Our EquityAnalytics department is always updating price targets and ratings on companies that we cover 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), First Solar (FSLR), General Motors (GM), Meritage Homes (MTH) and The Boston Beer Co. (SAM).
The chart below shows new ratings, price targets and buy/sell ranges vs. old ones:
Beazer Homes: Maintain at Hold, Decrease PT From $3 to $2
At one point in 2011, we believed that Beazer Homes was the company most likely to go bankrupt from residential construction sector. We still are fairly certain that BZH is one of the weakest companies in the industry, and we are not seeing them being able to break even on profit until 2013. The company's latest results were still weak and weaker than we expected given current industry trends. The company saw new orders rise, but they also saw the cancellation rate rise. Right now, we do not believe they are in enough communities to be profitable. From here, we do like the company's rental REIT business they are opening, but we do not see profits until 2013 and until then shares will stay under pressure.
First Solar: Maintain at Buy, Decrease PT from $52 to $21
What a whirlwind year for First Solar. The company is closing out most of its operations in Europe and cutting jobs. The job cuts are going to help bring down a lot of costs and increase margins, but it limits upside and shows the company has less upside now. Right now, FSLR needs business to develop in emerging markets, the U.S. and China. When that occurs, we will see the company have growth again. Yet, the business line that made them so effective with cheap thin film and low costs of doing business is null due to low demand. At the same time, the business seems to have gotten the message and is turning things around. We had not updated our price since the European announcement, and that is the majority of the cut due to lower earnings growth over the next two years. We would believe they will start to see growth again in operating income in 2013. Right now, the company is pricing in a lot of weakness, and if you believe that FSLR is not going to become obsolete, this is a nice buy point for a multi-year investment.
General Motors: Maintain at Hold, Decrease PT from $25 to $23
We dropped our price target on General Motors after their latest earnings as results were a bit under our expectations. Debt levels also rose in the quarter, which brings down equity value. Right now, we are going through a cyclical lull in automotive stocks as they had a great 2009-2011, and they are going to flat line in growth as the numbers from those years has come back up. For GM, we continue to believe its ties to Europe are weak, but we like their ties in China and dominance there. The stock is fair valued right now, and we need to see more cyclical strength to up our price targets again.
Meritage Homes: Upgrade from Hold to Buy, Increase PT from $27 to $38
Meritage Homes had a nice quarter, and we upped our expectations for the company moving forward. The company is benefiting from a better residential construction market with lower supply, rising prices and a solid balance sheet. The latest round of earnings were very good for MTH. They saw solid growth in profits, margins and sales. The company, additionally, has moved well into the Western region where home prices are higher. We see a lot of value here in MTH.
The Boston Beer Co.: Downgrade from Buy to Hold, Decrease PT from $127 to $121
The Boston Beer Co. is a very solid company with good growth and a solid balance sheet, and we continue to like the business. Yet, we reduced our price target not due to a reduction of expectations, but we saw capital expenditures remain a bit more elevated above usual. The company's capex usually is around $20-$30M, but we are seeing the company projecting around $50M this year. We may see capex stay a bit higher to help power more growth in the future, and that has brought down our expectations somewhat. The company has upside, but its a nicer buy sub-$100.
Disclosure: I am long SAM.