Monday, September 15, 2014
- Tesla (NASDAQ:TSLA) is initiated at ISI Group with a Buy rating and $320 price target, as the firm believes battery electric vehicles are the way forward, not hydrogen fuel cell electric vehicles.
- ISI says TSLA is not exposed to global emissions standards, which the firm sees as the single largest threat to automotive returns; while conventional OEMs face headwinds of ~$1,350/unit, TSLA's costs will come down with technology advances and scale, the analysts say.
- TSLA’s volumes are frequently compared to other electric vehicle sales, but the global market opportunity for TSLA is far greater, ISI says, suggesting 500K units by 2020 is achievable.
- Of all TSLA milestones so far, few are as important as the company’s progress in China, the firm says, adding "it is difficult to foresee an OEM better placed than Tesla to assist the government in meeting its goals."
- Offshore drillers are navigating choppy seas today - and it's not just Seadrill (NYSE:SDRL) with problems - as analysts reiterate Sell ratings on Transocean (RIG -1%) and Noble (NE -1.7%).
- Deutsche Bank worries about RIG’s ability to simultaneously fund its dividend, maintain capex and pay down debt; the firm thinks RIG is counting on continued funding from MLP drop-downs and asset sales, assumptions it is not willing to make at this late stage in both the interest rate and offshore drilling cycles.
- Zephirin cuts its NE price target to $23 from $26 on concerns about the semi-submersile/ultra-deepwater backlog, which is now heavily reliant on the Gulf of Mexico market with 56% of the total ~$9.5B backlog; it expects a declining dayrate environment to negatively impact Gulf EBITDA and earnings.
- Canaccord initiates coverage of two top Bakken shale producers, Continental Resources (CLR +1%) and Whiting Petroleum (WLL +0.5%), with Buy ratings and respective price targets of $92 and $108 (I, II).
- CLR is the largest leaseholder in the Williston Basin and is an industry leader in downspace and enhanced completions testing in the play, and additional upside could come from the development of the SCOOP in Oklahoma, where CLR also is the largest leaseholder and producer.
- WLL trades at a discount to peers that Canaccord considers unwarranted; the firm sees substantial upside given WLL's ~845K net acres in the core Williston Basin, which can be further exploited via downspacing and enhanced completion techniques.
Saturday, September 13, 2014
- Cowen analysts choose their favorite clean technology stocks in areas such as next-generation transportation, natural gas and liquid natural gas, smart grid and next-generation lighting.
- Polypore (NYSE:PPO) is Cowen's top pick in clean tech, is very levered to the fast-growing electric car market, and the firm feels it is poised to take advantage of long-term deals with Samsung and Panasonic.
- Pacific Ethanol (NASDAQ:PEIX) is the leader in California’s ethanol market, margins have been improving, and Cowen expects California ethanol prices to rise with increased rail costs from the Midwest to the state.
- Maxwell Technologies (NASDAQ:MXWL) is a top supplier of innovative ultra-capacitor solutions and has growth opportunities in China with sales for regenerative braking systems for municipal buses.
- Acuity Brands (NYSE:AYI) is a leading provider of lighting fixtures; the stock is not cheap, but the firm thinks non-residential sales trends and LED margin improvement can continue to drive shares higher.
- Silver Spring Networks (NYSE:SSNI) provides IP-based secure networking platforms as well as a suite of solutions to utilities, and Cowen likes its industry-leading 30% share in utility networking equipment.
Friday, September 12, 2014
- Keep an eye on Transocean Partners (NYSE:RIGP), the MLP which holds several of Transocean's (NYSE:RIG) drilling rigs and offers a source of funds for fleet replacement as well as shareholder-friendly policies like share buybacks and dividend increases, Morgan Stanley says.
- Although the firm doesn’t expect to much in the near term, it does see “meaningful scope for medium-term valuation uplift, depending on the path RIG’s board takes.”
- Stanley draws a roadmap to a $60 bull case: "An overlooked element of value in RIG is the embedded MLP worth of its fleet, and our bull case is contingent on RIG accelerating the monetization of 6G+ units with sufficient contract coverage while divesting the rest of its lower-spec fleet."
- Polypore (PPO +1.2%) is higher after Cowen analysts initiate coverage of the stock with an Outperform rating and a $53 price target, saying the company is poised to grow alongside the market for electric cars.
- Lithium separators are only about 20% of PPO’s revenue but are driving 60% of margins and provide a path to $5 in annual EPS, Cowen says.
