Benefytt Technologies – A Leader in Offering Telemedicine Benefits to Seniors… Says the Secretary of Health and Human Services

Price Target $60

Yesterday’s White House briefing to the country on the COVID-19 pandemic started and ended with the same theme – the need for more telemedicine offerings for seniors.  This is not a trend or a fad… this is the moment that will make telemedicine mainstream and Benefytt Technologies is at the forefront of this megatrend.  Just look at their commercial that started to run nationwide yesterday.

https://citronresearch.com/wp-content/uploads/2020/03/Namath-Questions.mp4

While some might view a TV commercial as archaic, the use of this channel has become so effective that last month HHS Secretary Alex Azar referred to it as “The Future of Healthcare”.

As noted by Azar:

“One particular ad looks a bit like something out of the 1990s, with red, white, and blue graphics, and, to complete the picture, there’s an NFL star from the 1960s involved. 

On its surface, this doesn’t look or sound like the future of healthcare—but it represents important work done here at the department, placing patients at the center and providing them with a tailored set of benefits that will keep them healthy and keep their costs affordable.

We’ve delivered significant results on affordability over the past year.”

https://citronresearch.com/wp-content/uploads/2020/03/HHS.mp4

https://www.hhs.gov/about/leadership/secretary/speeches/2020-speeches/2020-state-of-the-department-address.html

This is the commercial he was referring to:

With 10k people turning 65 every day, the importance of Medicare Advantage cannot be overstated and Benefytt Technologies is using a suite of products to become a top 5 nationwide broker for Medicare Advantage.

The first half of this Citron report will address BFYT and its role in Medicare Advantage / Telemedicine and the second half will give a clear valuation analysis of why this stock will be over $60 by the end of 2020 – regardless of the economy.

READ THE FULL REPORT HERE

Citron Updates Peloton

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Peloton Investors Must “Eat the Apple” and Accept the Truth

2020 Target Price – $5

While Citron Research is widely known as a “short selling” research firm, we must first say that we are deeply concerned about the turn of events in this country and would never use this platform to spread fear or undue panic as we wish for a speedy economic recovery for all countries.

But as a short seller, we have to point out that any major downturn in the market presents unique asymmetrical opportunities from a stock market that has long been infected with bullish optimism on the even the most faddish of companies.

To think less than one year ago Wayfair was $170 – the stupidity of it all.

This brings us to the stock that will be down 80% in the next 52 weeks.

While $PTON stock has maintained somewhat of a bid during this market demolition based on the narrative of benefiting from the stay at home trend, the financials are so stretched that recent analyst coverage justified price targets by using 2030 financials (if we are still afraid to leave our homes in our homes in 2030 having a few extra pounds is the least of our worries).

First and most important.  As reported by Mac Rumors and then confirmed by CNBC, Apple’s new IOS system will contain Apple produced guided workout videos from “cycling to yoga”.  They can integrate with your iPad, Apple watch, or Apple TV.  So, guess who the Apple of fitness is going to be… APPLE!

https://www.cnbc.com/2020/03/11/apple-iphone-app-codenamed-seymour-will-offer-workout-videos.html

https://www.macrumors.com/2020/03/09/apple-ios-14-fitness-app-guided-workouts/

*Note this is not just an afterthought by Apple, but like everything else, they do it has been carefully crafted with a world-class team for years.

And to think a $2K Peloton bike does not even have a monitor to watch content on the Internet or attach an iPad or even have a USB plugin.  The Peloton screen cannot even pivot to do yoga.

How will this Apple app hurt Peloton?  Well just look at the comments of $PTON CEO John Foley on the Q2 2020 earnings call:

“One important aspect of our strategy to maintain leadership in connected fitness is to also win in digital-only fitness… We believe more digital members will lead to the sale of more connected fitness products.”

If you can imagine how much money Peloton lost selling the first 500K bikes to enthusiasts and the affluent during an economic boom… what does the next year look like?   Who buys the next 500k – and don’t say Europe.

We are not even going to beat a dead horse about:

  • Financing and churn
  • Immense hardware competition
  • TAM for Cycling
  • Soul Cycle initiative
  • Unknown settlement with the music industry
  • Share structure
  • Tepid guidance
  • Mall traffic

Let’s get right to valuation.  If there is one thing we learned the past month, it is important to know what you own so you can sleep at night and decide whether to sell or buy more.  Well here is Citron’s optimistic assumptions for Peloton.  Note the word OPTIMISTIC.

We are going to ignore the headwinds facing the business and focus on its current value per subscriber as compared to other “Stay at home stocks”.  This will make it more valuable than it should be, but let’s stay optimistic.

