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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.
WMT-NYSE
Buy • Price $148.21 on May 17
by Guggenheim
Walmart reported first-quarter adjusted earnings per share of $1.30, 16 cents below our estimate. This was a disappointing quarter, but we believe that [the May 17] pullback presents an incremental buying opportunity for long-term investors (the shares were down 11% intraday, versus up 2% for the SPDR S&P Retail ETF).
The retailer reported solid sales across all segments; we would be more concerned about these results if there were a sales issue at Walmart. The consolidated gross margin was down 87 basis points (U.S., down 38 basis points), well below our expectations. [A basis point is 1/100th of a percentage point.] There were three main profit challenges in the quarter: quick and significant fuel-price increases, scheduling inefficiencies related to the Covid-affected labor force, and higher supply-chain costs and inventory levels….We now anticipate some persistence of elevated costs due to inflation and logistics headwinds. We are reducing our fiscal 2022/2023 EPS estimates to $6.40/$7 from $6.75/$7.25, as well as our price target to $175 (from $185 previously).
JD-Nasdaq
Buy • Price $53.67 on May 18
by Benchmark Research
JD.com delivered solid first-quarter results with a robust bottom-line beat, but guided second-quarter growth below expectations, attributable to Covid lockdowns and logistics disruptions. While Covid remains the biggest variable for JD’s growth outlook in the near quarters, it is important to note that 1) JD continues to take market share, with strengthened brand awareness and deepened brand/merchant partnerships, thanks to its supply-chain and logistics capability; and 2) JD has a resilient profitability outlook, despite a [likely] short-term revenue setback. The recent optimization of its operations and investments enables a leaner and more efficient organization. This potentially promises higher earnings-growth power once normalized revenue growth returns. JD should continue to be a relative outperformer in China’s e-commerce space. We reiterate our Buy rating and lower our price target to $106 [from $117], based on our-sum-of-the-parts valuation.
PANW-Nasdaq
Outperform • Price $436.37 on May 19
by BMO Research
Palo Alto Network’s [fiscal third-quarter earnings] report offered many highlights that we think will support the shares, even amid a turbulent tech tape, led by 40% year-over-year billings and FCF [free cash flow] growth. [The cybersecurity company] can sustain high 20% FCF growth over the next few years. Furthermore, we believe that investors will continue to prefer stocks with valuation frameworks based on reasonable free cash flow multiples, rather than on growth stories with weak margins/FCF. Hence, we comfortably reiterate our Outperform rating and top pick designation for Palo Alto. But we are lowering our target price [to $615 from $685 previously], reflecting the state of valuation in the software market.
ADI-Nasdaq
Outperform • Price $159.92 on May 18
by Raymond James
We reiterate our Outperform rating and $210 price target following Analog Devices’ strong March-quarter
report and outlook. The company echoed the comments we heard from its peers a month ago, indicating that [computer chip] demand remains strong and supply remains tight, despite the market’s vociferous disagreement. Looking forward, additional capacity coming on-line in the second half of this year should benefit revenue and allow the company to catch up on unfulfilled backlog, as long as demand holds. In addition, we think that one of the biggest things differentiating Analog Devices from its peers is its ability to modulate capacity during downturns by turning foundry capacity up or down—in contrast to
Texas Instruments
(ticker: TXN), which is adding capacity to fully address capacity needs internally, and other analog/mixed-signal peers, which have been forced to sign take-or-pay foundry agreements that limit flexibility.
TUP-NYSE
Buy • Price $6.33 on May 18
by Lane Research
We are reducing our estimates to well below consensus to reflect softness in Asia, particularly in China, due to the pandemic, and in Europe, due to geopolitics, as well as overall softness in North America, particularly in the U.S., coupled with the continued rise in the dollar against most foreign currencies. Additionally, we believe that negative sales leverage and broad-based cost inflation will disproportionately impact Tupperware, given its global manufacturing footprint, which requires a larger fixed-cost component than most of the other companies we follow.
However, we believe that the company is still in the very early innings of its efforts to properly monetize the Tupperware brand, and at current valuations, even on our well-below-consensus estimates, patient investors may look back to this period as being a very attractive entry point into the stock. Price target: $12.50.
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