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.
Western Digital WDC-Nasdaq
Overweight •Price $54.48 on Feb. 9
by Wells Fargo Securities
Today, after the close, Western Digital announced that its NAND flash-memory ventures with Kioxia in [Japan] have suffered chemical contamination. Western Digital said that it will see a reduction in flash availability of at least 6.5 exabytes. While this certainly can be viewed as a negative, historically, disruptions to flash production (earthquakes, power outages, etc.) have resulted in positive impacts on NAND flash pricing and consequentially share prices. [We reiterate our Overweight rating and $80 price target on WDC stock.] We also expect the news to be a positive catalyst for Micron Technology (ticker: MU), which has had about a 10% to 12% share in the total NAND market.
Pfizer PFE-NYSE
Buy Price $51.70 on Feb. 8
by BofA Global Research
Pfizer shares trailed the market (-3%; DRG -0%) after 2022 Paxlovid guidance ($22 billion on signed contracts) fell short of rising expectations. Pfizer took a conservative stance, based on only confirmed contracts, but is talking to “100s of countries and entities” globally which should be a meaningful upside driver in 2022, based on high margins. We are increasing our 2022 forecast for Paxlovid [a pill to treat Covid-19] to $27 billion (from $20 billion). As for Pfizer’s C-19 vaccine, an incremental $1 billion in 2022 contracts (to $32 billion) isn’t exciting, nor is the discussion of yet another booster shot. Overall, we’d be aggressive buyers at current levels, given Pfizer’s base business growth of 5% to 6%, which is near the top tier of biopharma, likely meaningful upside from Paxlovid sales as supply ramps up, and the opportunity for larger-scale M&A to convert C-19 cash into a durable franchise that addresses the 2026-30 period [during which some of the company’s main drug patents expire]. For 2022, we’re in line on total revenue ($99 billion versus $98 billion to $100 billion guidance) and ahead on EPS ($7 a share versus $6.35 to $6.55 guidance), on Paxlovid’s improved margins. Price objective: $70.
Check Point Software CHKP-Nasdaq
Neutral Price $126.68 on Feb. 3
by Guggenheim Securities
Check Point reported a good quarter, with product, revenue, and billings accelerating. The company reported strong traction in CloudGuard, Infinity, and its Quantum appliances. FY22E revenue guidance was above Street [expectations] and implied accelerated momentum, but EPS guidance was a bit light. Overall, a good quarter that shows healthy demand trends and improved execution. We maintain our Neutral rating and price target of $120, which is based on an FY22E multiple of 11 times [enterprise value/free cash flow]. We believe an 11 times multiple is fair for a low- to mid-single-digit growth company, given the uncertainty around coming tougher comps and the competitive landscape.
Coursera COUR-Nasdaq
Overweight • Price $21.03 on Feb. 10
by KeyBanc Capital Markets
Coursera [an online training and education company] posted revenue of $115 million [in the fourth quarter], slightly ahead of the $111.6 million consensus estimate. Consumer posted 24% year-over-year growth, well above consensus expectations of 18%, on strong professional-certificate demand. Enterprise grew 72% and also added 92 net new accounts, quarter-over-quarter, bring the total to 803 on strong demand across all categories. Degrees reported $13.3 million in revenue, largely in line with expectations, with the number of degree students increasing to 16,204 from 16,068 in Q3. We are maintaining our price target of $35, and continue to view Coursera as one of our favorite ideas for 2022.
Linde LIN-NYSE
Neutral Price $304.15 on Feb. 9
by Seaport Research Partners
Linde [the world’s largest industrial gas supplier] managed through the higher-cost environment to deliver 4Q earnings ahead of expectations. Sales were ahead of our model in all segments, with engineering showing the strongest beat. The operating margin was slightly below our model, and was flat, year over year, but would have been up [1.2%], excluding the impact of cost pass-throughs. Guidance for 2022 EPS of $11.55 to $11.85 is slightly below our $11.86 estimate. Q1 EPS is expected in the $2.70 to $2.80 range. [We believe that] LIN can continue to deliver solid earnings growth related to productivity, operating leverage, price/cost management, and new projects.
Phathom Pharmaceuticals PHAT-Nasdaq
Buy Price $17.30 on Feb. 9
by Needham
Phathom Pharmaceuticals reported positive top-line results from the Phase 2 trial evaluating Vonoprazan as on-demand therapy for non-erosive reflux disease (NERD). All three dose levels hit the primary endpoint of [reducing the] percentage of heartburn episodes, with complete relief versus placebo through week six. With the strong results, we are raising our [estimated chance of the drug’s success] to 50% (from 25%). Price target: $55.
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