Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity says the recovery for Under Armour (UAA-N) is going to take longer than what the market is currently predicting and kept its “sell” rating on the stock after it reported slightly higher than expected earnings.
“UAA delivered a low quality Q4 beat with adjusted earnings per share of 9 cents coming in ahead of our 3 cent estimate and consensus at 4 cents. While 1.5 per cent revenue growth was slightly better than our -0.3 per cent, the beat relative to our model was driven by lower SG&A growth (+4), a 1 times tax benefit (+4 cents), lower interest expense (+1 cent), and higher other income (+1 cent). Gross margin expansion of ~160bps was also relatively in line with our estimate, reflecting mix benefits (channel, region), lower product costs, lower promotions and lower air freight. Despite the gross margin improvement, EBIT declined in all geographies except APAC. The 1.5 per cent sales growth was driven by international (+24.5 per cent) as w/s contraction coupled with lower off-price sales led to a 6 per cent decline in NA. By category, growth was entirely driven by apparel (+2 per cent vs. our +1 per cent estimate) as footwear (-4.5 per cent vs. our -5 per cent estimate) and accessories (-2.2 per cent vs. our -3 per cent estimate) both declined year over year. Overall, these tepid results are not indicative of a business that is demonstrating the kind of resumption of growth it needs to justify its valuation. As such, we continue to believe that UAA’s road to recovery is going to be longer and bumpier than what the market is pricing in. We see the current valuation (65 times NTM P/E and 25 times EV/EBITDA) at risk of a sharp pullback,” said analyst Camilo Lyon.
The analyst reiterated a “sell” rating and kept a US$13 price target. The median price target is US$21, according to Zack’s Investment Research.
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Citigroup has trimmed its forecasts for Charles Schwab Corp. (SCHW-N) after the company issued a business update.
“We took a fresh look at our average IEA [interest-earning asset] build up and believe our prior forecast was too optimistic for 2019. Stepping back, the Business Update introduced two risks that we believe may curb the P/E multiple, centering on: 1) the relationship between NNA [net new assets] growth and IEA growth; and, 2)relative IEA growth of SCHW versus other banks,” siad analyst William Katz.
He lowered his price target to US$45.50 from US$46.50. And kept his neutral rating. The median price target is US$55.
He reduced his 2019 to 2021 earnings per share estimates to US$2.76/$3.07/$3.33 versus $2.80/$3.14/$3.46 prior “reflecting lower average interest-earning asset (IEA) growth and revised forward rate curves, partially offset by further year to date market appreciation.”
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After Shopify Inc. (SHOP-N; SHOP-T) reported strong earnings, Mackie Research Capital has raised its estimates and target price.
“SHOP reported a strong finish to its first billion-dollar topline year, 2018, as revenue outperformed expectations yet again. We expect SHOP to add the second billion to its topline much quicker, very likely in 2020 (i.e. in two years),” said analyst Nikhil Thadani.
He currently expects 2020 revenue to be about US$1.97-billion, compared to a consensus estimate of US$1.95-billion.
He raised his target price to US$210 from US$170. “SHOP is trading at a slight discount to peers despite strong January stock price performance,” he said. The median price target is US$175. He reiterated his “buy” rating on the stock.
“As always, market risk could provide opportunistic entry points – we have consistently called out market risk as possibly the most important near term stock price risk factor for SHOP, which has been evident in H2/18,” he said.
“That said, we expect the company’s revenue growth focus and track record to provide the basis for long term shareholder value creation.”
Roughly half of the 27 analysts that cover the stock raised their price targets to as high as US$230, according to data by Refinitiv Eikon.
Now, 19 analysts recommend buying SHOP, seven are neutral and one has a “sell” rating. The median price target is US$192.50, up from US$170 a month ago, according to Refinitiv.
With files from Reuters
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After Twilio (TWLO-N) reported strong revenues and rising subscriber growth, Canaccord Genuinty raised its target price on the company’s stock.
