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.
Uber Technologies
UBER-NYSE
Outperform • Price $36.52 on May 3
by AB Bernstein
We walk away from first-quarter 2023 earnings with more conviction on Uber, which remains our top pick in the group. Fiscal-year 2023 Street numbers should move higher on the back of second-quarter guidance, in our view (ours have).
We believe that Uber is a good business, and the company continues to prove that out, with market share gains and healthy incremental margins. Importantly, the second-quarter adjusted Ebitda guidance shrugged off concerns around rising insurance costs and competitive dynamics in U.S. rideshare, while also pointing to better-than-expected trends in Mobility growth.
We believe this is the right time for longer-duration investors to take a closer look at the name, as well, with GAAP profitability, excess capital return, and possibly S&P inclusion on the table, particularly as we look to 2024. Price target: $45.
Chewy
CHWY-NYSE
Outperform • Price $31.10 on May 10
Raymond James
We assume coverage on Chewy [the online pet-food retailer] and upgrade to Outperform with a $36 price target. What we like:
1) The drag on active customer growth from the churn of “Covid cohorts” is lessening (Sensor Tower mobile app checks indicate improving trends), and we see a positive inflection in customers in the second half of 2023;
2) increasing loyalty drives higher net sales per active customer and we see it as a strong and sustainable tailwind;
3) expansion of total addressable market remains a big focus (healthcare now; international soon), which should benefit new customer growth and net sales per active customer;
4) 73% of revenue (and rising) comes from Autoship/subscription programs (high visibility despite macro uncertainty);
5) Ebitda guidance for 2023 already embeds headwinds from investments and some conservatism, leaving room for upside; and
6) net cash and improving free cash flow differentiate Chewy from others in digital commerce.
Diamondback Energy
FANG-Nasdaq
Buy • Price $141.93 on May 1
by
UBS
It was a quiet quarter with first-quarter 2023 cash flow per share and crude oil volumes in line with Street expectations and the fiscal-year 2023 guide reiterated, but we see the update as positive on the financial outlook.
Key, in our view, is a path for fiscal-year 2023 capital expenditure to come in at the low end of the range and a shift in free cash flow allocation from the dividend to buybacks that shows Diamondback’s ability to improve its ratio of free cash flow to barrels of oil equivalent and create shareholder value during periods of market volatility.
Additionally, Diamondback remains on track to show balance sheet deleveraging through FCF generation and divestitures, which will continue to support them returning 75% of FCF to shareholders. Price target: $177.
Verisk Analytics
VRSK-Nasdaq
Buy • Price $203.97 on May 4
by BofA Global Research
We upgrade Verisk Analytics [a data analytics and risk assessment firm] to Buy from Underperform. We think the shares look attractive here due to Verisk’s 1) defensive business model in an uncertain environment; 2) accelerating sales growth, which drives our higher earnings-per-share outlook; and 3) a more focused management and potential for higher returns following recent businesses exits.
We raise our 2023/24 EPS to $5.53/6.55 from $5.45/6.41 prior and above the $5.45/6.37 consensus. We lift our price objective to $243 from $167 on higher EPS and valuation multiple (37 times 2024 estimated price/earnings ratio), given its higher organic sales and potential for EPS upside.
MetLife
MET-NYSE
Overweight • Price $58.71 on May 3
by J.P. Morgan
MetLife’s earnings were pressured by poor variable investment income, but underlying business fundamentals were healthy. We remain bullish on MetLife, given an upbeat outlook for business trends. Our Overweight rating reflects a positive outlook for business trends, the company’s high capital flexibility, and steady execution.
Also, valuation is compelling following the stock’s pullback….We forecast MetLife to report strong margins in the group insurance division, improving spreads in retirement and income solutions, and healthy sales in the international business. Also, MetLife has ample capital to supplement organic growth with steady share repurchases.
On a cautious note, MetLife Holdings should remain a drag on overall returns. Furthermore, a weak labor market could suppress group insurance results. Price target: $80.
Molson Coors Beverage
TAP-NYSE
Neutral • Price $65.08 on May 3
by Wedbush
In light of strong [first-quarter results] and current market tailwinds, we are raising our price target to $60, which reflects a 13.6 times target multiple on 2024 EPS. While we are certainly encouraged by Molson’s strong start to the year, with more potential tailwinds on the come, most of this looks to be priced into the shares, which have appreciated by over 25% since the beginning of April.
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