Text size
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.
Freeport-McMoRan
FCX-NYSE
Overweight Price $32.02 on Feb. 9
by J.P. Morgan
We are upgrading Freeport-McMoRan to an Overweight rating and a $37 December 2021 price target. Freeport is the largest copper pure play, with one of the highest-quality assets in the history of resource extraction: Grasberg in Indonesia, which is ramping up through 2022. In addition, Freeport’s portfolio of assets in the Americas provides a stable base of production, as well as additional long-term growth potential.
As copper and gold production grows and major project capital expenditures decline, the company should generate significant free cash flow. We model $14 billion in free cash flow for 2021-23, representing about a third of Freeport’s current market cap.
Beyond allowing Freeport to drive net debt to a target of $3 billion to $4 billion within the next 12 months, the ramp in free cash will allow Freeport to return capital to shareholders via a variable dividend. Our analysis suggests that such a strategy results in outperformance over time, on both a relative and absolute basis. Given the trends in electric vehicles and renewables, we believe in copper’s long-term secular demand story.
Western Union
WU-NYSE
Buy Price $23.47 on Feb. 10
by BTIG
While Western Union’s discount valuation has persisted, its fourth-quarter report provided plenty of reasons for the stock deserving a larger earnings multiple. Among them: the ongoing growth of its digital money-transfer business, which during the quarter posted monthly active customer growth of 49% and is on pace to generate about $1 billion in revenue in 2021; expanding operating margins, fueled by management’s cost-reduction initiatives; and the underappreciated potential of Western Union’s white-label program [which allows money transfers via third parties]. Price target: $28.
Adobe Systems
ADBE-Nasdaq
Buy Price $458.77 on Jan. 29
by Edward Jones
Adobe
is the clear leader in the growing markets of digital publishing and marketing analytics, led by a management team with a strong track record for executing on strategy. After transitioning to a subscription-[software] model, Adobe is well positioned for good recurring revenue growth and has the financial flexibility to invest in new products, including machine learning and augmented reality. Adobe trades at a premium to its peers, which is warranted, based on its leadership position in growing markets, innovative product suite, and proven management team.
New York Community Bank
NYCB-NYSE
Buy Price $10.77 on Jan. 27
by BofA Securities
[New] CEO Tom Cangemi was very clear during today’s earnings conference call that management is focused on evaluating growth opportunities. It sees significant room to bring in core deposits from its existing customer base, a historically untapped opportunity. Branch consolidation should provide a cost-saving opportunity. We also sensed a greater openness to add lending capabilities via opportunistic hiring. On the macro front, a steepening yield curve should be a tailwind for lending margin, while a steady reopening of New York should remove the city’s commercial real-estate-driven overhang on the stock.
In addition, management reiterated its interest in partnering with another bank and staying on the lookout for merger-and-acquisition opportunities. We believe that the recent CEO change opens the door for a lot more merger opportunities, especially merger-of-equals deals. Price objective: $13.
Altice USA
ATUS-NYSE
Outperform Price $37.65 on Feb. 11
by Macquarie Research
Altice’s fourth quarter was strong in dollar terms, but light in subscription numbers, which had been strong in the first three quarters. Residential video lost 74,000 subs, accelerating a downward trend to minus 6.9%, year over year. Altice added 7,000 mobile lines, also the lowest figure of the year. We are lowering 2021 estimated earnings per share from $1.44 to $1.14 on the company’s conservative guidance. However, we like Atlitce’s incremental growth potential and cash focus. At 10 times enterprise value/ earnings before interest, taxes, depreciation, and amortization, the stock remains inexpensive versus peers
Comcast
(ticker: CMCSA) and
Charter Communications
(CHTR). Our 12-month price target is $40.
Zynga
ZNGA-Nasdaq
Overweight Price $11.16 on Feb. 10
by KeyBanc Capital Markets
Zynga [a digital-game maker] reported solid fourth-quarter earnings and guided bookings above consensus for 2021. We expect double-digit bookings growth in 2022, with margin expansion. There are a multitude of growth opportunities with the potential to significantly scale up the company’s size over the next several years. We’re raising our price target to $13.50 [from $12.50] based on 16 times estimated 2022 EV/Ebitda.
To be considered for this section, material should be sent to [email protected].
