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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.
Darden Restaurants DRI-NYSE
Buy Price $142.91 on Dec. 22
by Stifel
We are upgrading Darden to Buy from Hold. Shares declined following a strong earnings report, which we believe was driven by the concurrent announcement of CEO Gene Lee’s retirement at the end of May. While we were not surprised by the initial weakness, we are confident investors will quickly realize that his successor, Rick Cardenas, can continue to guide the company on a similar strategic growth path. We believe that Cardenas’ views as chief financial officer/chief operating officer have greatly influenced Darden’s direction in recent years. Darden continues to report solid results, and we believe that the company is well positioned to outperform peers in a challenging operating environment. Target price: $165.
Nike NKE-NYSE
Outperform Price $156.98 on Dec. 20
by Cowen
Nike reported second-quarter earnings per share of $0.83, above our Street-high estimate of $0.75 and well ahead of consensus of $0.63. Gross margin expanded 279 basis points year over year to 45.9% (ahead of our estimate of 44.4%), marking the highest second-quarter level in more than 15 years. After adjusting our estimates, we are raising our price target to $192, representing 40 times our fiscal-2023 estimated EPS, 31 times enterprise value to Ebitda, and six times EV/sales.
Bank of Montreal BMO-NYSE
Outperform Price $102.61 on Dec. 20
by RBC Capital Markets
Bank of Montreal announced an agreement to acquire Bank of the West and its subsidiaries for $16.3 billion (C$20.95 billion). Upon closing, BMO will have 3.8 million customers, a strong position in three of the top five U.S. markets, and a footprint in 32 states. We like this bold deployment of capital from BMO, and we are upgrading the stock as a result. Shorter term, we think the stock might be challenged, as there are a lot of moving parts between now and closing that some investors might fret over (e.g., capital build, regulatory uncertainty, etc.). However, assuming that the transaction goes according to plan, we find the deal compelling both strategically and financially. Price target: $124.81.
Wejo WEJO-Nasdaq
Outperform Price $5.26 on Dec. 21
by Wedbush
We are initiating coverage of Wejo with an Outperform rating and a $10 price target. Wejo is a cloud, data, and analytics software platform with unique data supply direct from roughly 12 million live vehicles and 17 billion-plus data points a day. Wejo is a pioneer around ingesting data for consumers on the automotive life cycle, which is becoming increasingly more important in this autonomous and electric-vehicle transformation for the next decade….Wejo is in a unique position to be able to unlock a massive total addressable market, and we believe that the company will be a major player in the connected vehicle data market in both the consumer and commercial segments. Price target: $10.
Joann JOAN-Nasdaq
Buy Price $9.92 on Dec. 22
by Guggenheim
Although Joann’s third-quarter operating results were mixed—modest net sales shortfall offset by better-than-expected adjusted gross margin and healthy expense control (we continue to see relative stability in two-year net sales trends, with both main categories—sewing and arts and crafts/home decor—experiencing positive two-year stacked growth year to date. As a result, despite our expectation for the company to realize $50 million to $60 million of excess ocean freight and supply-chain costs between third-quarter 2021 and second-quarter 2022, we remain encouraged by Joann’s profit-and-loss progression and see a path to an acceleration in trends once management restarts its refresh and relocation initiatives. We are lowering our estimates but reiterating our Buy rating with a $14 price target.
XPO Logistics XPO-NYSE
Buy Price $73 on Dec. 22
by Benchmark
We are initiating coverage of XPO Logistics with a buy rating and $103 price target. After the spinoff of GXO Logistics, we view the company as a more focused, pure-play transportation provider. Its core North American LTL [less than truckload] business is the third largest nonunion carrier and has seen over 1,000 basis points of OR improvement since 2015. It is the third-largest truck broker in North America with a leading-edge digital platform. We see opportunity for yield increases and margin expansion but also other ways for the company to enhance shareholder value. The stock has materially underperformed since the spin, after LTL margins disappointed in the third quarter, and we see the potential for a rerating as the company executes its LTL turnaround plan.
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