“We have known Twilio for over four years, through good and challenging times. What has been interesting to watch is the firm’s transformation from a tool often used to help hobbyist developers into something far more compelling. Indeed, if you squint a bit, you see the outline of something that looks a lot more like ServiceNow than the firm that so many told us was about to be obliterated by Vonage or whatever competitive scary monster you wanted to choose,” said analyst Richard Davis.
"Is Twilio perfect? Of course not. Low, mid-50 per cent gross margins (due to running on the back of carrier networks) makes this stock more expensive than it appears on a simple EV [enterprise value/R [revenue] basis. We also would like management to talk more about margins at scale; a 10 per cent FCF [free cash flow] margin at US$1-billion would be nice – so when we hear only ‘growth spending now,’ we wonder if that means ‘we can’t be bothered to make money.’ And indeed, cash flow profits and growth are how ServiceNow became NOW, the rocket ship stock. Even so, Twilio is still a bit of a teenager maturity wise, so we will give them this year to keep hiring aggressively, but as 2020 looms, we are certain that investors will begin to ask for growth and profits, if only because they will be back in stress/panic mode over an election that looks to be a choice between two extremes. We expect that a combination of beats and raises against another conservative guide along with legitimate investor belief that Twilio really could become a quite significant platform, will propel this stock higher in 2019, somewhere between 10-30 per cent from current levels we’d guess. That’s enough for a ‘buy,’ he said.
He kept his “buy” rating and raised his target price to US$125 from US$90. The median is US$110.
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Strong response to Electronic Arts Inc.'s (EA-Q) new online game Apex Legends, led BMO Research to boost its price target on the company.
“The strong initial response to the surprise launch of Apex Legends, a free to-play battle royale title from Electronic Arts’ (EA) Respawn studio, has continued into its second week. Player feedback has been overwhelmingly positive and on Monday afternoon, EA announced that Apex had reached over 25 million players with a peak of ‘well over’ 2 million concurrent players,” said analyst Gerrick Johnson.
“We expect the game’s player base to continue to expand and engagement to remain high. Therefore, we are raising our estimates for FY2019, FY2020, and FY2021,” he said.
He raised his price target to US$116 from US$96 and kept his “outperform” rating. The median price target is US$99.50.
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BMO Research has started coverage of SilverCreast Metals Inc. (SIL-X) calling the company “a stand-out success.”
“Over the past two years, SilverCrest has been a stand-out success story against a backdrop of many precious metals companies whose share prices have struggled. Las Chispas is a scarce asset (high grade, silver) so we think the strong share price performance has been warranted,” said analyst Ryan Thompson.
He initiated coverage with an “outperform” (speculative) rating and a target price of $6.50.
The rating “is underpinned by SIL’s high grades, proven management track record, and exploration upside. We think these features make the company an attractive acquisition target.”
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In other analyst actions:
* Advantage Oil & Gas Ltd : TD Securities cuts price target to C$4.75 from C$5.50
* Chinook Energy Inc : Raymond James cuts price target to C$0.05 from C$0.15
* Computer Modelling Group : Canaccord Genuity cuts target to C$7.50 from C$8
* DHX Media Ltd : CIBC cuts target price to C$2.25 from C$2.50; TD Securities cuts price target to C$2.25 from C$2.75; Cormark Securities cuts price target to C$2.0 from C$2.5
* Hydro One Ltd : Raymond James cuts to market perform from outperform
* Innergex Renewable Energy Inc : BMO raises target price to C$15 from C$13.50
* Pinnacle Renewable Energy Inc : BMO cuts target price to C$14 from C$16; CIBC cuts target price to C$14 from C$17
* Riocan REIT : CIBC raises target price to C$28 from C$27; RBC raises price target to C$27 from C$26.5
* Roots Corp : Jefferies raises price target to C$6 from C$5
* Sandstorm Gold : RBC raises PT to C$8.5 from C$7.5; reiterates outperform rating
* Supreme Cannabis Company Inc : Cormark Securities raises to buy rating
* Taseko Mines : National Bank of Canada cuts price target to C$1.50 from C$1.85