Barron’s is Bullish on Oil, Bearish on Tesla

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue features several names. They include:

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BULLISH MENTIONS

Large-cap energy companies in better shape to raise dividends – With oil prices close to $50 a barrel, large-cap energy companies are in better shape to maintain or even raise their dividends than they were a few years ago, when prices collapsed, Lawrence Strauss writes in this week’s edition of Barron’s. Oneok (OKE), Valero Energy (VLO), Exxon Mobil (XOM), Phillips 66 (PSX), Marathon Petroleum (MPC) and ConocoPhillips (COP) expected to boost their payouts above 2016 levels this year, the publication said.

Delta Air Lines could rise 35% in two years. At $50, Delta’s (DAL) shares trade at about nine times estimated 2017 earnings, which is “inexpensive” for a company looking to post double-digit earnings growth in the coming years, Andrew Bary writes in this week’s edition of Barron’s. The shares could rise 35% in the next two years, Bary notes, adding that a 50% dividend hike in September will lift the yield to 2.4%.

Finisar seen as the ‘most attractive’ Apple iPhone supplier – With the next Apple’s (AAPL) iPhone expected this fall, Wall Street is starting to speculate on the winners, with CEVA (CEVA) joining Cirrus Logic (CRUS) and Skyworks Solutions (SWKS), Tiernan Ray writes in this week’s edition of Barron’s. Among the most talked-about aspects of the next iPhone is augmented reality, Ray notes, adding that possible beneficiaries include Finisar (FNSR), Lumentum Holdings (LITE), II-VI (IIVI), and Viavi Solutions (VIAV). Finisar shares surged in June when it announced quarterly results that included an order for “3-D sensing,” a code name for augmented reality, Barron’s points out.

Southern ‘a good bet’ for investors willing to take on more risk – This year has not been kind to Southern Company (SO) shares, but after Scana’s (SCG) news that it would abandon its plan to build two nuclear reactors in South Carolina, Southern could be a “good bet” for investors willing to take on a little more risk, Ben Levisohn writes in this week’s edition of Barron’s. Southern could decide to abandon the two plants it has under construction in Georgia, something that would likely be rewarded by the market, #Levisohn adds.

Voya Financial could be worth 30% more – Voya Financial (VOYA) shares have fallen over 13% in the past two years, with Wall Street penalizing the company for a “troubled” legacy variable-annuity business that had made some of the most generous benefit guarantees in the industry, Reshma Kapadia writes in this week’s edition of Barron’s. However, there are indications that Voya’s core retirement and investment business is growing, and that management is taking the right steps to reduce risk, Kapadia argues, adding that Voya could be worth at least 30% more than its current market value in the next year.

BEARISH MENTIONS

Slower growth in China could prompt retreat in Copper prices, Barron’s says – Copper is enjoying its biggest rally in months, boosted by increased confidence about global growth and a weaker U.S. dollar., Ira Iosebashvili writes in this week’s edition of Barron’s. However, some market participants urge caution, warning that the ground may shift under investors’ feet in the second half of the year, with many concerned about China, Iosebashvili adds. Publicly traded companies in the space include Freeport McMoRan (FCX), BHP Billiton (BHP), Rio Tinto (RIO), Anglo American (NGLOY), Southern Copper (SCCO), and Vale (VALE).

Chipotle (CMG) shares should be avoided, since food-safety
problems might be structural and not coincidental.

Buy Tesla car, not stock – In a follow-up story, Barron’s writes that Tesla (TSLA) shares have outrun most analysts’ reasoned cases for buying the stock. While initial reviews of the Model 3 are glowing, and Tesla reports a remarkable 450,000 in pre-orders, the company’s stock price leaves little on the table, the publication adds.

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International Barrier Technology Sold for $22 Million

Louisiana-Pacific to acquire Int’l Barrier Tech for $22M

Louisiana-Pacific to acquire Int'l Barrier Tech for $22M. See Stockwinners.com Market Radar to read more

 

Louisiana-Pacific Corporation (LPX) announced it has entered into an arrangement agreement to acquire Watkins, Minn.-based International Barrier Technology Inc. (IBTGF) for $22M.

The agreement is for 100% of the shares of Barrier, a British Columbia company publicly traded on the TSX Venture Exchange, making Barrier a wholly owned subsidiary of LP.

