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.
General Electric GE-NYSE
Neutral Price $78.21 on April 27
by J.P. Morgan
General Electric is operating through a difficult period, born from leverage-related issues that, combined with challenged end markets and intensified competition, have left the company with significant liabilities and little free cash flow, or FCF, to support it. The company has undertaken major portfolio moves to [reduce leverage], diluting future fundamental earnings and FCF. We believe that incomplete guidance is keeping a persistently optimistic Street from resetting [its forecasts], making the stock look cheaper than it is. We continue to see structural concerns in GE’s key power markets, and now structural weakness in aviation, combined with still relatively high financial leverage, and numerous tail liabilities—all hurdles to a speedy turnaround. Given what we view as a low quality of earnings, we believe FCF remains the most relevant metric for valuation and the stock screens expensive on this basis, with investors giving the benefit of the doubt for improvement in the out years. We remain on the sidelines. December price target: $55.
Fiserv FISV-Nasdaq
Outperform Price $100.81 on April 27
by Raymond James
We are maintaining our Outperform rating [on the financial-services and payment-technology company], following better-than-expected top- and bottom-line first-quarter results. The merchant sector continues to drive the upside, accounting for the quarter’s entire revenue beat, driven by 39% growth in Clover and 20% growth in Carat volumes. That said, we note that FCF conversion [the ability to turn operating profits into free cash flow] will likely remain a sticking point for investors, as first-quarter conversion of just 65% is well below historical levels, though we note that management reaffirmed expectations for 95% to 100% conversion. While some may have hoped for the company to at least point to the high end of its financial guidance following the first-quarter upside, we believe management is prudent to hold off, given macro uncertainty. With the stock trading at just about 13 times estimated 2023 earnings, despite midteens earnings-per-share growth, we find the risk/reward attractive. Price target: $120.
Beam Global Beem-Nasdaq
Buy Price $17.15 on April 25
by Maxim Group
Beam sells products for electric-vehicle charging without connecting to a power grid. The company’s primary EV ARC [charging station] fits in a parking spot, generates electricity from solar panels, and stores power with batteries. Beam trades at an enterprise value/revenue multiple of 6.9 times our 2022 revenue estimate of $23.1 million. Our $50 stock-price target is based on an EV/revenue multiple of 10.9 times our 2023 revenue estimate of $46.5 million. We expect revenue to accelerate in 2022 and remain above 100% growth in 2023, and for Beam’s gross margin to turn positive in 2022. Our rating is based on our outlook for demand for electric-vehicle charging and clean energy.
Teladoc Health TDOC-NYSE
Neutral Price $55.99 on April 27
by Credit Suisse
While Teladoc’s first-quarter results tracked the consensus estimate, updated 2022 estimates of consolidated revenue and Ebitda were cut by 6% and 26%, respectively, at the midpoint, with the high end of the range for total visits being lowered. Although Teladoc continues to expect sustainable growth across its suite of products and services, it is experiencing challenges in the direct-to-consumer mental-health and chronic-condition markets. In the mental-health market, higher advertising costs in some channels are generating a lower-than-expected yield on marketing spending. In the chronic-condition market, Teladoc is seeing an elongated sales cycle, as employers and health plans evaluate their long-term strategies to deliver the benefits and care that their populations need. As a result, Teladoc now assumes a 10% lower revenue yield per dollar of ad spending for the full year and is taking a $6.6 billion impairment to goodwill. We are downgrading the stock from Outperform, and cutting our target price to $35 from $114.
Barrett Business Services BBSI-Nasdaq
Outperform Price $73 on April 27
by Barrington Research
Barrett is a leading provider of business management solutions, combining human resource outsourcing and professional management consulting in a unique operational platform. We expect Barrett [which is scheduled to report results on May 4] to have first-quarter revenue of $257.6 million. Our forecast represents a year-over-year increase of 17% and a sequentially flat change. The company’s PEO revenue [revenue from services, such as human resources, that a customer needs but that don’t add to its profits] is based on a percentage of gross billings. In fourth-quarter 2021, gross billings grew 13%, year over year, which followed third-quarter growth of 12% and second-quarter growth of 17%. The gross billings growth over the past three quarters compares favorably to the prior four quarters. Stock-price target: $85.
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