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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.
Apple
AAPL-Nasdaq
Outperform Price $254.29 on April 1
by Evercore ISI
The global spread of Covid-19 has shifted the downside case from a China supply shock to a multiquarter demand slowdown, but we think Apple is better positioned than most to experience a rapid recovery after the virus is brought under control.
Apple shares have held up better than the broader market since the beginning of the selloff, and it remains a hotly debated name among investors. Bulls see demand as pushed out, not canceled, and remain focused on long-term upside levers (wearables, services, gross margins). They also see some support from buybacks, given Apple’s $100 billion net-cash position. Bears think Apple products are a luxury that can be deferred and [argue that the] risk to fiscal 2020 numbers isn’t adequately reflected in the consensus. (We somewhat agree, but think buy-side expectations are lower than consensus numbers.)
Net/net: Our bull thesis is unchanged, and we think Apple’s unparalleled brand and net-cash positions it to be a relative outperformer in a severe economic downside scenario. Price target: $325.
OKTA
OKTA-Nasdaq
Buy Price $119.57 on April 2
by Guggenheim
OKTA [which provides program-access management software platforms for workforces] reiterated its revenue guidance for the quarter and year, in spite of the potential disruption from the Covid-19 pandemic, which we think is pretty impressive. If we look back at fiscal 2020, around 70% of the [$553 million in] subscription revenue the company recognized had been already booked or billed by the end of fiscal 2019. The “new” revenues that the company had to generate on top of that were around $167 million. For fiscal 2021, OKTA already had $592 million booked or billed at the end of fiscal 2020. It has guided to revenue of $770 million to $780 million. Hence, the “new” subscription revenue it needs to meet its guidance totals $144 million—lower, year over year, versus 2020’s level.
Veeco Instruments
VECO-Nasdaq
Buy Price $9.57 on April 1
by Benchmark
Veeco reiterated its March-quarter guidance. Due to the stay-at-home order in northern California, the firm had previously pulled its guidance, which called for a sales range of $95 million to $120 million and a corresponding non-GAAP earnings range of breakeven to 22 cents per diluted share. The firm now expects March-quarter sales to range from $100 million to $105 million. As a result, we now project March non-GAAP earnings of five cents per diluted share, on sales of $100 million.
While we see significantly lower sales in the June quarter, we expect a second-half 2020 rebound as the effects of the virus subside. Therefore, we remain at Buy with a $16 target price.
NLY-NYSE
Buy Price $5.67 on March 29
by CFRA
We see revenue rebounding in 2020 by over
35% after 2019’s revenue contraction of 12%, given expectations for a more normal yield
curve. The Federal Reserve reversed course
with its first interest-rate cuts in 2019, and has subsequently cut rates to zero due to
coronavirus fears and volatility. While funding dislocations have emerged, we see the Fed doing whatever it takes to backstop the [U.S. government] agency [securities] market and keep it liquid.
To increase its returns and growth, Annaly [a mortgage real estate investment trust that invests in and finances residential and commercial assets] is expanding investments in its non-agency portfolio, such as residential credit, commercial real estate, and middle-market lending. However, the agency portfolio, still nearly 80% of its capitalization, will remain the company’s primary growth driver.
Given NLY’s size and competitive advantage of scale, there could be further acquisition opportunities. Compared to many of NLY’s mortgage REIT peers that retain substantial credit risk, we view NLY’s leverage levels as moderate. NLY’s economic leverage declined to 7.2 times in the fourth quarter, from 7.7 times in the prior year. We see NLY increasing leverage closer to its target range of eight to 12 times after volatility dies down. Our 12-month target price of $8 is equal to a price-to-book value of one, slightly below its historical average of 1.1.
IMAX
IMAX-NYSE
Buy Price $8.38 on April 2
by B Riley FBR
The [movie] exhibition industry is in uncertain times, amid the Covid-19 pandemic and required theater closures. With IMAX shares off about 59% since the start of the year (versus around 24% for the S&P 500), we feel that IMAX typically gets lumped in with the traditional exhibitor group even though the company has limited, to no, fixed assets/expenses and essentially operates as a licensor. And with about 2.5 years of liquidity before any additional operational cost cuts, IMAX has the liquidity to weather this Covid-19 storm. We are reiterating our Buy rating and $19 price target.
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