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.
Tesla TSLA-Nasdaq
Underperform Price $580.99 on Jan. 29
by Needham
Coming off record deliveries, Tesla ended the fourth quarter with its second consecutive profit. Moreover, it announced its ambitious goal of delivering 500,000 vehicles in calendar-year 2020, implying 36% growth over its 367,000 shipments in calendar 2019. This goal is highly dependent on robust Model Y production in Fremont, Calif., and a ramp up in Model 3 production at Gigafactory Shanghai.
While Tesla has begun to show signs of profitability, we struggle with the recent run-up in the shares. Revenue growth actually decelerated in 2019, to 14.5% versus 82.5% last year, and net income was only $36 million. We have not yet seen an inflection point in gross margins, either. We believe the valuation of 85 times our new 2021 earnings-per-share estimate is unwarranted, given the slowing revenue growth and growing competition. We remain cautious on Tesla’s ability to grow units to over 500,000, owing to potential manufacturing obstacles as it scales production.
New York Community Bancorp
NYCB-NYSE
Buy Price $11.18 on Jan. 29
by
Bank of America Securities
NYCB shares are underperforming after the bank reported fourth-quarter EPS that topped expectations. We attribute today’s stock weakness primarily to management’s first-quarter 2020 net interest margin guidance for two basis points [each equal to 1/100th of a percentage point] in sequential expansion, the same pace as in fourth-quarter 2019. Investors probably expected some acceleration on the back of declining funding costs. But we expect margin expansion to accelerate in second-quarter 2020 and forecast a fiscal-year 2020 net interest margin of 2.10% versus the 2.04% reported for fourth-quarter 2019. Moreover, investors will probably need to see a quarter or two of healthy multifamily loan growth, after fourth-quarter balances received a boost from $771 million in loan purchases. We shave our 2020 EPS estimate by a penny, to 84 cents. While the stock lacks a catalyst, we see risk/reward as attractive. We reiterate our Buy rating and $13 price objective.
Imax
IMAX-NYSE
Buy Price $17.54 on Jan. 29
by Benchmark Research
We have reduced our fiscal fourth-quarter 2019 performance expectations, as the Imax global box office underperformed our expectations. We have reduced our fiscal-year 2020 performance view from the coronavirus’ impact on Chinese New Year holiday film slate/attendance, potential deceleration in new-theater openings, and concern over the domestic box office, where the relative lack of blockbuster films could challenge near-term growth.
Imax last reported 681 screens in China, or 43% of their total 1,568 screens. Greater China is their largest market; an estimated 32% of total sales over the three quarters ending in fiscal third-quarter 2019 were generated from the region. There are an estimated 286 theaters in backlog that are scheduled to be installed by fiscal 2022; backlog from the region is an estimated 47% of the total current backlog. The U.S. market is Imax’s second largest; an estimated 31% of total sales, year to date. Our new price target is $20, down from $28.
Principia Biopharma
PRNB-Nasdaq
Buy Price $51.45 on Jan. 28
by H.C. Wainwright
A report published yesterday questioned the rationale, clinical design, and future of Principia’s clinical assets, including the coming multiple sclerosis trial run by partner
Sanofi
(SNY). The report’s conclusion that Principia’s drugs don’t work contained many faulty arguments. We think Principia’s recent positive stock performance mirrors increased investor confidence, based on data delivered, clinical-execution time lines, and, importantly, its novel tailored covalency [drug delivery] platform. This platform wasn’t mentioned once in the report. Price target upped to $63.
Dolby Laboratories DLB-NYSE
Outperform Price $69 on Jan. 31
by Barrington Research
Increased adoption of Dolby’s technologies (including the combined Vision and Atmos ecosystem) is providing meaningful tailwinds in key product categories. In television, the company continues to expand its penetration in 4K TVs, reaching into even lower priced [models]. Expectations for continued growth in market share underpin guidance for solid top-line growth. The value that content creators place on the new technologies is highlighted by a growing number of titles released in the combined experience. Music is now gaining traction, with the building of an ecosystem of content, distribution, and equipment that takes advantage of Atmos, with the added support and backing of respected recording artists.
We reaffirm out Outperform rating. Our fiscal 2020 price target is $85, which applies an enterprise value/Ebitda multiple of about 19 times, similar to the level the market assigned to the fiscal 2019 reported results.
To be considered for this section, material should be sent to [email protected].
