Barron\'s - 09.09.2019

(Kiana) #1

M12 BARRON’S September 9, 2019

Research Report





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 to

Comcast• MCSA-Nasdaq

Outperform • Price $45.52 on Sept. 4

by Oppenheimer

Comcast is trading at its lowest relative

price/earnings ratio to the market ever

and its highest free-cash-flow yield (our

9% estimate versus the Street’s 8%) and

dividend yield relative to Treasuries. It

will delever from three times Ebitda to

two times within two years, driven by very

strong broadband growth and margins,

but we also expect good margin expansion

from Sky and NBCUniversal.

Comcast will have easier comps in 2020,

with two very significant events: the sum-

mer Olympics and U.S. elections. Film also

has easier comps and should benefit from

new installments in both Minions and the

Fast and Furious franchises. Broadband/

Sky are seeing stronger incremental mar-

gins....Comcast is executing well and is

highly diversified, with the ability to slash

expenses to improve margins. Video sub-

scribers are a concern going forward.

However, broadband is as strong as ever,

with rising prices and very high incremen-

tal margins with declining capital intensity.

This is the primary driver of free-cash-

flow growth. Price target: $54.

Royal Dutch Shell• NYSE-RDS/A

Market Perform • $55.89 on Sept. 5

by Cowen

We are downgrading Royal Dutch Shell

from Outperform to Market Perform, re-

ducing our price target from $69 to $60.

RDS has peer-leading exposure to interna-

tional gas prices; lower forecast prices

through year-end 2020 could limit FCF

[free cash flow] growth. Cash generation

through 2020 post-divestments could fall

$8 billion short of shareholder returns, with

dividend increase unlikely before 2021.

Weak international gas prices could

persist through at least 2020, weighing on

RDS’ results, given its peer-leading expo-

sure at 30% upstream production. The

stock has been flat, year to date, on a to-

tal-return basis, in line with its European

peers and modestly worse than the U.S.

integrated oil group. Its 6.7% dividend

yield compares with a 5.2% average since

2000 and a 6% average since 2010, imply-

ing limited compensation for its $10 billion

a year repurchase program. The company

doesn’t expect to increase its dividend un-

til after completing the program by year-

end 2020. We see stable, $15 billion annual

FCF through 2021, after factoring in our

updated gas prices and assuming $60

Brent, resulting in a net cash outflow of

$8 billion post-divestments to fund the re-

purchase program through 2020.

Apple• AAPL-Nasdaq

Overweight • Price $209.19 on Sept. 5

by Piper Jaffray

We expect Apple to ship 5G iPhones in

second-half of 2020. While early to be talk-

ing about devices that will not hit the mar-

ket for over a year, the 5G iPhone’s inte-

gration into the investor narrative around

Apple shares has already begun. Our sec-

ond survey of more than 1,000 U.S. iPhone

owners shows that 23% are interested in

purchasing a 5G iPhone, up from 18% in

our June 2019 survey. We see this as a

high level of interest, given limited 5G

marketing/chatter to date and the high

price point suggested in our survey. Look-

ing at the remainder of fiscal year 2019,

we expect limited excitement around this

year’s iPhones (to be announced on Sept.

10), however, as long as services and non-

iPhone devices continue to perform well,

this should tide investors over until antici-

pation for 5G iPhones intensifies. We are

maintaining our Overweight rating and

$243 price target.

The last “major” iPhone cycle was the

6 Plus, which drove 52% Y/Y iPhone reve-

nue growth in fiscal-year 2015; even the

Nov. 17 release of the iPhone X drove 17%

growth in fiscal 2018. The launch of 5G

iPhones (enabling materially faster data

transfer) should drive upgrades, especially

as the 5G infrastructure improves and

apps leveraging 5G permeate the App

store. We are conservatively modeling 2%

Y/Y iPhone revenue growth in fiscal year

2021 (in line with consensus).

Kraft Heinz• KHC-Nasdaq

Underperform • $25.52 on Sept. 3

by Credit Suisse

Kraft Heinz’s new CEO, Miguel Patricio,

hosted a meeting today with sell-side

research analysts to hear their perspective

and provide some more color on his ap-

proach for developing a multiyear turn-

around plan for the company. Personality-

wise, Patricio is the type of CEO we like to

meet: humble, good-humored, and eager to

listen—but also strategic and assertive.

However, we didn’t hear anything to alter

our concern about the significant challenges

facing the company longer term and the

likelihood of a dividend cut in the near term.

Fitch and Standard & Poor’s have re-

duced their outlooks on Kraft and issued

warnings that if the company’s Ebitda

stays at $6 billion, it will need to make sig-

nificant asset sales to pay down debt and/

or cut its dividend in order to meet their

thresholds for an investment-grade rating.

Patricio’s decision to pause asset sales

while withdrawing Ebitda guidance was

the primary catalyst for the outlook revi-

sions. Price target: $23.










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 347, 036 ,175 and 29, 466 ,421 respectively; Source: Thomson Reuters



Ratio = 12



Company/Symbol Insiders Shares (000's)

Pvh PVH 1 133,155 9,986
Coty COTY 2 312,000 2,976

NewMediaInvestment NEWM 3 295,000 2,589
CommunityHealthSystems CYH 1 1,200,000 2,382

EastWestBancorp EWBC 7 44,440 1,727

LibertyLatinAmerica LILAK 1 81,407 1,304
ProspectCapital PSEC 1 201,548 1,288
Intra-CellularTherapies ITCI 1 125,000 1,065

VtvTherapeutics VTVT 1 606,061 776

Intel INTC 2 16,376 748

Cannae CNNE 1 20,000 570

Corteva CTVA 1 18,393 552
Abbvie ABBV 1 7,525 498

SallyBeauty SBH 1 40,500 495

HorizonGlobal HZN 1 120,293 473

Unitedhealth UNH 1 2,000 455

UsXpressEnterprises USX 3 104,177 441
EldoradoResorts ERI 2 12,000 440
StateStreet STT 1 7,000 353

ApellisPharmaceuticals APLS 1 11,699 348


$ Val
Company/Symbol Insiders Shares (000's)

Anterix ATEX 1 1,000,000 43,500
Oracle ORCL 1 787,500 40,793
ConstellationBrands STZ 2 189,018 38,666

TandemDiabetesCare TNDM 3 410,297 28,921

IacInteractivecorp IAC 2 112,402 28,547

NovocureLtd NVCR 3 246,181 22,424

AutomaticDataProcessing ADP 8 117,125 19,672
WecEnergy WEC 2 153,115 14,732

TylerTechnologies TYL 2 55,592 14,261

RestaurantBrandsInternational QSR 3 164,072 12,744

Facebook FB 2 67,267 12,291

BurlingtonStores BURL 1 50,000 10,084
FairIsaac FICO 2 25,000 8,784
RepublicServices RSG 1 95,126 8,561

DellTechnologies DELL 1 167,275 8,559

EsteeLauderCos EL 3 38,158 7,678
Salesforce.Com CRM 5 47,647 7,388

OsiSystems OSIS 3 64,963 6,877
NexteraEnergy NEE 2 28,737 6,420

AirLease AL 2 150,106 6,135

andexcludestradesprecededbyoptionexerciseinthe12monthspriortothereportedevent. Source:ThomsonReuters
Free download pdf