M10 BARRON’S February 22, 2021
ResearchReports
HowAnalystsSizeUpCompanies
These reports, excerpted and edited by Barron’s, were issued recently by investment
andresearchfirms.Thereportsareasamplingofanalysts’thinking;theyshouldnot
beconsideredtheviewsorrecommendationsofBarron’s.Someofthereports’issuers
have provided, or hope to provide, investment-banking or other services to the
companies being analyzed.
To be considered for this section, material
should be sent [email protected].
Chesapeake Energy•CHK-Nasdaq
Overweight•Price $43.55 on Feb. 17
by Wells Fargo
Following its emergence from Chapter 11
last week, a revamped Chesapeake Energy
offers investors differentiated cash flow ver-
sus peers still transitioning to Shale 3.0 [a
catchphrase for frackers’ drive to fund oper-
ations from cash flow, rather than from bor-
rowing or capital raises]. Management will
need time to establish a solid Shale 3.0
track record that investors can believe in.
The story has other challenges, which in-
clude a declining production profile, mate-
rial (though improved) midstream commit-
ments, and a disadvantaged hedge profile in
2021 and 2022. That stated, the stock trades
at a significant discount to peers and has a
clear line of sight to a debt-free balance
sheet. We initiate with a $58 price target.
Upwork•UPWK-Nasdaq
Buy•Price $56.77 on Feb. 16
by BTIG
With shares of Upwork [a freelancing plat-
form] up a strong 64%, year to date, inves-
tors will be closely scrutinizing the com-
pany’s fourth-quarter performance and first-
quarter guidance when it reports earnings
on Feb. 23. In our Jan. 6 update we high-
lighted that our tracking suggested Up-
work’s fourth-quarter performance looked
good, relative to revenue guidance. We have
observed more bullish data since then, as
we have tracked a notable acceleration in
job listings. We believe this acceleration is
above typical seasonality and positions Up-
work well to guide above our first-quarter
2021 estimates. We now look for gross ser-
vices volume of $2.95 billion and $3.55 billion
in fiscal-year 2021 and 2022, respectively, up
from our prior estimates of $2.93 billion and
$3.49 billion. Our revenue estimates for fis-
cal 2021 and 2022 climb to $437 million and
$520 million from $434 million and $513 mil-
lion. Based on our new estimates and target
multiple, we are raising our price target to
$68 from $42.
Henry Schein•HSIC-Nasdaq
Outperform•Price $64.87 on Feb. 17
by Barrington Research
Henry Schein delivered $1 a share in [fourth-
quarter] non-GAAP earnings per share from
continuing operations, versus last year’s 97
cents. Our estimate was 93 cents; the consen-
sus was 99 cents. Total revenue of $3.17 bil-
lion easily exceeded our estimate of $2.85 bil-
lion. The consensus estimate was $2.88 billion.
We are increasing our price target to $80
from $72. While dental patient traffic remains
well below pre-Covid levels, the company has
continued to deliver results via incremental
personal protective equipment, or PPE, and
other Covid-19-related business. Our new
price target is 12.5 times our fiscal-2021 ad-
justed estimate of earnings before interest,
taxes, depreciation, and amortization.
Wells Fargo..............................M
Neutral•Price $36.59 on Feb. 17
by J.P. Morgan
We are upgrading Wells Fargo to Neutral
from Underweight, following news reports
that the Fed has accepted the company’s
plan to overhaul its risk management and
compliance, a critical step on the path to
eventually lifting the company’s asset cap;
news reports indicate that the cap is ex-
pected to be lifted by the Fed in 2022. How-
ever, we believe Wells’ valuation is appropri-
ate after factoring in the potential earnings
benefit from lifting of the asset cap, plus
sizable cost savings from restructuring.
There is still much uncertainty about the
bank’s earnings run rate and profitability
once the restructuring is completed.
