The Investment Allure of American Water Works – Barron’s

Posted: January 10, 2020 at 10:52 pm

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These reports, excerpted and edited by Barrons, 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 Barrons. Some of the reports issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.

American Water Works AWK-NYSE Buy Price $120 on Jan. 8 by Janney Montgomery Scott

American Water Works acquisition activity has been robust recently, with five announced deals in the past 30 days, totaling $108 million. Illinois and Pennsylvania accounted for the bulk of the deals, with New Jersey also generating a small transaction. This provides reinforcement to our positive investment thesis, and we maintain our Buy rating and $153 fair value on the shares, based on a price/earnings ratio of just over 35 times our 2021 earnings-per-share estimate of $4.32.

Newtek Business Services NEWT-Nasdaq Underperform Price $22.83 on Jan. 8 by Raymond James

We are downgrading our rating to Underperform from Market Perform.

We believe that there are a number of earnings headwinds ahead, with difficult growth targets in the Small Business Administration 7(a) lending business and a tougher comparison for Newteks merchant services segment. There is potential for upside versus our expectations from the conventional lending joint venture, but we do not believe that opportunity overwhelms the risk we see from other segments at this stage.

While there are always other levers to pull, such as one-time dividends from control subsidiaries, such earnings sources could result in a weaker quality of returns and [might] impact the sustainability of the current premium multiple valuation.

Royal Caribbean Cruises RCL-NYSE Overweight Price $130.44 on Jan. 7 by J.P. Morgan

We are raising our 2020 year-end price target to $154, from $135, on a slightly higher 2021 estimated P/E multiple of 13 times, from 11.4 times previously (no change to estimates).

A higher multiple is warranted, given that Royal proved in 2019 that it could comfortably grow core yields in the current elevated-capacity growth environment. Thirteen times is 1.0-1.5 times below the companys long-term average multiple and still well below the broader market multiple, and fair, in our view, given where we are in the economic cycle (late), and the inherently significant operating leverage in the cruise-line business model.

Cytokinetics CYTK-Nasdaq Buy Price: $10.83 on Jan. 6 by H.C. Wainwright & Co.

This morning, Cytokinetics announced the opening of enrollment in the Redwood-HCM study, a Phase 2 clinical trial testing CK-274 for the treatment of hypertrophic cardiomyopathy [HCM, a genetic disorder characterized by an abnormally thick heart muscle].

CK-274 has been optimized to ensure rapid symptom relief for HCM patients, which is particularly important in this patient population, and very valuable compared with gene-therapy approaches (which probably require longer periods of time, after administration, before becoming effective in relieving symptoms). We reiterate our Buy rating and price target of $30.

Lyft LYFT-Nasdaq Buy Price $43.58 on Jan. 2 by CFRA

Our Buy opinion reflects our outlook on Lyfts attractive end-markets/geographic exposure, scalable and recurring-based business model, as well as our expectation for considerable margin expansion through 2021. We see Lyft taking market share in the still nascent mobility-as-a-service space, with overseas expansion as a potential significant growth opportunity long term (the company is currently operating in the U.S. and Canada only). We like Lyfts initiatives and partnerships [for] autonomous capabilities.

Risks include slower-than-expected adoption of mobility-as-a-service, lower-than-expected revenue per active rider, greater-than-projected insurance costs, higher-than-expected expense growth, and greater-than-forecast intermediate-term cash burn.

Our 12-month $70 target price is based on our discounted-cash-flow analysis.

Bio-Techne TECH-Nasdaq Overweight (Volatile) Price $217.16 on Jan. 7 by Stephens

Since 2013, Bio-Techne has expanded its portfolio of assets from legacy reagents/diagnostics, moving into instruments and new clinical applications, which has resulted in growth accelerating from the low-single to the low-double digits. We see this continuing as Bio-Techne begins to benefit from cell- and gene-therapy capabilities, along with Exosome (liquid biopsy), in coming years. All of which should result in Bio-Techne achieving its targets of $1.2 billion in revenue and 40% margins by 2023.

Since CEO Chuck Kummeth joined the company in 2013, Bio-Techne has transformed into a more-diversified, higher-growth life-science company. Given the outlook for accelerating organic growth and expanding margins, we [give it] an Overweight (Volatile) rating, with a $250 price target.

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The Investment Allure of American Water Works - Barron's

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