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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.
Slack Technologies
WORK-NYSE
Outperform Price $20.98 on Feb. 3
by RBC Capital Markets
We initiate coverage of Slack with an Outperform rating and a $25 price target (12.6 times enterprise value/2021 estimated revenue). We see Slack as having a leading brand, differentiated technology, and strong tailwinds from a growing workplace-collaboration market, which create an opportunity for the company to have durable, multiyear 30%-plus growth.
Slack is a modern enterprise communication and collaboration hub that acts as a thin horizontal layer across standard enterprise software, enabling lower-friction workflow orchestration and efficiency. We believe that Slack is the leader in this space from both a brand and feature/functionality perspective, and remains in an early growth phase with a defensible competitive position and significant monetization potential. Importantly, if Slack were to just win the majority of the developer market, its revenue could easily more than double over the next few years.…At 10.4 times EV/estimated calendar-2021 revenue, Slack trades at a 30% discount to our high-growth comp group.
Penn National Gaming
PENN-Nasdaq
Overweight Price $34.43 on Feb. 6
by
J.P. Morgan
We stick with our Overweight rating and bump our December 2020 price target to $39 (up $6), taking into account value related to Penn’s out-year sports-betting opportunity. The stock has had a nice run over the past week (+30%, outpacing the S&P 500 index’s 2.5% move), but we see several catalysts that will push it higher:
1) Top-line upside potential in 2020, related to easy growth comps, given the weather-impacted results in full-year 2019
2) (Continued) property-level Ebitda margin upside, relative to the modest margin gains we are modeling, up just 40 basis points [each equal to 1/100th of a percentage point] in 2020
3) Potential asset sales in the Tropicana Las Vegas and slot route operator, Prairie State Gaming
4) The company’s June investor day—we often mock investor days as catalysts, but we think this one will be different for sentiment. It should have two major benefits: showcasing Penn’s dynamic CEO (its former chief operating officer), and letting investors better understand Penn’s opportunities in sports betting and online/iGaming through leveraging its investment in Barstool Sports, a sports and entertainment digital platform.
Nokia
NOK-NYSE
Buy Price $3.88 on Feb. Jan. 31
by CFRA
We are seeing increasing momentum in the initial stage of 5G investment, led by North America, that offsets the weakness in other regions, caused by tapering of 4G investments. We believe that the 5G cycle could be much longer than [those of] the past, given its wider spectrum deployment, not only for consumers, but also for industrials.
Nevertheless, 5G contracts are expected to be margin-dilutive, due to pricing competition and strategy to gain market share. Nokia’s 5G investment in its end-to-end strategy that [includes] solutions, products, and services will likely push out its margin recovery to 2021. While this margin guidance is disappointing, we think that a leading network equipment vendor such as Nokia should benefit from the 5G investment cycle.
Downside risks include: an inability to achieve the target synergies from the combination with Alcatel-Lucent; heightened competition from other players, including Huawei and
Ericsson
[ERIC]; and lower-than-expected growth in the overall telecom-equipment market. Our target price of $5 is equivalent to 2020 EV/E of 10 times, which is equivalent to main rival Ericsson’s 10 times multiple.
Uber Technologies
UBER-NYSE
Outperform Price $36.29 on Feb. 2
by Wedbush
Since its initial public offering, shares of Uber have been a nightmare for investors. The stock has traded well below its $45 IPO, with the Street putting the name squarely in the investor penalty box out of the gate. Our analysis of Uber’s growth dynamics, pricing rationalization in the ride-sharing space, and Uber Eats strategy now lay the groundwork for a company going through a growth metamorphosis, with a profitable business model on the near-term horizon for 2021. The anchor on the Uber ship in terms of profitability has been Uber Eats, as the overall food-delivery landscape, combined with growing investor frustration/potential activism on this area of the business, ultimately has forced Uber to look very carefully, both domestically and internationally, at this business. As such, the recent sale of its India Eats business to Zomato is just one step in a broader strategy over the next six to 12 months that will help shape/rationalize this segment.
We are raising our price target to $50 from $45. We are also adding Uber to the Wedbush Best Ideas List.
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