International Barrier Technology Inc. develops, manufactures, and markets proprietary fire resistant building materials designed to protect people and property from the destruction of fire in the United States. The company uses non-toxic Pyrotite formulation that is used to coat wood panels and has application to engineered wood products, paint, plastics, and expanded polystyrene.

The transaction is subject to the approval of the Barrier shareholders and satisfaction of customary conditions, including court approval.

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Barron’s is Bullish on Citi, Honeywell, Remains Bearish on Twitter

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

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Advance Auto Parts could rally 20%-30% in two years – Advance Auto Parts (AAP) stock’s valuation seems to discount a lot of bad news, while ignoring the potential for the company to boost profit margins and spur earnings growth in coming years, Vito Racanelli writes in this week’s edition of Barron’s. The shares could rally 20%-30% in the next two years, as earnings rise and the company demonstrates it can hold its own in the face of increasing online competition, he adds.

Citi could rise by 50% – At its first investor day since 2008, Citigroup (C) laid out some ambitious financial targets and Wall Street liked what it heard, Andrew Bary writes in this week’s edition of Barron’s. While the company’s shares finished the week up 2%, there could be more upside because Citi offers the combination of a low valuation and what could be the highest earnings growth rate among its peers in the years to come, Barron’s adds. The bank is targeting $9 a share in 2020 earnings, and suggested its stock could hit $100, 48% above the current level, Bary points out.

Honeywell (HON) shares could return 15% next year – If Darius Adamczyk, Honeywell’s new CEO, delivers as expected, the company’s revenue could rise 4% next year, and earnings, 10%, leading to a higher price/earnings ratio and a 15% total return for the shares, Lawrence Strauss writes in this week’s edition of Barron’s.

Blue Chips set to boost dividends – The third quarter is shaping up to be a ‘very strong one’ for dividend growth among blue-chip names, Lawrence Strauss writes in this week’s edition of Barron’s. IHS Markit expects Mondelez (MDLZ) to announce a 10.5% dividend increase and Intuit (INTU) to declare a hike of 15%, he says. Meanwhile, Microsoft (MSFT) is expected to raise its quarterly dividend by 10.3%, Royal Caribbean Cruises (RCL) to boost its quarterly payout by nearly 15%, Yum! Brands (YUM) to increase 13.3%, and Accenture (ACN) to boost payout by 10%, Barron’s points out.

BEARISH MENTION

Amazon.com, Alphabet to likely ‘cool off for a while,’ – Last week, Alphabet (GOOG; GOOGL) and Amazon (AMZN) beat quarterly sales expectations but showed underwhelming profit and it is not surprising investors would seize upon blemishes in the report as an excuse to take profits, Tiernan Ray writes in this week’s edition of Barron’s. While there is no fundamental weakness with either company, shares will probably show less upside in the rest of this year than in the first half, he notes.

Barron’s sees ‘no relief in sight’ for Twitter – Twitter (TWTR) is nearly as expensive as Facebook (FB), whose revenue and profit are galloping higher, based on next year’s projected earnings before interest, taxes, depreciation and amortization, Jack Hough writes in this week’s edition of Barron’s. That means Twitter must bounce back quickly, or get bought, or suffer a continuing stock-price decline, perhaps to single digits, Hough argues, adding that the first two outcomes are looking increasingly unlikely.

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Stock Upgrades Downgrades for July 18, 2017

Stockwinners’ analysts upgrades, downgrades and initiations for July 18, 2017

Everyday, we will e-mail our readers a list of analysts actions as shown below. Please see below on how to sign up for Stockwinners’ Service.

