Edited by
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 Overweight -- Price $183.60 on July 24 by J.P. Morgan Alphabet delivered solid overall second-quarter results with notable strength in Search (+14% year over year), Cloud (+29% Y/Y), and operating income (32.4% OM).
The company remains on the offensive in generative artificial intelligence. Gemini [the company's largest AI model] is being integrated into nearly all Google products, including each of the six with more than two billion users (Search, YouTube, Play, Android, Chrome, Gmail), and the company continues to innovate across every layer of the GenAI tech stack from chips up to agents.
It remains early days for AI Overviews within Search, but they are rolled out in the U.S., and will scale up in query volume and to other markets by year end. Google believes that AI Overviews are driving higher usage and engagement, and monetization is building. Importantly, we believe that Google's strong second-quarter Search results, combined with further positive commentary on AI Overviews, will allay near-term fears around market share and competition, though it will take time to work through long-term debates.
Price target: $208.
Visa -- V-NYSE Outperform -- Price $256 on July 23 by William Blair We reiterate our Outperform rating and recommend that investors allocate new investment dollars to Visa. Our view remains that Visa is a core financial-technology holding, and we believe that the stock offers through-the-cycle outperformance and relative insulation from momentum-driven technology strategies.
Although we don't believe that fiscal third-quarter results are a catalyst, we see little risk to our long-term expectations of roughly 10% organic revenue growth and low- to midteens percent earnings-per-share growth.
We submit that Visa has defensive characteristics that could support relative outperformance versus the market in a downturn, and 14% year-to-date relative underperformance reflects perceived better returns elsewhere, rather than structural company-specific earnings growth concerns.
O'Reilly Automotive -- ORLY-Nasdaq Outperform -- Price $1,050.71 on July 25 by Mizuho Shares of O'Reilly Automotive surprised to the upside today, trading higher by 4% amid a rush to defensive names. This is in line with our thinking, given the largely nondiscretionary nature of the auto-parts business, some healthier sales trends for O'Reilly into June and July, and the true rarefied haven status of this name within the consumer complex.
While commentary toward gross margins may have added to the debate, we continue to view O'Reilly as well situated for at least the balance of the year. This quarter's guidance cut should prove the first and last for fiscal 2024, in our view.
We reiterate our Outperform, with slight changes to our sales and EPS forecasts. Price target: $1,225.
Union Pacific -- UNP-NYSE Outperform -- Price $237.38 on July 25 by Evercore ISI Union Pacific posted second-quarter EPS of $2.74, beating our estimate of $2.62 and the average Street forecast of $2.70, with the help of productivity gains (and intermodal equipment sales, which helped the operating ratio by 70 basis points). Volumes remain a challenge for Union Pacific, particularly punitive coal declines, and mix is also working against yield.
However, productivity improvements continue to surprise to the upside, with nearly every cost line item coming in below projections. We are far from identifying the demand inflection necessary to take the margin gains to the next level, especially as we believe that coal volumes are likely to remain down by double digits through the rest of the year, yet we still estimate material year-over-year and modest sequential operating-ratio improvement, even without volume tailwinds.
Our full-year 2024 EPS estimate edges up to $11.26 (from $11.13) on the second-quarter beat and a lower cost run rate, with our 2025 forecast remaining at $12.70.
Price target: $254.
IMAX -- IMAX-NYSE Buy -- Price $19.16 on July 25 by Benchmark IMAX has shown resilience following the end of industry strikes and the pandemic, with second-quarter marking a significant growth phase in system sales and installations. The company raised its full-year 2024 installation guidance to 130-150 systems, up from 128 last year, and exceeded consensus expectations on revenue and profitability. A robust film slate through 2026, including numerous high-profile releases, and a record number of films expected to be shot with IMAX cameras in 2025, are key growth catalysts.
We believe that IMAX developing a scalable, smaller concept based on the Sphere Experience could be strategic, maintaining its immersive qualities while integrating Hollywood and local content.
Price target: $27.
Crocs -- CROX-Nadaq Outperform -- Price $131.30 on July 23 by Baird Equity Research We once again see an improved risk/reward following the stock's recent pullback. Conservative estimated second-quarter/2024 margin guidance and potential share buybacks should support positive EPS revisions. At just 9.6 times next-12-months price/earnings we see a favorable setup for the stock into year end since valuation should rerate higher if investors gain more confidence in sustained top-line growth metrics.
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July 26, 2024 18:30 ET (22:30 GMT)
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