Weekly Update - September 15, 2022

Selected stock price targets highlights

By: Teni Nyca Antenor

ADBE Down After Q3 Results And Figma Acquisition Plans

Adobe reported FQ3 earnings and Q4 estimates. They also mentioned Figma acquisition plans for $20 billion in cash and shares. Following the announcement, ADBE stock fell by 50% in premarket Thursday trading.

 

– Q3 EPS was $3.40 vs. analyst estimate of $3.33

– Q4 EPS estimate is $3.50 vs. analyst consensus of $3.45

– Q4 revenue estimate is $4.52 billion vs. analyst consensus of $4.58 billion

 

On the design platform Figma acquisition, Adobe chairman and CEO Shantanu Narayen said, “The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”

 

Here’s what analysts have to say:

 

– “$20B Figma acquisition is raising new concerns given its size, high price and timing, Thill tells investors in a research note,” reports The Fly. The Jefferies analyst cut $ADBE price target to $440 (from $475) and kept a Buy rating.

– Oppenheimer downgraded Adobe to Perform from Outperform with no price target. Analyst Brian Schwartz sees a few near-term catalysts. Figma acquisition was “a defensive move” to the previous inconsistent executions of Adobe.

– Wolfe Research analyst Alex Zukin cut PT to $340.

– Credit Suisse analyst Phil Winslow lowered ADBE price target to $350.

IRNT Is In The Red According To Analysts

September 14, 2022

By: Teni Nyca Antenor

 

IronNet reported continuous trouble this week, resulting in a negative analyst outlook on the stock.

 

IRNT Reported Disappointing Q2 Results

 

– EPS was $0.28 vs. analyst estimate of $0.21

– Revenue was $6.61 million vs. analyst estimate of $7.55 million

 

“We encountered unexpected headwinds in our transactional business this quarter. To contain costs, we are undertaking a further restructuring of the company with the support of our new CFO Cameron Pforr,” said General (Ret.) Keith Alexander to The Fly. “We have decided to forego a call with management this quarter, until we are better able to communicate on our progress.”

 

Alexander is the Chairman and co-CEO of IronNet.

 

CFO and co-CEO Resigned

 

– CFO James Gerber resigned to move to a private cybersecurity company.

– Co-CEO William Welch to resign because of business restructuring.

 

IronNet Withdrew FY23 Guidance

 

After issuing revenue and ARR guidance for 2023, IRNT took it back. The company reasoned management transitions, restructuring, and underperformance for the quarter.

 

Here’s what analysts think:

 

IronNet’s liquidity is “now a major issue” due to the “unexpected headwinds,” according to Jefferies analyst Joseph Gallo. BTIG analyst Gray Powell thinks it will be severe in the next six months as the company is rapidly burning cash.

 

Gallo cut his $IRNT price target to $1 (from $2.25). The analyst also downgraded the company to Underperform (from Hold).

 

Powell downgraded the company to Sell (from Neutral). The BTIG analyst has a $0.15 price target.

STOR To Be Acquired in $14 Billion Deal By GIC And Oak Street

September 15, 2022

By: Teni Nyca Antenor

 

Real estate investment trust, Store Capital, is about to be acquired.

 

– GIC and Oak Street want to take the Arizona-based company private at $32.45 per share.

– The merger is valued at $14 billion and will be paid in all cash.

– It is expected to be closed in Q1 2023.

 

The transaction will deliver “a meaningful premium that provides immediate and certain value for our stockholders in a challenging market environment while positioning the Company, its customers, and its partners for continued success,” according to Tawn Kelley. Kelley is the Chairman of the Board of Directors of Store Capital.

 

BMO Capital analyst John Kim thinks a competing bid is unlikely to happen. Kim has an Underperform rating for STOR.

 

Truist analyst Ki Bin Kim thinks this deal size is a positive transaction comp. “It highlights the long-term value of triple-net REITs that are trading at deep discounts, that have been fueled by the volatile and unfavorable cost of capital environment,” reports The Fly. The analyst has a $30 price target on $STOR and a Hold rating.

“Buy-Now, Pay-Later” Stocks Amid CFPB Crackdown

September 16, 2022

By: Teni Nyca Antenor

 

The U.S. Consumer Financial Protection Bureau is looking into regulating “buy-now, pay-later” companies. The CFPB thinks that “their fast-growing financing products are harming consumers,” reported Benzinga.

 

Block Inc, Klarna, Paypal, and Zip Co was found to have originated a total of $24.2 billion. Since 2019, there has been a “nearly ten-fold increase in the use of Buy Now, Pay Later loans.”

 

$PYPL

 

Paypal has “everything you want to own in this tape,” according to Raymond James analyst John Davis. The analyst cited the following reasons:

 

– High margin incremental OVAS revenue from higher rates (up to +300 bp rev growth tailwind in FY23)

– $15B buyback authorization ($18B total or 16% of the mkt cap)

– Potential to cut opex further if needed (up to an additional ~$700M)

 

“We have a high degree of confidence the Street’s $4.78 is not only safe but biased higher despite macro uncertainty,” David capped.

 

Davis upgraded PYPL rating to Outperform (from Market Perform) and kept a $123 price target.

 

AFRM

 

Dan Dolev recommended buying on weakness for Affirm Holdings Inc. The Mizuho analyst reiterated a $42 $AFRM price target and a Buy rating. Dolev said that CFPB’s report is “less harmful than feared” and “lack of a clear call for action is a positive.”

 

SQ

 

Block Inc. got a double downgrade from Evercore analyst David Togut.  Togut downgraded $SQ price target to $55 (from $120) and rating to Underperform (from Outperform). Togut believes increased competition, tightening credit, and macroeconomic growth slowdown will drive “growing headwinds.”

