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.
Mondelez International MDLZ-Nasdaq
Overweight Price $56.39 on Sept. 8
by Wells Fargo Securities.
It isn’t often that a large-cap “consensus long” offers multiyear upside to numbers and an abnormally wide valuation discount versus peers, but so is the case for Mondelez, in our view. We think now is the time to take advantage of this disconnect. Covid-19-related uncertainty is evident in the calendar-year 2021 estimated price/earnings discount versus global Staples peers (15% versus 5% five-year average), and we are more confident than ever in our “411” growth thesis; that three Mondelez-specific factors can yield about 100 basis points of upside to annual organic revenue growth (to 4%) versus the snacking category (3%), while operating leverage and our estimated $600 million-plus of savings, into 2023, yield a model capable of +11% earnings per share…Net, as Dirk Van de Put’s tenure as CEO turns three years old, execution appears stronger than ever. In our view, the model has yet to reach its stride. We increase our fiscal-2021 estimated earnings per share to $2.85 from $2.83, on stronger Global Brands growth, and maintain our 12-month price target at $68.
Outperform Price $276.70 on Sept. 9
Coupa reported solid fiscal second-quarter results, in our assessment, and raised guidance. Highlights include: 1) good pipeline and sales execution commentary from management, 2) record operating margins, and 3) strong cash flow generation. On balance, the implied fiscal third-quarter billings guidance is 9% year-over-year growth, we estimate, which could take time to gain comfort with. However, we think that management is taking a prudent approach to guidance, given the pandemic. Bottom line: We believe that the fiscal second-quarter results lend support to our thesis that Coupa is successfully taking share in a large and lightly penetrated spend-management total addressable market. We view Coupa as a core investment holding and are long-term positive on the business. However, we recognize near-term sentiment headwinds from valuation. We maintain our Outperform rating, and raise the price target to $285 from $265.
Outperform Price $15.96 on Sept. 7
We are launching on Vertiv Holdings with an Outperform rating and a $21 price target, as we view the name as a unique way for investors to play a multitude of secular themes related to growth in data centers and increased relevance around power management and optimization. Our bullish bias is driven by: 1) Attractive total addressable market: Vertiv’s TAM is effectively total dollars spent on power management across data centers, at $30 billion and growing 3% to 5%; 2) Pure play in the land of conglomerates: Pure play assets, given their inherent ability to be nimble and agile, tend to win, particularly when customers themselves value agility, ensuring that Vertiv can grow at greater than 1.5 times the industry trend; 3) Plenty of margin upside, earnings per share upside to $2: Vertiv is at the onset of their margin expansion journey, which should enable greater than 500 basis points of mid-term expansion; and 4) Deleveraging: Vertiv’s current leverage is at three times, and the company is working toward a target of two-to-2.5 times, which should help enable their valuation to expand.
Neutral Price $29.32 on Sept. 9
by Mizuho Securities
Although paid net adds were in line with our expectations, Slack reported a worse- than-expected fiscal second quarter, as the benefits associated with work-from-home in fiscal first quarter significantly waned. Specifically, billings growth was only 25% year over year and missed consensus. In addition, net revenue retention, or NRR, and net new customers greater than $100,000 in annual recurring revenue also materially decelerated due to seat growth pressures, sending the stock down sharply (-18% after hours). Moreover, the primary issue, in our view, remains the competitive threat from Microsoft Teams, which we believe is continuing to gain momentum. We lower our price target to $25 versus $29 previously and remain cautious on the shares at this time.
Buy Price $90.36 on Sept. 9
appears to see seasonal changes around the NFL season, with weekly sales volumes in the first and fourth quarters roughly 6%-to-7% points, on average, above the lowest quarter of the year, third quarter. While we estimate sales growth moderated in the final weeks of the fiscal-August period, sales have strengthened in the past couple of weeks. With the kickoff of the NFL’s season occurring [on Sept. 10], followed by a bevy of games on Sunday and Monday, the brand’s performance over the coming week could provide a better indication of sales performance over the next several weeks.
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