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.
Intel
• INTC-Nasdaq
Buy • Price $39.41 on Nov. 14.
by Mizuho Securities
We are upgrading Intel to Buy with a $50 price target (from Neutral, $37 price target). We downgraded Intel in October 2021 because we saw Intel lose focus from its core Data Center/Compute road map. Since then, Intel has lost significant PC and DC market share, and gross margins are down to 43% from 56%. We now see Intel refocused on a better 2024 estimated DC/PC road map, which could drive DC/PC share gains and improve margins. An improving Intel 2024 estimated Data Center road map sees the most prolific product launches with Emerald Rapids, Sierra Forest, and Gaudi2/3 Accelerators. These releases would make estimated 2024 one of the most prolific product launch years for Intel….We are raising fiscal-2024 revenue/earnings-per-share estimates from $60.9 billion/$1.74 to $63.8 billion/$2.01.
Advance Auto Parts
• AAP-NYSE
Hold • Price $58.40 on Nov. 14
by Truist Securities
We like to give new management teams the benefit of the doubt. However, retail turnarounds are notoriously difficult. Advance is a complex business that is under significant financial strain (3.3 times debt/Ebitdar; recently downgraded by credit agencies), and is experiencing sharply deteriorating profitability/cash flow and is now uncovering financial misstatements. Way too much for our taste.
Some investors may look to their “spreadsheet math” and potential divisional sales to stay interested, but this isn’t one we can get behind at this point, especially given the potential dilution of a transaction. Price target: $53.
Target
• TGT-NYSE
Buy • Price $110.79 on Nov. 15
by Guggenheim
Target reported third-quarter diluted earnings per share of $2.10, $0.58 above our estimate. Comps were down 4.9%, essentially in line with our estimate of a 5% decline, reflecting softer industry trends in discretionary categories. Target saw its consumers delay spending until the last moment, indicating continued macro pressures.
While we maintain our conservative stance for the remainder of the year, we flow through the profitability enhancements from this quarter and increase our fiscal-2023 EPS estimate to $8.40 from $7.75. Our fiscal-year 2024 EPS estimate of $9.75 remains intact. We believe that the rate of change of top line and margins is declining and also that at current levels the shares offer an attractive risk/reward ratio. We see various levers/paths for the company to begin its return to a 6% operating margin. Price target: $160.
Palo Alto Networks
• PANW-Nasdaq
Outperform • Price $256.18 on Nov. 15
by BMO Research
While there were numerous positive metrics, Palo Alto missed October-quarter billings expectations, lowered its fiscal-2024 billings guide, and reported weak remaining performance obligation, or RPO, bookings. Near term, we think that investors will be asking about the risk associated with lowered guidance. In our judgment, the lowered guidance has less risk, but we are not comfortable asserting that there is no risk. Hence, while we remain supportive of Palo Alto, driven by the strength of its portfolio and solid end markets excluding firewalls, we nevertheless believe that a lower multiple is warranted, and our new price target is $283.
Catalent
• CTLT-NYSE
Buy • Price $35.53 on Nov. 15
by UBS
We are maintaining our Buy rating and $58 price target following Catalent’s fiscal-2024 first-quarter results, which were above consensus on the top and bottom lines. While the beat was largely driven by Covid-19 revenue, guidance for the full year was reaffirmed, which we believe came as a relief for some investors following a challenging earnings season for the space.
We believe that long-term biologic and cell-and-gene-therapy industry demand is intact, with later-stage gene therapy opportunities continuing to move forward and Catalent winning business in this area. In fiscal 2024, Catalent expects to generate less than $100 million of revenue from GLP-1 products [for diabetes and weight loss].
However, through fiscal-year 2026, the company will be adding lines globally for these products and expects GLP-1s to contribute “well over $500 million in revenue” once these projects are finished.
ChargePoint Holdings
• CHPT-NYSE
Buy • Price $3.13 on Nov. 17
by Needham
We reiterate our Buy rating but lower our price target to $4 post-ChargePoint’s negative preannouncement. ChargePoint continues to see order delays amid economic uncertainty, as well as slowness in fleet and commercial electric-vehicle deliveries negatively impacting the timing of revenue, with ChargePoint’s lack of revenue visibility leading to consistent negative earnings revisions year to date.
We are still believers in EV adoption at the consumer and fleet levels, given government incentives and the lower total cost of ownership versus internal-combustion-engine vehicles, with near-term weakness pushing out growth in our model.
Our $4 target represents 15 times our 2027 adjusted Ebitda discounted back, down from 25 times prior, with only modest changes to our 2027 revenue and adjusted Ebitda estimates. Price target: $4.
To be considered for this section, material should be sent to [email protected].
Read the full article here
