These reports, excerpted and edited by Barron’s, were recently published by investment and research firms. The reports are a sample of the analysts’ thinking; they should not be considered Barron’s opinions or recommendations. Some of the issuers of the reports have provided, or expect to provide, investment banking or other services to the companies analyzed.
Price above $30.15 on Feb 16
by Raymond James
We reaffirm our outperformance rating, but lower our price target to $40 from $46 due to lower near-term earnings and multiple compression. F3Q22 sales were relatively in line with expectations, but adjusted EPS was lower than expected, due to higher than expected supply chain volatility…. many of which were beyond La-Z-Boy’s control and seem transient. [However,] La-Z-Boy should be able to achieve higher long-term margins than historical as its supply chain improves. Specifically, La-Z-Boy’s backlog remains at an all-time high, illustrating continued strong demand. [There are] sheltering favorable winds for residential furniture, improving price realization and increasing manufacturing efficiency. Longer term, we also see benefits for La-Z-Boy through the growth of its Joybird business. [a small e-commerce retailer and manufacturer of upholstered furniture that is growing quickly]additional La-Z-Boy-branded furniture galleries (target: ~400 over time, from 350 today) and increased digital exposure to the legacy La-Z-Boy brand.
The cheesecake factory
Surpass • Price $40.87 on February 16
We expect post-Covid market share opportunities to result in higher growth relative to pre-Covid rates, which will result in an increase in premium relative to CAKE’s pre-Covid valuation. The recovery of sales in recent weeks to pre-Omicron levels allows forecasts of sales to be higher than expected. Quarterly same-store sales growth through Feb. 15 was 24.3% at Cheesecake and 38% at North Italia, and price increases were enough to prevent 2022 margin downgrades. Management now expects commodity inflation to be around the 1920s average in the first quarter, declining to mid to high single digit levels in the fourth quarter, and 60% to 65% of commodities are contracted for l ‘year. Net labor inflation should be around 5%. We are increasing our 2022 EPS estimate to $3.06 from $2.87. Share price target: $52, down from $49 previously.
To sell Price $54.95 on February 16
Roblox [an online entertainment and videogaming platform] announced disappointing financial results for Q4Q22, with declining audience size and player engagement in key geographies and demographics. We expect continued weakness in the US and Canada, as well as the company’s core group of under-13 players, as engagement normalizes [after the pandemic]. We are concerned that management’s desire to drive growth through older demographic and brand ads will ultimately create a toxic community experience. [for younger users]….. and we suspect parents may allocate less capital to RBLX as inflation impacts family budgets. We are not impressed with the management’s control of the company…. and note significant insider selling. Our price target is $45, up from $70.
Grand Canyon Education
Surpass Price $79.09 on February 16
by Barrington Research
Last night after the market closed, Grand Canyon Education reported mixed financial results for its fourth quarter and fiscal year ended Dec. 31. Initial forecasts for 2022 were lower than expected. While fourth-quarter revenue rose 5.5% to $251.4 million from $238.3 million a year earlier. , which was slightly lower than our estimate of $253 million. Adjusted Diluted EPS increased 11.3% from $1.89 to $2.11, in line with our estimate of $2.12. Management’s initial guidance for 2022 calls for revenue of between $905 million and $930 million and adjusted diluted EPS of $5.58 to $6.18. At its current level, the stock is trading at 1.5x revenue, 4.9x Adjusted EBITDA and 13.4x diluted EPS, based on our reduced estimates for 2022, which represents a discount to its ed tech peer group. We view the current challenges as temporary and expect growth to accelerate in the second half of 2022 and beyond. We are, however, reducing our 12-month price target to $90 (from $100) to reflect our weaker near-term earnings outlook.
North American Construction Group
Surpass Price CA$19.09, $15.08 on Feb 16
by National Bank of Canada Financial Markets
[This company is one of Canada’s largest heavy construction and mining contractors.] Revenue in its latest quarter was C$181 million, up 32.3% year-on-year, in line with Street’s consensus. Including joint venture revenue, the total was C$235 million, compared to C$170 million. The margin charged on total combined revenue was 24%, compared to 26.6% in the same period last year. The margins were [hurt] by operator shortages and greater equipment maintenance (which will contribute to future utilization levels), and site restrictions due to Covid protocols. Adjusted EPS of 59 cents Canadian [matched] street consensus. Contractual backlog was C$1.7 billion at the end of the quarter. Finally, the company’s board of directors approved an increase in the dividend from 16 cents Canadian per year to 32 cents Canadian. Target price: CA$27.
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