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.
Microsoft
• MSFT-Nasdaq
Outperform • Price $337.20 on July 13
by Oppenheimer
We are increasing our price target for Microsoft to $410 from $330, based on 32 times calendar 2024 estimated earnings per share of $13, close to the 35x highs of 2020. We believe that Microsoft will improve on its already dominant enterprise IT position, as the only player with an integrated/AI platform, three actually, and with the key wholesale marketplace through Teams/Azure.
It can also uniquely integrate compute/networking/security services, which are converging. It has one billion Windows users and 1.5 billion devices; no one in the business segment comes close. It has access to its own and others’ enterprise applications and data, to drive network automation and novel services. AWS and Google should remain strong in wholesale, but neither has the customer base nor the front-end operating system and integrated applications.
U.S. Bancorp
• USB-NYSE
Buy • Price $33.74 on July 11
by BofA Securities
We upgrade our rating on U.S. Bancorp from Neutral to Buy. We believe investor focus on capital build has distracted attention from what is among the highest-quality franchises in the U.S. banking industry.
USB’s scale, earnings defensibility, and strong execution should drive superior EPS growth and stock outperformance, with shares trading at eight times 2024 estimated EPS, a discount to PNC Financial and Wells Fargo. The company has a resilient fee revenue base, bolstered by a differentiated payments business. The payments business offers upside optionality to stock valuation. Price target: $40.
IMAX
• IMAX-NYSE
Outperform • Price $17.08 on July 13
by Wedbush
IMAX remains on Wedbush’s Best Ideas List, given our view that IMAX is 1) the best way to play the theatrical rebound in 2023 as it gains market share, 2) the best positioned to gain from consumers’ ongoing shift toward premium screens, 3) a solid way to position for the ongoing economic rebound in China, and 4) expanding its relevance globally by expanding its local-language content (30-40 titles expected in 2023).
The Street is currently valuing IMAX at seven times 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda, in line with a mature domestic theater chain. With IMAX’s significant global footprint, growth potential, and market share gains on its growing base of joint-venture screens, it is clear that IMAX shares are currently undervalued. Price target: $26.
Oracle
• ORCL-NYSE
Buy • Price $116.02 on July 12
by Mizuho Securities
We attended an Oracle event hosted by CEO Safra Catz and executive vice president Mike Sicilia at NYSE. We came away increasingly confident in Oracle’s ability to drive Oracle Cloud Infrastructure growth, improve its margins, and drive cross-sells to the Cerner customer base.
We believe that Oracle has successfully transitioned to become the fourth-largest hyperscaler, and, coupled with its leadership in cloud enterprise-resource planning, the next phase of Oracle’s journey is just beginning.
We expect Oracle to generate solid top-line and cash-flow growth over the medium term, and exceed its FY26 targets. We reiterate our Buy rating and $150 price target.
American Tower
• AMT-NYSE
Outperform • Price $195.43 on July 13
by BMO Capital Markets
We initiate on AMT with an Outperform rating and $230 target price. We view AMT as the best way to invest in the global theme of wireless connectivity and increased data usage. With a diversified global portfolio, AMT has a long multiyear growth runway, is moving past headwinds, including Sprint churn, and an India resolution nears.
We expect AMT to deliver 2023-25 adjusted funds from operations/share compound annual growth rate of 7.7%, above peers, and 10% a year dividend growth. With the shares trading at 18.5 times 2024E AFFO/share, we view the risk/reward as compelling.
Haverty Furniture
• HVT-NYSE
Buy • Price $30.59 on July 10
by Benchmark
We initiate coverage of Haverty with a Buy rating and $41 price target. HVT is a family-controlled furniture retailer in the Southeast, operating 123 stores in 16 states. We believe the company’s debt-free balance sheet, significant free cash flow, and continually refined operations, combined with its current valuation, represent an attractive investment thesis for the stock.
Further, migration to HVT’s Southeast market bucks national housing trends, and big-box retail bankruptcies present opportunistic growth opportunities. After strong sales during Covid, current financial metrics are clouded and not fully understood by investors.
Macy’s
• M-NYSE
Sell • Price $16.13 on July 11
by UBS
The reason our M rating is Sell is we believe the company will miss Street earnings expectations both this year and over the long term. In the near term, we believe the U.S. consumer spending environment will deteriorate and this will negatively impact M more than the market expects.
Over the long term, we think the Street underestimates the pressure on M earnings from share loss as consumers migrate to online pure-play channels, retailers with better value-for-money propositions such as TJX, and brands’ own stores and websites. Price target: $12.
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