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.
Apple
• AAPL-Nasdaq
Outperform • Price $182.91 on Sept. 7
by Evercore ISI
Apple stock has been under pressure in recent days on the back of US/China geopolitical issues. Most recently, it was announced that the Chinese Communist Party told employees not to use Apple iPhones (or other foreign devices) for work purposes. The headline is a negative for Apple, but it is not clear how much of an impact this will have, as party officials have likely avoided using American products in the workplace for long before the official ban was enacted (i.e. self-banning out of political awareness).
China is 19% of Apple revenue, so any more meaningful restrictions could hit the bottom line, but the Evercore ISI China team feels this is unlikely unless Apple begins moving supply chains out of China at a rate that makes China uncomfortable. Apple noted back in 2019 that it supports over five million jobs in China, so it would be difficult for the CCP to take a more material action against Apple without impacting Chinese jobs.
Net/net: We think this is more of a headline issues versus something that will have a material impact on financial performance, given that government officials were likely already avoiding Apple products. Maintain Outperform rating and $210 target.
CME Group
• CME-Nasdaq
Buy • Price $202.43 on Sept. 5
by UBS
Following CME Group’s August metrics release, we are raising our third-quarter 2023 earnings-per-share estimate to $2.24 from $2.17 (versus $2.20 Street).
August average daily volume was higher than our expectations due to solid trading activity in interest-rate products and better-than-feared volume in equity products. Pricing was generally in line with our forecast, but mix (higher volume in the lowest fee interest rate and equity complexes) reduces our overall estimate by 2%. Cash balances at the Federal Reserve are tracking down 16% quarter over quarter.
We remain constructive on the shares, as macro uncertainty remains elevated and the stock is trading below its relative historical range to the S&P 500 index. Price target: $230.
Zscaler
• ZS-Nasdaq
Buy • Price $162.74 on Sept. 5
by Mizuho Securities
Consistent with our checks, Zscaler [a cloud security company] reported a very good fiscal fourth quarter. Total billings growth of 38% year over year (34% excluding a large deal) significantly exceeded our and the Street’s 27% growth forecast. Revenue and OMs also showed meaningful upside, and, importantly, fiscal-2024 billings and revenue guidance were above Street expectations. Notwithstanding recent stock strength (up 16% since mid-August), we believe these results are good enough.
More broadly, we continue to believe Zscaler remains very well positioned for growth, and that its unique cloud proxy security architecture should enable it to thrive in an increasingly digital-enabled world. We also continue to expect significant improvements in monetization going forward. We raise our price target to $185 from $168.
Canada Goose Holdings
• GOOS-Toronto
Outperform • Price C$21.92 on Sept. 5
by Raymond James
We initiate coverage on Canada Goose Holdings with an Outperform rating and C$26 ($19.25) price target. As a luxury performance outerwear brand, we see Canada Goose mostly driving strong growth from new distribution and also increases from new adjacent product categories. We see Canada Goose more than doubling its footprint while remaining smaller than luxury competition. Category expansion is in early innings and showing progress. We acknowledge volatile trends in North America, and China may be choppy, but the bigger picture suggests the company has ample room to grow and expand profitability.
We model revenue as up 19.5% in fiscal 2024 and 13% in fiscal 2025, making Canada Goose among the fastest growing global brands. Valuation is attractive with a price/earnings ratio of 12.5 times (five-year average is 25 times).
Airbnb
• ABNB-Nasdaq
Outperform • Price $151.77 on Sept. 6
by AB Bernstein
New York City’s well-flagged regulations on vacation rentals came into effect this week. The press has largely called the new regulations a “ban,” but this is not strictly correct—stays will remain legal if for more than 30 days or for registered properties renting out to a group of up to two where the host will be present in the property (which will be hard to enforce) and where the guests and the host have a “common household.”
The immediate impact on Airbnb will be small. New York City is less than 1% of revenues, and half of that is longer term (greater than 30 night) stays.
Walmart
• WMT-NYSE
Buy • Price $161.47 on Sept. 7
by Jefferies
Walmart is reportedly cutting its starting pay for some new hires. This move helps flatten the labor structure within the store and allows for greater staffing flexibility (i.e., cashier, online pickup, etc.). Net-net, we don’t believe that this change will have a material impact on Walmart’s payrolls.
However, this news does indicate that the labor market tightness is easing more broadly. We believe that Walmart is seeing better availability for labor, which gives it the confidence to make this change. Price target: $190.
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