Analysts Stocks

      Weekly update - October 1, 2022

      Selected stock price target news highlights

      By: Teni Nyca Antenor

      September 26, 2022

      VOYA Benefits Inflationary Times – Buy Says Piper Sandler

      Piper Sandler analyst John Barnidge raised VOYA price target to $70 (from $65) and upgraded the rating to Overweight (from Neutral).

       

      Voya Financial Inc.’s attractive valuation is due to its portfolio. The financial services stock has 70% in wealth solutions and 15% in health solutions. “These tend to fare well during inflationary period. They’re also likely to weather a recession better than others,” published Yahoo Finance.

       

      “Voya’s purchase of Allianz Global Investors U.S. funds brings enhanced distribution with limited currency exposure and its valuation is materially lower than life insurers with sizable asset management operations, Barnidge tells investors in a research note.” The Fly

       

      BIIB Soars 40% After New Alzheimer’s Drug Trial Win

       

      Biogen skyrocketed 40% after the biotech announced positive trial data. Lacanemad, BIIB’s experimental Alzheimer’s treatment, succeeded in a final-phase test.

       

      According to Investors.com, “The drug removed built-up plaque called beta amyloid in the brains of patients with early-stage Alzheimer’s disease and, importantly, that led to a benefit on cognition. Patients who received lecanemab had a 27% slower decline in cognition vs. placebo recipients.”

       

      “SVB Leerink said these positive results would reinvigorate the Alzheimer’s space,” reports Benzinga.

       

      It’s “a new dawn for Alzheimer’s treatment,” says Guggenheim Securities analyst Yatin Suneja.

       

      After Biogen’s win on Lecanemad, several healthcare stocks related to Alzheimer’s programs are also gaining.

       

      “Eli Lilly (LLY) surged 7.5% as Roche (RHHBY) popped nearly 7%. Both are working on late-stage drugs using the same mechanism. Prothena (PRTA) skyrocketed almost 88% on renewed hopes for its amyloid-targeting Alzheimer’s drug,” wrote Investor.com.

       

      Benzinga adds the following pharmaceutics shares to the list: NVO, SAVA, ACIU, ABOS, ALZN, ANVS, LGVN, and CGTX

       

      Price target movement after the announcement:

      • Mizuho analyst Salim Syed upgraded the price target to $270 (from $207) and rating to Buy (from Neutral).
      • BMO’s Evan Seigerman increased BIIB price target to $360 (from $217) and upgraded the rating to Outperform (from Market Perform).
      • Baird analyst Brian Skorney lifted the price target to $340 (from $224) and upgraded the rating to Outperform (from Neutral).
      • Piper Sandler’s Christopher Raymond raised the price target to $280 (from $200) and maintained a Neutral rating.
      • Wells Fargo analyst Mohit Bansal reiterated an Overweight rating and increased the price target to $350 (from $265).
      • RBC’s Brian Abrahams upped the price target to $321 (from $251) and kept an Outperform rating.
      • JP Morgan analyst Chris Schott increased the price target to $275 (from $221) and maintained a Neutral rating.
      • Wedbush’s Laura Chico raised the price target to $217 (from $183) and reiterated a Neutral rating.

       

      PAYX Reports Double-Digit Growth in Revenue and Earnings For Q1

       

      “We are off to a good start for fiscal 2023, achieving double-digit growth in revenue and earnings,” announced Martin Mucci, Chairman, and CEO, of Paychex.

       

      First quarter business highlights as reported by BusinessWire:

      • Service revenue increased to $1.2 billion in the first quarter, an increase of 11%.
      • Operating income grew 12% to $495.6 million.
      • The effective income tax rate was 22.9% compared to 24.9% for the prior year period.
      • Diluted earnings per share increased 14% to $1.05 per share.
      • Adjusted diluted earnings per share increased 16% to $1.03 per share.

       

      In a CNBC interview, Mucci said they are “not seeing a recession at this point.” So far, revenue retention has been better than pre-pandemic.

