Anaplan Shares Jump Over 20% on Strong Q2 Earnings; Buy with Target Price of $70

Anaplan Inc, a global cloud-based planning software company headquartered in San Francisco, reported a 26% jump in quarterly revenue as subscription-based sales surged amid COVID-19 pandemic and raised its revenue forecast for the fiscal year 2021, sending its shares up over 20% on Wednesday.

The business-planning software company said its total revenue increased 26% year-over-year to $106.5 million in the second quarter ended July 31 and subscription revenue surged 32% year-over-year to $97.1 million. GAAP operating loss was $37.7 million or 35.4% of total revenue, compared to $41.2 million in the second quarter of fiscal 2020 or 48.7% of total revenue.  GAAP loss per share was $0.26, compared to $0.31 in the second quarter of fiscal 2020.

“We reiterate our Outperform rating on Anaplan and raise our price target from $55 to $70. The company reported a nice FQ2 revenue and EPS beat driven by nice expansion business and help from the company’s partners,” said Shebly Seyrafi, equity analyst at FBN Securities.

“We are encouraged by the outlook in Europe in FQ3 following international growth of 35% Y/Y in FQ2 (better than the 20% Y/Y growth in the Americas). We arrive at an estimated NG EPS of -$.08 (above consensus of -$.10). The company plans to make investments in FH2 2021 in go-to-market and in engineering. The trend in Europe appears to be more encouraging,” Seyrafi added.

Anaplan forecasts total revenue between $109 and $110 million in the third quarter and between $437 and $439 million for full-year fiscal 2021.

Anaplan shares closed 21.60% higher at $58.15 on Wednesday. Also, the stock is up over 10% so far this year.

Executive comments

“Businesses need an agile digital connected planning platform in today’s challenging environment. We are at the forefront of offering real-time, valuable business performance insights, providing a competitive advantage to our customers,” said Frank Calderoni, chief executive officer at Anaplan.

“I’m pleased with our progress this quarter, and we are confident in the long-term market opportunity for Connected Planning.”

Anaplan stock forecast

RBA raised their target price to $75 from $55, Evercore ISI upped their price objective to $72 from $57. Other equity analysts also recently updated their stock outlook. Canaccord Genuity raised their target price to $66 from $55. Morgan Stanley gave a target price of $58 with a high of $94 under a bull-case scenario and $38 under the worst-case scenario.

Twelve analysts forecast the average price in 12 months at $57.00 with a high forecast of $74.00 and a low forecast of $35.00. The average price target represents a -1.98% decrease from the last price of $58.15. From those 12 analysts, nine rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

We think it is good to buy at the current level and target $70 as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Analyst view

“As planning moves from an annual process run by the finance department to an ongoing collaborative effort across the entire organization, we see Anaplan as a key beneficiary of this trend. The company’s core Connected Planning platform enables collaborative planning across all areas of an organization, including finance, sales, supply chain, marketing, human resources, and operations,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“With an estimated $24 billion addressable market and a strong competitive moat, we see 22% revenue CAGR over the next 15 years. While we are optimistic on the sustainable growth trajectory, near term risk from slower macro leaves us on the sidelines at our $58 price target,” Zlotsky added.

Upside and Downside risks

Upside: New sales hires drive to become fully productive faster than expected, driving upside to growth and margin estimates – highlighted by Morgan Stanley.

Downside: 1) Increased competitive pressure from larger, well-established incumbents (Oracle, IBM, SAP) and emerging vendors like Workday/Adaptive. 2) Unlikely to achieve operating profitability over the next couple of years. 3) Investment in new sales hires fail to generate meaningful productivity.

Salesforce.com Shares Hit Record High on Strong Earnings; Buy with Target Price of $280

Salesforce.com Inc, an American cloud-based software company headquartered in San Francisco, reported a 29% jump in quarterly revenue as demand for online business software surged amid COVID-19 pandemic and raised its revenue forecast for the fiscal year 2021, sending its shares to a record high of $245.10 in after trading hours on Tuesday.

Salesforce’s second-quarter revenue jumped 29% to $5.15 Billion, higher than the market consensus of $4.90 billion. Excluding items, the leading provider of enterprise cloud computing solutions said it earned a profit of $1.44 per share and net income surged to $2.63 billion, or $2.85 per share, from $91 million, or $0.11 per share, a year earlier.

“Salesforce (CRM) remains a top front office pick as pipelines continue to improve despite the current environment. Despite the 13% AH increase, we believe Salesforce is valued attractively at 9.1x EV/2021 rev vs. group at 9.9x. As such, we maintain Buy and raise our PT to $285,” said Brent Thill, equity analyst at Jefferies.

“We believe Salesforce can deliver more margin improvement given its scale and will continue to monitor. Mgmt. also noted that this is not the best M&A environment primarily due to elevated multiples within Software. We continue to highlight this in our valuation piece and believe the next leg of growth has to be driven by fundamentals,” Thill added.

Salesforce forecast revenue between $20.7 billion and $20.8 billion in the fiscal year 2021, up from its previous forecast of $20 billion.

Salesforce.com shares closed 3.64% higher at $216 but surged over 13% to a record high of $245.10 in after trading hours on Tuesday. However, the stock is up over 30% so far this year.

Salesforce.com stock forecast

Morgan Stanley gave a target price of $275 with a high of $335 under a bull-case scenario and $172 under the worst-case scenario. Credit Suisse raised the target price to $245 from $200. Other equity analysts also recently updated their stock outlook. JP Morgan upped target price to $250 from $200, Jefferies increased their price objective to $285 from $235, Piper Sandler raised the target price to $285 from $210 and Wedbush rated outperform with a price target of $250.

Twenty-six analysts forecast the average price in 12 months at $208.40 with a high forecast of $254.00 and a low forecast of $120.00. The average price target represents a -3.54% decrease from the last price of $216.05. From those 26 analysts, 22 rated “Buy”, two rated “Hold” and two rated “Sell”, according to Tipranks.

We think it is good to buy at the current level and target $280 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Salesforce remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation. We see the company as a long-term share gainer within an estimated >$200 billion TAM spread across areas ranging from Sales, Customer Service, Marketing, and Digital Commerce to App Cloud, Analytics, and Integration Cloud,” said Keith Weiss, equity analyst at Morgan Stanley.

“With an expanding solution portfolio, a large and incremental contribution from recent M&A, we see total revenue nearly doubling by FY24, while expanding margins support durable ~20% CAGR in FCF/share through FY24. We remain Overweight CRM shares with our $275 PT is based on 27X our CY25e FCF per share of $13.08, discounted back at 7.5%,” he added.

Upside and Downside risks

Upside: 1) Better than expected synergies with newly acquired assets. 2) Bigger bounce back in margins after recent M&A – highlighted by Morgan Stanley.

Downside: 1) M&A may complicate raise concerns about core business strength and margin expansion potential. 2) Competition from apps vendors and emerging Internet platforms (ORCL, SAP, MSFT, AMZN).

Best Buy Q2 Sales Rose about 6% But Warns of a Slowdown in Q3; Shares Down About 8%

Best Buy Co Inc, an American multinational consumer electronics retailer headquartered in Minnesota, said its comparable sales rose about 6% in the second quarter but cautioned about a slowdown in the third quarter as the company faced a risk of higher unemployment, lower fiscal stimulus and supply chain issues due to COVID-19 pandemic, sending its shares down about 8% on Tuesday.

The technology retailer said its enterprise comparable sales rose 5.8%, which was higher than the market consensus of 3.7% growth. Overall revenue increased about 4% to $9.9 billion and revenue in the U.S. increased by 3.5% to $9.13 billion versus last year. The increase was primarily driven by comparable sales growth of 5%, which was partially offset by the loss of revenue from 25 permanent store closures in the past year.

Best Buy said in the U.S. online revenue increased 242.2% to $4.85 billion on a comparable basis primarily due to higher conversion rates and increased traffic. As a percentage of total revenue in the U.S., online revenue increased to approximately 53.1% versus 16.1% last year. Best Buy’s net earnings climbed 81.5% to $432 million in the quarter.

