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These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Marvell Technology Group
MRVL-Nasdaq
Overweight Price $22.59 on March 4
by Piper Sandler
Strong beat, even with coronavirus haircut. Marvell reported January-quarter results and April-quarter guidance ahead of Street expectations. Specifically, Marvell reduced its April-quarter outlook by 5% and provided a wider revenue range to account for the potential coronavirus impact.
For fiscal 2021, we are now modeling 94 cents a share on revenue of $3.02 billion, compared with our previous estimate of 87 cents on revenue of $2.97 billion. For fiscal 2022, we are now forecasting earnings per share of $1.46 on revenue of $3.59 billion, compared with our prior estimate of $1.36 on revenue of $3.50 billion. The primary driver of our estimate revision reflects higher revenue expectations and lower operating expenses. It appears that the storage segment is stabilizing, while the networking segment is expected to benefit from several growth drivers in the second half of calendar 2020. Price target: $32.
Nokia
NOK-NYSE
Buy Price $3.87 on Feb. 29
by CFRA
We are seeing increasing momentum in the initial stage of 5G investment led by North America that offsets the weakness in other regions caused by tapering of 4G investments. Overall, we believe that the 5G cycle could be much longer than [cycles in] the past, given its wider spectrum deployment not just for consumers but also for industrials. Nevertheless, 5G contracts are expected to be margin dilutive, due to pricing competition and strategy to gain market share. Nokia’s 5G investment in its end-to-end strategy comprised of solutions, products, and services will likely push out the margin recovery to 2021, in our view. While the margin guidance cut is disappointing, we think a leading network-equipment vendor such as Nokia should benefit from 5G investment cycle. Twelve-month price target: $5.
Skyworks Solutions
SWKS-Nasdaq
Buy Price $99.63 on March 4 by Needham
Similar to its peer
Qorvo
(QRVO), Skyworks Solutions updated its March revenue outlook to include the impact from Covid-19, expecting sales to be $765 million, $45 million lower than the previously guided midpoint of $810 million. EPS guidance is also reduced to $1.34 a share from $1.46. Skyworks has significant exposure to Apple (about 56% in fiscal first-quarter 2020),
Samsung
(around 5%), with another 24% split among the three tier-1 handset original-equipment manufacturers (Xiaomi, Oppo, Vivo). We maintain our Buy rating and our $145 price target (which implies a 17 times price/earnings ratio on fiscal-year 2021 EPS of $8), on Skyworks’ strong positioning in the 5G smartphone cycle and significant radio-frequency content increases.
PulteGroup
PHM-NYSE
Positive Price $41.55 on March 3
by Susquehanna Group
PulteGroup [a home builder] has been improving returns and diversifying its product set, all while protecting gross margins and steadily returning capital to shareholders. Moreover, our spring checks are showing that the company’s core trade-up segment is seeing a reacceleration in demand and pricing power.
While the market selloff has spared few, the fundamentals for housing remain strong and should be relatively insulated from any long-term virus impact. The pullback last week has given us the opportunity we’ve been looking for to get more constructive on the shares, which we are upgrading from Neutral to Positive.
We are raising our EPS estimate for fiscal 2020 modestly, as we increase our orders outlook for first-quarter 2020 and continue to model deliveries above the high end of management’s guidance range. For fiscal 2020, we now forecast EPS of $4.25, up from $4.22 previously. We’re also raising our price target from $50 to $51, as we apply our static 12 times P/E multiple to our new estimate.
Ciena
CIEN-NYSE
Outperform Price $43.24 on March 5
by Raymond James
We maintain our Outperform rating after Ciena’s report that included a sales and EPS beat and fiscal guidance consistent with prior commentary.
Ciena’s fiscal 2020 second-quarter outlook includes a 3% Covid-19 headwind. Despite risks associated with the virus, Ciena [which sells optical transport and switching systems] appears poised to do well in fiscal 2020 and beyond. We envision upside from its newer customers, such as NTT, Deutche Telekom, CenturyLink, Charter, and more, which will enable Ciena to achieve or exceed its 6% sales growth target in fiscal 2020, coupled with margin expansion. We think that an incremental 10% contribution from this group could expand Ciena’s fiscal 2020 sales growth above the 6% to 8% forecast. We expect the combination of
AT&T,
Verizon,
and India to hold fairly flat year over year. Our price target goes to $52.
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