       

      Price target movement following the results:

      • Credit Suisse analyst Kevin Mcveigh lowered PAYX price target to $138 (from $150) and maintained an Outperform rating.
      • Cowen’s Bryan Bergin raised the firm’s price target to $132 (from $125) and reiterated an Outperform rating.

       

      Industrial Stock Trend Not Ending Soon

       

      According to Entrepreneur.com, “Labor market stocks like Paychex (PAYX), Automatic Data Processing (ADP), and even Cintas (CTAS) have been sustaining growth and outperforming expectations in the face of sketchy economic conditions, and that trend is not ending. The latest reports from Cintas and Paychex show that the employment situation is not only strong but also strengthening. Both companies beat on the top and bottom line and increased their dividends, but one stands out as a winner for investors. Most labor-related stocks are trading at high multiples right now, about double the broad market average, because of their underlying strength and outlook for dividend payments.”

       

      Semiconductor Equipment Stocks Fall After Micron’s Awful Q4 Earnings

       

      “The semiconductor industry is a rapidly growing business segment that currently thrives on the digital transformation wave. The demand for memory chips and other semiconductor products increased over the years, but the cyclical nature of the business often creates uncertainty. Currently, chipmakers like Micron Technology, Inc. (MU) are going through a rough patch despite the high demand,” wrote AlphaStreet.

       

      Micron Technology reported awful Q4 revenue and Q1 2023 short-term outlook:

      • Revenue result was $6.64 billion for Q4 vs. $8.27 billion last year.
      • Expected revenue for Q1 2023 is $4.25 billion vs. analyst estimate of $5.62 billion.

       

      “An unprecedented confluence of events has affected overall demand, including COVID-related lockdowns in China, the Ukraine war, the inflationary environment impacting consumer spending, and the macroeconomic environment influencing customers’ buying behavior in multiple segments,” CEO Sanjay Mehrotra said in an earnings call. “In addition, inventory adjustments at customers across all end markets are also contributing to demand weakness. These factors are depressing demand for DRAM and NAND to well below end market consumption levels. We are also seeing an extremely aggressive pricing environment.”

       

      Barron’s reported that a hiring freeze is in place. Micron will also scale back by nearly 50% its capital investment in chip wafer-manufacturing equipment.

       

      Semiconductor Stocks Slumps

       

      “When the semiconductor industry sneezes, the equipment companies catch a cold,” Robert Maire, president of consulting firm Semiconductor Advisors, said in a note to clients. “Obviously cutting Micron’s WFE (wafer fabrication equipment) capex in half is a big deal for the equipment companies as their revenues can drop faster than their customers.” – Investors.com

       

      The following semiconductor equipment stocks fell following the capex cuts: AMAT, ASML, KLAC, and LRCX

       

      Analyst Rating Changes

      • BOFA analyst Vivek Arya cut MU price target to $58 (from $62) and maintained a Neutral rating.
      • BMO’s Ambrish Srivastava lowered the price target to $70 (from $80) and kept an Outperform rating.
      • Morgan Stanley analyst Joseph Moore slashed Micron’s price target to $49 (from $56) and reiterated an Underweight rating.
      • Piper Sandler’s Harsh Kumar lowered the price target to $45 (from $50) and kept an Underweight rating.
      • Mizuho analyst Vijay Rakesh reduced $MU’s price target to $52 (from $56) and maintained a Neutral rating.
      • Rosenblatt’s Hans Mosesmann reaffirmed a price target of $100 and a Buy rating.
      • Needham’s Rajvindra Gill reduced Micron’s price target to $60 (from $64) and kept a Buy rating.
      • KeyBanc analyst John Vinh reiterated a $70 price target and Overweight rating.

       

      Nike Slips Over 44% Inventory Overstock, What It Hints About Other Consumer Stocks

      On Thursday, Nike reported its Q1 fiscal 2023 results.

      • EPS was $0.93 vs. analyst estimate of $0.92
      • Revenue was $12.7 billion vs. analyst estimate of $12.29 billion.

