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.
Overweight Price $222.47 on Feb. 24
We are raising our CAT estimates on improving equipment fundamentals, particularly in construction, mining, and energy. We view the unprecedented winter storm in Texas as a catalyst for near-term construction and back-up power-equipment demand (rental initially, sales thereafter) while also strengthening bipartisan support for a broad-based [national] infrastructure package. Additionally, U.S. oil/gas production is likely to accelerate, albeit off a relatively low base. Separately, we believe that mining capex is entering a sustained, demand-driven upcycle as hard commodity prices continue to rally and equipment replacement is likely to continue to accelerate. We raise our December 2021 price target to $237 from $205.
OutperformPrice $91.63 on Feb. 25
Redfin reported strong fourth-quarter results, plus first-quarter guidance well ahead of expectations, on both the top and bottom line. Guidance implies results in the core real estate services segment well ahead of our expectations (we raise our 1Q growth estimate for this business to 53% from 31%). The strength in the housing market is continuing to drive material benefits to Redfin. It is having trouble keeping up with demand, even after making changes to its site that discourage customers from requesting tours when an agent is unlikely to be available. Redfin still doesn’t have nearly the number of agents it needs for the level of demand it is seeing and is hiring aggressively to get there. Redfin is also seeing increasing repeat rates and referrals, which can support longer growth. We continue to see Redfin as exceptionally well positioned to [benefit from the] real estate tech evolution. Our $109 price target is six times our 2022 enterprise value/revenue estimate.
Outperform Price $64.56 on Feb. 23
Our $77 price target is derived from applying about a 30% premium to our one-year forward net-asset-value per share estimate of $58.49. The premium is due to ADC’s external growth opportunities, favorable access to capital markets, active portfolio management, and the high quality of its existing properties. Around 68% of ADC’s rent is derived from tenants [or their parent companies] with an investment-grade rating. The strong tenant profile has translated into top-tier rent collections during the Covid-19 pandemic. The low cost of capital, combined with Agree’s existing tenant relationships, should yield above-average deal volume, with the pipeline skewed toward lower-risk investments.
Penn National Gaming
Overweight Price $117.70 on Feb. 22
by J.P. Morgan
We view PENN as a catalyst-filled stock, supercharged to benefit from a post-Covid-19 recovery. We don’t see any need for investors to be cautious and wait for a pullback to add here, and the same could be said for most regional/land-based/online-sports betting/iGaming operators. We think this subsector will continue to work through midyear before one reasonably has to reassess the risk-reward balance. We are raising our December 2021 price target to $142 from $134.
Buy Price $14.30 on Feb. 25
CARS beat fourth-quarter expectations on both revenue and adjusted Ebitda [earnings before interest, taxes, depreciation, and amortization]. Total revenue came in at $153 million versus our $147 million estimate, which is also where the Street was. Average revenue per dealer was $2,264, up 6%, year over year. Management cited FUEL [a system that allows car dealers to target online consumers who are shopping for a car] as a key contributor. While FUEL has low margins, that didn’t stop Cars.com from delivering a gross margin in line with our 82% estimate. Overall, adjusted Ebitda came in at $49 million, versus our $42 million estimate, helped by lower marketing spending. However, all three car listings companies expect higher marketing expense in 2021 as the market becomes more competitive. Despite this, CARS guided to a 1Q adjusted Ebitda margin of 27% to 30%, bracketing the consensus of 28%. Overall, we view this as a solid report that supports our thesis that CARS is reinvigorating its top line. Our price target: $16.
Outperform Price $22.28 on Feb. 19
We are establishing a 12- to 18-month stock-price target of $30. Over the past several years, Under Armour and its once enviable brand have suffered, owing to significant mismanagement and heightened competition in the global athleisure marketplace. UAA is not yet out of the woods, but we are increasingly confident that a much more targeted consumer focus and improved operational controls should gradually facilitate a return to outsize top-line expansion and unlock significant profit potential.
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