Summary
- Thermo Fisher has enjoyed an exceptional year to date, with investors realizing 43% to the upside, on the back of strong fundamental tailwinds.
- The stock has bounced away from support 4 times this year, with potential new support drawn from the end of September.
- Valuation remains heavily dislocated from today's trading, but return on invested capital and capital employed supports the market price relative to valuation.
- Several catalysts are in the pipeline, and the market expects huge things from Thermo, which we will enjoy completing our deep dive into the company following Q3 earnings.
Investment Thesis
Thermo Fisher Scientific (NYSE:TMO) continues to shine for shareholders this year, up 67.66% since April to an all-time high of $466.72 at the beginning of today's play. Significant catalysts have panned out for TMO YTD, which the company seems to be capitalizing on, alongside several other tailwinds that may yet to be priced into market value. Since our initial long-thesis on TMO back in July (found here), the company has featured several advancements that have impacted share price positively over the previous 2 months to date.
Just take a look at some of the key updates on the TMO growth story over this period, credits to Seeking Alpha for the updates:
August 5th:
Thermo Fisher announces high-throughput testing system for coronavirus
August 10th:
Thermo Fisher develops COVID-19 blood test for transplant community
August 13th:
Thermo Fisher walks away from Qiagen after deal deadline passes
August 19th:
Thermo Fisher introduces new assays for next-gen sequencing solutions
August 28th:
Thermo Fisher Scientific to inaugurate VTM production site
September 8th:
Inovio adds Thermo Fisher to list of COVID-19 vaccine makers
September 15th:
Thermo Fisher expands laboratory plastics production
September 23rd:
Humanigen inks manufacturing deal with Thermo Fisher for lenzilumab
Freeline inks supply agreement with Thermo Fisher
Data Sources for all news items: SEEKING ALPHA
Seemingly impressive from this life sciencesgiant. What has been equally as impressive, is the upward movement on the charts which has reflected this positive market sentiment and ongoing push for growth from TMO. Since March, we've seen TMO bounce from the support line 4 times, with a potential new support line originated from September 25th. Based on the 2 most recent developments in TMO's story, one may cite the manufacturing deal with Humanigen and supply agreement with Freeline as catalysts for the uptick in price from this point. Under the Freeline agreement, dedicated production capacity for Freeline has been secured until 2027, commencing in 2021, which includes the potential commercialization of FLT180a, Freeline's hemophilia B program.
Combined with the large tailwinds outlined in our previous report, it may be apparent that TMO is showing no signs of slowing, particularly as the market rushes in a flight to quality in equities, with the current shape of the US treasury yield curve lacking excitement in prospective returns. In the chart below, we see how TMO has continuously bounced from the support line YTD nicely, with new support at $416 from September 25th, as mentioned earlier. Recent migration towards the RSI 70 line may be heading to overbought territory, providing grounds for a small pullback, which would be ideal for entry if the market continues its love for TMO long-term.
Data Source: TradingView and Seeking Alpha TMO
New Support at 25th September:
Data Source: TradingView and Seeking Alpha TMO
