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.
AMP-NYSE Buy • Price $272.93 on Sept. 7 at UBS Ameriprise bank’s recent [regulatory filing] strengthens our conviction in our forecast for 140 basis points [1.4 percentage points] or yield expansion from its second quarter to its third. There are reporting and timing differences between regulatory filings and GAAP reporting, so precise quarter/quarter movements can sometimes be out of line, but over time, trends at Ameriprise’s bank subsidiary align with reported results. We expect net interest income to more than double in 2022. Our $320 stock price target represents roughly 11 times our 2023 earnings estimate ($29.50 a share), which we believe is conservative.
Apollo Global Management
APO-NYSE Overweight • Price $55.62 on Sept. 6 by Wells Fargo During this year’s equity selloff, Apollo shares have performed roughly in line with the [alternative-asset management] group (down 22%, year to date, as of Sept. 6, versus down 18% for the
index and 23% for the other alt manager stocks we cover), while life insurance stocks’ average pullback has been just 6%. To us, the relative performance mainly reflects concerns related to the less traditional investment strategy of Apollo’s life insurance subsidiary, Athens (the source of 50% of Apollo’s earnings). But we now see a more favorable environment for credit-oriented alternative names, especially Apollo, given its investment-grade focus.
Blackstone Mortgage Trust
BXMT-NYSE Buy • Price $28.76 on Sept. 7 by BTIG The stock has pulled back to roughly 1.05 times its net asset value, and an 8.6% yield, versus the average for commercial mortgage real estate investment trusts near 9.5%. Over the near term, we’re still drawn to the earnings and book value upside potential connected to higher short-term interest rates. Some of that benefit should begin appearing in earnings this quarter, given the 0.75% Federal Reserve rate hike in July, and the 0.75% hike anticipated later this month. We expect there could be less of a benefit in the Europe portfolio. Our $32 price target is based on roughly 1.15 times book value and about an 8% dividend yield.
MAY-NYSE Market Perform • Price $39.33 on Sept. 2 by Barrington Research Net sales in Methode’s automotive segment decreased 9.8%, to $176.6 million, in its first quarter, from $195.8 million a year earlier, primarily driven by a major program roll-off in North America and lower demand in Asia, due to the China lockdowns. Operating income decreased 46.2%, to $14.7 million (8.3% margin), from $27.3 million (13.9% margin), primarily driven by decreased sales and higher material costs. Net sales in Methode’s industrial segment rose 17.3% to a record $92.1 million, from $78.5 million, driven by increased sales in power distribution and commercial vehicle lighting. We’re maintaining our market perform rating on the stock. Once we move beyond [the current uncertain economic environment]a longer-term investment opportunity could materialize around electric vehicles.
NWL-Nasdaq Strong Buy • Price $17.98 on Sept. 6 at Raymond James Following Tuesday’s [earnings] preannouncement, we trim our price target to $23 from $26 on Newell, [which makes personal care and household products]. But we maintain our Strong Buy, as we believe today’s estimate cut should adequately reflect the challenging backdrop and related inventory culling by retailers, while the stock’s valuation is attractive, even on our lowered forecasts.
RIVN-Nasdaq Outperform • Price $33.25 on Sept. 7 at RBC Capital Markets Rivian and Mercedes-Benz this morning signed an [agreement] for joint production of electric vans in Europe, starting in a few years. The JV plant will produce two vans, one based on Rivian’s light-van platform and the other on M-B’s MB Vans electric architecture platform. The plan is for common assembly lines to leverage operational synergies. This should help Rivian save capital (versus a go-it-alone strategy) and potentially accelerate its entry into Europe’s attractive van market. Our price target on Rivian is $75.
NOK-NYSE Hold • Price $4.93 on Sept. 2 by Ford Equity Research Our recommendation is a result of our systematic analysis of Nokia’s earnings strength, relative valuation, and recent stock price movement. Nokia’s earnings have been flat over the past five quarters. Its operating earnings yield of 8.3% ranks above 73% of the other companies in our stock universe. But its stock price is down 18.6% in the past 12 months, 3.1% in the past quarter, and 4.3% in the past month. This historical performance points to average price performance in the next one to three months.
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