- PPO would not only benefit from more electric cars on the road but also from a trend toward dual-voltage cars, which would carry lithium batteries to power safety, entertainment and self-driving features as well as carry the usual lead acid batteries, the firm says.
- T-Mobile US (TMUS +1.7%) added 552K postpaid customers in August, more customer additions than any other month in the company's history, and added 208K prepaid customers, CEO John Legere tells investors at the Goldman Conference in NYC.
- The wave of new subscribers was in part due to the popularity of a promotion that allows customers to add four lines for $100/month, Legere says.
- Earlier, Argus upgraded shares to Buy from Hold with a $40 price target, saying a series of innovative plans promoted with razzle-dazzle marketing is gaining traction with subscribers; the firm also expects the latest TMUS offer, which facilitates Wi-Fi communications and interoperability with the cellular network, to resonate with subscribers.
- Chesapeake Energy's (CHK -1.3%) stock price target is cut to $30 from $35 at Oppenheimer to reflect a weaker natural gas price outlook.
- The firm expects CHK's stock performance to reflect management's ability to deliver on its strategic objectives of creating value through capital efficiency and superior operating performance, while strengthening and simplifying the balance sheet and growing production and cash flow.
Thursday, September 11, 2014
- Alibaba (Pending:BABA) is started with an Outperform rating and $80 price target at Wedbush, where analyst Gil Luria sees potential gross merchandise volumes greater than Amazon and eBay combined.
- Wedbush foresees growth in Chinese e-commerce at 30%-plus for several years based on low penetration and leapfrogging of offline commerce, and views BABA’s competitive position as sound given its network effect and scale advantages.
- Meanwhile, several companies that have filed IPOs are waiting for Alibaba to make sure they aren't hit with an IPO market freeze as happened with the Facebook IPO; sidelined companies include solar installer Vivint Solar, internet company GoDaddy, and online storage Box Inc.
- Helmerich & Payne (HP -1.9%) is upgraded to Buy from Hold with a $124 price target at Argus, which believes HP's rare underperformance relative to the market over the last three months provides a favorable entry point for investors seeking exposure to a top U.S. drilling company with a focus on unconventional resources.
- Argus says HP continues to benefit from its position as the leading provider of high-horsepower, high-specification, premium AC-drive rigs in the U.S. onshore market, which are favored by E&P customers drilling complex unconventional horizontal wells.
- Midcoast Energy Partners (MEP -5.5%) is downgraded to Underperform from Neutral with a $21 price target at BofA/Merrill, which believes certain risks are not reflected in MEP's 5.2% distribution rate.
- The firm sees continued downside risk to MEP's marketing and logistics segment due to reduced commodity price volatility, execution risk with drop-downs from Enbridge Energy Partners, and high leverage at the Midcoast Operating level.
- MEP's geographic concentration and exposure to second-tier production basins also is a risk, as low commodity prices have persisted, BofA says.
- High-flying U.S. Silica (SLCA -0.4%) enjoys at least three analyst price target raises, to $83, $83 and $77 from BofA/Merrill, Cowen and Howard Weil, respectively.
- BofA says it came away more bullish on the stock following the company's recent investor conference, where it raised full-year EBITDA guidance implying a 2014-20 compound average growth rate of ~25%; the firm finds the raise particularly encouraging given management's conservative approach.
- Cowen, in lifting its target from $67, sees the SLCA investment case evolving to a more durable long-term thesis, and continues to forecast secular growth in frac sand demand owing to rising proppant intensity (Briefing.com)
- Yamana Gold (AUY -1.2%) is lower after Morgan Stanley, Credit Suisse and Raymond James cut their price targets on the stock to $10.70, $10.50, and $10, respectively.
- In the case of Morgan Stanley, the lower target still implies upside of more than 40%; AUY has said the Pilar mine in Brazil has shown improvements with output increasing M/M, but the ramp up is tracking modestly below expectations, thus the firm's tempered outlook.
- An update on Canadian Malartic and meeting quarterly expectations are potential catalysts expected over the next 6-8 weeks.
Wednesday, September 10, 2014
- Despite overall sector valuation concerns, BMO Capital comes out positive on a few top MLPs.
- BMO believes MLPs will continue to benefit from strong energy fundamentals requiring significant infrastructure, but the sector is trading at historically high valuation multiples, reflecting the current low interest rate environment.
- Enterprise Products Partners (NYSE:EPD) is awarded an Outperform rating and $45 price target based on EPD’s structural advantages with a low cost of capital and a slimmer structure than most MLPs; BMO sees stable fee-based cash flows and a diverse asset platform.
