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.
Buy Price $141.31 on Aug. 11
After upgrading Splunk shares from Sell to Neutral in May 2021, we are going one step further and upgrading Splunk to a Buy. Key catalysts include a more stable tone from our checks (namely about competition, the potential for upside in security-related demand, and good Splunk Cloud traction), the prospect that Splunk returns to out-period guidance on this pending second-quarter/July call and the comfort we derive from the recent $1 billion Silver Lake investment and AWS hires. Importantly, this is against a backdrop of continued mixed/cautious Street sentiment, making the stock setup attractive in our view. At 6.5 times annual recurring revenue and 8.5 times estimated calendar 2022 revenue, Splunk shares seem reasonably priced, given the prospect of greater stability and a growth outlook of 15% to 20%. We’re raising our price target from $137 to $165.
SVB Financial Group
Overweight Price $587.02 on Aug. 9
by J.P. Morgan
We recently held investor meetings with Silicon Valley Bank’s CFO, Dan Beck. With the company recently reporting yet another off-the-charts growth quarter, one of the recurring questions from our meetings regarded the sustainability of these elevated growth metrics (particularly with total client funds at $300 billion-plus). With the company aggressively investing over the past several years, SIVB is now quickly moving from being the bank of the innovation economy to becoming the one-stop shop of the innovation economy. In fact, with SIVB smartly remaining on offense, expansion of its capabilities have included adding a healthcare investment bank (Leerink) and expanding its personal-banking offerings (through BPFH), with a pending technology investment-banking announcement (disclosed on the second-quarter call) imminent. We see a growing network effect as driving increased market share gains over time (and beyond the current 50% of venture capital-backed start-ups). We see several lanes potentially converging toward a $1,500 to $3,000 stock over the next decade.
Petco Health & Wellness
Overweight Price $19.67 on Aug. 11
by Wells Fargo
WOOF is now seven months removed from its successful initial public offering process, yet shares sit firmly among the most debated in our coverage, considering its recent underperformance (down 22.8% versus a gain of 6.7% for the
index since May 2020) in spite of relatively strong trends. In our view, certain technical factors are clearly at play, with rising short interest, secondary-offering volatility, and a Reddit-driven day in the sun. But when it comes to fundamentals, we see upside to fiscal second-quarter estimates and we believe the long-term opportunities via Omnichannel, Vet/Health, and Services offerings are underappreciated at sub-12 times fiscal ’22 enterprise value to Ebitda [earnings before interest, taxes, amortization, and depreciation]. In our view, valuation at these levels more so reflects the WOOF of old (circa fiscal 2016-17) versus the new-and-improved fiscal ’21 WOOF. We see rerating potential with added post-IPO credibility, further margin progress, and continued evidence that near-term strength is sustainable.
Albertsons Companies ACI
Neutral Price on August 11
by Tigress Financial Partners
We are downgrading our rating on ACI from Buy to Neutral and maintain our 12-month target price of $27, as the recent run-up in price now fully reflects our 12-month target price performance and value expectations. ACI’s shares gained over 17% yesterday on the news that it had hired highly regarded retail industry executive Sharon McCollam as its new president and chief financial officer, beginning in September. While we remain positive on ACI’s business initiatives, including increasing digital sales and store upgrades, the stock is now trading in line with our 12-month target price of $27 and fully reflects our value expectations. We would become more positive on any significant pullbacks in share price.
Buy Price $6.41 on Aug. 10
Lightning eMotors and Forest River (a
company) announced a strategic agreement for up to 7,500 zero-emission shuttle buses. The agreement is for ZEV to supply fully electric powertrains and provide charging products and services to Forest River over the next 4 to 5 years with a value up to $850 million. The powertrains will be manufactured at ZEV’s Loveland, Colo., facility and shipped to Forest River’s Indiana plant for final assembly. The strategic partnership, in our view, is another step in confirming the expansion of EV powertrains in the commercial side of the global vehicle market, and doubles the size of ZEV’s current backlog. Price target: $17.
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