 

FedEx Receives Downgrades From Analysts After Q1 Warning And Withdrawal Of Guidance

September 16, 2022

By: Teni Nyca Antenor

 

Shares of FedEx took a plunge after it warned for Q1 and withdrew its full year’s guidance.

 

  • Q1 preliminary EPS is $3.44 vs. analyst estimate of $5.14
  • Q1 preliminary is $23.2 billion vs. analyst consensus of $23.54 billion

 

“FedEx preannounced the weakest set of results we’ve seen relative to expectations in our ~20 years of analyzing companies,” Deutsche analyst Amit Mehrotra wrote in a note.

 

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said Raj Subramaniam. Subramaniam is FedEx’s Corporation president and chief executive officer. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives. These efforts are aligned with the strategy we outlined in June, and I remain confident in achieving our fiscal year 2025 financial targets.”

 

Despite Subramaniam’s strategic growth initiatives and FY25 goals, Wells Fargo analyst Allison Poliniak-Cusic said it failed to instill confidence. Near-term expectations are “overly optimistic” according to KeyBanc analyst Todd Fowler.

 

Brian Ossenbeck pointed, “What is more concerning is that the results likely had a material tailwind from fuel surcharges similar to F4Q22 which masks the underlying weakness in the F1Q23 results and F2Q23 guide; it is a sobering thought to consider Express could have lost money (ex-fuel) during the quarter.”

 

There is “likely more downside risk to the FY24 estimate than upside potential,” commented Jonathan Chappell. The Evercore analyst reduced his FY23 and FY24 EPS projections. BofA analyst Ken Hoexter also cut his FY23, FY24 and FY25 EPS estimates by 40%, 28% and 23%, respectively.

 

Analysts Thomas Wadewitz, Ariel Rosa and Garrett Holland lists the following as major factors in Express losses:

  • COVID lockdowns
  • Macro weakness on Asia outbound shipments
  • Operational issues in Europe
  • Weaker U.S. activities
  • Weak e-commerce volume

 

“Weakness in demand and overall macro conditions, particularly outside the U.S., are not particularly surprising, warning that these are likely to be a source of pressure on earnings across global transport and logistics stocks,” reported The Fly.

 

“But we have a hard time believing that’s the full picture,” adds Stifel analyst J. Bruce Chan. Even with factoring density and network effect, the EBIT was substantially worse for missing at around 35%.

 

When compared with UPS, Citi analyst Christian Wetherbee commented, FedEx’s performance is “likely stands out to the downside.”  UPS reiterated their guidance in early September.

 

Here’s what other analysts have to say:

  • JPMorgan downgraded $FDX price target to $214 (from $258) and rating to Neutral (from Overweight).
  • UBS cut the firm’s price target to $232 (from $308). Wadewitz maintained his Buy rating.
  • Evercore lowered FedEx’s price target to $243 (from $318) and kept an Underperform rating.
  • Wells Fargo cut $FDX price target to $199 (from $269) and kept an Overweight rating.
  • Cowen analyst Helane Becker lowered the firm’s price target to $230 (from $310) and maintained an Outperform rating.
  • Credit Suisse cut $FDX price target on FedEx to $246 (from $314) and kept an Outperform rating.
  • Baird lowered the firm’s price target on FedEx to $240 (from $300) and maintained an Outperform rating.
  • BMO Capital analyst Fadi Chamoun lowered the firm’s price target on FedEx to $215 (from $270) and kept a Market Perform rating.
  • Loop Capital analyst Rick Paterson has a $202 price target for FedEx. The analyst downgraded the company to Hold (from Buy).
  • BofA analyst downgraded FedEx to Neutral (from Buy) with a price target of $186 (from $275).
  • Stifel lowered $FDX price target to $195 (from $288). The firm also downgraded to a Hold (from Buy).
  • Citi lowered FedEx’s price target to $180 (from $225) and maintained a Neutral rating.
  • KeyBanc downgraded $FDX to Sector Weight (from Overweight) without a price target.

 

Morgan Stanley Bullish on FirstEnergy Despite Overhangs

 

Steven E. Strah Retires

 

  • FirstEnergy CEO Steven Strah decided to retire as president and CEO of FirstEnergy and as a member of the Board of Directors.

 

  • John W. Somerhalder II chair of the FirstEnergy Board of Directors sits in as interim president and CEO.

 

  • The FirstEnergy Board started searching for external candidates for the permanent CEO position.

 

FirstEnergy’s outlook FY22 results

 

Following the appointment of John Somerhalder II, FirstEnergy announced its outlook FY22 results.

 

  • FY22 non-GAAP EPS was estimated to be $2.30-$2.50.

 

  • The current FY22 EPS consensus is $2.41.

 

“FirstEnergy’s outlook for 2022 continues to be strong, and the company expects results in the upper half of the guidance range provided to the investment community on its second quarter earnings call in July. In addition, the company continues to be focused on accelerating its balance sheet improvement efforts in order to achieve credit metrics consistent with those of premier utilities. The company expects to achieve this through organic growth in operating cash flow, as well as an additional, EPS-accretive transaction involving a minority interest in a transmission or distribution asset,” reported StreetInsider.

 

“Morgan Stanley analyst Stephen Byrd said he remains bullish on the stock with overhangs getting resolved and “several catalysts ahead for a re-rating.”,” reported The Fly. The management review and management transition ironed out CEO uncertainty and Federal HB6 investigations implications. Byrd adds that support for higher valuation may follow in the next few months. The analyst has a $53 $FE price target and an Overweight rating.