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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.
La-Z-Boy LZB-NYSE
Outperform Price $30.15 on Feb. 16
by Raymond James
We reaffirm our Outperform rating, but trim our target price to $40, from $46, on lower near-term earnings and multiple compression. F3Q22 sales were relatively in-line with expectations, but adjusted EPS were below estimates, driven by greater than anticipated supply chain volatility…. a lot of which was out of La-Z-Boy’s control and appears transitory. [However,] La-Z-Boy should be able to deliver better than historic long-term margins as its supply chain improves. Specifically, La-Z-Boy’s backlog remains at an all-time high, illustrating strong ongoing demand. [There are] housing tailwinds for residential furniture, improving price realization, and increased manufacturing efficiency. Longer-term, we also see upside for La-Z-Boy through growth in its Joybird business [a small e-commerce retailer and manufacturer of upholstered furniture that is growing quickly], additional La-Z-Boy branded furniture galleries (target: about 400 over time, versus 350 today), and increased digital exposure to the legacy La-Z-Boy brand.
The Cheesecake Factory CAKE-Nasdaq
Outperform • Price $40.87 on Feb. 16
by Wedbush
We expect post-Covid market share opportunities to result in higher growth versus pre-Covid rates, resulting in an increasing premium, relative to CAKE’s pre-Covid valuation. Recent weeks’ top-line recovery to pre-Omicron levels allows for top-line guidance above expectations. Quarterly same-store sales growth through Feb. 15 was 24.3% at Cheesecake and 38% at North Italia, and price increases have been enough to preclude downward 2022 margin revisions. Management now sees commodity inflation in the mid-teens range in Q1, declining to mid- to high single-digit levels by Q4, and 60% to 65% of commodities are contracted for the year. Net labor inflation is expected to be around 5%. We are increasing our 2022 EPS estimate to $3.06 from $2.87. Stock-price target: $52, up from $49.
Roblox RBLX-NYSE
Sell Price $54.95 on Feb. 16
by Benchmark
Roblox [an online entertainment and videogaming platform] reported disappointing F4Q22 financial results, with both audience size and player engagement declining in key geographies and demographics. We anticipate lingering weakness in the U.S. and Canada, and in the company’s core under-13 player group, as engagement normalizes [after the pandemic]. We are concerned that management’s desire to drive growth through older demographic and brand advertisements could ultimately create a toxic community experience [for younger users]….. and we suspect that parents may allocate less capital to RBLX as inflation impacts family budgets. We aren’t impressed with management’s grasp of the business…. and note meaningful insider sales. Our price target is $45, reduced from $70.
Grand Canyon Education LOPE-Nasdaq
Outperform Price $79.09 on Feb. 16
by Barrington Research
Last night, after the market close, Grand Canyon Education reported mixed financial results for its fourth quarter and year ended Dec. 31. Initial guidance for 2022 was below expectations While Q4 revenue increased 5.5%, to $251.4 million, from $238.3 million a year earlier, that was slightly below our estimate of $253 million. Adjusted diluted EPS increased 11.3%, to $2.11, from $1.89, in line with our estimate of $2.12. Management’s initial guidance for 2022 calls for revenue in a range of $905 to $930 million and adjusted diluted EPS of $5.58 to $6.18. At its current level, the stock trades at 1.5 times revenue, 4.9 times adjusted Ebitda, and 13.4 times diluted EPS, based on our reduced 2022 estimates, representing a discount to its ed tech peer group. We view the current challenges as temporary and expect growth to accelerate in 2022’s second half and beyond. We are, however, scaling back our 12-month price target to $90 (from $100) to reflect our lower near-term earnings expectations.
North American Construction Group NOA-Toronto, NOA-NYSE
Outperform Price C$19.09, $15.08 on Feb. 16
by National Bank of Canada Financial Markets
[This company is one of Canada’s largest heavy construction and mining contractors.] Revenue for its latest quarter came in at C$181 million, up 32.3%, year over year, in line with the Street consensus. Including joint-venture revenue, the total was C$235 million, versus C$170 million. The imputed margin on total combined revenue was 24%, compared with 26.6% in the same period last year. Margins were [hurt] by operator shortages and greater equipment maintenance (which will help future utilization levels), and site restrictions due to Covid protocols. Adjusted EPS of 59 Canadian cents [matched] the Street consensus. The contractual backlog stood at C$1.7 billion at quarter’s-end. Lastly, the company’s board approved a dividend increase from 16 Canadian cents per annum to 32 Canadian cents. Stock-price target: C$27.
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