Weekly Update - September 26, 2022

Selected stock price targets highlights

By: Teni Nyca Antenor

Starboard Value Disclosed Owning 9% Stake in WIX

On Friday, Starboard Value disclosed in a regulatory filing holding a 9% stake in WIX. Here’s what it means for both companies:

 

• Starboard plans to support the Israel-based website building platform to become profitable.
• Starboard has no plans to have board seats at the time.

 

Starboard has made a similar move with GoDaddy Inc. last year. Spearheaded by Jeff Smith

Truist Securities analyst Naved Khan sees the support as a positive thing for WIX. Starboard is led by Jeff Smith, one of the industry’s most prominent activist investors. Smith is also  known for his operational expertise.

According to Khan, it can “lead to improvements in execution and help unlock value in the business as WIX pursues its MT FCF margin goal of 20% along with healthy top line growth.”

Khan has a $WIX price target of $120 and Buy rating.

“We respect the views of all WIX shareholders and regularly speak with our investors about our business strategy, performance, and long-term objectives,” a WIX spokesperson told StreetInsider.com. “We have engaged constructively with representatives from Starboard since we became aware of its investment, and we intend to continue the constructive engagement.”

GrafTech’s Monterrey Facility Closure Affects 25% Of Total Production

 

 

 

GrafTech’s Monterrey facility is 25% of its total production. The announcement came at an inopportune time as the remaining operations face headwinds. BMO analyst David Gagliano lists high energy/electricity cost and weakness in spot UHP GE markets as challenges.

 

Price target movements following the suspension:

• BMO cut $EAF price target to $7 (from $9) and kept a Market Perform rating.
• RBC Capital analyst Arun Viswanathan kept GrafTech’s $7.00 price target and Sector Perform rating.
• Credit Suisse analyst Curt Woodworth lowered the company’s price target to $10.

 

Qualcomm’s Inaugural Investor Day Wows Analysts

September 22, 20222

By: Teni Nyca Antenor

 

Qualcomm impressed analysts on its first-ever Automotive Investor Day. The company highlighted its automotive design-win pipeline growth to $30B.

 

Other key updates as listed by StreetInsider:

• Estimated Automotive TAM expansion to $100 billion by 2030
• Automotive design-win pipeline of $30 billion
• Strong QCT Automotive revenue growth from $975 million in FY21 to ~$1.3 billion in FY22e
• Increased QCT Automotive revenue growth forecast since November 2021 to greater than $4 billion in FY26e and greater than $9 billion in FY31e
• Introduced the industry’s first integrated automotive super-compute class System-on-Chip, the Snapdragon Ride™ Flex SoC

 

“We have been impressed by the run of design wins from Qualcomm in the ADAS business – including BMW, General Motors, Stellantis, and Volkswagen, all with L2+ ADAS wins slated to ramp in 2025 or so; this was backed up by the financial information that the company gave,” said Morgan Stanley.

 

Barclays analyst Blayne Curtis noted that QCOM is well-positioned in:

• Next-gen Auto designs with a stronghold in connectivity
• Growth in the digital cockpit
• Emerging presence in ADAS/AD

 

“The breadth and flexibility of its differentiated technology portfolio and its unique go-to-market strategy that has enabled it to gain significant share in the automotive segment,” told Deutsche analyst Ross Seymore.

 

Barclays and Wells Fargo also see significant growth opportunities in automotive for QCOM in the next decade. In the meantime, Rosenblatt analyst Kevin Cassidy thinks many other opportunities will be closed within the next two years.

 

Price target movements following Qualcomm’s announcement:

• Rosenblatt retained a $220 price target and Buy rating.
• Barclays reiterated a $160 price target and Equal Weight rating.
• Wells Fargo kept a $150 price target and Equal Weight rating.
• Morgan Stanley reiterated a $170 price target and Overweight rating.
• Deutsche kept a $170 price target and Buy rating.
• BofA maintains a $180 price target and Buy rating.

Xiamen Airlines Switches To Airbus, Boeing Losing Market Share

 

Airbus reported Xiamen Airlines has switched to them for its fleet growth. The airline has placed an order for 40 A320neo Family aircraft.

 

“The agreement was announced by the major shareholder China Southern Airlines to the Shanghai Stock exchange.

 

The A320neo Family incorporates new generation engines and Sharklets, which together deliver more than 25 percent fuel and CO 2 savings, as well as a 50 percent noise reduction. Passengers are benefitting throughout the trip from Airbus’ award-winning Airspace interior, which brings the latest cabin technology to the A320 Family. At the end of August 2022, the total number of A320neo Family firm orders reached over 8,500 from more than 130 customers worldwide,” announced Airbus.

 

Boeing Losing Market Share

 

According to BOFA analyst Ronald Epstein, Xiamen Airlines’ switch is “another setback” for Boeing (BA). Xiamen Airlines was one of “Boeing’s biggest customer in the region.” They had previously been an all-Boeing operator.

 

Epstein thinks that Boeing will participate in the commercial aerospace recovery. However, the company is losing market share in the narrowbody jet market, reported The Fly.

 

BOFA Securities currently has a $175 price target for $BA and a Neutral rating.

 

Analysts Bullish On Costco Despite Lowered Price Targets

 

Costco topped Q4 EPS, Revenues beat:

• Costco’s Q4 EPS was $4.2 vs. analyst consensus of $4.15.
• Q4 Revenue was $72.09 billion vs. analyst consensus of $71.64.

 

Price targets movement following the report:

• Oppenheimer cut $COST price target to $550 (from $600) and kept an Outperform rating.
• MKM Partners lowered the price target to $512 (from $517) and maintained a Neutral rating.
• Evercore cut the price target to $550 (from $600) and maintained an Outperform rating.
• Truist cut the price target to $559 (from $571).
• Jefferies kept a $610 price target and a Buy rating.
• DA Davidson upped the price target to $455 (from $440) and maintained a Neutral rating.

Despite most firms lowering their price targets, the analysts remain bullish.

 

“Costco’s core retail operations are becoming more profitable, but its value proposition remains unmatched and continues to drive strong traffic and sales,” Scot Ciccarelli notes. The Truist analyst adds Costco’s strong fundamentals, “virtually unmatched” competitive positioning, and the potential for future membership fee increases.

 

According to Greg Melich, the “main question now seems to be what the multiple should be.” The Evercore analyst estimates that the upper end of its historic 1.5-2.3 times the market is “justified.”

 

Costco remains a Top Pick for Jefferies analyst Corey Tarlowe and Oppenheimer analyst Rupesh Parikh.