vehicle, the Cybertruck, will be pushed back into late 2022. Tesla also hopes to have Tesla insurance live in most US states by next year.

Cannacord Genuity raised its price target on the stock today to $940 from $768.

 

Allogene Therapeutics

Allogene Therapeutics shares are on course to take a significant hit today after announcing the Food & Drug Administration has put a hold on the company’s clinical trials evaluating the effectiveness of its cancer drug after one patient showed a ‘chromosomal abnormality’.

‘Patient safety is our highest priority, and we are committed to working closely with the FDA to evaluate any potential clinical implications of this finding, and determine next steps for advancing ALLO-501A and our clinical programs,’ said Allogene.

The company said the abnormality was detected in a bone marrow biopsy that was undertaken after the patient had a low blood count and investigations continue.

 

Quidel

Quidel said revenue continued to grow in the latest quarter as demand for its rapid diagnostics tests continues to rise.

The company, which provides rapid diagnostic testing, said it expects third quarter revenue to come in around $505 million to $510 million, marking a 6% to 7% lift from last year. That was the result of Quidel shipping 45 million SARS tests in the period, more than double the volumes shipped last year when the pandemic hit. Covid-19 revenue is expected to rise to around $406 million from $375.7 million. It also said it signed a $284 million contract soon after the quarter ended to provide over 51 million Covid-19 tests to the federal government.

‘In the third quarter of 2021,we saw a significant uptick in demand across multiple markets for our SARS category products as COVID-19 infections continued to rise due to the spread of the highly transmissible Delta variant. Thanks to the strategic investments we made to continue building out our professional and retail channels in the first half of the year, Quidel was able to meet much of this demand at multiple points of care, including to consumers in stores and online, driving better-than-expected product sales,’ said CEO Douglas Bryant.

 

Pfizer

Japan has ordered another 120 million doses of the Covid-19 vaccine developed by Pfizer and its European partner BioNTech, with the first doses to be shipped early next year.

The Japanese health ministry confirmed the first doses will arrive in January 2022, having bought around 194 million doses during 2020. As of October 6, around 92 million Japanese people have had their first dose of a Covid-19 vaccine with just under 80 million having had their second dose. For context, Japan has a population of around 125 million.

 

Ford

Ford will suspend production at its Hermosillo plant in Mexico on October 11 and 12 as it cannot get its hands on the materials it needs to maintain output, according to the labour union that represents workers at the plant.

Factory workers are set to be paid 75% of their wages for the two days production is halted at the factory, which produces Ford’s Bronco Sport SUV. It is the latest factory to be hit by supply chain woes after Ford said earlier this month that it would have to suspend production at its other plants in Michigan and Kansas City.

 

Nasdaq

The boss of Nasdaq’s North American markets, Tal Cohen, has said he expects exchanges and retail brokers such as Robinhood to start offering sports betting services as more US states regulate and legalise the activity.

Around 25 US states have opened up to sports betting and many more are contemplating it, including the likes of California, Florida and New York. Cohen said the opportunity means sports betting in the US could be worth $37 billion per year by 2025. The attractiveness of the opportunity is demonstrated by the fact Nasdaq bought a stake in Sportrade earlier this year.

‘In terms of competition, we'll have liquidity providers, market makers, compete for business, which means better prices and better odds, and lowers friction, and also means there's more data for you to look at when you're placing a wager,’ Cohen said, speaking at the Securities Traders Association conference.

He added that customers interested in buying stocks or cryptocurrencies will also be interested in sports, which should result in a ‘natural evolution’ and see firms like Robinhood branch-out into the market.

 

Analyst Recommendations

Oatly was upgraded to Overweight from Neutral by JPMorgan, which believes the stock is now undervalued after losing over 48% of its value since mid-June.

Sirius XM was downgraded to Neutral from Overweight by JPMorgan over concerns that the slowdown in sales of new vehicles and increased investment will weigh on its performance.

Biogen had its price target slashed to $400 from $500 by Jefferies, citing the challenging launch of its controversial drug Aducanumab.

Fox Corp had its price target bumped-up to $48 from $44 by Credit Suisse on expectations that Fox’s strong position in sports will allow it to benefit from increased advertising as more states regulate sports betting.

A number of brokers cut their price targets on Tilray after its disappointing earnings yesterday, with Piper Sandler trimming its target to $13 from $14, Cannacord Genuity slashing its target to $12 from $17, and CIBC cutting its target to $12 from $14.

 

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