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.
Outperform Price $51.31 on June 29
by Baird Equity Research
Based on positive data in our weekly eBay tracker, we are increasing our second-quarter revenue and earnings-per-share estimates to $2.80 billion and $1.06, from $2.77 billion and $1.05, respectively. We are modeling 26% year-over-year growth in both U.S. and international gross merchandise volume.
Given broad-based momentum in online spending trends, as well as the fairly steady weekly volumes in our tracker, we believe that there is also upside potential for eBay in the second half of the year. Specifically, we note the company’s efforts to sustain higher levels of buying and selling among both new and repeat users, as well as opportunities to improve marketing efficiency. For the year, our EPS estimate is now $3.45, versus $3.33 previously.
Price target: $60, up from $59.
Buy Price $32.04 on June 26
Pfizer and Mylan (ticker: MYL) have announced plans to spin off Pfizer’s off-patent brand-drug business Upjohn (20% of Pfizer sales), and all of Mylan’s assets into a new company (Viatris); the deal is expected to close in mid-2020. Upjohn sells many well-known drugs, like Viagra and Lipitor, that were once major growth drivers for Pfizer, but are now in decline after losing patent protection. Pfizer shareholders will own 57% of Viatris, whose 2020 pro forma free cash flow is expected to be around $4 billion. This is a good deal for Pfizer, as it rids itself of a declining business (Upjohn sales were down 18%, year over year, in 2019) that has been a drag on sales growth. In the process, Pfizer will receive $12 billion, and its shareholders will get a 57% stake in the new company. We expect strong growth in Pfizer’s existing oncology drugs, near term. Longer term, we see even more promising oncology drugs coming out. Our 12-month target price of $41 is 13.5 times our 2021 EPS estimate, slightly below Pfizer’s five-year historical forward price/earnings average.
Buy Price $14.24 on June 30
Despite recent price appreciation, we believe that the shares of Upwork [a platform that matches freelancers with jobs] remain attractively valued, trading at 6.1 times our gross profit estimate for fiscal 2012. With the sector overall seeing strong performance, our analysis suggests that the average e-commerce stock growing 15% should trade at 6.8 times gross profit. We would argue that Upwork is more attractively positioned than most companies, given its leading market share and minuscule penetration rate, relative to a total addressable market we estimate at $322 billion. We believe that direct sales-force investment, new membership plans, hyperlocal marketplaces, specialized profiles, and other initiatives will help reaccelerate revenue growth. Our $16 price target is based on 6.5 times our fiscal-2021 gross profit estimate.
Overweight Price $83.74 on July 1
by KeyBanc Capital Markets
We rate BlackLine Overweight, with a $95 price target, based on about 14 times our calendar-year 2021 estimate of enterprise value/sales.
BlackLine helps finance and accounting professionals close the books, a critical task that all chief financial officers watch closely and one that has been disrupted by [macro developments, especially the Covid-19 outbreak]. This will ultimately raise awareness [of BlackLine’s products] and could translate into upside as the sales disruptions abate. Price target: $95.
Outperform Price $140.22 on July 1
by Raymond James
FedEx’s negative earnings drift, on the heels of trade uncertainty, unanticipated start-up costs around seven-day ground service, and Covid-19, has been hyper-frustrating. However, we see limited further downside at current levels, although we are keeping a close eye on the macro trends.
While 2020 has proved to be little more than a throwaway year, the delivery company’s investments across its portfolio position FedEx to reap long-term operational cost benefits, synergies (from its TNT Express acquisition), and growth.
Our price target is $165.
Warner Music Group
Buy Price $31.43 on June 29
by Tigress Financial Partners
Warner Music Group represents the best way to play the secular growth in music streaming. It is benefiting from several global secular trends, including increasing opportunities in digital distribution and new licensing opportunities, plus its ability to develop and leverage new production and development technologies that enhance music quality and increase access to content.
Increased streaming drives both revenue growth and operating efficiencies. In media and entertainment, content is king, and WMG’s massive music library well positions it to leverage opportunities.
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