Inside the Market’s roundup of some of today’s key analyst actions
While 2018 was a great year for Estee Lauder Companies Inc. (EL-N) the company, it was not for its stock, said Citi Research analyst Wendy Nicholson. But she is optimistic for the stock in 2019 and has boosted her target price and rating for the stock.
“EL entered and left calendar 2018 with its share price basically unchanged – at US$130, despite the fact that during the year, EL posted FY18 EPS growth of about 30 per cent. While the consensus forecast for FY19 EPS growth is for only 8 per cent, we are optimistic that this forecast will rise. Given the flat share price, while EL entered 2018 trading at about 30 times our then-year-forward CY [calendar year] EPS forecast, EL is entering 2019 trading at about 25 times our now-year-forward CY EPS forecast. While some of this is due to the lower overall market multiple, we believe it is also due to some EL-specific concerns that we think are overblown,” the analyst said.
She said the reasons to buy the stock now include that she expects there will “be upside to EL’s FY19 EPS forecast; EL’s balance sheet is in terrific shape, and positions EL well either to make an acquisition or buy back more stock.” In addition, “any broadening of EL’s revenue growth drivers would help allay some fears [and] comps are easy in Makeup, especially from a margin perspective.”
Risks to Citi’s forecast include the impact of China, tariffs, increased foreign exchange pressures, and tough comparable sales in the skin care division.
Ms. Nicholson boosted her rating on the stock to “buy” from “neutral” and raised her target price to US$155 from US$145. The median is US$155, according to Zack’s Investment Research.
“On Citi’s forecast for 2019 EPS for the S&P, the market is now trading at about 15 times. We believe that EL should trade at 2 times this multiple, higher than EL’s historical average valuation, reflecting our belief that (i) there is real scarcity value to the top line growth that we think EL can deliver over the next 12-24 months, and (ii) there is likely upside to our forecast for EL’s CY19 EPS. This leads us to our new target price of US$155, +19 per cent upside from current levels.”
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UBS Research says its “bearish thesis" has now been priced in for Caesars Entertainment Corp. (CZR-Q), with the stock down 33 per cent over the past three months.
UBS analyst Robin Farley upgraded Caesar’s to “netural” from “sell” and but cut her price target to US$7 from US$9. The median is US$12.
“We are upgrading CZR to neutral from sell as our bearish thesis, we believe, is now priced in,” she said.
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Citi is cutting its target price on MyoKardia Inc. (MYOK-Q) as Sanofi moves to give back rights to the company.
"While some might see Sanofi giving back all rights back to MYOK as a negative, we see significant strategic implications in longer term. This would give the company more freedom to employ its " divide and conquer" precision strategy. We also highlight that Sanofi’s decision was related to wanting U.S. control over Mavacamten, and is not related to the profile of the products. We continue to think that Mavacamten Phase 3 trial could get significantly de-risked with Pioneer-OLE data (1Q’19). Full control also makes MYOK a potential M&A candidate, in our opinion. While we see this as a positive, we are also adjusting our TP to account for current rate environment and recent weakness in the SMID [small and mid-cap] biotech," said analyst Mohit Bansal.
MyoKardia, Inc. is a biopharmaceutical company focused on discovering, developing, and commercializing therapies for the treatment of serious and neglected rare cardiovascular diseases.
He cut his target price on the stock to US$70 from US$90. The median stock price is US$77. He kept his high-risk “buy” rating on the stock.
“We are lowering our TP as we increase the discount rate to 12 per cent versus 10.5 per cent previous to account for recent changes in the rate environment. We are also lowering our peak sales estimates for Mavacamten as we lower the launch price to US$35,000 vs. US$55,000 prior. Our recent doc-checks like Mavacamten but highlighted pricing challenge in a market dominated by inexpensive beta blockers. Lower revenues and increase expenses are offset by increased revenues with gain of global rights and change to our TP is largely due to increase in discount rate.”
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RBC Capital Markets upgraded Wells Fargo & Co. (WFC-N) and cut its price target with the view that the company’s stock price fully reflects its regulatory issues, said analyst Gerard Cassidy.