       

      “NIKE’s first quarter results set the foundation for another year of strong growth,” said Matthew Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. “Our focus continues to be the consumer, as we take action to navigate near-term dynamics while expanding long-term structural benefits through our Consumer Direct Acceleration strategy.”

       

      However, Nike’s shares are down due to excess inventory. Inventory surged by +44% on a year-over-year basis to $9.66 billion. The analyst consensus was at $6.91 billion.

       

      “Elevated inventories are “driving intense margin pressure,” Wedbush Securities analyst Tom Nikic said in a research note. Nike is going to need “excess clearance activity in order to clean up the marketplace,” he said.” Kim Bhasin, Bloomberg.

       

      “Our strong start to FY23 highlights the depth and breadth of NIKE’s global portfolio, as we continue to manage through volatility,” said John Donahoe, President and CEO, NIKE, Inc. “Our competitive advantages, including the strength of our brand, deep consumer connections and pipeline of innovative product, continue to prove that our strategy is working. We expect our unrelenting focus on better serving the consumer to continue to fuel growth and create value like only NIKE can.”

       

      Analysts have lowered their numbers to reflect the inventory surge but have maintained their ratings, seeing a solid long-term opportunity for investors.

       

      • Telsey’s Joseph Feldman cut his price target to $110 (from $125) and maintained an Outperform
      • Citi’s Paul Lejeuz lowered his price target to $93 (from $113) and maintained a Neutral rating.
      • Goldman Sachs’ Kate McShane cut the firm’s price target to $98 (from $120) and held a Buy rating.
      • RBC analyst Piral Dadhania slashed $NKE’s price target to $115 (from $125) and kept an Outperform rating.
      • Jefferies’ Randal Konik lowered his price target to $115 (from $130) and reiterated a Buy.
      • Cowen analyst John Kernan maintained an Outperform but cut his price target to $114 (from $127).
      • Wedbush’s Tom Nikic lowered his price targets to $101 (from $121) and maintained an Outperform rating.
      • Deutsche analyst Gabriella Carbone reiterated a Buy rating but lowered her price target to $99 (from $123).
      • BOFA’s Lorraine Hutchinson cut the firm’s price target to $100 (from $122) and maintained a Neutral rating.
      • BMO analyst Simeon Siegel lowered $NKE price target to $110 (from $128) and maintained an Outperform rating.
      • Morgan Stanley’s Alex Straton cut the price target to $120 (from $129) and kept an Overweight rating.
      • Credit Suisse analyst Michael Binetti lowered the price target to $110 (from $124) and maintained an Outperform rating.
      • JP Morgan’s Matthew Boss cut the price target to $120 (from $130) and kept an Overweight rating.
      • UBS analyst Jay Sole lowered $ NKE’s price target to $141 (from $156) and maintained a Buy rating.
      • Piper Sandler’s Abbie Zvejnieks reiterated a Neutral rating and lowered the price target to $95 (from $115).
      • Guggenheim analyst Robert Drbul cut the firm’s price target to $135 (from $155) and maintained a Buy rating.

       

      Trend For Consumer Sector Stocks

       

      It’s not only Nike that’s facing the brunt. According to Coinspeaker, “Consumer companies are facing the heat with inflationary pressure eating into their margins.”

       

      SeekingAlpha says, “Nike is an industry stalwart going through inventory issues that management is quite familiar with, much like other retailers from Walmart (WMT) to Target (TGT).”

       

      “The bottom line is that for companies like Nike, Starbucks and Apple, it’s all about the reopening story in China. Investors understand its choppy, but further rationalization of pandemic policies will be good news for these companies,” recapitulates CNBC.

       

      It’s a different story for TJX Companies Inc. For the off-price retailer, retail’s inventory glut is an opportunity.

       

      “With many retailers continuing to close stores and with congestion in the supply chain, we offer vendors an attractive solution for clearing inventory,” TJX wrote, adding later that it is “in a great position to take advantage of the plentiful off-price buying opportunities in the marketplace.”