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.
Under Armour UAA- NYSE
Overweight Price $19.01 on Dec. 14
by Wells Fargo
We resume coverage of UAA at Overweight with a $33 price target—24 times our adjusted fiscal 2022 estimated Ebitda [earnings before interest, taxes, depreciation, and amortization] of $614 million. Our fiscal 2021/22 estimated EPS forecasts are 77 cents and 75 cents. We see UAA’s turnaround as being on firmer footing headed into 2022, driven by category tailwinds (particularly toward more technical offerings, where UAA excels) and the company’s effort to drive profitable top-line gains. Following 2021’s strong top-line and gross-margin gains, we see UAA’s margin expansion into fiscal 2022 as stickier. With the turnaround still in the middle innings, we believe the stock can continue to ride higher as the brand makes headway on its medium-term 10% margin target and beyond.
Wayfair
W-NYSE
Underperform Price $207.29 on Dec. 15
by B of A Securities
We are downgrading Wayfair to Underperform from Neutral and lowering our stock-price objective to $175 (from $265) on a continuation of weak near-term data, tough comparisons through 1Q22, and our belief that there is a risk that the company’s core mass consumer customer will shift spending from furnishings back into other categories, such as travel and entertainment, in 2022. We still see positives in W’s long-term growth story, but we believe a more cautious view is warranted now, given a weaker near-to-medium growth outlook and limited positive catalysts for growth. Our $175 price objective is based on 1.2 times our 2023 enterprise value/sales estimate (1.6x 2022E prior). Our 2021-23 sales estimates are now 2%/10%/12% below the Street’s. Our Ebitda estimates for 2021-23 are 5%/14%/34% below the Street’s, but still include over 400 basis points [4 percentage points] of gross margin gains since 2019.
American Tower AMT-NYSE
Buy Price $274.35 on Dec. 15
by Edward Jones
As subscribers and traffic grow, wireless providers must install additional equipment and antennas at AMT’s tower sites. Also, more equipment is needed when upgrading from a 4G to a 5G network, and AMT collects additional rent whenever new equipment is installed. American Tower derives close to half of its revenue abroad. International sites offer a strong growth opportunity because in many markets, subscribers are adopting wireless services for the first time, traffic is expanding rapidly, and many of these markets are still installing 4G technology. AMT aggressively acquires towers that were owned by wireless service providers. Many had been used only by their former owner and offer the chance to add other wireless providers, raising profitability. American Tower shares are valued on the basis of funds from operations. AMT is trading at about 26 times estimated 2022 FFO, versus their five-year average of 24. However, this valuation is supported by 5G network builds.
Quest Diagnostics DGX-NYSE
Buy Price $168.41 on Dec. 15
by Mizuho Securities
We recently met with Quest Diagnostics CEO Steve Rusckowski. Our main takeaway is that the reimbursement outlook for DGX’s base business appears brighter now than it has been over the past decade, for both Medicare and commercial services, which we view as a structural shift for the industry. Separately, we are raising our 2022 estimated adjusted EPS by 50 cents and our stock-price target to $185 [from $166], driven by recent legislation that delayed [Medicare payment] cuts by a year. We believe our estimates could have further upside, driven by Covid-19 testing, which is likely more durable than is reflected in current estimates.
Lowe’s Cos. LOW-NYSE
Buy Price $257.54 on Dec. 15
by Guggenheim Securities
Not only did management’s initial 2022 guidance essentially bracket our original Ebitda and EPS forecasts, but we see conservatism in the industry outlook that was used to formulate the guidance. Importantly, although Lowe’s shares historically have traded at a 10% discount to the S&P 500, we see the potential delivery of a 300 to 400 basis point [3% to 4% positive] performance gap in 2022—as predicated by management’s guidance—as justification for a market premium. We are raising both our 2022-23 expectations and our price target (to $300 from $275).
Micron Technology MU-Nasdaq
Positive Price $85.66 on Dec. 15
by Susquehanna Financial Group
Going into MU’s November-quarter earnings [due to be reported after the market close on Monday, Dec. 20], we remain comfortable with our EPS estimates, but don’t rule out a miss to the top line. In our view, a better mix could help drive margin upside, despite lower revenue, thus helping EPS to come in line. Looking beyond the February quarter, we expect a rebound in blended average selling prices, which should be enough to drive material upside to the current consensus earnings estimates. We have a stock-price target of $125, 10 times our above-consensus calendar year 2022 EPS estimate.
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