READ THE FULL UPDATE HERE

Citron Updates Schrodinger ($SDGR)

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2020 Target Price – $80

Last week, Citron Research issued an opinion on $SDGR calling it the most important IPO of the last 5 years.  We purposely did not use the words “Corona Virus” in the report in order to eschew from the report being considered opportunist or promotional.  But the obvious has to be addressed…

No one has spent their life and fortune more dedicated to the eradication of disease and possible pandemics than Bill Gates.  Mr. Gates has repeatedly stated that the need to find fast cures is essential.

https://www.cnbc.com/2020/01/27/bill-gates-in-2018-world-needs-to-prepare-for-pandemics-just-like-war.html

Mr. Gates is a key investor in $SDGR and has publicly stated:

“Schrödinger has demonstrated that precise molecular design can significantly accelerate drug discovery and lead to unexpected solutions that stand to benefit patients. We’re pleased to support this exciting stage in Schrödinger’s growth,” said Bill Gates, who has led three previous investments in Schrödinger since 2010.

https://www.businesswire.com/news/home/20190104005471/en/Schr%C3%B6dinger-Closes-85-Million-Financing-Advance-Computational

 

Citron does not know who is going to deliver the vaccine to market, but whoever it is there is a good chance they use the $SDGR platform as ALL the top 20 pharma companies in the world already do.

It must be noted that the $SDGR story goes beyond borders as one of their key investors and collaborators is Chinese pharma giant WuXi AppTec who is the largest Chinese CRO that many US biotech firms rely on for drug-discovery services.

https://cen.acs.org/pharmaceuticals/Biotech-firms-consider-contingency-as-the-coronavirus-outbreak-hits-CROs/98/i7

As investors, we are amazed that the media is giving attention to stay at home exercise bikes when the real story here is how this innovative computational platform with artificial intelligence will be instrumental in the quick delivery of drugs not just for our current crisis but also for any future pandemics.

Cautious Investing to All

READ THE FULL  UPDATE

 

Schrodinger (SDGR) – Taking Drug Discovery to the “Space Age”

 

The Most Important IPO in the Past 5 Years

It has been almost 10 years since Tesla went public as the once “Concept Company” has since succeeded in disrupting the transportation industry and has forever changed the performance and commercial acceptance of electric vehicles.  While it has been a bumpy road, the stock is now trading at parabolic levels while investors must ask themselves – What stock has the characteristics of Tesla in its early days?  The answer is clear – Wall Street’s recent IPO, Schrodinger (SDGR).

While the investing public has spent the past week discussing the future of civilian space travel, the most disruptive software platform to ever hit the pharmaceutical industry, which also happens to be backed by the world’s most sophisticated investors, has just gone public.

Citron will offer a simple explanation of Schrodinger’s business model that has become too complex for television and has not been given the media attention it deserves.

In one paragraph:

Through use of artificial intelligence and a world class scientific team that is unmatched by ANY public company, Schrodinger has created a software platform that integrates predictive physics-based methods with machine learning to become the leader in molecular simulation that 1) reduces the average time and cost required to identify a drug development candidate and 2) increases the probability of drug discovery programs entering clinical development.

With the global pharma industry spending approximately $180 billion on R&D annually, this innovative software platform is completely disrupting the drug development process.

READ THE FULL REPORT HERE

 

LOPE – The Educational Enron

The Multiple Smoking Guns that Prove LOPE is Using a Captive Subsidiary to Manipulate Earnings.

Citron Research is entering our 19th year of publishing independent research.  In our 19 years, we have exposed more corporate fraud than any non-government agency across the globe.  With that in mind, we are judicious when we use the “F” word.  In only the rarest of occasions do we have validation of fraud from another government agency who is investigating a public company for its operations and not the accuracy of its financials.

On September 9th, 2019, Citron wrote about Grand Canyon Education (“LOPE”) and established a $30 price target.  This target was based on an analysis of a highly competitive online education industry and the failure of LOPE to become a successful OPM.  In our presentation, we presented a slide that highlighted some red flags that LOPE might already be in violation of securities law and misrepresenting its financials (that slide is in the appendix), but it was somewhat of an afterthought as we had no proof or supporting documentation at the time.

What happened next is something that we never expected.

On November 6th, 2019 Grand Canyon University disclosed that after a 2-year application process, the Department of Education refused to grant them non-profit status.  At the time of our previous report, we did not believe that an adverse ruling on non-profit status was a potential risk as the company never disclosed it in its risk factors and sell-side assumed approval was guaranteed.