“Expectations were clearly high heading into Best Buy’s print, and we think their results and early 3Q look met expectations. With the stock having moved up significantly recently, it’s unclear how much is left in the near term, and we could see some profit-taking,” said Michael Baker, MD and senior research analyst at D.A. Davidson.

“But, we continue to like this story as trends accelerate and the company remains very well positioned for the new ‘stay, play, earn and learn’ from home normal, or ‘work, learn, connect and cook’ at home, as Best Buy states it,” Baker added.

Best Buy’s shares traded about 8% lower at $109.19 on Tuesday. However, the stock is up over 30% so far this year.

Executives’ comments

“Enterprise revenue growth was almost 4%, even though our stores were open by appointment only for the first six weeks of the quarter. Specifically, enterprise sales growth was approximately 16% in the last seven weeks of Q2 after we opened our stores and the strength continued into August, with sales up approximately 20% for the first three weeks of Q3,” said Corie Barry, Best Buy CEO.

“As a result of the ongoing uncertainty, we are not providing financial guidance today. However, I would note that we are planning for Q3 sales to be higher compared to last year but likely will not continue at the current quarter-to-date level of approximately 20% growth. Also, as our stores are fully reopened, we are planning for Q3 SG&A expense to be more in line with last year’s third quarter,” Best Buy CFO Matt Bilunas said.

Best Buy stock forecast

Fourteen analysts forecast the average price in 12 months at $110.00 with a high forecast of $135.00 and a low forecast of $92.00. The average price target represents a -6.28% decrease from the last price of $117.37. From those 14 analysts, nine rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Best Buy had its price target raised by Telsey Advisory Group to $120 from $105. They currently have an outperform rating on the technology retailer’s stock. Morgan Stanley gave a target price of $85 with a high of $105 under a bull-case scenario and $60 under the worst-case scenario.

Other equity analysts also recently updated their stock outlook. Piper Sandler lifted their price objective on shares of Best Buy to $127 from $112 and gave the company an overweight rating.

We think it is good to buy at the current level and target $130 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Best Buy is a best in class retailer led by a capable management team, and we are positive on the longer-term opportunity for the business and stock. BBY’s leading position in a healthy category and strength in key Retail fundamentals including merchandising, labour management, supply chain and omni-channel underpin our view,” said Simeon Gutman, equity analyst at Morgan Stanley.

“The shorter-term outlook seems less favourable, with a high level of uncertainty around sales/margin trends in 2020-2021. This keeps us Equal-weight rated,” he added.

Intuit Climbs After KeyBanc Ups Price Target

Intuit Inc. (INTU) shares jumped 3.38% Monday after KeyBanc reiterated its ‘Overweight’ rating on the accounting software maker’s stock and lifted its 12-month price target to $350 from $315. The upgrade implies a 5% premium to Monday’s $333.12 close.

Analyst Josh Beck says his analysis of Key First and IRS data prompts a more positive bias on TurboTax fundamentals. Beck also argues the company has synergy opportunities through its recent acquisition of Credit Karma – a fintech startup with more than 37 million active users. In February, Intuit announced that it had bought the firm for $7.1 billion to bolster its personal finance offerings.

As of Aug. 25, 2020, Intuit’s shares have an $86.87 billion market capitalization, offer a modest 0.66% dividend yield and trade 28% higher on the year. Over the past three months, they have gained 16%. From a valuation standpoint, the stock trades at about 40 times future earnings, above its longer-term multiple of 30 times.

Upbeat Earnings Expected

Analysts expect Intuit to post fiscal Q4 earnings of $1.20 per share when the company reports its quarterly results after the closing bell on Tuesday. This compares to a loss of 9 cents a share in the year-ago quarter. Meanwhile, the Street tips revenues to come in at $1.55 billion, indicating year-over-year (YoY) top-line growth of 55.8%. The postponement of IRS tax filing from the third quarter to the fourth is likely to have provided a considerable tailwind during the period.

Wall Street Ratings

Analysts remain bullish, impressed by financial software company’s opportunity to grow its QuickBooks Online subscriber base. Currently, the stock receives 12 ‘Buy’ ratings, 6 ‘Hold ratings, and just 2 ‘Sell’ ratings. Price targets range from as high as $350 to as low as $220, with the median consensus pegged at $308.

Technical Outlook and Trading Tactics

Intuit shares broke above an ascending triangle pattern last week, with gains accelerating on above-average volume yesterday after the KeyBanc price upgrade. Given the relative strength index (RSI) sits in overbought territory, traders should consider waiting for a pullback entry instead of chasing recent gains.

Look for buying opportunities near $313.50, where the stock finds support from the triangle’s upper trendline. Traders who enter at this level should consider placing a stop-loss order below the 50-day simple moving average (SMA). Set a profit target that is at least twice the amount risked. For instance, if using a $15 stop, consider targeting a move of at least $30.

Estee Lauder’s Price Target Raised to $233 on Strong Skincare Business, $275 in Best-Case Scenario: Morgan Stanley

Estee Lauder’s, one of the world’s leading manufacturers and marketers of quality skincare, price target was raised to $233 from $196, largely driven by expectations of higher growth in the skincare business, according to Morgan Stanley equity analyst Dara Mohsenian, who also said key value drivers will remain intact in the long-term post-COVID-19 crisis.

Estee Lauder’s shares traded about 3% higher at $212.59 on Monday. The stock gained more than 50% since March low and is up over 3% so far this year.

On August 20, the Estee Lauder reported net sales of $14.29 billion for its fiscal year ended June 30, 2020, a decrease of 4% from $14.86 billion in the prior-year period. The net sales decline was driven by retail store closures as a result of the global spread of COVID-19 that was partially offset by the tremendous acceleration online.

However, skincare net sales grew across most regions, led by Estee Lauder and La Mer. The category increased 26% in the first half of the fiscal year and was the most resilient category globally during the pandemic. Origins also increased net sales.

The company forecasts long-term growth of 6% to 8%, 50 basis points of operating margin expansion and double-digit adjusted diluted earnings per share growth in constant currency after a period of normalization as the impacts of COVID-19 subside.

“We also continue to believe that Estee Lauder’s (EL) recent mix shift to its skincare business is underappreciated by the market, as EL’s mix has rapidly shifted to this segment at 101% of EL’s profit mix in FY20, or even 75% in FY19 pre-COVID, vs ~50% historically in FY16-17. We view skincare as a crown jewel, as it is both a much higher growth area within the beauty category over time given a consumer focus on health/wellness and anti-ageing, as well as greater pricing power with high barriers to entry, which also gives us confidence in the sustainability of higher topline growth/margin over time. EL’s skincare business grew at a 10% sales CAGR in the last decade pre FY20, 12% in the last five year and 19% in the last three years,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“Premium skincare is a higher-growth, higher-margin category, outperforming premium make-up and mass skincare category growth globally, giving us greater confidence that EL’s momentum is supported by secular trends. Looking at global premium skincare growth weighted by EL’s geographic mix, the category has posted robust +6.5% growth over the last 10 years, with at least +4% growth for every year since the turn of the decade, and growth of more than +5% for all but one year in the same time frame. Given Euromonitor excludes travel retail growth, we think that these numbers actually understate premium skincare growth, and we note that EL has continued to gain significant skincare market share even as the category has become increasingly competitive,” Mohsenian added.

Morgan Stanley target price under a bull-case scenario is $275 and $158 under the worst-case scenario. Several other equity analysts have also updated their stock outlook. RBC raised to outperform from sector perform and upped target price to $240 from $194. Estee Lauder Companies had its price target raised by equities research analysts at Citigroup to $220 from $194. The firm presently has a “neutral” rating on the stock. Stifel Nicolaus lifted their price objective on Estee Lauder Companies from $185.00 to $235.00 and gave the company a “Buy” rating.

Fourteen analysts forecast the average price in 12 months at $221.50 with a high forecast of $244.00 and a low forecast of $180.00. The average price target represents a 2.93% increase from the last price of $215.20. From those 14, 11 analysts rated ‘Buy’, two analysts rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

“We are Overweight Estee Lauder (EL) as we view long-term EL growth as more robust and sustainable than peers with its large exposure to the high growth, high margin skincare segment, e-commerce and expansion opportunity in China, and a potential rebound in near-term COVID impacted business. We assume EL recovers to pre-COVID EPS levels by FY22, with margins supported by cost-cutting,” Morgan Stanley’s Risinger added.

