September 16, 2019 BARRON’S M11
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Netflix•NFLX-Nasdaq
Outperform•Price $294.34 on Sept. 9
by Credit Suisse
Our tracking of app downloads data through
the first seven weeks of the third quarter
suggests a broad-based rebound in global
Netflix trends, reversing its mysteriously
poor second-quarter performance. A more
marketable content slate appears to be con-
tributing, based on the timing of download
improvements in certain countries, including
Saudi Arabia cracking the top 10. It is un-
clear if India’s addition of a mobile tier of
service is enhancing a rebound there, but
international ex-India is similarly improved.
Our updated content tracker shows
many more original-content releases in the
third quarter, in particular for international
series and Hollywood dramas; several key
titles are left (including Ryan Murphy’s
first show). We have materially higher con-
tent spending year over year for the fourth
quarter, notably forThe CrownS3,The
Witcher, The Irishman,and6 Under-
ground.
Netflix’s original slate dwarfs the new
entrants. We have tracked 48 titles in de-
velopment at Disney+ (launching Nov. 12),
43 at Apple’s TV+, and 23 at HBO Max
(launching in spring 2020), versus Netflix’s
71 English-language dramas, 62 non-Eng-
lish series, 32 comedies, and 108 films in
development (not including unscripted
shows, documentaries, and animated fea-
tures). Netflix trades at 15 times our esti-
mated 2023 price/earnings ratio; our $440
target is unchanged.
Chipotle Mexican Grill•CMG-NYSE
Outperform•Price $836.32 on Sept. 9
by Wedbush
As the industry transitions toward a
larger mix of digital transactions, we be-
lieve that Chipotle is in a leading position
to establish a digital moat. We not only
continue to see near-term momentum as
management executes toward this transi-
tion, but also we believe that CMG is poised
to sustain outsize same-store sales and
earnings-per-share growth in the medium
to long term in an industry where...growth
is likely to command an increasing pre-
mium. Therefore, we upgrade to Outper-
form from Neutral.
We believe that digital sales at CMG
are on a path toward a 30%+ sales mix ex-
iting 2021. On the third-party marketplace
front, we expect CMG to adopt incremen-
tal partners, given their varying regional
market-share dynamics, adding additional
layers of comp. Meanwhile, we expect the
promotional collaboration between CMG
and existing partnerships to continue to
drive increased transactions. With respect
to Chipotle’s own app, aside from a favor-
able promotional cadence, we expect loy-
alty to act as the primary lever behind
both adoption and usage, positioning CMG
at the top of restaurant apps likely to find
space on customers’ handheld devices
We are increasing our 2019 EPS esti-
mate to $13.78 from $13.34. We are also in-
creasing our 2020 EPS estimate to $18.32
from $17.96, and our 2021 EPS estimate to
$23.19 from $22.49. We are increasing our
price target to $980 from $780. Our price
target represents a 52 times multiple on
our higher 2020 EPS estimate, net of cash.
TD Ameritrade•AMTD-Nasdaq
Buy•Price on Sept. 11 $48.59
by Sandler O’Neill Partners
Trading in August was above our expecta-
tions, as daily average revenue trades came
in at 898,000 (+12% month over month,
+15% year over year). We are raising our
fiscal-2019 EPS estimate by two cents a
share, to $4.04, while maintaining our fiscal
2020 estimate, also $4.04. Our price target of
$60 is based on about a 15 times multiple of
our fiscal-2020 estimate, which is at a mod-
est discount to TD Ameritrade’s historical
average P/E multiple, due to multiple con-
traction across the peer group because of
the interest rate outlook for 2019 and 2020.
Varian Medical Systems•VAR-NYSE
Outperform•Price $115.19 on Sept. 11
by Baird Equity Research
Varian announced this afternoon that
China has granted a tariff exclusion re-
quest for medical linear accelerators,
reversing a tariff policy that has been in
effect since Aug. 23, 2018. The tariffs im-
pacted those systems manufactured by
Varian at its Palo Alto facility (i.e., all sys-
tems other than Halcyon, which is manu-
factured in China).
