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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.
FedEx
FDX-NYSE
Buy Price $201.96 on Aug. 12
by Citi
As we highlighted back in June, we believe that the fundamental landscape is turning positive for FedEx, but what we didn’t predict then was that the stars were beginning to align for what could be a more-powerful-than-expected fundamental backdrop. Currently, we see an e-commerce volume surge, nascent price improvement, new industry leadership, and the optionality of an urgent vaccine trade all coming together to provide a potentially sharp positive tailwind for FedEx and UPS. We admittedly missed UPS, but firmly believe that FedEx has meaningful upside. As such, we reiterate our Buy rating and are increasing estimates and our price target to $235.
We think that we are at/near the inflection point to positivity and see a reasonable path toward 50% gains in earnings power from $9.50 in fiscal 2020 to $14 in fiscal 2023. As such, we are increasing our fiscal 2021, 2022, and 2023 estimates to $10.70, $12.50, and $14, respectively, from $10.50, $11.65, and $12.50.
Lyft
LYFT-Nasdaq
Outperform Price $30.52 on Aug. 13
by Evercore ISI
We come away from Lyft’s second quarter encouraged by a number of positives, including 1) rides were down “only” 54% year over year through July, which we think was largely better than feared; 2) consumer incentives have essentially evaporated and likely remain structurally lower going forward; 3) the expectation to be profitable in fourth-quarter 2021 was reiterated; and 4) the company hinted at potentially higher longer-term target margins. On the other hand, rides in the first nine days of August improved by only one point versus July’s average, and management is prepared to temporarily shutter operations in California if the preliminary injunction [blocking ride-sharing companies from classifying drivers as contractors] is upheld. While the regulatory backdrop remains precarious, we think that the company has improved its cost structure (break-even is coming at a volume 20% to 25% lower than previously expected), the industry is moving away from coupons, and volumes are recovering at a steady pace. Overall, we modestly trim our fiscal 2020-21 revenue estimates and therefore lower our target price to $48 from $52.
Exxon Mobil
XOM-NYSE
Underperform Price $44.09 on Aug. 12
by Raymond James
During its second-quarter 2020 call on July 31,
Exxon
management made a headline-grabbing set of promises: 1) not to take on incremental debt, while also 2) maintaining a commitment to the current dividend payout. As is often the case, it is easier to create a catchy slogan than to follow through, especially as commodity prices have a way of torpedoing even the best-laid plans. Today, we address the question: How credible is Exxon’s pledge? The answer is that the path to fulfill that pledge during 2021 is likely to be very narrow, unless we start ascribing credit for hypothetical asset sales. The issue of whether Exxon might need to borrow an extra $5 billion or even $10 billion is hardly a game changer either way. The reason this matters is more a matter of optics, i.e., would management need to walk back its pledge and thus lose some credibility? To be clear, our Underperform rating does not assume that the dividend will be cut; rather, we look at management’s emphasis on maintaining S&P Dividend Aristocrat status as a doable but unhelpful encumbrance under current oil-market conditions.
AMC Entertainment
AMC-NYSE
Neutral Price $4.64 on Aug. 13
by B. Riley FBR
On Aug. 13, AMC Entertainment confirmed that it will begin reopening theaters in the U.S. on Thursday, Aug. 20—with 100 theaters to start and plans to open an additional 300 theaters in the following two weeks. These plans put AMC on track to have 400 of the company’s 630 domestic theaters open before the expected release of Tenet by Warner Bros. on Sept. 3.
While we have recently become increasingly optimistic that studios will hold relatively firm with the current release calendar and adopt more of a gradual/staggered release schedule into available markets, we are remaining cautious until there is additional visibility into attendance patterns and recently lowered our 2020-21 estimates accordingly. We are remaining on the sidelines with a Neutral rating and a $4 price target.
Aspen Technology
AZPN-Nasdaq
Buy Price $97.71 on Aug. 13
by Benchmark
Aspen Technology [a software and services company] reported a strong quarter, delivering 9.6% annual spend growth—topping management’s former outlook, our estimates, and the Street consensus. The outperformance was spread across all product lines, the share-repurchase program was reinstated, and the company guided fiscal-year 2021 annual spend growth of 6% to 9%. Shares of Aspen currently trade at 22 times enterprise value to free cash flow on fiscal-2022 estimates, which in the past has proved to be a good entry point. We maintain our Buy rating and $130 price target.
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