“We view EL’s valuation as compelling, corroborated by our DCF analysis. Sum-of-parts valuation vs peers similarly points to the upside.”

Upside risk: Lower than expected COVID impact, particularly in China/travel retail, a category growth rebound in prestige beauty, market share gains in key categories, favourable FX movements -highlighted by Morgan Stanley.

Downside risk: Prolonged COVID-19 impacts, China results slow with tariff/boycott risk, category growth deceleration, macro conditions worsen, market share losses, competitive pricing, and unfavourable FX.

Blackstone to Buy Takeda Pharma’s Japanese Consumer Healthcare Business for $2.29 billion; Target Price $60

U.S. investment fund Blackstone Group said on Monday that it will acquire Takeda Pharmaceutical’s Japanese consumer healthcare business for $2.29 billion, marking Blackstone’s second private equity transaction in Japan’s healthcare sector following the acquisition of AYUMI Pharmaceutical last year.

Takeda anticipates a pre-tax gain of about JPY 140.0 billion on the sale of shares of the subsidiary, to be recognized when the transfer of shares is executed and completed. Takeda anticipates Reported Net Profit attributable to owners of the Company to increase by about JPY 105.0 billion.

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. is acting as an exclusive financial advisor to Blackstone, while Simpson Thacher & Bartlett LLP and Anderson Mori & Tomotsune are acting as legal advisors.

Blackstone’s shares closed 0.91% higher at $52.97 on Friday. However, the stock is down about 5% so far this year.

Executives’ comments

“We are privileged to announce this partnership and invest in the company’s plans to become the leading consumer healthcare business in Japan. TCHC is well-positioned to grow its established brands in Japan and launch new and expanded product offerings. We see tremendous potential for TCHC in Japan and throughout Asia, and we are confident that Blackstone’s global network and expertise in the sector can accelerate TCHC’s growth,” said Atsuhiko Sakamoto, Head of Private Equity in Blackstone Japan.

“Throughout decades, TCHC’s brands including Alinamin have earned the trust and confidence of consumers in Japan. We believe the active and strategic investment by Blackstone will enable TCHC to maximize its potential. Blackstone is one of the world’s leading investment firms and has rich experience in the healthcare sector, and we are confident this will help TCHC further develop its products and brands and strengthen the business overall,” said Milano Furuta, Chairman of the Board, Takeda Consumer Healthcare Company.

Blackstone stock forecast

Nine analysts forecast the average price in 12 months at $61.88 with a high forecast of $65.00 and a low forecast of $54.00. The average price target represents a 16.82% increase from the last price of $52.97. From those nine analysts, five rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $65 with a high of $100 under a bull-case scenario and $20 under the worst-case scenario. Blackstone Group had its price target lowered by UBS to $63 from $65

Other equity analysts also recently updated their stock outlook. Deutsche Bank raised the price target to $54 from $49, Citigroup upped their price target to $58 from $57, JP Morgan increased their price target to $58 from $54 and Credit Suisse raised to $65 from $64.

We think it is good to hold for now as 50-day Moving Average and 100-200-day MACD Oscillator signals a mild selling opportunity.

Analyst view

“Best-in-class private markets franchise with significant brand power, $156 billion of dry powder and strong mgmt company balance sheet uniquely position Blackstone to capitalize on a challenging recession backdrop and drive above peer growth,” said Courtney Yakavonis, equity analyst at Morgan Stanley.

“Fundraising machine that should raise over $211 billion in 2020-21, supported by newer initiatives (i.e., Infrastructure, Core+ RE, Tac Opps, Secondaries, longer-dated PE, Asian PE etc.) and existing strategies. We view Blackstone as best positioned for the secular growth story in alternatives given their leading businesses in every major category that should command a premium multiple,” he added.

Upside and Downside risks

Upside: 1) Ramping cash performance fees in newer funds/strategies incl: BCP VI, VII, Tac-Opps, BREP VIII. 2) Growth in Fee-Related Earnings from fee activation of newly raised funds. 3) Faster penetration of retail channel – highlighted by Morgan Stanley.

Downside: 1) Deeper recession that delays harvesting of investments and dampens returns which lowers cash earnings. 2) Regulatory risk: Increased political and regulatory scrutiny of the private equity business model.

Zoetis’ Price Target Raised to $167 on Strong Companion Animal Trends, $203 in Best-Case Scenario: Morgan Stanley

Zoetis Inc’s, the world’s largest producer of medicine and vaccinations for pets and livestock, price target was raised to $167 from $125, largely driven by higher multiple assumptions, according to Morgan Stanley equity analyst David Risinger, who also said better-than-anticipated performance in the face of COVID-19 pressures has caused the increase for this year’s and 2021’s EPS to 9% and 6%, respectively.

Early this month, the animal health company said its revenue came in at $1.5 billion for the second quarter of 2020, which is flat compared with the same quarter a year earlier. Net income for the second quarter of 2020 was $377 million, or $0.79 per diluted share, an increase of 2% and 3%, respectively.

Revenue in the U.S. segment was $823 million, an increase of 6% compared with the second quarter of 2019. However, Revenue in the international segment was $708 million, a decrease of 5% on a reported basis and an increase of 3% operationally compared with the second quarter of 2019.

Zoetis forecasts its full-year 2020 revenue between $6.300 billion and $6.475 billion, reported diluted EPS between $3.14 and $3.32 and adjusted diluted EPS between $3.52 and $3.68.

“We increased our revenue in 2020e by 4% (from $6.2 billion to $6.5 billion) and 4% in 2021e (from $6.7 billion to $7.0 billion). We increase our EPS in 2020e by 9% (from $3.35 to $3.66) and 6% in 2021e (from $3.94 to $4.18). In addition, we significantly raise our price target from $125 (32x 2021e EPS of $3.94) to $167 (40x 2021e EPS of $4.18). We are increasing our multiple targets because the market is assigning higher multiples to “best of breed” companies, and Zoetis is the #1 company in the Animal Health industry,” said David Risinger, equity analyst at Morgan Stanley.

“Since we had assigned a PT of $125 on April 2, the S&P 500 has traded up +35% and NASDAQ has traded up +49%. Zoetis’ stock is trading close to all-time high absolute P/E and relative P/E multiples. ZTS multiple has expanded as it has outgrown peers, delivered earnings upside, and benefited from the premium the stock market is assigning to best-in-class companies,” Risinger added.

Morgan Stanley target price under a bull-case scenario is $203 and $137 under the worst-case scenario. Several other equity analysts have also updated their stock outlook. The brokerage currently has an “equal weight” rating on the stock. Credit Suisse Group reiterated a “buy” rating and set a $147.00 target price.

Twelve analysts forecast the average price in 12 months at $166.00 with a high forecast of $185.00 and a low forecast of $150.00. The average price target represents a 4.71% increase from the last price of $158.54. From those 12, seven analysts rated ‘Buy’, five analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“Zoetis has compelling long-term prospects, but COVID-19 and recession impacts could drive earnings downside near-term. We believe the company’s high quality is balanced by high stock valuation. Faster growth, positive new product developments, and tuck-in M&A potential yield Bull Case upside. Financial shortfalls, competitive pressures and new product disappointments yield Bear Case downside,” Morgan Stanley’s Risinger added.

Upside risks: 1) Faster rebound post-COVID in vet clinics and livestock; 2) Greater Companion Animal demand, especially in parasiticides and key dermatology products; 3) Faster uptake of Simparica Trio; 4) MAb candidates for pain in cats and dogs remain on track to launch in 2021 -highlighted by Morgan Stanley.

Downside risks: 1) Competitors could garner the approval of products which compete with Zoetis’ key Companion Animal growth drivers and 2) COVID’s negative impact on the livestock business could persist longer than expected, and 3) Stock multiple could contract if stock market money flows shift toward cyclical.