“We downgraded WFC to Underperform in February due to our expectations that the Federal Reserve’s Cease & Desist (C&D) Order would seriously hamper WFC’s ability to operate in an otherwise healthy banking environment. We are now raising our investment rating to Sector Perform as WFC’s stock price is below our price target and we believe at current prices the stock fully discounts the company’s regulatory problems,” he said.
He upgraded the stock to “sector perform” from “underperform” but cut his price target to US$48 from US$50. The median is US$62.50.
"At present prices we believe the stock fully discounts the company’s regulatory problems. As a result, we are raising our rating to Sector Perform from Underperform. Though we have raised our rating on WFC’s stock we believe the company is still not ‘out of the woods’ yet regarding its regulatory problems. Furthermore, based on the precedent of the amount of time it has taken other banks to work their way out from under their regulatory orders, we do not believe the mandatory freeze on its balance sheet size (which was applied to the company when it received its C&D order) will be lifted until 2020. The company maintains, however, it will have the freeze on its balance sheet lifted by the ‘first half of 2019.’ "
“We lowered our 4Q18 to US$1.15 from US$1.20, [full year] 2018 to US$4.41 from US$4.46 and 2019 to US$4.95 from US$5.05, respectively, to reflect the current weakness in in the residential mortgage and retail investment brokerage businesses. Our 2019 EPS estimate also takes into account our revised expectations about future Federal Funds rate increases. We now expect the Federal Reserve to increased the Federal Funds rates 1-2 times in 2019 versus our prior expectations of 2-3 times in 2019. We are publishing our 2020 EPS estimate at US$5.60.”
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Shares of Bausch Health Companies Inc. (BHC-N) climbed nearly 8 per cent on Wednesday after Piper Jaffray upgraded the stock to “overweight” and raised its price target, saying the drugmaker is starting to stand apart.
The brokerage raised its price target to by US$5 to US$27, up from US$22.
The stock was recently trading up nearly 8 per cent per cent at $19.93 and is top performer on NYSE Arca Pharmaceutical index, which is down 1.8 per cent. S&P 500 Health Care index also down about 2 per cent.
Senior leadership team has positioned BHC for not only longer-term (LT) EBITDA (earnings before interest, taxes, depreciation and amortization) stability, but potentially meaningful LT growth, Piper said.
Given this, the brokerage views BHC as unique among highly levered generics and brand-focused companies such as Teva, Endo International, Mylan and Mallinckrodt, and even moderately-levered cos such as Allergan, it said.
The brokerage said that on relative basis, BHC’s asset quality “actually quite good” based on durable consumer-focused eye care segment, visibility on LT durability for top-seller Xifaxan along with growing gastroenterology product footprint and most significant losses of exclusivities now in rear-view mirror
Now, of 17 analysts covering BHC, eight rate the company a “buy” or stronger, five have “hold” recommendations, and four recommend selling. The median price target is US$31, according to data from Refinitiv.
BHC trades at about 9 times NTM (next 12 months) EV (enterprise value)/EBITDA, roughly inline with AGN and TEVA; but stock expensive versus MYL, MNK and ENDP, which trade in the 6 to 7 times range.
Reuters
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Other analyst actions:
* Aritzia Inc : Baird cuts price target to C$20
* Bombardier : CIBC cuts price target to C$4.5 from C$5
* Canada Goose Holdings Inc : Wells Fargo cuts target price to C$80 from C$98
* Canadian National Railway Co : CIBC cuts price target to C$118 from C$120
* Cargojet Inc : CIBC cuts price target to C$90 from C$93
* Chorus Aviation Inc : CIBC cuts price target to C$9.5 from C$10.5
* Linamar Corp : CIBC cuts price target to C$68 from C$71
* NFI Group Inc : CIBC cuts price target to C$48 from C$50
* TFI International Inc : CIBC cuts price target to C$43 from C$52
Bausch Health Companies Inc.: Piper Jaffray upgraded to “overweight” from “neutral”.
Norbord Inc: Bank of America Merrill Lynch lowered its price target on the stock.
With files from Reuters