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Tuesday’s Market Insights: Castle Brands Inc (ROX), Seadrill Ltd (SDRL), Cempra Inc (CEMP)

Castle Brands Inc (NYSEMKT:ROX) shares skyrocketed over 40% after the premium branded spirits company announced an agreement to supply Goslings Stormy Ginger Beer and Goslings Stormy Diet Ginger Beer to all U.S. Walmart stores. Consumers can expect to find Goslings Stormy Ginger Beer in Walmart stores in March 2017. In addition to its uses as a stand-alone soft drink and as a mixer, Goslings Stormy Ginger Beer and Goslings Black Seal Rum combine to make the trademarked Dark n’ Stormy ® Cocktail.

John Glover, Chief Operating Officer of Castle Brands said, “Supplying Walmart with both the Regular and Diet Goslings Stormy Ginger Beer adds to the brand’s impressive growth and strengthens our position in the U.S. market. We are pleased that Walmart has implemented a full store roll-out.  We look forward to working with Walmart to promote the continued success of Goslings Stormy Ginger Beer.”

Barrington analyst Matthew Gall recently noted, “Castle Brands’ premium spirits portfolio and continued investments to accumulate bourbon should generate opportunities for top-line acceleration in the rapid growth whiskey segment. Our thesis assumes Castle continues to deliver higher revenue growth than the industry average and could be a consolidation target. Castle Brands remains undervalued, trading at a discounted 1.7x EV/Sales on our forward sales estimates. Applying a 5.0x EV/Sales multiple on our NTM revenue estimate of $81.5 million, we reiterate our price target of $2.”

Seadrill Ltd (NYSE:SDRL) shares are tumbling nearly 15% in Tuesday’s trading session, after the company disclosed, as part of its earnings release, that it’s been working with lenders to restructure its debt, and warned that if an agreement is not reached, chapter 11 bankruptcy would be a possibility.

Wells Fargo analyst Judson Bailey commented, “Although we view the 4Q16 earnings results as mixed given the modest EBITDA beat in 4Q16 and the lower 1Q17 EBITDA guidance ($250MM vs. Street $273MM), we believe the stock reaction will be negative given the financing update highlighting the risks of ”substantial dilution” of bonds converting into equity, a ”challenging” timeline for an agreement with all parties by April 30th, and a possible Chapter 11 contingency plan if no agreement is reached.”

Cempra Inc (NASDAQ:CEMP) are having a rough day after the drug maker reported that it cut 67 percent of its workforce and disclosed that its Phase 3 clinical trial, SOLITAIRE-U, for the treatment of uncomplicated genitourinary gonorrhea (GC) with or without concomitant chlamydia infection failed to demonstrate the non-inferiority of solithromycin.

Jefferies analyst Brian Skorney noted, “Cempra reported in-line earnings in 4Q16, along with a host of trial discontinuations, failure in gonorrhea, and updates on discussions with FDA/EMA. After FDA rejection of solithromycin in CABP, two key risks to our short thesis have been potential success in gonorrhea and approval in Europe. However, today’s commentary indicates that neither of these is likely to occur in the near term. Further, despite positive recent Taksta data, the pathway forward is less than clear.”

Out of the 12 analysts polled by TipRanks (in the past 3 months), two rate Cempra stock a Buy, eight rate the stock a Hold and two recommend to Sell. With a return potential of 196%, the stock’s consensus target price stands at $10.30.

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