Alibaba Posts Strong Q2 Revenue as COVID-19 Crisis Boosts Online Business; Target Price $290

Alibaba Group Holding Ltd, the largest online and mobile eCommerce company in the world, said its revenue surged 35% year-over-year in the second quarter, largely due to growth in core commerce and cloud computing businesses, which has been accelerated by the COVID-19 pandemic.

The Chinese multinational technology company said its Q2 revenue rose to 153.75 billion yuan, an increase of 34% year-over-year. Alibaba’s net income attributable to ordinary shareholders more than doubled to 47.59 billion yuan from 21.25 billion yuan.

Alibaba said its annual active consumers on China retail marketplaces reached 742 million, an increase of 16 million from the 12 months ended March 31, 2020. Mobile MAUs on China retail marketplaces reached 874 million in June 2020, an increase of 28 million over March 2020.

Net income attributable to ordinary shareholders was 47,591 million yuan, and net income was 46,437 million yuan. Non-GAAP net income was 39,474 million yuan, an increase of 28% year-over-year.

Alibaba’s shares traded about 2% lower at $158.28 on Thursday. However, the stock is up over 20% so far this year.

Executive comments

“We delivered a very strong start to our new fiscal year, with revenue growing 34% year-over-year and adjusted EBITDA growing 30% year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

“Our domestic core commerce business has fully recovered to pre-COVID-19 levels across the board, while cloud computing revenue grew 59% year-over-year. Our strong profit growth and cash flow enable us to continue to strengthen our core business and invest for long term growth.”

Alibaba stock forecast

Twenty-one analysts forecast the average price in 12 months at $278.05 with a high forecast of $316.00 and a low forecast of $216.00. The average price target represents a 6.70% increase from the last price of $260.59. From those 21 analysts, 20 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $290 with a high of $344 under a bull scenario and $169 under the worst-case scenario. Alibaba Group had its price target increased by Truist to $242 from $240. They currently have a buy rating on the speciality retailer’s stock.

Other equity analysts also recently updated their stock outlook. Nomura restated a buy rating and issued a $309.00 target price on shares of Alibaba Group. Oppenheimer restated a buy rating and issued a $260.00 price objective.

Analyst view

“COVID-19 has accelerated e-commerce penetration, especially in FMCG (fast-moving consumer goods), the next core category for e-commerce. Alibaba is set to benefit from this secular trend, given its leading position, and we expect it to maintain >50% market share over time, thanks to its strong ecosystem,” said Gary Yu, equity analyst at Morgan Stanley.

“In addition, merchants’ marketing budgets will continue to shift online given increasing reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized. Our new target implies 25x F22e P/E, in line with the average since 2017. Despite its recent rally, BABA’s NTM forward P/E discount to Tencent is deeper than the historical average of 20% since 2017,” he added.

Upside and Downside risks

Upside: 1) Better core e-commerce monetization drives earnings growth upside. 2) Faster enterprise digitalization re-accelerates cloud revenue growth – highlighted by Morgan Stanley.

Downside: 1) Intensified competition in less-developed regions would slow down GMV growth and pose downside to margins. 2) Lingering macro headwinds may pressure discretionary spending in China and affect our GMV and earnings forecasts.

Lowe’s Q2 Earnings Surge on Solid Sales Amid COVID-19 Restrictions; Buy with Target Price $190

Lowe’s Companies Inc, a home improvement retailer that distributes building materials and supplies through stores in the United States, said its net earnings surged more than 70% and total net sales jumped over 30% in the second quarter as consumers ordered more home improvement products amid COVID-19 restrictions.

The home improvement retailer reported net earnings of $2.8 billion and diluted earnings per share (EPS) of $3.74 for the quarter ended July 31, 2020, compared to net earnings of $1.7 billion and diluted EPS of $2.14 a year earlier. Second-quarter adjusted diluted EPS of $3.75 was 74% higher than adjusted diluted EPS of $2.15 same period last year.

Lowe’s said its sales for the second quarter were $27.3 billion, up from $21.0 billion in the second quarter of 2019, and comparable sales increased 34.2%.  Comparable sales for the U.S. home improvement business increased 35.1% during the period.

“We are increasing our fair value estimate to $133 per share from $111 after incorporating banner second-quarter results into our model. This included a stellar 34% comp growth and around 300 basis points of adjusted operating margin improvement as the company capitalized on its essential retailing status. Our medium-term outlook incorporates improvements to the supply chain, inventory management, and technology, bolstered by further investment in those categories. Our fair value estimate implies a 2021 price/earnings ratio of 15 times and an enterprise value/EBITDA multiple of 11 times,” said Jaime M. Katz, senior equity analyst at Morningstar.

“Post COVID-19, when demand normalizes, we expect throughput for home improvement products should depend mostly on changes in the real estate market, which are driven primarily by prices, interest rates, and turnover, given the maturity of the industry. We expect sales to grow at a low-single-digit pace over the long term (2%-3%, after rising 18% in 2020 in our forecast), supported by low-single-digit same-store sales (20% in 2020 and averaging about 4% over the next decade) and moderate location growth (netting 10 boxes per year after 2020), as from an online competitor;  shipping and returns are troublesome at best,” Katz added.

Lowe’s shares closed 0.2% higher at $158.28 on Wednesday. The stock is up over 30% so far this year.

Executive comments

“We delivered very strong second-quarter results, with all merchandising divisions posting comparable sales growth exceeding 20% and all U.S. geographic regions delivering comparable sales growth of at least 30%.  Sales were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending,” Marvin R. Ellison, Lowe’s president and CEO said in the statement.

“Looking ahead, our sales momentum continues into August, and we are investing in the business to further our omnichannel capabilities and position the Company to deliver long-term value to associates, customers and shareholders.”

Lowe’s stock forecast

Twenty-one analysts forecast the average price in 12 months at $166.24 with a high forecast of $193.00 and a low forecast of $130.00. The average price target represents a 5.03% increase from the last price of $158.28. All 21 analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley target price is $160 with a high of $230 under a bull scenario and $90 under the worst-case scenario. Lowe’s Companies had its target price upped by equities researchers at Robert W. Baird to $190 from $175. The brokerage presently has an “outperform” rating on the home improvement retailer’s stock.

Other equity analysts also recently updated their stock outlook. SunTrust Banks boosted their target price to $135 from $115 and gave the stock a “buy” rating. Telsey Advisory Group boosted their price objective to $175 from $140 and gave the company an “outperform” rating. Guggenheim reiterated a “buy” rating and issued a $135 target price. At last, Barclays upped their price target to $150 from $125 and gave the company an “overweight” rating.

We think it is good to buy at the current level and target $190 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“We view Lowe’s favourably given its longer-term transformation opportunity and structural industry tailwinds, with near-term tailwinds from COVID-19 spending shifts,” said Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience,” he added.

Upside and Downside risks

Upside: 1) Housing market remains strong, driving an acceleration in comps. 2) Margin initiatives gain momentum, driving achievement of 12% EBIT margin target (9.1% in 2019) faster than expected – highlighted by Morgan Stanley.

Downside: 1) Slowing housing market & deterioration in the competitive landscape. 2) Execution missteps cause flow through to be weaker than expected. 3) Gross margin stagnation/contraction as it nears peak levels.

Johnson & Johnson to Buy Momenta Pharmaceuticals for $6.5 Billion; Buy with Target Price $170

Johnson & Johnson, well known for consumer products like Band-Aids, said it has entered into a definitive deal to buy Momenta Pharmaceuticals, a company that discovers and develops novel therapies for immune-mediated diseases, in an all-cash transaction for about $6.5 billion.

The world’s largest and most comprehensive manufacturers of healthcare products said this acquisition provides an opportunity for the Janssen Pharmaceutical Companies of Johnson & Johnson to broaden its leadership in immune-mediated diseases and drive further growth through expansion into autoantibody-driven disease.

“Janssen will have the potential to introduce multiple launches, many as first-in-class indications with potential for significant peak year sales, some of which could exceed $1 billion,” Johnson & Johnson noted.

The deal is expected to close in the second half of 2020.

Johnson & Johnson shares gained 0.26% to $150.48 in pre-market trading on Wednesday. The stock is up about 3% so far this year.

