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These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Zillow Group
ZG-Nasdaq
Buy Price $123.80 on May 5
by Canaccord Genuity
Zillow’s first-quarter results came in strongly ahead of estimates, as Premier Agent revenue growth accelerated again, amid continued housing-market tailwinds. The Homes segment also experienced strong growth and delivered another quarter of outsize profitability, with the number of homes sold exceeding those purchased. Second-quarter revenue and profitability guidance assumes ongoing housing-market momentum.
Zillow estimates that more than 1 in 10 Americans have moved during the pandemic and that about eight million existing homeowners may enter the real estate market, with nearly 9{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} of consumers planning to purchase a home over the next six months, a level near a 20-year high. As this “great reshuffling” unfolds, Zillow’s portfolio of technology-enabled real estate offerings addresses the full spectrum of consumer needs and moves the company closer to becoming the central real estate transaction platform. This should drive significant long-term shareholder value creation. We maintain our $220 price target, based on about eight times our 2022 revenue estimate.
RingCentral
RNG-NYSE
Outperform Price $294.33 on May 4
by Evercore ISI
RingCentral delivered strong first-quarter results, highlighted by subscription revenue growth of 33.8{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16}. While competitive concerns have tilted the investment narrative these past few weeks, these results, along with contributions from partners picking up, should help mitigate some of the fears. To that end, Ring [which provides cloud-based communications services to small businesses and other companies] delivered a record number of $1 million-plus wins, and two $10 million-plus wins in the quarter. On the partnerships front, there were multiple seven-figure deals. Management pointed to an uptick in interest in its direct routing integration with the
Microsoft
[ticker: MSFT] Teams application. Ring is well positioned to sustain 25{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} to 30{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} growth over the long term. We are adjusting our stock price target to $410 (21 times estimated 2022 sales).
General Motors
GM-NYSE
Buy Price $55.34 on May 4
by Benchmark
General Motors reported first-quarter earnings of $2.25 per share, compared with 71 cents in the comparable 2020 period and our estimate of $1.10. Three key profit drivers: Pretax income from North America totaled $3 billion; equity income from China totaled $308 million, the highest quarterly contribution since first-quarter 2019; and GM Financial reported pretax income of $1.2 billion, its third consecutive quarter with income of $1 billion or more. GM also confirmed [its full-year] guidance, leaning toward the upper end of the adjusted Ebit [earnings before interest and taxes] range of $10 billion to $11 billion. GM has maintained full-year 2021 guidance for free cash of $1 billion to $2 billion, despite the adverse $1.5 billion to $2.5 billion impact from the chip shortage.
Our price target on the stock is $64.
Cummins
CMI-NYSE
Market Perform Price $255.61 on May 4
by William Blair
Cummins traded up fractionally, but was in a tight range for most of the day today, after reporting solid first-quarter results that came in better than expected and delivering an optimistic outlook. Adjusted earnings per share came in at $4.07, compared with the Street’s estimate of $3.47 and our $3.34. Overall revenue of $6.09 billion grew 21.6{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16}, year over year. The company [best known for its truck engines] raised its full-year expectations, with revenue expected to grow by 20{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} to 24{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} (versus 8{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} to 12{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} previously) and Ebitda [earnings before interest, taxes, depreciation, and amortization] margins within the range of 15.5{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} to 16{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16}. Our new 2021 EPS estimate is $16 (versus $14 previously) and our 2022 EPS estimate is $19.25 ($16.95 previously). At about $255, Cummins is trading at 16 times our 2021 EPS estimate and 13 times our 2022 estimate, or 10 times our 2021 Ebitda forecast of $3.8 billion ($3.4 billion previously) and eight times our 2022 Ebitda estimate of $4.4 billion ($3.9 billion previously). Our Market Perform rating is based on our belief that headwinds facing Cummins probably will play out over the next couple of years. These include concerns peaking for Nafta truck volume and growth of electrification in commercial vehicles that could [hurt] the company’s core combustion-engine franchise.
Mid Penn Bancorp
MPB-Nasdaq
Overweight Price $27.03 on May 5
by Piper Sandler
MPB has completed a $75 million gross common equity raise, bolstering capital for growth. It also just reported first-quarter EPS of $1.11, a 10-cent beat versus our estimate and 20 cents above the consensus. The primary driver was good cost control. We [expect] outsize growth versus the banking company’s peers and believe [there is] plenty of bottom-line growth potential over the next 12 to 24 months. Also, the company’s higher market cap [following the equity raise] should mean that MPB remains in the
Russell 2000
when the index rebalances this summer. Our price target is $30.
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