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.
Freeport-McMoRan FCX-NYSE
Overweight Price $32.02 on Feb. 9
by J.P. Morgan
We are upgrading Freeport-McMoRan to an Overweight rating and a $37 December 2021 price target. Freeport is the largest copper pure play, with one of the highest-quality assets in the history of resource extraction: Grasberg in Indonesia, which is ramping up through 2022. In addition, Freeport’s portfolio of assets in the Americas provides a stable base of production, as well as additional long-term growth potential.
As copper and gold production grows and major project capital expenditures decline, the company should generate significant free cash flow. We model $14 billion in free cash flow for 2021-23, representing about a third of Freeport’s current market cap.
Beyond allowing Freeport to drive net debt to a target of $3 billion to $4 billion within the next 12 months, the ramp in free cash will allow Freeport to return capital to shareholders via a variable dividend. Our analysis suggests that such a strategy results in outperformance over time, on both a relative and absolute basis. Given the trends in electric vehicles and renewables, we believe in copper’s long-term secular demand story.
Western Union WU-NYSE
Buy Price $23.47 on Feb. 10
by BTIG
While Western Union’s discount valuation has persisted, its fourth-quarter report provided plenty of reasons for the stock deserving a larger earnings multiple. Among them: the ongoing growth of its digital money-transfer business, which during the quarter posted monthly active customer growth of 49% and is on pace to generate about $1 billion in revenue in 2021; expanding operating margins, fueled by management’s cost-reduction initiatives; and the underappreciated potential of Western Union’s white-label program [which allows money transfers via third parties]. Price target: $28.
Adobe Systems ADBE-Nasdaq
Buy Price $458.77 on Jan. 29
by Edward Jones
Adobe is the clear leader in the growing markets of digital publishing and marketing analytics, led by a management team with a strong track record for executing on strategy. After transitioning to a subscription-[software] model, Adobe is well positioned for good recurring revenue growth and has the financial flexibility to invest in new products, including machine learning and augmented reality. Adobe trades at a premium to its peers, which is warranted, based on its leadership position in growing markets, innovative product suite, and proven management team.
New York Community Bank
NYCB-NYSE
Buy Price $10.77 on Jan. 27
by BofA Securities
In addition, management reiterated its interest in partnering with another bank and staying on the lookout for merger-and-acquisition opportunities. We believe that the recent CEO change opens the door for a lot more merger opportunities, especially merger-of-equals deals. Price objective: $13.
Altice USA ATUS-NYSE
Outperform Price $37.65 on Feb. 11
by Macquarie Research
Altice’s fourth quarter was strong in dollar terms, but light in subscription numbers, which had been strong in the first three quarters. Residential video lost 74,000 subs, accelerating a downward trend to minus 6.9%, year over year. Altice added 7,000 mobile lines, also the lowest figure of the year. We are lowering 2021 estimated earnings per share from $1.44 to $1.14 on the company’s conservative guidance. However, we like Atlitce’s incremental growth potential and cash focus. At 10 times enterprise value/ earnings before interest, taxes, depreciation, and amortization, the stock remains inexpensive versus peers Comcast (ticker: CMCSA) and Charter Communications (CHTR). Our 12-month price target is $40.
Zynga ZNGA-Nasdaq
Overweight Price $11.16 on Feb. 10
by KeyBanc Capital Markets
Zynga [a digital-game maker] reported solid fourth-quarter earnings and guided bookings above consensus for 2021. We expect double-digit bookings growth in 2022, with margin expansion. There are a multitude of growth opportunities with the potential to significantly scale up the company’s size over the next several years. We’re raising our price target to $13.50 [from $12.50] based on 16 times estimated 2022 EV/Ebitda.
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