These reports, excerpted and edited by Barron’s, were recently published by investment and research firms. The reports are a sample of the analysts’ thinking; they should not be considered Barron’s opinions or recommendations. Some of the issuers of the reports have provided, or expect to provide, investment banking or other services to the companies analyzed.
Las Vegas Sands
Overweight Price $36.43 on January 10
We’re upgrading Las Vegas Sands from Neutral and raising our 2022 year-end price target to $48 [from $36], and adding it to our analyst priority list as a value pick. We believe the risk-reward ratio is favorable after a massive underperformance in 2021 (down 35%, versus US gaming stocks up 59%, and the
up 25% with LVS (and the rest of Macau-centric US-listed stocks) lagging other reopening sectors (gaming, accommodation, US cruise lines) and risks priced in after a year of additional regulatory issues (unfavorable license renewal terms, probable death of VIP junket business). Sell side cut estimates (so did we) as travel mobility tightened/failed to ease after Covid-19 spikes in the region amid case tolerance policy close to zero by China. We note that the current level of investor apathy towards Macau is the worst of any sub-sector in our coverage universe in our 22+ years of gaming and accommodation coverage.
Surpass Price $487.51 on January 11
At today’s ICR investment conference, management provided guidance that prompted us to cut our 2022 EPS projections by just under 1%. That said, feedback was positive on the company’s structural growth drivers, and we remain optimistic that Domino’s is well positioned to meet current industry-wide challenges and deliver solid growth in 2022. and beyond. DPZ has announced plans to migrate its national $7.99 three-topping pizza take-out offering to a digital-only offering (previously it was available in all ordering methods). The company is also reducing the number of chicken wing items to 8 pieces from 10 previously. We wouldn’t be surprised to hear DPZ roll out similar changes to its $5.99 National Mix & Match deal in coming quarters. These actions are expected to increase average checks and reduce costs for franchisees, while drawing additional customers into Domino’s digital ecosystem, thereby increasing technology fees for DPZ. Price target: $574.
To buy Price $40.64 on January 11
We participated in a discussion with Marco Racanelli, Senior Vice President and Managing Director, and Noit Levy, Senior Vice President of Investor Relations, at our 24th annual Needham Virtual Growth conference this week. Tower continues to increase the capacity of the most profitable processors, which helped to increase its gross margin by 300 basis points [3%] over the past year. The company recently announced a partnership with
[ticker: JNPR] to start production of an advanced SiPho [silicon photonics] product (in calendar year 2023), which is the highest gross margin segment for Tower. The company is also teaming up with STMicro to co-invest in a 300mm [chip-fabrication plant] in Italy, which will start production at a low rate in CY23 and increase more significantly in CY24. Price target: $45.
Overweight Price $70.24 on January 12
We reiterate our $145 price target on Beam Therapeutics, following the announcement of a partnership with
[PFE] focused on in vivo base-editing programs, as well as Beam’s announcement outlining 2022 initiatives. Approval from a leading global pharmaceutical company represents major validation for base-editing technology by Beam. We are also awaiting funding from Pfizer to accelerate Beam’s internal programs. We believe Beam has the most advanced gene-editing technology and expect continued interest from others. And Beam’s disciplined approach to partnering preserves the value of its core assets.
Kratos Defense & Security
To buy Price $16.93 on January 12
by B. Riley Securities
There is a trade opportunity in Kratos, after a massive sell-off of 7.7% on Jan. 11 following a pre-market downgrade alleging slower-than-expected growth engine development. CEO Eric DeMarco, in a virtual conference, acknowledged the evidence that the United States continues to operate under an ongoing federal fiscal year budget resolution, extending through February 18. This prevents the Department of Defense from embarking on new programs, including those that feature KTOS’s disruptive and affordable tactical combat drones. The most successful in the world and capable of surviving in [hostile] environments, such as the South China Sea, these are the only such systems flying today. KTOS believes the Air Force and other customers aren’t resetting anything, as evidenced by Air Force Secretary Frank Kendall’s recent remarks citing hope for new classified drone programs in the upcoming budget request for the Air Force. fiscal year 2023 (even as we await a federal budget for fiscal year 22). The biggest takeaway for us comes from a slide unveiled by KTOS, revealing a new Demogorgon drone at a production price of $8 million. In total we see KTOS’ [aerial] targets single businesses as a ramp-up to an annual production rate of around $250 million. Price target: $29.50.
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