Merck•MRK-NYSE
Buy•Price $75 on Feb. 12
by CFRA
On Jan. 25, we cut our view on Merck to Buy
from Strong Buy, due to its unsuccessful
Covid-19 vaccine development efforts, which
will result in increased costs, negatively
impacting profitability. Yet, long term, we see
a favorable patent setup, with no key brands
losing marketing exclusivity until 2022, and
Merck’s growth engine, [cancer drug]
Keytruda, on patent until 2028.
We also welcome Merck’s decision to
spin off its women’s health, legacy brands,
and biosimilars into a new company (Or-
ganon), enabling faster growth. Based on
our estimates, the transaction is expected
to generate $1.5 billion in operating effi-
ciency by 2024. Our 12-month $90 target on
Merck stock is 12.9 times our 2022 EPS es-
timate, a discount to the company’s 10-year
forward price/earnings ratio.
CommScopeHolding•COMM-Nasdaq
Market Perform•Price $14.53 on Feb. 17
by Raymond James
We maintain our Market Perform rating on
[network specialist] CommScope, following a
fourth-quarter report including light sales,
better earnings per share, and still no guid-
ance. Citing its CEO transition, CommScope
won’t provide guidance for perhaps two more
quarters while it undertakes a strategic re-
view. Investor hopes have risen on prospects
for restructuring and divestitures, yet the ma-
jority of revenue remains challenged. After a
good run in the stock, a lack of catalysts, and
consensus estimates that we think will decline,
an intraday pullback makes sense. We remain
on the sidelines.
INSIDERTRANSACTIONSRATIO
01020304050607080M A M J J A S O N D JFRatio of Insiders Sales to Buys. Readings under 12:1 are Bullish. Those over 20:1 are Bearish.The total top20 sales and buys are 686, 303 ,253 and 9, 842 ,378 respectively; Source: Thomson ReutersBearish
Bullish
Ratio=70
INSIDERTRANSACTIONS:RecentFilings
Purchases
$ Val
Company/Symbol Insiders Shares (000's)GreenbrierCompaniesGBX 1 50,000 2,179
Dun&BradstreetDNB 2 47,900 1,115
CotyCOTY 3 140,225 941
CalixCALX 1 20,000 715
SouthernNationalBancorpOfVirginiaSONA 1 50,000 644ViantTechnologyDSP 2 25,750 644
PowerReitPW 3 16,867 573
FirstBank(Hamilton)FRBA 1 38,745 414
AffiliatedManagersAMG 1 2,500 364
Net1UepsTechnologiesUEPS 3 70,441 350
DxcTechnologyDXC 1 11,443 300
GordonPointeAcquisitionHOFV 5 102,000 250
CrownCastleInternationalCCI 1 1,500 245
EverestReRE 1 1,000 244
DynexCapitalDX 3 9,523 170Babcock&WilcoxEnterprisesBW 4 28,496 167
U.S.SilicaSLCA 1 16,003 157
ArchResourcesARCH 1 3,000 138
AdtalemGlobalEducationATGE 3 3,160 130
FvcbankcorpFVCB 1 6,020 105Sales
$ Val
Company/Symbol Insiders Shares (000's)SquareSQ 2 414,073 95,349
DatadogDDOG 2 912,000 89,624
ViantTechnologyDSP 3 1,123,072 53,593
FacebookFB 1 179,000 48,353
CarvanaCVNA 1 162,528 47,919
CharlesSchwabSCHW 5 821,779 46,694
UnitySoftwareU 6 304,839 39,132
Bill.ComBILL 6 189,483 34,056
PelotonInteractivePTON 3 226,857 32,994
RaymondJamesFinancialRJF 1 250,000 27,802HysterYaleMaterialsHandlingHY 1 208,972 20,824
IllinoisToolWorksITW 1 100,233 20,551
TradewebMarketsTW 4 298,954 19,843
TexasInstrumentsTXN 3 102,871 17,974
AdvancedMicroDevicesAMD 3 189,720 17,350PaylocityPCTY 3 78,733 16,289
WoodwardWWD 2 131,964 15,313
GreenBrickPartnersGRBK 1 700,000 14,385
ElectronicArtsEA 2 95,975 14,130
TwistBioscienceTWST 2 80,000 14,128Aninsiderisanyofficer,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