Updated Price Targets, Ratings: Beazer, Dr. Pepper, Gamestop, Heineken, Skechers

Includes: BZH, DPS, GME, SAM, SKX
by: David Ristau

Our EquityAnalytics department is always updating price targets and ratings on companies that we have coverage on based on new information. Our price targets and ratings are thoroughly researched and use financial analysis tools to determine stock prices. Today, we are updating the following companies from our coverage - Beazer Homes (BZH), Dr. Pepper Snapple (DPS), Gamestop (GME), Heineken (HINKY), and Skechers (SKX).

The chart below shows new ratings, price targets, and buy/sell ranges versus old ones:

Click to enlarge

BZH - Upgrade from Sell to Hold, Increase PT from $0 to $3

Beazer Homes appears to be back from the brink. When we last looked at Beazer Homes, the situation seemed very dire for the company. It continues to look fairly dire for Beazer as it is still running at a significant loss right now, but it was good to see the company post a 36% increase in new home order sales. Further, the losses seem to be done getting worse and now the company is back on track to breakeven by 2013.

The company is seeing fairly strong sales growth, which is a result of prior weakness, but is a good sign as well. Overall, the company is looking out of the woods. We would like to see more debt drawdowns over the next two years, as well as continued upside in closing orders. A good turnaround and could be a very successful investment if the housing industry does recover over the next few years. At the same time, there is a lot of risk still in the housing industry.

DPS - Maintain at Hold, Increase PT from $47 to $50

We upped our PT on Dr. Pepper Snapple to $50 now as we believe that the company is going to have a strong 2012. The company is looking to improve operating margins over 2011. We look for the company to bring operating income back to $600M this quarter. We also upped our target as depreciation outpaced our expectations, working capital did not increase as much as we had expected, and shares outstanding declined. Soda sales are struggling, but we believe that DPS has good value and many of the worries over margin and growth compression are configured. That notion can be seen by the sub-15 PE ratio for the stock.

GME - Upgrade from Buy to Hold, Increase PT from $31 to $34

Gamestop continues to be one of our favorite companies, and it offers some of the best value in the stock market in our opinion. The stock has a 9 PE as well as 6.5 future PE. The market does not believe in the business model for GME with the developments and transition of the gaming industry. We do, however. The company's second-hand business remains strong, and it continues to dominate market share, despite being a niche shop.

Further, the competition between Microsoft (MSFT), Sony (SNE), and Nintendo is good for GME. Additionally, we believe Gamestop online services are going to be the difference maker for the company. It has developed PC downloads well, and we believe it will continue to see great growth from its online business. Overall, shares are very undervalued, and we see growth accelerating with larger releases for the rest of the year.

HINKY - Maintain at Hold, Increase PT from $23.50 to $25

Heineken continues to be fairly unexciting for us as its market share seems to be limited due to the growth of the craft beer market. We do believe that the company has improved its value over the past several months. The company has improved cash holdings over the past three months. Additionally, capital expenditures were less than we expected. Heineken may be in a tough spot with the rise of companies like Boston Beer (SAM) and other craft brewers. Growth concerns continue to make us wary, and we think the stock is fair valued.

SKX - Maintain at Sell, Decrease PT from $14 to $8

As we have been saying for the past year, the Skechers ride is very over. The hot moment for Skechers Shape Ups has passed, and the company was not able to leverage that popularity into company-wide popularity. Now that the popularity of Shape-Ups has passed, we believe a lot of value is gone. We do not see profits returning until 2013. Skechers is extremely cyclical, and we are not at the bottom of this cycle yet. We continue to see more downside coming for SKX as it looks for another popular item to help increase sales and income.

Disclosure: I am long SAM, MSFT.

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