October 12, 2020 BARRON’S M11
Research Reports
HowAnalystsSizeUpCompanies
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Bank of America• BAC-NYSE
Buy • Price $24.62 on Oct. 5
by Edward Jones
Bank of America is composed of many strong
franchises and is domestically focused.
Therefore, its loan growth and credit perfor-
mance are closely linked to the strength of
the U.S. economy. Given its large wealth
management business (Merrill Lynch), it also
appears well positioned to benefit from long-
term demographic trends.
Bank of America is planning to open addi-
tional financial centers, modernize others,
and complete upgrades of thousands of auto-
mated teller machines in the next couple of
years. The company is growing its presence
in many major markets across the country,
leveraging its significant investments in tech-
nology. When Bank of America’s expansion is
complete, its network will provide coverage
for more than 90% of the U.S. population.
In addition, Bank of America’s capital
levels have improved materially and are
above those of many of its large U.S. banking
peers. Bank of America recently suspended
buybacks, and we believe that dividend in-
creases are also on hold. Our current outlook
is for both to resume in early 2021.
Domino’s Pizza• DPZ-NYSE
Hold • Price $431.05 on Oct. 7
by Stifel
Domino’s reported third-quarter earnings
of $2.49 a share were well short of expecta-
tions (Stifel, $2.75; Street, $2.79), primarily
because of lower-than-expected restaurant
and supply-chain margins. Company stores
continued to incur additional compensation
expense for frontline team members during
the pandemic.The stock’s strong perfor-
mance heading into the earnings report,
coupled with the wide margin miss, will
likely put the shares under pressure today.
The primary variances between reported
earnings per share and our estimate include
lower company-owned restaurant profits (14
cents a share), a lower supply margin (11
cents), and higher general and administra-
tive expenses (eight cents).
The restaurant operating margin fell by
400 basis points [four percentage points],
year over year, to 19.8%, well below consen-
sus expectations. The supply chain margin
fell to 10.2%, down 60 basis points from the
prior year’s and the lowest since 2014’s fourth
quarter, with the company citing the sharp in-
crease in food costs (i.e., cheese) as the rea-
son for the shortfall. G&A expenses were
$91.7 million, versus our $87.9 million expec-
tation. The company attributed this to higher
variable performance-based comp expense.
Our 12-month stock-price target: $400.
Landec• LNDC-Nasdaq
Market Perform • Price $10.52 on Oct. 7
by Barrington Research
Landec’s first quarter was better than ex-
pected, especially cash flow generation, but
the shares still seem fairly valued. Revenue
of $135.6 million exceeded our $133.1 million
estimate. [The company sells food and prod-
ucts promoted as improving wellness.]
The reported loss of 38 cents a share in-
cluded [27 cents of] restructuring and other
nonrecurring charges. Adjusted earnings
before interest, taxes, depreciation, and
amortization were $3.1 million, versus our
$1.5 million estimate. The company gener-
ated positive free cash flow in the first
quarter and has also sold two facilities in re-
cent months, which will generate approxi-
mately $13.6 million in aggregate proceeds.
Management affirmed its fiscal-2021 guid-
ance of $530 million to $550 million in reve-
nue and $33 million to $37 million in adjusted
Ebitda.
Walmart• WMT-NYSE
Outperform • Price $140.63 on Oct. 6
by Cowen
We are constructive on the launch of Wal-
mart Insurance Services and other recent
actions taken by management to create a
one-stop shop for health-care services.
Health care is a major strategic priority
for Walmart, and its massive scale, with 160
million weekly shoppers, positions the re-
tailer to leverage its footprint for growth. In
our view, retail, health care, artificial intelli-
gence, and personalization are a critical part
of the future of retail, and shopper and per-
sonal interaction measurement enabled by
technology will link these spheres.
Our vision is for Walmart to integrate
grocery shopping needs with [health-re-
lated considerations]. This can drive loyalty
and longevity. In the beginning, Walmart
Insurance Services will primarily exist on-
line, but over time will become more omni-
channel-focused.
Our stock-price target is $155.
Paycom Software• PAYC-NYSE
Outperform • Price $351.83 on Oct. 8
by Oppenheimer
Our checks, analysis of the latest U.S. mid-
market monthly new business formation and
employment data, and chief financial officer
survey show customer-acquisition strength
continuing at Paycom, with same-store sales
(i.e., installed-base hiring) maintaining a
better-than-consensus trajectory.
We see good upside to consensus estimates
for Paycom’s third quarter, and for 2021 and
- Our bull case charts accelerating recur-
ring revenue growth to 25%-plus in 2021 and
31%-plus in 2022. This should trigger better
sentiment and a higher valuation. Our price
target rises to $405 a share, from $345.
INSIDER TRANSACTIONS RATIO
0
10
20
30
40
50
60
O N D J F M A M J J A SO
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 490, 613 ,393 and 19, 279 ,234 respectively; Source: Thomson Reuters
Bearish
Bullish
Ratio = 25
INSIDER TRANSACTIONS: Recent Filings
Purchases
$ Val
Company/Symbol Insiders Shares (000's)LogicbioTherapeutics LOGC 1 1,481,482 8,889
Cardlytics CDLX 1 97,384 6,941Net1UepsTechnologies UEPS 1 370,933 1,277
LiquidityServices LQDT 1 94,567 726Carmax KMX 1 2,700 252ProgressSoftware PRGS 3 6,322 238
BlackDiamondTherapeutics BDTX 1 5,000 152
CueBiopharma CUE 1 10,000 152PbfEnergy PBF 1 21,893 128Digimarc DMRC 1 5,000 112FirstFinancialBancorp FFBC 7 4,940 59Terex TEX 1 2,853 56
HeritageGlobal HGBL 1 28,570 50RetailValue RVI 1 4,000 50Ovintiv OVV 1 6,000 45VoxxInternational VOXX 1 5,200 42AltusMidstream ALTM 1 2,671 29
Tiptree TIPT 1 5,655 28
SunnovaEnergyInternational NOVA 1 1,000 28MidPennBancorp MPB 6 1,532 27Sales
$ Val
Company/Symbol Insiders Shares (000's)PalantirTechnologies PLTR 6 8,964,505 87,170
Asana ASAN 6 2,844,146 78,673
Broadcom AVGO 2 83,125 30,477Apple AAPL 1 257,343 29,233Nike NKE 2 180,000 23,017Merck&Co MRK 1 251,273 20,360Workday WDAY 1 88,339 19,587
Etsy ETSY 8 149,448 19,446Novavax NVAX 4 174,644 19,077Natera NTRA 2 261,185 18,703Catalent CTLT 2 186,590 16,046EvoquaWaterTechnologies AQUA 4 718,779 15,909
Bj'SWholesaleClub BJ 1 390,622 15,831
Stamps.Com STMP 4 59,359 14,995Nutanix NTNX 1 682,285 14,894Pinterest PINS 2 349,599 14,764
Salesforce.Com CRM 3 55,800 14,051Tesla TSLA 3 31,904 13,846
FairIsaac FICO 1 28,462 12,136MonolithicPowerSystems MPWR 5 42,440 11,798Aninsiderisanyofficer,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