 

STOCK UPGRADES

CMG Chipotle to Buy from Hold at Maxim
CMG Chipotle to Buy on queso launch at Maxim
IPXL Impax to Neutral from Underweight at Piper Jaffray
MMP Magellan Midstream to Buy from Neutral at UBS
NFLX Netflix to Buy from Neutral at Rosenblatt
OAS Oasis Petroleum to Buy from Hold at Williams Capital
ORLY O’Reilly Automotive to Buy from Neutral at Northcoast
QDEL Quidel to Outperform from Market Perform at William Blair
SC Santander Consumer to Outperform from Market Perform at JMP Securities
SEAS SeaWorld to Neutral from Sell at Goldman Sachs
SEDG SolarEdge to Outperform at Oppenheimer
SEDG SolarEdge to Outperform from Perform at Oppenheimer
SKX Skechers to Positive from Mixed at OTR Global

DOWNGRADES

ADP ADP to Equal Weight from Overweight at Barclays
CCJ Cameco to Underperform at Credit Suisse
COG Cabot Oil & Gas to Hold from Buy at Williams Capital
DDC Dominion Diamond to Market Perform from Outperform at BMO Capital
DDC Dominion Diamond to Hold from Buy at Gabelli
DNN Denison Mines to Underperform from Neutral at Credit Suisse
EXLS ExlService to Neutral from Buy at Citi
FMC FMC Corporation to Neutral from Buy at Seaport Global
FPI Farmland Partners to Market Perform from Outperform at FBR Capital
IPGP IPG Photonics to Hold from Buy at Canaccord
NYLD NRG Yield to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold from Buy at Deutsche Bank
OAS Oasis Petroleum to Hold at Deutsche Bank
QEP QEP Resources to Hold from Buy at Deutsche Bank
SSL Sasol to Neutral from Overweight at JPMorgan
UAA Under Armour to Negative from Mixed at OTR Global

STOCK INITIATIONS

DC Agree Realty with a Buy at Canaccord
ADRO Aduro Biotech with an Outperform at Cowen
ALBO Albireo Pharma with a Buy at Needham
BFAM Bright Horizons with a Buy at Citi
BHGE Baker Hughes resinstated with a Sell at Goldman Sachs
CVNA Carvana with a Neutral at Wedbush
FANG Diamondback Energy with an Outperform at Imperial Capital
FCPT Four Corners Property Trust with a Hold at Canaccord
GOOD Gladstone with a Hold at Canaccord
GPMT Granite Point Mortgage with an Overweight at JPMorgan
GPMT Granite Point Mortgage with a Market Perform at Keefe Bruyette
GTY Getty Realty with a Buy at Canaccord
INFN Infinera with a Buy at Craig-Hallum
MSCI MSCI with an Equal Weight at Barclays
MTDR Matador with an Outperform at Imperial Capital
O Realty Income with a Buy at Canaccord
OMF OneMain Holdings with a Buy at DA Davidson
REN Resolute Energy with an Outperform at Imperial Capital
RM Regional Management with a Neutral at DA Davidson
TAL TAL Education with a Neutral at Citi
TWOU 2U with a Buy at Citi
WPX WPX Energy with an Outperform at Imperial Capital

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Sevcon Sold for $200 Million

Sevcon signs definitive agreement to be acquired by BorgWarner for $22 per share

Stocks to buy, stocks to watch, upgrades, stock downgrades, stock earnings, Stocks to Avoid

Sevcon (SEV) announced that it has entered into a definitive merger agreement with BorgWarner (BWA) that provides for BorgWarner to acquire all of the outstanding shares of Sevcon’s common stock for $22.00 per share in cash and all of the outstanding shares of Sevcon’s Series A Convertible Preferred Stock for a price per share on an as-converted basis equal to the common stock, together with payment of any accrued and unpaid dividends.

Sevcon, Inc. designs and sells motor controllers under the Sevcon name in the United States, the United Kingdom, France, South Korea, Japan, and China.

The total transaction value, including the assumption of indebtedness, is expected to be approximately $200M at the closing of the transaction.

The transaction price of $22.00 per share represents a 61% premium to the closing sale price of common stock of the Company on Friday, July 14, 2017 and a 64% premium to the 30-day volume weighted average price of common stock of the company.

The Sevcon board has unanimously approved the merger agreement and has recommended approval of the merger by Sevcon’s stockholders.

The transaction is expected to close in the fourth calendar quarter of 2017 and is contingent on the approval of Sevcon’s stockholders, and is subject to the satisfaction or waiver of certain other closing conditions.

The transaction is not subject to a financing condition.

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General Cable is For Sale

General Cable to review strategic alternatives, potential sale 

The Company reports preliminary Q2 revenues of approximately $923M

 

general cable is for sale. See Stockwinners.com Market Radar to read more.

