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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.
Charles Schwab
SCHW-NYSE
Overweight Price $55.03 on Jan. 6
by Wells Fargo Securities
Interest rates are spiking after the somewhat surprising outcome from the Georgia Senate runoff elections. That is bullish for financials broadly, but especially for Charles Schwab, as it is one of the most interest-rate-sensitive financials we know of. Schwab is a top pick of ours for 2021. We estimate that each 25 basis-point [0.25 of a percentage point] increase to interest rates across the curve results in earnings-per-share accretion of 10% for Schwab. For a 25 bp increase to longer-term interest rates only (i.e., yield curve steepening), we estimate accretion of 3% in earnings per share.
We also think that Schwab has minimal risk from more draconian financial regulations/oversight; its banking operations are not loan-intensive and its brokerage business is low cost and free of many conflicts of interest that regulators have frowned upon in the past (e.g., brokerage commissions).
Qualcomm
QCOM-Nasdaq
Buy Price $151.19 on Jan. 6
by Tigress Financial Partners
We reiterate our Buy rating, as Qualcomm continues to expand its leadership position in the global high-speed 5G network rollout and benefit from a massive global upcycle in smartphone demand.
Qualcomm is benefiting from increasing 5G chip demand, as the 5G high-speed rollout is driving consumers to upgrade their smartphones. Qualcomm reported incredibly strong fourth-quarter results, with a massive 73% gain in revenue, driven by increased 5G chip demand. Overall chip sales increased by 38%, and licensing rose by 30% in the quarter. Qualcomm also increased its first-quarter guidance, driven by the ramp-up of 5G-enabled smartphone production. Qualcomm is projecting global shipments of 5G enabled smartphones of 450 million to 550 million in 2021, doubling expected smartphone sales this year….Qualcomm’s strong balance sheet and cash enable ongoing investment in innovation and enhance shareholder returns through periodic dividend increases and share repurchases. Significant upside exists.
Macy’s
M-NYSE
Buy Price $11.39 on Jan.6
by Jefferies
Our thesis continues to develop with the promotion of Nata Dvir—a name we know well from the beauty sector—as chief merchandising officer at Macy’s, and a store-closure update. Initial feedback from brands cited Dvir’s ability to integrate omni strategies, curate indie brands, and amplify the shopping experience with technology and events. Her appreciation of the importance of the millennial and Gen Z customer is especially important, and we look forward to a more concerted marketing and merchandising push toward these cohorts. Price target: $14.
Corning
GLW-NYSE
Buy Price $36 on Dec. 31
by CFRA
Corning is a leading maker of glass substrates used by the electronics industry, and fiberoptic equipment used by the telecommunications industry. Our Buy opinion reflects our view that demand is beginning to recover across many of its end markets.
Corning will continue to focus on cost reduction, which we see as the proper strategy in the face of rising global Covid-19 cases. We see positive long-term trends in optical communications, driven by strong growth in hyperscale data-center demand and projects to upgrade legacy copper lines. Corning has the financial strength, including a balance sheet with a weighted average debt maturity of 10 years, to weather recent challenges. The company has completed its purchase of the communication markets division of
3M
(ticker: MMM) for $900 million. The business consists of optical fiber and copper passive connectivity telecom solutions. We view this acquisition as a positive as it expands Corning’s product portfolio into high-growth markets. Our 12-month target of $40 is 21.4 times our 2021 EPS estimate, comparable to the peer average. It reflects Corning’s secure dividend and our expectation that the company will weather short-term headwinds.
McDonald’s
MCD-NYSE
Outperform Price $210.22 on Jan. 4
by Wedbush
We believe that McDonald’s ongoing menu, technology, marketing, and capital investments render visibility into sustained mid-single digit global same-store sales growth very high in a post-Covid global restaurant environment. As the margin impact of some of these investments wanes, we expect free-cash-flow per share growth in 2022 and EPS growth in ’23 to accelerate to double digits, resulting in multiple expansion. We initiate at Outperform, with a $240 price target.
Collegium Pharmaceutical
COLL-Nasdaq
Sell Price $20.59 on Jan. 6
by BWS Financial
Collegium, a company focused on pain management, issued 2021 guidance that puts adjusted Ebitda slightly lower than consensus estimates, even though management had been highlighting wins for the start of 2021. Our 12-month price target is $8.
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