Stocks’ Details

Marathon Oil Corporation

Q3FY20 Result Highlights: Marathon Oil Corporation (NYSE: MRO) is an oil and gas production company with a market capitalization of ~$6.5 billion as on 22 January 2021. For Q3FY20, the company reported oil-equivalent production of 370,000 net boed. Free cash flow generation for the quarter stood at $180 million on strong execution across all elements of the company’s business. For Q3FY20, the company reported a net loss of $317 million. The company ended the quarter with total liquidity of $4.1 billion, including undrawn revolving credit facility of $3.0 billion and $1.1 billion in cash and cash equivalents. Subsequent to Q3FY20, the company reinstated quarterly base dividend at 3 cents per share and reduced gross debt by $100 million, in line with the company’s objective to return capital to shareholders and enhance its balance sheet.

Q3FY20 Result Highlights (Source: Company Reports)

Board Changes: On 11 January 2021, the company appointed highly experienced Brent Smolik to its Board of Directors. Earlier on 8 January 2021, the company had appointed, Kimberly Warnica, to its senior vice president and general counsel.

Outlook: The company’s total oil production for FY20 is expected to be between 188-192 mbbld. Further, the total oil equivalent production is expected to be in the range of 375-390 mboed. The company is focused on implementing a transparent capital allocation framework that provides free cash flow visibility and ensures decent cash flow available for investors. The company recently announced that it will release its fourth quarter and full-year 2020 earnings results on 17 February 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock has provided a return of 97.33%. The stock has a 52-weeks low and high of $3.02 and $12.83, respectively, and is trading above the average of its 52-week price level band. On the technical analysis front, the stock has a support level of ~$6.83 and resistance of ~$8.45. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit. For the purpose, we have taken peers like EOG Resources Inc (NYSE: EOG), Devon Energy Corp (NYSE: DVN), and ConocoPhillips (NYSE: COP), etc. Considering the stock’s significant rise in the last three months, current trading level, uncertainties related to the commodity price volatility, ongoing COVID-19 pandemic, negative ROE, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $8.15, down by 1.21% as on 22 January 2021.

Workhorse Group Inc.

International Expansion of Sales Channel: Workhorse Group Inc. (NASDAQ: WKHS) is a technology company, focused on providing sustainable and cost-effective drone-integrated electric vehicles. As on 22 January 2021, the company’s market capitalization stood at ~$2.83 billion. The company recently announced the expansion of its sales channel internationally into Canada for the first time as it received a purchase order for 6,320 C-Series all-electric delivery vehicles from Pride Group Enterprises.  The delivery of the vehicles will be commenced in July 2021, and the distribution will be through Pride dealerships for fleet use.

Q3FY20 Result Highlights: For Q3 FY20, the company reported total sales of $564,707 compared to $4,258 in pcp. Further, the company reported cost of goods sold of $2.8 million, higher than $1.4 million in Q3 FY19, due to increases in labor and materials relating to costs for the C-Series production. The company’s operating income during the period was a loss of $9.8 million compared to a loss of $5.6 million Q3FY20. At the end of September quarter, the company had cash and cash equivalents and short-term investments of $80.2 million, up from $23.9 million as of December 31, 2019.

Q3FY20 Results (Source: Company Reports)

Outlook: In the first quarter of 2021, the company is expected to have supplemental volume additions. For 2021, the company expects to produce around 1,800 units, subject to COVID-19 situation and its associated impacts. The company’s ongoing partnership with Hitachi and Hitachi Capital America continues to benefit the company as it optimizes the company's manufacturing, operational and supply chain capabilities. The company recently received a purchase order for 500 of its all-electric C-1000 delivery vehicles from Pritchard Auto Company that will be financed by Hitachi Capital America (HCA).

Stock Recommendation: Over the last three months, the stock has provided a return of 26.87%. The stock is trading above the average of its 52-week price brand of $1.31 and $30.99. On the technical analysis front, the stock has a support level of ~$19.51 and resistance of ~$26.78. Through various financings, the company has improved its current cash position to over $260 million. Considering the company’s improved cash position, expansion of its sales channel, recently received a purchase order from Pritchard Auto Company, and modest outlook, we are of the view that the stock might see further upside in the coming times. Hence, in the light of above-mentioned facts, we give a “Hold” recommendation to the stock at the closing price of $23.51, up 2.89% on 22 January 2021.

Lightbridge Corporation

Received Patents for Innovative Nuclear Fuel Assemblies: Lightbridge Corporation (NASDAQ: LTBR) is an advanced nuclear fuel technology development company mainly involved in the development of Lightbridge Fuel™, a proprietary next-generation nuclear fuel technology for current and future reactors. As on 22 January 2021, the company’s market capitalization stood at ~$38.51 million. On 24 December 2020, the company announced that Eurasian Patent Office has granted it the patent for its innovative nuclear fuel assemblies, comprising of multi-lobe fuel rods arranged in a mixed grid pattern. The receival of this patent validates the company’s unique approach to advanced nuclear fuel. The company’s CEO, Seth Grae, recently participated at the 2021 Atlantic Council Global Energy Forum, which was held on 20 January 2021.

Q3FY0 Result Highlights: For Q3FY20, the company reported total operating expenses of $3.09 million, up from $2.21 million in Q2FY19. Net loss for the quarter stood at $3.06 million. Total cash used for the nine months ended September 30, 2020 was $0.6 million, down from $4.1 million for the nine months ended September 30, 2019. The company ended the quarter with cash and cash equivalents of $17.4 million and no debt.

Q3FY20 Results (Source: Company Reports)

Outlook: The company is currently well placed to fund its ongoing fuel development efforts throughout 2021 while pursuing additional opportunities towards commercializing Lightbridge Fuel™. Currently, the company is witnessing increasing bipartisan governmental support for advanced nuclear technologies. It expects that GAIN voucher that provides over $600,000 from U.S. Department of Energy (DOE) could be the first of a series of U.S. government funding opportunities.

Stock Recommendation: Over the last three months, the stock has provided a return of 162.069%. The stock is inclined towards its 52-weeks high price of $8.55. On the technical analysis front, the stock has a support level of ~$5.8 and resistance of ~$7.2. Considering the stock’s significant rise in the last three months, negative ROE, and current trading level, we suggest investors to book profit and give a “Sell’ rating to the stock at the closing price of $6.84, up by 17.73% as on 22 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.