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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.
Lowe’s
LOW-Nasdaq
Neutral Price $245.73 on Nov. 17
by Wedbush
Lowe’s reported third-quarter results that met buy-side expectations on sales comps, but beat on margins. Home improvement demand remains solid. Like
Home Depot
(ticker: HD), Lowe’s did not experience any material negative demand from higher prices. Despite more difficult comparisons in December and January, Lowe’s implied fourth-quarter flattish comp guidance is very conservative. All in, it reported operating margins of 12.2% (+240 basis points [each equal to 1/100th of a percentage point], year over year) versus the consensus 10.8% estimate, and earnings per share of $2.73 versus the consensus $2.35. The company plans to address its 2022 outlook at a virtual meeting on Dec. 15. While Lowe’s is executing well and has material medium-term margin expansion potential, we continue to favor HD, given its higher exposure [to construction and home-improvement pros.] We are raising our estimates, increasing our target price to $260 from $210, but reiterating our Neutral rating on Lowe’s.
Cisco
Systems CSCO-Nasdaq
Outperform Price $56.86 on Nov. 17
by Evercore ISI
Cisco reported October-quarter results of $12.9 billion in sales and 82 cents in EPS, versus the Street consensus of $13 billion/80 cents. Cisco saw strong 8% top-line growth, driven by strength across several key segments (Internet of future +46%, Secure Agile networks +10%). The challenge with the print was that its January-quarter guidance came in below expectations. Cisco is calling for 4.5% to 6.5% sales growth, versus the Street’s 7.3%, in light of supply-chain challenges. Positively, Cisco maintained its fiscal-year 2021 guidance of 5% to 7% top-line growth and noted that it is seeing signs of supply-chain normalization. In addition, robust order growth, which accelerated to +33% in the quarter (versus 31% in July), should give investors confidence in the multiyear growth profile as supply-chain issues fade and information-technology deployments accelerate, driven by the shift in digital transformation. We are sticking with our $67 price target.
Sportradar Group
SRAD-Nasdaq
Buy Price $21.83 on Nov. 17
by Needham
We see Sportradar’s shares as a compelling, way of benefiting from the growth of sports betting globally and the increasing importance of in-game betting. Sportradar [which provides event data to sportsbooks] has signed an exclusive contract with the NBA, following the loss of its NFL contract to
Genius Sports
(GENI, Buy, $29 PT). We are encouraged that Sportradar is adding revenue sources like distribution streaming rights and directing advertising spending on behalf of sportsbooks. We see the risk-reward ratio skewing toward our bull case, given the importance of high-quality data as in-game betting becomes increasingly important. We are increasing our price target to $30 [from $28].
Activision Blizzard
ATVI-Nasdaq
Outperform Price $66.14 on Nov. 16
by BMO Capital Markets
The Wall Street Journal published an article [a few days ago] alleging that CEO Bobby Kotick knew about sexual misconduct at the company [but mishandled the situation]. While Activision Blizzard has stated that the article was misleading, pressure continues to mount, and we expect it’s becoming increasingly more likely that Kotick steps down. We maintain our Outperform rating, as we see significant value in Activision’s intellectual property and game brands. We anticipate the stock will see a relief bounce if Kotick resigns, and note the depressed share price could make it an attractive takeover target for a larger tech company. Price target: $90.
PNC Financial Services
PNC-NYSE
Perform Price $199.13 on Nov. 18
by
PNC reported third-quarter EPS of $3.30, versus the consensus $3.35; however, these figures contain noise from reserve releases and merger-related items. On a core basis, we’d place EPS at around $3.55, versus our estimate of $3.09, mainly on lower charge-offs and strong private-equity gains. On balance, the results leave our outlook for 2022 and beyond basically unchanged. We generally like PNC. It has good businesses, a solid track record, and well-regarded management. The company’s longer-term growth prospects are very favorable, but its valuation keeps us on the sidelines.
Fresenius Medical Care
FMS-NYSE
Sector Perform Price $32.96 on Nov. 15
by RBC Research
Fresenius [which provides kidney dialysis and related services and products] posted third-quarter results in line with expectations, despite reacceleration of excess mortality from Covid-19, due to the Delta variant. Despite this, the company achieved 1.2% organic top-line growth, driven by a reimbursement increase in the U.S., continued payor-mix improvement from strong Medicare Advantage growth, and solid underlying demand and return of elective medical procedures in the Asia-Pacific region. However, we are lowering our price target to $35 from $42, primarily on sector rerating.
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