We estimate that management’s most
recent guidance update implied about a $55
million to $60 million gross tariff impact to
fiscal-2019 earnings before interest and
taxes, before accounting for any mitigation
benefits. Management had quantified the
revenue and Ebit impact from the China
tariffs at $48 million at the beginning of fis-
cal 2019. Back-of-the-envelope math on our
part suggests that the original $48 million
Ebit headwind estimate from the August
2018 China retaliatory tariffs amounts to
upward of about 40 cents in EPS.
Today’s announcement is a nice win for
Varian and should imply upside to current
Street estimates for fiscal 2020 and fiscal
2021, and it gives management meaningful
operating/budgeting flexibility for next
year. Price target: $158. We would be buy-
ers in the near term to the low/mid $150s.
INSIDER TRANSACTIONS RATIO
0
10
20
30
40
50
60
S O N D J F M A M J J AS
Ratio of Insiders Sales to Buys. Readings under 12:1 are Bullish. Those over 20:1 are Bearish.
The total top20 sales and buys are 500, 460 ,873 and 65, 623 ,915 respectively; Source: Thomson Reuters
Bearish
Bullish
Ratio = 8
INSIDER TRANSACTIONS: Recent Filings
Purchases
$ Val
Company/Symbol Insiders Shares (000's)CotyCOTY 3 1,296,507 12,365
AtHomeHOME 6 1,857,693 10,582TurningPointTherapeuticsTPTX 3 189,999 8,550
CignaCI 1 32,509 5,044Intra-CellularTherapiesITCI 1 485,000 4,975ClouderaCLDR 1 439,914 3,871
CapstarFinancialCSTR 9 220,635 3,400
GladstoneLandLAND 1 210,000 2,494RbbBancorpRBB 1 115,000 2,300ElancoAnimalHealthELAN 2 85,750 2,277LibertyLatinAmericaLtdLILAK 1 100,000 1,700YextYEXT 1 85,429 1,402
PrudentialFinancialPRU 3 13,580 1,138OrganogenesisORGO 4 225,110 1,025CottCOT 1 80,000 1,005UnifiUFI 1 41,700 849NeoleukinTherapeuticsNLTX 1 250,000 782
EmmausLifeSciencesEMMA 2 193,746 716
AeriePharmaceuticalsAERI 2 31,290 599L3HarrisTechnologiesLHX 2 2,700 550Sales
$ Val
Company/Symbol Insiders Shares (000's)MicrosoftMSFT 6 319,385 43,844
CernerCERN 3 602,887 40,527
IntuitINTU 3 139,688 38,965SnapSNAP 1 2,102,245 33,351LululemonAthleticaLULU 1 145,858 29,159CeridianHcmCDAY 1 500,000 28,000ElasticNvESTC 3 322,688 27,514
L3HarrisTechnologiesLHX 2 129,650 27,399AppianAPPN 3 467,000 26,019ShockwaveMedicalSWAV 2 725,000 24,930TotalSystemServicesTSS 3 173,011 24,378FidelityNationalInformationServicesFIS 3 174,256 23,414
FairIsaacFICO 4 58,000 20,685
AnteroMidstreamAM 1 2,855,848 19,448NovocureLtdNVCR 2 208,440 17,832RingcentralRNG 5 128,126 16,852
IntegraLifesciencesIART 1 250,000 15,137EsteeLauderCosEL 6 72,057 14,752
SbaCommunicationsSBAC 1 54,411 14,586CargurusCARG 2 411,551 13,668Aninsiderisanyofficer,directororownerof10%ormoreofaclassofacompany'ssecurities.Inmostcases,aninsidermustreportanytradeto
theSECwithintwobusinessdays.ThetableshighlightcompaniesthatfiledwiththeSECthroughlastWednesday.Thetablesdonotinclude
pension-planoremployeestock-optionactivity,tradesbybeneficialownersof10%ormore,tradesunder$2pershareortradesunder100
shares.The"Purchases"columnincludesonlyopen-marketandprivatepurchases;the"Sales"columnincludesonlyopen-marketandprivatesales,
andexcludestradesprecededbyoptionexerciseinthe12monthspriortothereportedevent. Source:ThomsonReuters