Johnson & Johnson stock forecast

Seven analysts forecast the average price in 12 months at $166.86 with a high forecast of $175.00 and a low forecast of $158.00. The average price target represents a 11.17% increase from the last price of $150.09. All seven analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley target price is $170 with a high of $204 under a bull scenario and $110 under the worst-case scenario. Independent Research raised its rating to buy from hold; upped target price to $164 from $161.

Other equity analysts also recently updated their stock outlook. Johnson & Johnson had its target price raised by Barclays to $182 from $173. Several other equity research firms have also updated their outlook. Credit Suisse maintained a “Buy” rating and issued a $161 price target. Citigroup lifted their price target on shares of Johnson & Johnson from $150 to $165 and gave the company a “buy” rating.

We think it is good to buy at the current level and target $170 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Litigation liability has been more than reflected in Johnson & Johnson shares, in our view, creating a meaningful valuation disconnect vs. the S&P. Pharma-driven acceleration is poised to drive the multiple higher in 2020 led by blockbuster franchises, pipeline launches and easing comparables. Momentum in MD&D and Consumer segments should drive a more balanced growth profile which is less reliant on Pharma,” said David Lewis, equity analyst at Morgan Stanley.

“Our price target of $170 for Johnson & Johnson is based on a ~19.0x multiple off of our base case 2021e EPS, supported by our SOTP analysis. We assume J&J trades at an in-line multiple with S&P 500 given defensive-oriented profile, growth acceleration in Pharma, and improving fundamentals in Consumer/MD&D, balanced by litigation overhang,” he added.

Upside and Downside risks

Upside: 1) Pharmaceutical growth accelerates to the HSD sustainability. 2) Opioid and talc litigations are settled. 3) MD&D growth accelerates – highlighted by Morgan Stanley.

Downside: 1) Litigation overhang persists / legal liabilities are greater than anticipated. 2) Pharma pipeline is unable to offset biosimilar and competitive risks. 3) COVID-19 impact to MD&D is more severe. 4) Turnarounds in Consumer and MD&D fail to materialize or slower than expected.

Walmart Posts Record Surge in Q2 Online Sales; Buy with Target Price $150

Walmart Inc, an American multinational retail corporation that operates a chain of hypermarkets, said its total revenue increased 5.6% in the second quarter to $137.7 billion and posted its biggest growth in online sales as buyers purchased everything from the comfort of their homes amid COVID-19 pandemic.

The world’s largest company by revenue said its U.S. sales increased 9.3%, led by strength in general merchandise and food and U.S. eCommerce sales grew 97% with strong results across all channels. Growth in membership income was the highest quarterly increase in more than five years. New member count increased by more than 60%.

“We like Wal-Mart’s global scale, extensive international growth opportunity, increasing focus on e-commerce and smaller Neighborhood Markets, and the company’s status as a large-cap defensive stock,” said Oliver Chen, equity analyst at Cowen.

“We believe improving US comps and the health of the US consumer are key positives for the stock and believe top-line momentum is set to continue in FY21 & FY22 driven by price investments and an improved store experience. We rate WMT Outperform with a $155 price target on ~28x our FY22 EPS of $5.50E,” Chen added.

The company said its operating income rose 8.5% to $6.1 billion in the quarter, while adjusted earnings per share of $1.56.

However, Walmart said its international net sales were $27.2 billion, a decrease of 6.8% as volatile currency rates negatively affected net sales by approximately $2.4 billion. The company’s net sales and operating results were significantly affected by a continuation of the global health crisis.

Walmart shares closed 0.6% lower at $134.7 on Tuesday, but it is up over 13% so far this year.

Walmart stock forecast

Twenty-two analysts forecast the average price in 12 months at $142.35 with a high forecast of $160.00 and a low forecast of $130.00. The average price target represents a 5.67% increase from the last price of $134.71. From those 22, 16 analysts rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $150 with a high of $240 under a bull scenario and $95 under the worst-case scenario. D.A. Davidson raised the price target to $154 from $148 and RBC raised it to $137 from $132.

Other equity analysts also recently updated their stock outlook. Keybanc raised the price target to $150 from $138, Raymond James upped the price objective to $145 from $140, Jefferies increased it to $157 from $151 and Stifel upgraded it to $130 from $125.

We think it is good to buy at the current level and target $150 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“We expect Walmart to sustain recent momentum in its core business in F’21/F’22 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $150 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers in the current COVID-19 environment,” said Simeon Gutman, equity analyst at Morgan Stanley.

“We think the launch of Walmart+ could serve as a sustainable positive tailwind for the stock (assuming the program benefits are made clear through disclosure of subscriber numbers or higher sales growth). In our base case we have estimated up to 20 million members may be willing to sign up for Walmart+ within six months of launch (per our AlphaWise survey data). Assuming a 1.7x spending uplift for existing Walmart shoppers that sign up for the program and breakeven e-commerce operations by the fifth year of membership yields $30 billion of NPV for Walmart ($10/share).”

Upside and Downside risks

Upside: 1) Comps accelerate to +MSD-HSD led by continued Grocery strength. 2) Sustainable US e-comm growth of 50-60%+ behind Click & Collect momentum. 3) PhonePe gains wider market appreciation, driving incremental multiple expansion. 4) Walmart+ gains more traction than expected – highlighted by Morgan Stanley.

Downside: 1) E-commerce loses begin to rise again after briefly moderating. 2) US e-comm growth slows to <30% (comps <2%). 3) Greater than expected Flipkart losses.

Home Depot Q2 Sales Jump Over 23% Amid COVID-19 Restrictions; Target $320

Home Depot Inc, the largest home improvement retailer in the United States, reported sales of $38.1 billion for the second quarter of fiscal 2020, a 23.4% increase from a year earlier as consumers ordered more home improvement products amid COVID-19 restrictions, sending its shares up about 3% in pre-market trading on Tuesday.

The home improvement retailer said its net earnings for the second quarter of fiscal 2020 were $4.3 billion, or $4.02 per diluted share, compared with net earnings of $3.5 billion, or $3.17 per diluted share, a year earlier.

For the second quarter of fiscal 2020, diluted earnings per share increased 26.8% from the same period in the prior year.

Home Depot also announced that its board of directors declared a second-quarter cash dividend of $1.50 per share.

Home Depot shares rose about 3% to $295.70 in pre-market trading on Tuesday after ending 2.7% higher at $288.24 a day before. The stock is up over 30% so far this year.

Executive comments

“The investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment. This enhanced our team’s ability to work cross-functionally to better serve our customers and deliver record-breaking sales in the quarter,” Craig Menear, chairman, CEO and president said in a press statement.

“We remain focused on continuing the momentum of our One Home Depot investment strategy that we believe will position us for continued growth over the long-term, while at the same time maintaining the flexibility to navigate the demands of the current environment. Through it all, we will continue to lead with our values by doing the right thing and taking care of our people.”

Home Depot stock forecast

Twenty-three analysts forecast the average price in 12 months at $283.33 with a high forecast of $320.00 and a low forecast of $221.00. The average price target represents a -1.70% decrease from the last price of $288.24. From those 23, 15 analysts rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $285 with a high of $380 under a bull scenario and $185 under the worst-case scenario. BofA Global Research raised price objective to $290 from $270, Oppenheimer raised target price to $320 from $274 and Credit Suisse raised it to $300 from $269.

Other equity analysts also recently updated their stock outlook. Home Depot had its price target upped by stock analysts at Raymond James to $295 from $250. The firm currently has an “outperform” rating on the home improvement retailer’s stock. Truist Securities raised their price objective on Home Depot from $300 to $240.

We think it is good to buy at the current level and target $320 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“We are Overweight HD given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2H’20/2021 economic/housing recovery,” said Simeon Gutman, equity analyst at Morgan Stanley.

Upside and Downside risks

Upside: 1) Housing market relatively stable through COVID-19 headwinds. 2) Initiatives gain momentum and drive top-line acceleration in 2020-2021 – highlighted by Morgan Stanley.

Downside: 1) A slowdown in the home improvement market. 2) Greater than expected interest rate hike. 3) Departure of key leadership.

