February 3, 2020

Opportunity Equity Update for Week Ended 1/31/20

Amazon Climbs After Strong Earnings While Facebook Falls on 1Q Deceleration

Last week, the Opportunity Equity strategy lost 3.52%, underperforming the S&P 500’s -2.10% decline (Exhibit 1). The strategy ended the week down -2.51% YTD, or 247 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 1/31/201

Time Period Opportunity Equity S&P 500
Last Week (1/24 – 1/31) -3.52% -2.10%
MTD -2.51% -0.04%
QTD -2.51% -0.04%
YTD -2.51% -0.04%
Inception (annualized since 6/26/00) 7.30% 6.20%

Source: Bloomberg, Miller Value Partners

Amazon.com Inc. (AMZN) gained after announcing 4Q results which beat expectations. The company reported revenue of $87.4B ahead of consensus of $86B and guidance of $80-86.5B. Operating Income came in at $3.879B beating consensus of $2.7B and guidance of $1.2-2.9B. AWS reported revenue of $9.95 (34% YoY growth) versus expectations of $9.87B and diluted EPS came in at $6.47 handily beating consensus of $4.04. The company guided for 1Q20 revenue of $69-73B with the midpoint of $71B slightly below consensus of $71.6B and operating income of $3.0-4.2B with the midpoint of $3.6B below consensus of $4.044B. JPMorgan increased their price target on Peloton Interactive Inc. (PTON) to $38, upside of 17% while Raymond James increased their price target to $36, upside of 11%, heading into earnings this coming Wednesday. Teva Pharmaceuticals (TEVA) gained over the week after the FDA approved a supplemental BLA for an auto-injector presentation of AJOVY for the preventative treatment of migraine in adults. DA Davidson upgraded Stitch Fix (SFIX) to a buy rating with a price target of $29, upside of 27%, citing multiple catalysts for this upcoming year. There was minimal news on GTY Technology (GTYH).

Exhibit 2: Significant Contributors to Performance, 1/24/20 – 1/31/20

Name Type Return
Amazon.com Inc. Equity 7.9%
Peloton Interactive, Inc. Equity 6.1%
Teva Pharmaceuticals Equity 3.0%
Stitch Fix, Inc. Equity 1.1%
GTY Technology Holdings Inc. Equity 2.5%

Source: Miller Value Partners

Tivity Health Inc. (TVTY) crossed below the 50-day moving average after Piper Sandler cut their recommendation on Tivity to Neutral from Overweight with a $25 price target, 16% upside to Friday’s close. Ziopharm Oncology Inc. (ZIOP) said that two recent publications in peer-reviewed scientific journals demonstrated the potential of its “Sleeping Beauty” system as a solution for the non-viral gene transfer of T-cells and facilitate the manufacture of TCR-T by obtaining neoantigen-specific TCRs from peripheral blood. Facebook Inc. (FB) fell after announcing 4Q results. The company reported revenue of $21.1B exceeding consensus of $20.9B with advertising revenue of $20.7B vs expectations of $20.5B. Adjusted EBITDA came in at $12.1B ahead of the street at $11.5B with EPS of $2.56 vs. $2.52 expected. Monthly active users were up 7.7% YoY with daily active users up 8.8% YoY. The company maintained operating expense and CAPEX guidance for 2020 of $54-59B and $17-19B, respectively. For 1Q the company expects revenue growth deceleration over 4Q of low-to-mid single digits compared to consensus of a 1% deceleration. The Board authorized a $10B increase to their stock buyback authorization. Micron Technology Inc. (MU) declined on concerns over the impact of the coronavirus spreading. There was minimal news on Intrexon Corp. (XON).

Exhibit 3: Significant Detractors from Performance, 1/24/19 – 1/31/20

Name Type Return
Tivity Health Inc Equity -10.9%
Intrexon Corp. Equity -17.3%
Ziopharm Oncology Inc. Equity -10.9%
Facebook Inc. Equity -7.4%
Micron Technology Inc. Equity -8.1%

Source: Miller Value Partners

1The performance figures reflect the results of a representative account net of management fee and certain other expenses. For important additional information about Opportunity Equity performance, please click on the Opportunity Equity Composite Performance Disclosure. The performance returns shown in this report are preliminary and are subject to revision. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are the Strategy holdings that had the greatest effect on Strategy performance for the week. Holdings that have been in the Strategy since the end of the most recent calendar quarter are identified by name. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.

Any views expressed are subject to change at any time, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2019 Miller Value Partners, LLC

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