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.
Las Vegas Sands LVS-NYSE
Overweight Price $36.43 on Jan. 10
by J.P. Morgan
We are upgrading Las Vegas Sands from Neutral and upping our year-end 2022 price target to $48 [from $36], and adding it to our Analyst Focus List as a value pick. We think the risk-reward is favorable after massive underperformance in 2021 (down 35%, versus U.S. gaming stocks up 59%, and the S&P 500 up 25%) with LVS (and the rest of the Macau-centric U.S.-listed stocks) lagging the other reopening sectors (U.S. gaming, lodging, cruise lines) and risks priced in after a year of incremental regulatory concerns (adverse licensing renewal terms, the likely death of the junket VIP business). The sell side has cut estimates (us, too) as travel mobility tightened/failed to ease after Covid-19 spikes in the region amid a near-zero case tolerance policy by China. We note that the current level of investor apathy toward Macau is the worst for any subsector within our coverage universe in our 22-plus years of covering gaming and lodging.
Domino’s Pizza DPZ-NYSE
Outperform Price $487.51 on Jan. 11
by Baird
At today’s ICR investment conference, management provided guidance that prompted us to trim our 2022 EPS projections by just under 1%. That said, commentary was positive about the structural growth drivers of the business, and we remain optimistic that Domino’s is well-positioned to navigate through current industry-wide challenges and deliver solid growth in 2022 and beyond. DPZ announced plans to migrate its national $7.99 Large Three-Topping Carryout Pizza offer to a digital-only offer (previously, it was available across all ordering modes). The company is also reducing the count for chicken-wing items to 8 pieces from 10 previously. We would not be surprised to hear DPZ outline similar changes for its national $5.99 Mix & Match deal in coming quarters. These actions should increase average checks and lower costs for franchisees, while also bringing additional customers into Domino’s digital ecosystem, boosting technology fees for DPZ. Price target: $574.
Tower Semiconductor TSEM-Nasdaq
Buy Price $40.64 on Jan. 11
by Needham
We participated in a discussion with Marco Racanelli, senior vice president and general manager, and Noit Levy, SVP of investor relations, at our 24th Annual Needham Virtual Growth Conference this week. Tower continues to expand capacity on more profitable processors, which has helped raise its gross margin by 300 basis points [3%] over the past year. The company recently announced a partnership with Juniper Networks [ticker: JNPR] to begin production of an advanced SiPho [silicon photonics] product (in calendar year 2023), which is the highest gross-margin segment for Tower. The company is also partnering with STMicro to co-invest in a 300mm [chip-fabrication plant] in Italy, which will begin low-rate production in CY23 and ramp up more significantly in CY24. Price target: $45.
Beam Therapeutics BEAM-Nasdaq
Overweight Price $70.24 on Jan. 12
by Wells Fargo
We reiterate our $145 price target on Beam Therapeutics, following the announcement of a partnership with Pfizer [PFE] focused on in vivo base-editing programs, as well as Beam’s announcement outlining 2022 initiatives. The endorsement from a leading global pharmaceutical company represents a major validation for Beam’s base-editing technology. We also expect funding provided by Pfizer to accelerate Beam’s internal programs. We believe that Beam has the most advanced gene-editing technology and expect continued interest from others. And Beam’s disciplined approach to partnering preserves the value of its core assets.
Kratos Defense & Security Solutions KTOS-Nasdaq
Buy Price $16.93 on Jan. 12
by B. Riley Securities
There’s a trading opportunity in Kratos, following a 7.7% selloff on Jan. 11 in the wake of a premarket downgrade alleging slower-than-anticipated growth-driver development. CEO Eric DeMarco, in a virtual conference presentation, conceded the obvious—that the U.S. continues to operate under a continuing resolution of the federal fiscal-year budget, extending to Feb. 18. This precludes the Defense Department from embarking on new programs, including those featuring KTOS’ disruptive and affordable tactical combat drones. The highest-performing in the world and survivable in [hostile] environments, such as the South China Sea, these are the only such systems flying today. KTOS believes the Air Force and other customers aren’t resetting anything, as evidenced by Air Force Secretary Frank Kendall’s recent remarks citing hope for new classified drone programs in the forthcoming fiscal 2023 budget request (even as we wait for a federal FY22 budget). The biggest takeaway for us stemmed from a slide KTOS unveiled, disclosing a new Demogorgon drone at an $8 million production price. Altogether, we see KTOS’ [aerial] targets business alone as ramping toward about a $250 million annual production rate. Price target: $29.50.
To be considered for this section, material should be sent to [email protected].