JD.com Nudges Toward All-Time High After Earnings Beat

JD.com, Inc. (JD) jumped 7.93% Monday to trade just below its all-time high after the Chinese e-commerce giant delivered better-than-expected quarterly results. The company reported second-quarter (Q2) adjusted earnings of 50 cents per share, easily surpassing analysts’ expectations of 39 cents a share.

The company did not offer guidance for the current quarter, due to restrictions relating to its recent listing on the Hong Kong stock exchange.

The Beijing-based online retailer grew its active customer accounts by an impressive 30% to 417.4 million over the past year ended June 30. Moreover, mobile daily active users grew by 40% in June. As of Aug. 18, 2020, the Nasdaq-listed JD.com ADR has a market capitalization of $105.24 billion and trades over 90% higher on the year. In the past three months alone, the shares have gained 31.72%.

Supply Chain Focus

The company continues to invest heavily in supply chain management for future growth. In July, the firm bought a stake in established supply chain manager Li & Fung to leverage private-label initiatives for the Chinese domestic market. “Our strong financial and operating performance form the basis for JD’s continued investment in innovative supply chain capabilities and a superior customer experience to support our long-term growth,” said Sandy Xu, the company’s chief financial officer.

Wall Street Outlook

Goldman Sachs analyst Ronald Keung upgraded JD.com to a ‘Conviction Buy’ after the results and raised his price target to $85 from $73, implying a 27% premium from Monday’s $66.98 close. The analyst argues the company’s strong Q2 should sustain the stock’s uptrend amid the ongoing retail scale expansion from discretionary to staple goods. Elsewhere, analysts overwhelmingly believe the shares have further upside. The stock receives 1 ‘Strong Buy’ rating, 17 ‘Buy’ ratings, and 3 ‘Hold’ ratings. At this time, no analyst recommends selling the shares.

Technical Outlook and Trading Tactics

After trading within an ascending triangle for the better part of six weeks, JD.com shares finally broke through the pattern’s top trendline on above-average volume after the upbeat earnings report. Furthermore, the moving average convergence divergence (MACD) indicator crossed above its trigger line in Monday’s session to generate a buy signal.

Traders who anticipate a continuation move higher should consider using the 50-day simple moving average (SMA) average as a trailing stop. To implement this strategy, stay in the trade until price closes below the indicator.

BHP Posts 4% Decline in Annual Profit Amid COVID-19 Slowdown; Warns Slow Growth Recovery Outside China

BHP Group, an Anglo-Australian multinational mining, metals and petroleum dual-listed public company, reported a decline in annual profit of nearly 4% to $9.06 billion in the second quarter and said except China, all other major economies will contract this year as a result of the COVID-19 pandemic.

The largest diversified natural resource company reported an attributable profit of $8.0 billion and underlying attributable profit of $9.1 billion broadly in line with the prior year. The company posted a profit from operations of $14.4 billion and underlying EBITDA of $22.1 billion at a margin of 53%, with unit costs reduced by 9%.

BHP Group also declared a final dividend of 55 cents per share, down from 78 cents a year earlier, or US$2.8 billion, which includes an additional amount of 17 US cents per share (equivalent to US$0.9 billion) above the 50% minimum payout policy. Total dividends announced US$1.20 per share, equivalent to a 67% payout ratio.

BHP Group expects that China and the OECD will return to their pre-COVID-19 trend growth rates from around 2023. Developing economies outside East Asia may take longer. Inflation trends and exchange rates have been volatile.

Executive comments

“We expect most major economies will contract heavily in 2020, China being the exception. Recovery will vary considerably by country. Our diversified portfolio and high-quality assets position us to continue to generate returns in the face of near-term uncertainty, even as we secure and create the options in future-facing commodities that will allow us to sustainably grow value in the long-term,” Chief Executive Mike Henry said in a statement.

“BHP’s operations generated robust free cash flow and our balance sheet remained strong, with net debt finishing the year at the low end of our target range. We have announced a final dividend of 55 US cents per share, bringing shareholder returns to US$6.1 billion for the full year,” Henry added.

BHP Group stock forecast

Eleven analysts forecast the average price in 12 months at GBX 1,820 with a high forecast of GBX 2,130 and a low forecast of GBX 1,450. The average price target represents a -1.15% decrease from the last price of GBX 1,841.20. From those 11, seven analysts rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is GBX 1,680 with a high of GBX 2,450 under a bull scenario and GBX 720 under the worst-case scenario. BHP Group had its price objective lowered by analysts at Royal Bank of Canada to GBX 1,900 from GBX 1,950. The firm currently has an “outperform” rating on the stock.

Other equity analysts also recently updated their stock outlook. UBS Group upped their price objective to GBX 1,850 from GBX 1,700 and gave the company a “buy” rating. Goldman Sachs Group upped their price target to GBX 1,850 from GBX 1,780 and gave the company a “buy” rating. Bank of America raised shares of BHP Group to a “buy” rating and set a GBX 2,050 target price.

Analyst view

“BHP’s portfolio mix and quality stand out among peers. The low-cost position of its assets enables the company to generate FCF yield even in a stress scenario. It maintains a strong B/S, giving the flexibility to pursue growth and/or increase cash shareholder returns, in particular given the company’s net debt target of $12-17 billion (post-IFRS16 adjustment) vs 1HFY20 levels of $12.5 billion,” said Alain Gabriel, equity analyst at Morgan Stanley.

“Spot FCF yields are comparable to peers, even without contributions from the Petroleum division, thus implying long-term optionality to a potential oil price recovery. We prefer BHP on a relative basis, given its attractive commodity mix ex-Iron Ore and free optionality on a potential oil price recovery,” Gabriel added.

Upside and Downside risks

Upside: 1) Growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam) successfully executed. 2) Better operating performance, lower costs and capital expenditure. 3) Higher commodity prices – highlighted by Morgan Stanley.

Downside: 1) Execution issues at growth projects (Jansen potash, Escondida growth, Spence hypogene, Olympic Dam). 2) Weak operating performance, higher costs and capital expenditure. 3) Lower commodity prices.

Sanofi to Acquire Principia Biopharma for $3.7 billion; Analysts Optimistic on Outlook

Sanofi SA, a French multinational pharmaceutical company headquartered in Paris, said it would acquire a U.S.-based biopharmaceutical company Principia Biopharma for approximately $3.7 billion, sending its shares up about 1%.

Under the terms of the merger agreement, Sanofi will commence a cash tender offer to acquire all outstanding shares of Principia common stock for $100 per share in cash for a total enterprise value of approximately $3.36 billion, the company said.

Sanofi expects to complete the acquisition in the fourth quarter of 2020.

At the time of writing, Sanofi shares traded nearly 1% higher at EUR 86.03 on Monday. The stock is down about 5% so far this year.

On the other hand, Principia Biopharma stock jumped over 11% to $101 in pre-market trading on Monday. The stock is up more than 65% so far this year.

Executives’ comments

“This acquisition advances our ongoing R&D transformation to accelerate the development of the most promising medicines that will address significant patient needs,” Sanofi Chief Executive Paul Hudson said in the statement.

“The merger will provide global resources to get these novel therapies to patients faster,” said Martin Babler, president and chief executive at Principia Biopharma.

Principia Biopharma stock forecast

Six analysts forecast the average price in 12 months at $112.83 with a high forecast of $130.00 and a low forecast of $100.00. The average price target represents a 24.34% increase from the last price of $90.74. All six analysts rated ‘Buy’, according to Tipranks.

SVB Leerink raised price target to $112 from $80 and Guggenheim gave a “Buy” rating and target price of $100.

Sanofi stock forecast

Morgan Stanley target price is EUR 107 with a high of EUR 130 under a bull scenario and EUR 75 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Independent Research lowered the target price to EUR 105 from EUR 108.00; rated Buy.

Kepler Capital Markets set a EUR 99 price target on Sanofi. The brokerage currently has a buy rating on the stock. UBS Group set a EUR 101 price target and gave the company a buy rating. Goldman Sachs Group set a EUR 105 target price and gave the company a buy rating. At last, Credit Suisse Group set a EUR 105 price objective and gave the company a buy rating.

