These reports, excerpted and edited by Barron's, were issued recently by investment and research firms. The reports are a sampling of analysts' thinking; they should not be considered the views or recommendations of Barron's. Some of the reports' issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Alphabet -- GOOGL-Nasdaq Outperform -- Price $157.73 on April 12 by Wedbush We think the near-term setup for Alphabet is the most attractive within our digital advertising coverage. Shares have underperformed peers, with the stock appreciating 5% since the company last reported earnings, on Jan. 30, lagging behind Meta Platforms, +31% over the same period, and the broader Nasdaq Composite index, +6%. [Alphabet is due to report first-quarter earnings on April 25.]
We think the market hasn't fully priced in the strength of the underlying demand environment for Google for three primary reasons: 1) Google does not provide quarterly guidance, and the strength that Meta and others alluded to early in the first quarter is yet to materialize in Google's reported numbers or in management commentary; 2) the company is viewed as a laggard relative to Meta due in part to comp dynamics that have exaggerated the recent divergence in growth; and 3) the perceived structural risk related to generative AI search (which we view as overdone) has kept some investors sidelined, despite the near-term strength of the advertising business.
For the first quarter, we are raising our estimates and now expect revenue growth of 14% year over year, 140 basis points ahead of consensus.
Target price: $175.
United Airlines Holdings -- UAL-Nasdaq Buy -- Price $48.31 on April 17 by Seaport Research Partners We anticipated a good first quarter of 2024, but it was a blowout quarter on revenue relative to Street expectations and United's own expectation. Following the airline's earnings call, we're concluding that the false earnings starts may finally be coming to an end, and that normalized earnings are within the investment horizon of investors.
Shares were up over 15% intraday [after the earnings release], but there is plenty of rerate potential ahead if management can execute on initiatives and drive margin expansion, as we believe is likely.
Shares now trade at 4.7/3.9/3.5 times our revised 2024/2025/2026 earnings per share (versus seven to 10 times historically). Given management's move to drive investment-grade metrics out of the business, and if history is a guide and management eventually returns capital, a rerate closer to nine times is justified in our view, and is a great place to start.
We're leaving our $66 price target unchanged, but if correct, the upside implies a stock price of closer to $120 for those with a two- to three-year horizon.
GE Vernova -- GEV-NYSE Outperform -- Price $131.75 on April 16 by Raymond James Decarbonization of electric power requires not only building clean generation assets but also modernizing the grid. Combining strengths across a broad spectrum of conventional and renewable generation, as well as grid technology, Vernova [GE's newly independent power-generation business] is involved in practically everything. Diversification has both advantages and drawbacks. Generally speaking, we are fans of the wind and electrification segments but less so the power segment, due to its fossil-fuel overweight.
We are initiating coverage with an Outperform rating. We are setting a target price of $160, based on 30 times estimated 2025 non-GAAP EPS.
Hilton Grand Vacations -- HGV-NYSE Overweight -- Price $43.53 on April 12 by J.P. Morgan We are initiating coverage of Hilton Grand Vacations at an Overweight rating and a December 2024 price target of $59.
Hilton is a timeshare operator that has transformed significantly since its spinoff from Hilton Hotels in 2017, with the acquisition of Diamond Resorts in 2021 and its recent acquisition of Bluegreen Vacations (closed in January). The pro forma company provides an opportunity for investors to gain exposure to the attractive timeshare business model at a relatively (and absolute) attractive valuation level, which can gain operating momentum in the second half of 2024 through 2025.
O'Reilly Automotive -- ORLY-Nasdaq Buy -- Price $1,089.51 on April 16 by UBS We think O'Reilly continued to outperform the broader auto aftermarket in the first quarter [results are due on April 24.] Yet, the magnitude of the gap probably moderated in the first part of the year. Specifically, we think O'Reilly maintained high-single digit commercial growth and low-single digit retail growth in the first quarter.
Looking forward, it can probably sustain these rates of growth throughout 2024, even though industry demand is lumpier this year, given the normalization in inflation and the pressure on the lower income consumer. Still, the sustainable growth will likely continue to be rewarded by the market with a premium multiple.
We raise our price target to $1,275 from $1,125.
Planet Fitness -- PLNT-NYSE Outperform -- Price $60.55 on April 16 by Baird Equity Research Planet Fitness this morning announced its next CEO, Colleen Keating, in a much-anticipated move following a transition initiated last fall. Keating joins as an unknown entity to public equity investors (most recently CEO of private company FirstKey Homes, but brings a solid résumé spanning scaled hospitality and franchised businesses. We think investor sentiment can improve over time, especially with one near-term uncertainty removed.
Price target: $80.
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(END) Dow Jones Newswires
April 19, 2024 14:48 ET (18:48 GMT)
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