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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.
Nvidia
NVDA-Nasdaq
Overweight Price $485.54 on Aug. 19
by Piper Sandler
Nvidia reported an extremely strong July quarter and provided exceptionally strong October-quarter guidance, surpassing Street expectations for both. Strength in the July quarter predominantly came from gaming, up a stunning 24%, quarter over quarter, and 26%, year over year. Data-center strength continued, too. The company is seeing tremendous strength with its new A100 [graphics processing unit]. We expect gaming to continue to be strong, as the pandemic is driving increased gaming adoption. The launch of new game consoles should drive additional adoption.
We are dramatically increasing our earnings estimates. For fiscal 2021, we are forecasting earnings per share of $9.02 on revenue of $15.7 billion, versus our previous estimate of $7.86 on $14.5 billion. For fiscal 2022, we now model EPS of $10.68 on revenue of $18.6 billion, up from $9.69 on $17.3 billion. We are increasing our price target to $540 from $390.
Darden Restaurants
DRI-NYSE
Hold Price $82.83 on Aug. 18
by Stifel
We are downgrading Darden to Hold from Buy, as we believe that the risk/reward looks fairly balanced at the current valuation, especially in the context of a continued challenging sales environment for casual-dining restaurants.
Although we remain confident in Darden’s long-term competitive position, we are not confident that the pace of sales recovery will match Street estimates, which we believe is necessary to show meaningful upside. We are concerned, as many casual-dining chains enter seasonally higher sales periods—with corporate conventions, holiday parties/events, live sports, etc.—that will likely be challenged by pandemic restrictions and consumers’ reluctance to gather in large groups.
The shares are roughly 5% from our $87 12-month target price and trading at 18 times our fiscal-2022 EPS estimate of $4.50. But our fiscal 2021 and 2022 estimates are below the Street’s mean forecasts, primarily because we are projecting lower comparable-restaurant sales beyond 2021’s first quarter.
For us to raise our target price to a level to justify a Buy rating, our estimates would need to be closer to the Street mean.
Medtronic
MDT-NYSE
Buy Price $100.05 on Aug. 7
by Edward Jones
Medtronic is one of the most diversified medical-technology companies in the world, specializing in cardiac and vascular devices, restorative therapies, diabetes devices, and minimally invasive therapies. Its innovative new products in robotic surgery, diabetes, and pacemakers, along with its strong brand reputation, should support solid long-term growth. Medtronic has a market-leading position in most areas that it operates in. While pricing pressure is a risk in the medical-device industry, we believe that Medtronic’s ability to continue to develop innovations will more than offset this risk.
Turning Point Therapeutics
TPTX-Nasdaq
Buy Price $67.10 on Aug. 20
by H.C. Wainwright
Initial results from a Phase 2 study continue to support a potentially best-in-class profile for repotrectinib [for treatment of certain types of gene-driven cancers]. Yesterday, Turning Point presented initial data from six [groups of patients participating in] the trial. The response rates appear to be either in line with or favorable to those from the Phase 1 trial. Repotrectinib continues to be well tolerated, with limited adverse events. We believe this also provides a point of differentiation, relative to [competing products] Xalkori (crizotinib) from
Pfizer
[ticker: PFE] and Rozlytrek (entrectinib) from
Roche
[ROG.Switzerland]. Furthermore, feedback from the U.S. Food and Drug Administration indicates that Turning Point may combine the data from the Phase 1 and Phase 2 trials, potentially allowing for a faster path to regulatory submission.
Our 12-month price target is $88 a share.
Hilton Worldwide Holdings
HLT-NYSE
Hold Price $84.07 on Aug. 18
by CFRA
Our opinion reflects what we view as fair valuation on the shares, which sharply declined in recent months amid concern about Covid disruption, which precipitated a steep, 84% decline in global RevPAR [revenue per available room] for the second quarter.
Having reopened about 96% of its hotels as of early August, Hilton noted a sequential monthly improvement in RevPAR and occupancy in all regions. While an arduous recovery could stretch well into 2021, Hilton ultimately could benefit from pent-up demand, with upside from its transition to a capital-light business model [emphasizing management, rather than ownership, of hotels].
Our 12-month target is $84, on 18.6 times our 2021 estimate of enterprise value/earnings before interest, taxes, depreciation, and amortization. This is a premium versus peers that partly reflects Hilton’s relative market share gains, asset mix, and quality.
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