Analysts’ views

“Principia acquisition makes strategic sense – we estimate implied peak SAR’168 sales of 3-4.5 billion euros,” said Mark D Purcell, equity analyst at Morgan Stanley.

“We value Sanofi using a DCF analysis, which incorporates government bond yield curves and the Sanofi CDS in generating a blended WACC of 6.8%. We assume a progressive return of the ROCE towards the European peer-group average over a 15-year fade period and we use a +1% terminal growth rate,” Morgan Stanley’s Purcell added.

“We reiterate our Buy rating and are increasing our price target to $108 from $77 to what we believe starts to more accurately reflect our initial conservative projections,” said Joseph Pantginis, equity analyst at H.C. Wainwright & Co.

Upside and Downside risks to Sanofi

Upside: Dupixent outperforms expectations, faster R&D turnaround, value-creative M&A, regulatory progress on the Rx-to-OTC switches of Cialis and Tamiflu, COVID-19 pandemic makes flu vaccination a global priority, highlighted by Morgan Stanley.

Downside: Dupixent growth slows as competitors take market share, the pipeline does not deliver (6 focus assets), management fails to turn around R&D and execute on cost-saving, value destructive M&A.

Starboard Value Sells 74% Stake in eBay; Buy With Target Price of $64

Starboard Value announced that it sold 74% of its stake in an American multinational e-commerce corporation, eBay, during the second quarter when the activist investment firm ended its proxy fight following the hire of Jamie Iannone as the new CEO of the e-commerce company.

According to a regulatory filing on August 14, the New York-based hedge fund held 2,090,000 shares of the e-commerce company, compared to 7,920,000 it reported in on May 15 filing.

eBay reported that its revenue rose to $2.87 billion in the second quarter, from $2.42 billion a year ago, beating market estimate of nearly $2.8 billion. The e-commerce company forecast a full-year adjusted profit between $3.47 and $3.59 per share.

eBay shares ended 0.018% higher at $56.29 on Friday. The stock is up over 40% so far this year.

eBay stock forecast

Twenty-seven analysts forecast the average price in 12 months at $62.32 with a high forecast of $82.00 and a low forecast of $52.00. The average price target represents a 10.71% increase from the last price of $56.29. From those 27, 11 analysts rated ‘Buy’, 16 rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $64 with a high of $71 under a bull scenario and $51 under the worst-case scenario. eBay had its price target upped by stock analysts at Stifel Nicolaus from $68 to $70. The firm presently has a “buy” rating on the e-commerce company’s stock.

Other equity analysts also recently updated their stock outlook. Mizuho upped their target price on shares of eBay to $52 from $46 and gave the stock a “neutral” rating. JPMorgan Chase & Co. upped their target price to $60 from $52 and gave the stock a “neutral” rating. Benchmark upped their target price to $69 from $60 and gave the stock a “buy” rating.

BMO Capital Markets lowered from a “positive” rating to a “market perform” rating and upped their target price for the stock to $59 from $52. At last, Wells Fargo & Co upped their target price to $58 from $50 and gave the stock an “equal weight” rating.

We think it is good to buy at the current level and target $64 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Near-term trends are strong, and we remain positive payments and ads…but we think execution on eBay’s 3 new growth pillars (for sustained growth into ‘21) will be key to driving material upside from here,” said Brian Nowak equity analyst at Morgan Stanley.

“eBay has shifted its strategy to lower growth and cost rationalization and is aggressively repurchasing shares. New growth drivers, such as Promoted Listings and Payment intermediation (to be rolled out in full mid-2020) are on track.”

Upside and Downside risks

Upside: 1) eBay stabilizes and re-expands its core marketplace GMV. 2) eBay executes better than expected on the payments and promoted listings opportunities, highlighted by Morgan Stanley.

Downside: 1) core marketplace GMV continues to deteriorate. 2) eBay misexecutes on the payments and promoted listings opportunities.

Novavax to Deliver 60 million Coronavirus Vaccine Doses to UK; Buy With Target Price of $227

Novavax Inc, an American vaccine development company headquartered in Maryland, said the UK government will purchase 60 million doses of coronavirus vaccine, NVX-CoV2373, beginning as early as the first quarter of 2021, sending its shares up about 6% in pre-market trading on Friday.

Novavax said the Phase 3 clinical trial will be a randomized, double-blind, placebo-controlled efficacy study in approximately 9,000 adults 18-85 years of age in the UK.

The trial is expected to begin in the third quarter of this year, with the UK government supporting and providing infrastructure to Novavax in the execution of the trial. The trial will assess the ability of NVX-CoV2373 to protect against symptomatic COVID-19 disease as well as evaluate antibody and T-cell responses.

Novavax’s is among the most advanced in developing the coronavirus vaccine, but not ahead as AstraZeneca PLC and Moderna Inc.

“We are honoured to partner with the UK government to deliver a vaccine that could provide vital protection in the fight against the global health crisis,” Stanley C. Erck, President and Chief Executive Officer of Novavax said in a statement.

“Our Phase 3 clinical trial in the UK will be a critical component to assess the efficacy of NVX-CoV2373, which in a Phase 1 trial has already demonstrated to be generally well-tolerated and to elicit robust antibody responses. We are also delighted to expand our collaboration with FUJIFILM Diosynth Biotechnologies to manufacture our antigen at its UK site.”

Novavax shares closed over 7% higher at $133.28 on Thursday, rising about 6% in pre-market trading on the last day of the week. The stock has surged over a massive 3,200% so far this year.

Novavax stock forecast

Five analysts forecast the average price in 12 months at $227.60 with a high forecast of $290.00 and a low forecast of $105.00. The average price target represents a 70.77% increase from the last price of $133.28. From those five, four analysts rated ‘Buy’, none analyst rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

H.C. Wainwright raised their 12-month price target to $290 from $132 and JP Morgan upped it to overweight from neutral, raising the target price to $275 from $105. We think it is good to buy at the current rate and target $227 as 100-day Moving Average and 100-200-day MACD Oscillator signal a strong buying opportunity.

Analyst comment

“Shares of Novavax have significantly outperformed the industry in the year so far. Novavax’s efforts to develop influenza vaccine candidate NanoFLu look encouraging. COVID-19 vaccine program also progresses well,” noted equity analysts at ZACKS Research, who gave the price target of $176.

“If successfully developed and launched, this can be a huge boost to the company given the absence of an approved vaccine to address the deadly COVID-19 pandemic. However, in the absence of a marketed product, Novavax is yet to generate any revenues from product sales. Dearth of collaboration contracts too remains a woe. Thus, any delay in the pipeline development will hurt the stock.”

Cloudflare Inc’s Price Target Raised to $46, $67 in Best-Case Scenario: Morgan Stanley

Cloudflare Inc’s, an American web-infrastructure and website-security company, price target was raised by 23% to $46 after a solid second-quarter results, Q3 and fiscal year 2020 guidance, according to Morgan Stanley equity analysts, who also revised their billings estimates by 8% for the outer years and revenue by 4%, 8% and 8% for the fiscal year 2020, FY21 and FY22, respectively.

Last week, the security, performance, and reliability company reported a total revenue of $99.7 million, representing an increase of 48% year-over-year in the second quarter. GAAP gross profit was $75.6 million in Q2, or 75.8% gross margin, compared to $52.6 million, or 78.0%, in the second quarter of 2019.

Cloudflare forecasts a total revenue between $102.5 to $103.5 million in the third quarter of fiscal 2020 and $404 to $408 million for the full-year fiscal 2020.

“We raise our PT to $42 from $34 as higher topline and margin estimates yield a CY30 FCF estimate of $748M (vs $711M prior). We now apply a 44x EV/FCF multiple to our CY30 FCF estimate (38x prior), implying a 1.7x EV/F/G (1.4x prior) which is in-line with the large-cap software median,” said Keith Weiss, equity analyst at Morgan Stanley.