General Cable (BGC) has announced that its Board of Directors has initiated a review of strategic alternatives to maximize shareholder value, including a potential sale of the company.

General Cable has engaged #JPMorgan Securities as financial advisor and Sullivan & Cromwell as legal advisor to assist in the process.

There can be no assurance that the Board’s strategic review will result in any transaction, or any assurance as to its outcome or timing. The company does not intend to disclose or comment on developments related to its review unless and until the Board has approved a specific transaction or otherwise determined that further disclosure is appropriate.

Separately, the company reported preliminary Q2 revenues of approximately $923M for North America, Europe and Latin America, one estimate $922.75M. Reported Q2 reported operating loss and adjusted operating income of approximately ($23M) and $32M, respectively.

The expected reported operating loss primarily reflects a one-time non-cash charge of approximately $36M related to the sale of General Cable’s investment in Algeria, consistent with the company’s previously announced divestiture program.

Additionally, as of June 30, General Cable maintained availability of approximately $360M under its $700M asset-based revolving credit facility.

General Cable Corporation (BGC) develops, designs, manufactures, markets, and distributes copper, aluminum, and fiber optic wire and cable products for the energy, industrial, construction, specialty, and communications markets in North America, Europe, Latin America, and Africa/the Asia Pacific.

Price Range:

BGC last traded at $16.55. It has a 52-week trading range of $11.70 – $20.80.

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Barron’s is Bullish on Adidas, Cisco, Whirlpool and Gilead

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

Barron's Logo on stockwinners

Adidas could double as profit margins expand, Barron’s says – Despite the nearly 40% run up in the past 12 months, adidas (ADDYY) shares still have significant upside, particularly if the company can make good on its goal of achieving the lofty profit margins of rival Nike (NKE), Victor Reklaitis writes in this week’s edition of Barron’s, citing portfolio managers for European equities at Hermes Investment Management.

Vertex, Gilead seen as innovators, Barron’s says – Jason #Kritzer and Samantha Pandolfi, co-managers of Eaton Vance Worldwide Health Sciences fund, believe it is “a great time” to invest in the health care sector, with a lot of innovation under way by drugmakers, medical-device companies and companies developing technologies used to deliver health care, Johanna Bennett writes in this week’s edition of Barron’s. Eaton Vance finds innovation in Vertex (VRTX), Zoetis (ZTS), and Gilead (GILD), publication notes.

Visteon rally far from over, Barron’s says – In a follow-up story, Barron’s tells readers that while shares of Visteon (VC) are up sharply this year, due to the popularity of the company’s auto electronics, the stock could have more room to run. Rapid earnings growth could power Visteon’s shares to $116 from $105, and a deal could lift them even higher, the publication notes, adding that potential buyers include nontraditional auto plays, such as Apple (AAPL) and Alphabet (GOOGL; GOOG), which are developing driverless cars.

Cisco seems undervalued as future looks brighter, Barron’s says – Seen as “Old Tech,” Cisco (CSCO) seems overlooked, while Verint Systems appears overvalued, Vito Racanelli writes in this week’s edition of Barron’s. With its 3.7% dividend yield, the former could be just “the ticket for a healthy-double-digit annual return” with somewhat low downside over the next 24 months, the publication notes.

Trade policy may favor some Americans over others, Barron’s say – Steel tariffs and import restrictions may secure profits for steel mills and employment for steel workers, but will inevitably drive up the cost of any product, Thomas Donlan writes in this week’s edition of Barron’s, noting that other American companies are the customers of the U.S. steel industry and protectionism will not put them first. While protecting steel is supposed to solidify national defense, protectionism actually “hardens the economic arteries of commerce,” Donlan added. Companies that may be impacted by Trump’s potential steel tariffs include U.S. Steel (X), AK Steel (AKS), Nucor (NUE), Steel Dynamics (STLD), ArcelorMittal (MT), Alcoa (AA), and Century Aluminum (CENX).

Whirlpool could rise 35% next year, Barron’s says – Whirlpool (WHR) is a “cash machine” for shareholders, and despite coping with the aftermath of the U.S. housing crisis, price competition from South Korean rivals, and troubled markets like Brazil, the maker of washers, dryers, dishwashers, ovens, and refrigerators has more than doubled earnings since 2012, Robin Goldwyn Blumenthal writes in this week’s edition of Barron’s. The shares remain cheap, the publication noted, but the stock may be worth about $260 a share, or 35% higher, if Whirlpool can continue to execute well in the year ahead.

