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.
Boeing BA-NYSE
Strong Buy Price $247.02 on May 28
by CFRA
Boeing carries high risk, due to its 737 MAX problems, the Covid-19 demand shock, and $50 billion of debt added since 2018. Nonetheless, we see a full demand recovery in 2023, which will likely result in material upside for the shares, given that many sell-side estimates imply that demand will never fully recover. We value BA in a highly conservative scenario in which free cash flow for the remainder of 2021-2022 is negative $6 billion (base case: positive $7 billion) and earnings don’t return to their 2018 peak until 2026 (base case: 2024). The market fears that the MAX will never regain its competitive edge and that there will be a permanent drop in business travel, post-Covid, but we don’t agree. MAX operators are already eager to buy more of the highly efficient plane (224 new orders in Q1, versus 38 for Airbus’s competing narrow-bodies). In addition, record highs in March and April for U.S. business jet flights and China domestic commercial flights suggest that businesses are eager to fully resume travel once Covid-19 risks dissipate. Our target price is $321, still 27% below Boeing’s all-time high.
IAC/InterActiveCorp IAC-Nasdaq
Overweight • Price $158.07 on June 2
by J.P. Morgan
We are updating our IAC sum-of-the-parts valuation and price target following completion of the Vimeo spin-off. IAC now consists of a majority ownership of publicly traded Angi; a portfolio of owned businesses (the stub), including Dotdash, Care.com, Ask Media Group, Mosaic, Bluecrew, Vivian Health, The Daily Beast, and IAC Films. Also included in the stub is IAC’s 25% ownership of private company Turo; minority stake in publicly traded MGM; and $2.8 billion in cash, less $397 million of estimated withholding taxes payable. If we back out the market value of IAC’s public company positions and net cash, its share price implies a stub value of $2.9 billion—a discount to our estimate of $4.7 billion. IAC has multiple levers to unlock value over time. But we believe that the IAC stub is likely to continue trading at a discount to our sum-of-the-parts estimate until we have more clarity around the next catalyst. That makes Angi—one of our best small-mid-cap ideas—an important part of our IAC bull thesis in the near term. Price target: $200
Etsy ETSY-Nasdaq
Buy Price $167.06 on June 2
by Canaccord Genuity
Etsy has agreed to acquire Depop, a leading mobile-first e-commerce marketplace for fashion items, in a deal valued at $1.63 billion. The move expands Etsy’s presence in the fast-growing second-hand apparel category, giving it access to Depop’s highly-engaged base of Gen Z consumers. Etsy now has three highly-differentiated marketplaces. While it plans to operate each on a stand-alone basis, it aims to leverage shared technology, customer support, and marketing strategies to drive operational efficiencies, using the same playbook it successfully executed following the Reverb deal in 2019. Price target: $270.
Verint Systems VRNT-Nasdaq
Outperform Price $46.11 on June 1
by Evercore ISI
We are initiating coverage with an Outperform rating and a $75 price target. Verint is a category leader in customer engagement. Digital transformation has changed customer service. Today, companies are engaging with customers not just through voice/call centers, but rather multiple touchpoints, including email, chat, self-service, user communities, social media, and e-commerce. The C-suite has noticed how investing in service can drive elevated customer experiences, differentiate brands, and drive new revenue streams. VRNT’s open engagement platform allows its customers to integrate and consolidate customer engagement data from disparate systems before being used in a more traditional front office channel.
We view Verint as a value idea for those looking to play off a multi-year upgrade cycle that has only just begun. Our price target is 5.5 times enterprise value/calendar 2022 sales.
Costco Wholesale COST-Nasdaq
Outperform Price $387.50 on May 27
by Baird
Building on its well-established focus of providing members with exceptional price/value, Costco continues to add key convenience capabilities to its business. Ongoing enhancements to Costco.com (improved search and checkout, new brands, additional categories) and delivery capabilities (same-day via Instacart) have helped COST build an increasingly credible convenience angle to its consumer appeal.
Costco’s international clubs are more profitable than their U.S. counterparts. As international openings become a greater percentage of the mix, Costco stands to benefit. Importantly, U.S./Canada [membership] renewal rates are at all-time highs, reinforcing our view that COST remains as relevant as ever with consumers. Our $430 price target,up from $415, is about 19 times our 2022 estimated Ebitda [earnings before interest, taxes, depreciation, and amortization].
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