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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.
Anheuser-Busch InBev
BUD-NYSE
Buy Price $49.57 on June 3
by Guggenheim
Anheuser-Busch InBev has announced key developments that remove a layer of uncertainty and give us a higher degree of visibility into the brewer’s ability to pay down debt. The first is easing of restrictions in Mexico and South Africa—two major markets that experienced some of the most severe lockdowns during the early months of the Covid-19 crisis—and the second is the completion of the sale of its Australian subsidiary for $11 billion.
We view these events as positive catalysts for the stock, which has been the most battered name among our beverage coverage universe, down 40%, year to date (versus its alcohol peers’ 21% decline). While we expect pressure on earnings for the remainder of 2020, we believe that most of the bad news is sufficiently priced into the shares. We see a favorable risk-reward, with the stock trading at 21.1 times our near-term earnings estimate, about an 8% discount to global beer peers. We are increasing our price target stock to $56 (previously $51).
Dick’s Sporting Goods
DKS-NYSE
Market Perform Price $36.46 on June 2
by Cowen
We rate Dick’s Sporting Goods Market Perform because we have concerns on margin contraction over the next several years. The sporting-goods and athletic-apparel and footwear industries are over-inventoried, and the environment remains promotional. Dick’s remains a preferred destination among shoppers for sporting goods, according to the Cowen Consumer Tracker Survey. We’re raising our price target to $36 from $21 previously, based on 10 times our fiscal-2021 earnings-per-share estimate of $3.55.
However, increased emphasis on the brand’s own direct-to-consumer platforms [including e-commerce with curbside goods pickup] could pressure same-store sales growth and margins.
BlackRock
BLK-NYSE
Price $538.23 on June 1 Buy
by Wells Fargo Securities
We think the market underappreciates the vastness of BlackRock’s growth opportunities, which is easy to do, given the company’s $7 trillion-plus asset base. BlackRock is not so big when viewed in distinct categories. We estimate market shares of less than 7% for much of the franchise, and some of its fastest areas of growth (e.g., alternative and non-U.S. assets) are from markets that it has least penetrated.
The market has frequently underestimated the underlying opportunity in exchange-traded funds, even though BlackRock already has a dominant position. Two areas primed for continued meaningful growth in ETFs are non-U.S. and fixed income, which we estimate could expand the worldwide market by more than $4 trillion, or 75%, if brought in line with U.S. penetration and, in the case of fixed income, penetration of the equity asset class.
Mainly on equity market appreciation that is above our previous assumption, we are increasing our EPS estimates by roughly 2% for this year and the next two, from $27.65 to $28.25 for 2020, from $31.15 to $31.90 for 2021, and from $34.95 to $35.65 for 2022. We are raising our 12-month stock price target from $530 to $605 (based on 19 times our 2021 earnings estimate).
Charles River Associates
CRAI-Nasdaq
Outperform Price $40.95 on June 4
by Barrington Research
CRA [a global firm specializing in legal, regulatory, and management consulting] hasn’t reduced consultant head count or salaries during the economic downturn. Management expects the current reduction in demand for its services to be temporary and wants to keep its strong intellectual assets (i.e., its consultants). Avoiding layoffs also has the benefit of maintaining the company’s strong culture and the loyalty of its consultant base, while conveying a positive message to consultants who may wish to join CRA in the future.
Underlying demand drivers remain solid: Management notes that the volume of legal case filings isn’t contracting in the current environment, indicating that longer-term demand should remain solid for its legal and regulatory consulting practices, which generate about 70% of total revenue. However, activity on filed cases is down, as courtroom closures and other impediments caused by the pandemic are slowing cases’ progression.
Our 2021 revenue estimate of $509.1 million is unchanged. We are maintaining our 2021 adjusted EPS estimate of $3.44. Our stock price target is $59.
Lululemon Athletica
LULU-Nasdaq
Outperform Price $300.10 on May 29
by Cowen
Our price target goes to $311 [from $280 previously]. We have confidence that new product, integrated marketing, and online momentum, combined with [customer] loyalty, a healthy high-end customer demographic, and athleisure fashion trends, will yield traffic. Despite store closings, the brand continues to offer online training and wellness classes, which boost its community. We model fiscal-2020 earnings of $4.60 a share and expect fiscal-2021 EPS to recover to $6.21.
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