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.
ConocoPhillips
• COP-NYSE
Overweight • Price $116.67 on Nov. 2
by Wells Fargo
We’re sticking with our Overweight rating for our top pick in international exploration and production. We remain positive on ConocoPhillips on the third-quarter beat and raise. The company is still poised to deliver free-cash-flow yield of just under 10% through estimates for 2024. Conoco continues to develop its global liquid national gas portfolio with 50% of Port Arthur now contracted but significant optionality remaining. Conoco increased its dividend and remains committed to its shareholder return framework. We expect Conoco to return $11 billion to shareholders in 2023, representing 54% of our estimated cash flow from operations. We raise our price target to $145 from $137, based on 5.5 times our 2025 enterprise value to Ebitda forecast.
CooperCompanies.
• COO-Nasdaq
Buy • Price $306.88 on Oct. 30
by BofA Securities
We initiate coverage of CooperCompanies [medical devices maker] with a Buy rating and a price objective of $380, implying 24% upside. Cooper is the second-largest contact-lens manufacturer (26% share) and is better positioned than its three main competitors to capitalize on favorable industry trends, in our view. Cooper’s fertility business is underappreciated but should deliver accretive sales growth.
The stock is down 19% since August, as investors believe the company’s 2024 earnings-per-share guide will fall short of Street expectations. But we think that is already priced into the stock, and the guidance should reset expectations and make upside more likely.
SolarEdge • SEDG-Nasdaq
Neutral/High Risk • Price $75.79 on Nov. 1
by Citi Research
We are downgrading SolarEdge to Neutral/High Risk. Though we expected this to be a rough quarter for SolarEdge and residential solar in general, the situation is much worse than we anticipated. Contrary to our assumption, Solar’s gross margin will be persistently low over the near to medium term, given a more severe need for inventory reduction and as fixed costs are meaningfully higher than expected. We expect Solar to face demand and margin headwinds through the late second half of 2024 and expect the stock to be range-bound and in the penalty box until then. Product pricing and competition has made the outlook in the near to medium term even more uncertain.
As a result, we await a better entry point and/or tangible progress toward inventory reduction and margin improvement while maintaining market share before becoming more constructive on the stock. Price target: $77, down from $187.
Expedia Group
• EXPE-Nasdaq
Buy • Price $94.84 on Nov. 3
by Benchmark
Expedia Group reported what appeared to be somewhat mixed results, with slight misses on room nights and gross bookings. However, we now find ourselves in a market where cash flow and buybacks appear to be being prioritized over growth, and on that front, Expedia didn’t disappoint, announcing a new, $5 billion share repurchase program, or more than a third of the entire current market cap.
We have followed CEO Peter Kern for quite some time and note that he has never been shy about putting company money where his mouth is, especially if there is a significant perceived valuation gap. And at a time when guidance was still reiterated for the year, and shares trading by our math at under four times estimated 2024 adjusted Ebitda, now certainly looks and feels like a good time to be aggressive with a buyback program. Price target: $160.
First Horizon
• FHN-NYSE
Outperform • Price $11.43 on Nov. 3
by Wedbush
We’re upgrading First Horizon to Outperform from Neutral and adding it to the Wedbush Best Ideas List. Our base-case macro forecast for 2024 is that the U.S. experiences at least a mild recession, and we’re leaning into more-defensive names for our bank group; First Horizon exhibits the characteristics we’re favoring in this backdrop.
We believe that First Horizon is well positioned to navigate through a potential recession, given its high capital ratios relative to peers, strong tangible book value growth, and attractive valuation, especially when taking into account loan and securities fair value marks.
We believe that capital ratios and tangible book value will become a bigger focal point of investors in 2024 as credit quality potentially weakens for the bank group and new capital rules are implemented.
We believe that First Horizon could be an acquisition target, given the recent termination of the TD deal, its below-average TBV valuation, and management’s openness about potential mergers and acquisitions to eclipse $100 billion in assets. Price target: $14.
Block
• SQ-NYSE
Buy • Price $43.98 on Nov. 3
by Jefferies
Although we don’t expect the debate around the stock to quiet, we believe that the quarter supplied far more incremental positives than negatives. An inflection to meaningful GAAP profitability is on the horizon as Block enters a new era of discipline, and for all the concerns about structural growth heading into the print, Block will exit the year growing gross profits nearly 20% year over year, while trading at fewer than 10 times our new fiscal-2026 GAAP Ebitda. Price target: $60.
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