“A $42 price target implies 24.8x CY21 EV/Sales and 0.68x growth-adjusted, a premium to the overall SaaS group at 0.54x growth-adj justified by a large TAM of $30B+, an effective sales motion spanning both SMB and enterprise customers, and importantly durable growth with growth prospects on the horizon around edge compute and yet-to-be-monetized remote access VPN (Cloudflare for Teams). Additionally, valuation is more balanced when looking at SaaS peers growing >30% CAGR (median 22x CY21 EV/Sales),” the analyst added.

Morgan Stanley target price under a bull-case scenario is $67 and $23 under the worst-case scenario. Several other equity analysts have also updated their stock outlook. Oppenheimer lifted their target price on Cloudflare to $55 from $35 and gave the company an “outperform” rating. Zacks Investment Research lowered shares of Cloudflare from a “buy” rating to a “hold” rating. JPMorgan Chase & Co. increased their target price on shares of Cloudflare to $52 from $30 and gave the stock an “overweight” rating.

Jefferies Financial Group upgraded shares of Cloudflare from a “hold” rating to a “buy” rating and boosted their price target to $50 from $27. At last, Needham & Company LLC increased their price objective to $50 from $47 and gave the stock a “buy” rating.

Twelve analysts forecast the average price in 12 months at $47.25 with a high forecast of $55.00 and a low forecast of $34.00. The average price target represents a 21.62% increase from the last price of $38.85. From those 12, ten analysts rated ‘Buy’, two analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“Attractive Long-Term Opportunity. Cloudflare’s purpose-built cloud solutions address the complex security and website performance needs of a broad customer base. Penetration into an attractive $30 billion+ TAM depends on the strength of security products and a swiftly expanding solution portfolio, including Workers for the emerging edge computing opportunity and Access/Cloudflare for Teams for remote access,” Morgan Stanley’s Keith Weiss added.

“Risk/Reward Balanced by Near-Term Macro Uncertainty.  Cloudflare, up 120% YTD has significantly outperformed the SW universe/NASDAQ. Current trade of 23x EV/CY21e sales, 0.62x growth-adj is a premium to SaaS avg at 0.54x, supported by attractive LT growth but not without NT risks in our view.”

Lyft Quarterly Revenue Drops Over 60% as COVID-19 Pandemic Bites

Lyft Inc, an American ridesharing company based in California, said its revenue plunged 61% in the second-quarter and number of active riders dropped by 60% to 8.69 million as the COVID-19 pandemic drastically affected business, sending its shares down over 1% in after-hours trading on Wednesday.

The ride-sharing company said its revenue slumped to $339.3 million in the second quarter ended June 30, 2020, versus $867.3 million in the second quarter of 2019, a decrease of 61% year-over-year.

Lyft said its restructuring effort to reduce operating expenses and adjust cash flows, announced in April 2020, is on track to reach its objective of becoming profitable by the end of next year. The number of active riders tumbled 60% to 8.69 million in Q2.

“We view 3Q20 earnings as the next major catalyst, as well as any updates on LT projections and/or any regulatory or legal proceedings related to ridesharing, and updates on COVID-19 impact,” said John Blackledge, equity analyst at Cowen.

“We forecast 23% annual revenue growth’20-’30 driven by ~12% active rider growth over the period and expect EBITDA to turn positive by ’22 with 42% annual EBITDA growth from ’23 to ’30,” Blackledge added.

Lyft shares closed about 0.42% lower at $30.52 on Wednesday. The stock has declined about 30% so far this year.

Executive comments

“In Q2, we successfully limited our Adjusted EBITDA loss, outperforming the outlook we shared on our Q1 call by more than 20%.  We continued to take aggressive actions to reduce costs and increase our underlying unit economics in the quarter, which has put Lyft on track to achieve $300 million of annualized fixed cost savings by the end of the year,” said Brian Roberts, chief financial officer of Lyft.

“These steps position the Company to achieve adjusted EBITDA profitability with 20 – 25% fewer rides than originally contemplated in our fourth quarter 2021 target.”

Lyft stock forecast

Nineteen analysts forecast the average price in 12 months at $44.79 with a high forecast of $66.00 and a low forecast of $30.00. The average price target represents a 46.76% increase from the last price of $30.52. From those 19, 13 analysts rated ‘Buy’, six analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $34 with a high of $52 under a bull scenario and $20 under the worst-case scenario. BTIG lowered the target price to $40 from $52 and RBA raised the target price to $48 from $47.

Several other equity analysts have also updated their stock outlook. Lyft had its price target dropped by Jefferies Financial Group to $40 from $50. The brokerage presently has a “buy” rating on the ride-sharing company’s stock. Credit Suisse Group lowered their target price to $66 from $75 and set an “outperform” rating. At last, RBC upped their price target to $51 from $47.00 and gave the company an “outperform” rating.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, can target $20 under a worst-case scenario.

Analyst comment

“How Big is Lyft’s Active Rider Opportunity? We view Lyft’s primary addressable market as 18-50-year olds living in MSAs with a household income of $50K+. We estimate (at most) 24% of this demographic were Lyft users in ’18. We expect the more rational duopoly structure in North America to lead to rising adjusted take rates and faster revenue growth for Lyft,” said Brian Nowak, equity analyst at Morgan Stanley.

“We don’t see Lyft generating positive adj. EBITDA until ’22 but expect healthy operating leverage due to insurance and sales and marketing efficiencies,” he added.

Upside and Downside risks

1) Less than expected impact from COVID-19. 2) Faster than expected rationalization in US rideshare industry. 3) Positive resolution of AB5, Morgan Stanley highlighted as major upside risks to Lyft.

1) Greater than expected impact from Covid-19. 2) Slower than expected market rationalization. 3) Inability to spur user/frequency growth through lower prices, higher liquidity and innovation. 4) Regulation as Lyft faces municipal, country and labour regulatory/legal challenges, were major downside risks.

Cisco Tumbles After Soft Q1 Earnings Guidance

Cisco Systems, Inc. (CSCO) plunged 6.44% in after-hours trade Wednesday on the back of declining fiscal Q4 revenues and downbeat guidance for the current quarter. The company, which manufactures networking hardware and security software, reported quarterly sales of $12.15 billion, down from year-ago revenues of $13.43 billion.

Meanwhile, adjusted earnings for the period came in at 80 cents per share compared to 83 a share in the quarter ended July 2019. However, the San Jose-based company’s top- and bottom-line figures surpassed Wall Street expectations by 0.50% and 8%, respectively.

Through Wednesday’s close, Cisco stock has a market capitalization of $203 billion, yields an enticing 3.05%, and trades just 2.52% higher on the year. Performance has improved over the past three months, with the shares gaining around 12%.

Soft Forward Guidance

Management forecast Q1 adjusted earnings guidance of 69 cents to 71 cents and a revenue decline of 7% to 9%.  Analysts had projected earnings of 76 cents and $12.25 billion in sales for the quarter, representing about a 7% decline.

Software Focus

The company said it plans to acquire network intelligence company ThousandEyes in the quarter for $1 billion to provide a range of remote work and learning solutions. In recent years, Cisco has made a strategic shift to generate more revenue from software and service solutions to compete with cloud offerings from tech heavyweights Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT), and Alphabet Inc. (GOOGL).

“By the end of fiscal 2020, we achieved our goal of more than half of our revenue coming from software and services, and this strategy continues to resonate with customers as they digitize their organizations,” Cisco Chief Executive Chuck Robbins said in a statement accompanying the quarterly results, per MarketWatch.

Wall Street Outlook

Despite the stock’s lackluster performance relative to the technology sector, analysts remain modestly bullish. The stock receives 13 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 13 ‘Hold’ ratings. Price targets range from as high as $60 to as low as $41, with a consensus of $50.05. This represents a 4% premium to Wednesday’s $48.10 close.

Technical Outlook and Trading Tactics

Since testing the low 30s in mid-March, Cisco shares have made a Nike swoosh-like recovery. Over the past two months, the price looks to be carving out the right shoulder of an inverse head and shoulders pattern – a formation that typically signals a market bottom. Furthermore, the 50-day simple moving average (SMA) crossed above the 200-day SMA last month to indicate a new uptrend. Traders should use any weakness as a buying opportunity, providing the stock remains above the June 11 low at $43.64. Look for a move up to the $57.50 level, where price funds overhead resistance from a horizontal trendline.