Orion Engineered aiming for continued gains, Barron’s says – The carbon-black market is growing twice as fast as the commodity business and is more profitable, Nicholas #Jasinski writes in this week’s edition of Barron’s. Orion Engineered (OEC) is the smallest of the three key global players, after Cabot (CBT) and Aditya Birla, but is the largest in the specialty carbon-black market, and “a little gem hiding in all of this black dust,” the publication noted. Orion’s long-term relationships with customers give the company the bargaining power to negotiate contracts indexed to the cost of carbon black’s main input, namely oil, the report added.

Bearish Names

Premium video on demand may pressure movie-theater operators, Barron’s says – This year, stocks of AMC Entertainment (AMC), Regal Entertainment (RGC) and Cinemark (CNK) have declined due to a “mediocre” summer box office on franchise fatigue, more beguiling choices on Netflix (NFLX) or Amazon (AMZN), and as technology is changing people shop, Kopin Tan writes in this week’s edition of Barron’s. Studios and distributors like Comcast’s (CMCSA; CMCSK) Universal Pictures or Walt Disney (DIS) are now debating how to roll out “premium video-on-demand,” which lets viewers watch a movie within a day to 50 days after it hits the big screen, the publication adds, pointing out that while this can benefit the studios, theaters will have much to lose.

Verint looks overvalued given performance, Barron’s says – Riding the “tech momentum” but looking overvalued, Verint Systems weakening track record over the past four years suggests that investor enthusiasm is misplaced, Vito Racanelli writes in this week’s edition of Barron’s. Verint Systems (VRNT) does not look like a tech company with sustainable growth, with its revenue growth dropping steadily, the report notes.

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Nutanix Could Be Sold

Nutanix climbs after Goldman adds to Conviction List, highlights M&A potential

Nutanix climbs after Goldman says it could be take over target. See Stockwinners.com Market Radar

The shares of Nutanix (NTNX) are rallying after Goldman Sachs added the stock to its Conviction List and called the company a potential takeover target.

The firm added that the company is “a once-in-a-decade tech infrastructure story,” while its results are poised to beat consensus estimates in “coming quarters.”

POSSIBLE TARGET IN HIGH-GROWTH MARKET

Calling hyperconvergence “the biggest trend in IT since public cloud,” Goldman analyst Simona Jankowski estimated that Nutanix has a roughly 30% share of the $2B hyperconvergence market, which she predicted would grow to $20B in a decade.

Hyper-convergence (hyperconvergence) is a type of infrastructure system with a software-centric architecture that tightly integrates compute, storage, networking and virtualization resources and other technologies from scratch in a commodity hardware box supported by a single vendor.

Meanwhile the stock’s 30% drop so far this year and the lack of similar companies makes a takeover of Nutanix “increasingly likely,” the analyst stated.

RESULTS OUTLOOK POSITIVE

Nutanix’s strong fundamentals and an accounting change it’s making should enable the company to report strong results, wrote Jankowski.

Later this year, Nutanix’s switch to new accounting rules that will allow it to recognize software revenue up front should significantly boost its results, Jankowski believes.

Goldman’s checks indicate that adoption trends for hyperconverged infrastructure in general and Nutanix specifically have been strong, according to the analyst.

COMPETITIVE ADVANTAGES

A number of Nutanix’s advantages over its competitors should enable it to retain its market share over the longer term even as competition in its category heats up, Jankowski stated.

Specifically, while the hypercoverged solutions of Cisco (CSCO) and HP Enterprise (HPE) can only work on their servers, Nutanix’s products can work on a number of third party servers, the analyst noted. Additionally, Nutanix’s system works with several hypervisors, including its own, free hypervisor, enabling users to avoid paying for VMware’s (VMW) product, thereby saving them as much as 30%, according to Jankowski.

TARGET

The analyst set a $31 price target on the stock, but she believes that the shares can rise more than 50% above her target.

PRICE ACTION:

In Friday trading, Nutanix rose 7.5% to $21.79.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.