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.
Overweight Price $706.28 on Dec. 30
by Wells Fargo Securities
We are raising our earnings estimates, primarily to reflect market appreciation and positive currency adjustments that exceed our standard quarterly assumptions.
Our fourth-quarter earnings estimate increases from $7.95 a share to $8.89, raising our 2020 estimate from $31.60 to $32.53. Our forecasts rise from $33.90 to $35.75 for 2021 and from $38.15 to $40.10 for 2022. Our 12-month stock-price target increases from $700 to $805 (based on a market multiple of 22.5 times our 2021 earnings estimate).
We expect BlackRock to continue to generate superior organic growth, which, in our view, is a more reliable thesis than the mergers-and-acquisitions speculation currently affecting some asset managers’ stocks. We see fourth-quarter growth of 8.8% in assets under management, raising the total to $8.499 trillion. Excluding advisory AUM, this indicated quarter-over-quarter gain of $689 billion includes $128 billion for total net inflows (with annualized organic growth of 6.5%, likely well above industry levels); $490 billion for market appreciation (a 6.3% return, in keeping with the 11% increase in the S&P 500 index so far in the quarter and BlackRock’s 56% portfolio weighting in equities and multi-asset holdings, as of Sept 30); and a positive currency adjustment of $71 billion (mainly on strength in the euro and British pound.
Buy Price $21.66 on Dec. 30
We are adjusting our 2021 earnings forecast to reflect a recent equity offering, and we are also increasing our stock-price target to $29 from $21. After treading water for much of this pandemic year, shares of Codexis [a biotechnology company focused on therapeutics, life sciences, and sustainable manufacturing] have taken off, following a strong third-quarter report, increased expectations for growth into next year, and acquisition/joint venture activity. Proceeds from the recent offering are expected to boost the company’s cash on hand to more than $140 million, enough to cover several years’ cash burn of roughly $20 million to $22 million annually. Our increased price target represents 27 times estimated revenue for 2020, the average price/revenue multiple for our six-member bioprocessing stock group.
Buy Price $17.70 on Dec. 29
by B. Riley Securities
IMAX is our favorite play in media and entertainment heading into the pandemic recovery. We believe recent indicators are helping to push our thesis to reality. With IMAX shares up about 60% over the past two months, versus around 13% for the S&P 500 and within about 2% of our prior, $18 price target, we had to make a choice. We believe that the positive underlying demand trends within the industry, along with our view of IMAX’s improving position, provide a rationale to raise our target to $26.
We are comfortable in both increasing our target multiple from 10 times Ebitda to 11 times, and shifting that figure from our 2021 estimate to 2022. However, we would not be surprised if that $26 target proves to be conservative as we move through 2021.
Strong Buy Price $256.18 on Dec. 24
by Raymond James
Alibaba’s shares were down 3% after hours following the news that Chinese regulators had announced an investigation into the company for suspected monopolistic behavior. The probe largely surrounds merchants being required to sign exclusive pacts preventing their offerings from being sold on other platforms. We believe the most likely outcome is the termination of these exclusive relationships, though it is difficult to quantify the potential revenue impact (for example, from consumers shifting buying to other platforms). With the shares down about 20% from their recent highs, we believe Alibaba is largely pricing in these concerns, and we remain buyers.
Separately, it has been reported that financial regulators will meet with Alibaba affiliate Ant Financial Group in the coming days. Alibaba Group owns about 33% of Ant [whose initial-public-offering plans were abruptly halted by Chinese authorities recently]. The timing of the IPO remains highly uncertain, and Ant Financial may be required to make concessions to the Chinese government, and face tighter regulatory control.
Underperform Price $47.07 on Dec. 29
by RBC Capital Markets
[Activist investor] Third Point is reportedly pushing Intel to look at strategic alternatives—specifically, separating its chip design from its fabrication-plant manufacturing operations and [stepping up efforts to retain] talented designers, who reportedly have been leaving] due to demoralization. [The stock moved up on the news.] However, we think the intraday move is overdone, given that most investors we speak with believe that Intel will likely outsource part of its manufacturing to [Taiwan Semiconductor (ticker: TSM) or
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