- Kinder Morgan (NYSE:KMI) also is at Outperform, with a $47 target, set to emerge from its restructuring with $125B-plus in enterprise value as the fourth-largest energy company in North America and likely 10% dividend growth through 2020.
- The firm also assigns Outperform ratings to Spectra Energy Partners (NYSE:SEP) and Enable Midstream Partners (NYSE:ENBL).
- Apple (NASDAQ:AAPL) shares tilt slightly lower premarket, -0.4%, as analysts begin to weigh in on yesterday's new product launches (I, II, III).
- Goldman Sachs reiterates its Buy rating and raises its price target to $115 from $107, saying the launch met high expectations; the firm sees the larger-screen iPhones as an important driver of improved growth in the segment, with Apple Pay and Apple Watch serving as key platform enhancements and further sources of stickiness for iOS.
- Mizuho maintains its Buy rating and lifts its target to $110 from $105; it expects Apple Pay to gain some traction, but notes there are multiple new technologies trying to penetrate the market and it remains to be seen how successful each of will be (Briefing.com).
- Pacific Crest, however, downgrades shares to Sector Perform from Outperform with an unchanged $100 target, saying the new products lack profit drivers; the downgrade is not a complete surprise, as the firm warned about a potential cut last week.
Tuesday, September 9, 2014
- No fewer than eight firms today initiated coverage of GE spinoff Synchrony Financial (NYSE:SYF), most with the equivalent of Buy or Outperform ratings.
- In awarding a Buy rating and $30 price target, BofA/Merrill noted SYF is the largest private label credit card and point-of-sale credit provider in the U.S. with more than $50B in receivables and $90B in purchase volume; SYF is seen as well positioned to deliver strong financial performance and growth as it capitalizes on a dominant position in a market defined by good credit and above average returns.
- In assigning an Outperform rating, Credit Suisse says SYF's strong marketing and analytics provides retailers with an attractive partner, "better than [the] overall credit card industry."
- Deutsche Bank only rates shares a Hold; while the valuation seems attractive, DB believes the risk/reward is less compelling as it expects higher expenses and funding costs to reduce EPS growth through 2016, also noting regulatory uncertainty related to its separation from GE (which owns 85% of SYF).
- Newmont Mining (NEM +0.6%) is upgraded to Outperform from Market Perform at Cowen, which comes after last week's news that Batu Hijau operations and exports are expected to resume earlier than the firm had expected.
- While new contract terms include an increase to royalties on concentrate production plus a commitment to help build a smelter, the firm sees the negative impacts offset by the positive impact of re-started cash flows and a reduction in the mine’s risk profile, as well as strong near-term production growth for copper and gold at Batu Hijau.
- With the Indonesian overhang soon removed, Cowen believes investors can now focus on NEM's growth initiatives in Nevada, Suriname and West Africa, which it thinks have been overlooked by the market.
- MarkWest Energy (MWE -0.7%) is downgraded to Hold from Buy at Stifel, which believes MWE's current valuation fairly reflects forecast utilization increases and DPU growth over the next couple of years.
- When comparing on an EV/consensus 2015 EBITDA estimate basis, MWE is trading at 15.5x vs. a peer average of 14.2x; if a calculation includes Class B units, which convert over the next three years, MWE's multiple increases to 16.3x.
- Also, MWE's current yield is 4.4%, compared to its peer group of 5.1%.
- ConocoPhillips (COP +0.7%) is upgraded to Neutral from Underperform with a $90 price target, up from $84, at BofA/Merrill, which sees a more favorable outlook than for Chevron.
- COP shows modest top line growth and a dividend funded from debt, which have acted as twin headwinds; BofA concludes COP fits better in the peer group of global oil majors, where its competitive position looks more favorable than Chevron over the next 12 months.
- Chevron (CVX -0.9%) is downgraded to Neutral from Underperform with a $133 price target, down a bit from $135, at BofA/Merrill, as lower price oil foreshadows a more difficult cash flow outlook.
- BofA contends that with management now routinely referencing $50B at $110/bbl oil as the outcome of its current growth plan, its base case $100 assumption applied across its coverage universe suggests a more challenging outlook for CVX's free cash flow, given current net cash outflow looks to remain above $50B.
- While planned disposals suggested by management could top ~$10B, BofA says its analysis suggests CVX will build material debt over the next four years, consistent with the ~$12B annual run rate evident over the past year.