Inside the Market’s roundup of some of today’s key analyst actions
Analysts at J.P. Morgan Chase & Co. raised their price target on Lululemon Athletica Inc. to US$146 from US$133 ahead of the company’s earnings release Aug. 30. The firm believes Lululemon can report same-store sales growth — revenue from locations open at least a year — of 10 per cent, versus analyst consensus of 8.7 per cent and the company’s guidance of high single digits. J.P. Morgan’s full-year earnings estimate of US$3.27 is also higher than consensus of US$3.23 and guidance of US$3.10 to US$3.18. “Our fieldwork and recent management access … points to momentum in the business.” The firm’s US$146 price target is based on 32 times its estimate of 2020 earnings.
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Analyst Linda Bolton Weaver of D.A. Davidson & Co. upgraded cosmetics seller The Estée Lauder Cos. Inc. to “buy” from “neutral” and raised her price target to US$167 from US$134.
“Fundamentals are the strongest we’ve seen in years,” Ms. Weaver wrote. “We had been concerned that Estée Lauder’s [fiscal year 2019] guidance could be below consensus, but now that we are past that and the stock is down 11 per cent from its June 15th high, we are taking this opportunity to upgrade.”
A number of other firms raised price targets on the company’s earnings release Monday, with J.P. Morgan going to US$154 from US$148 and Raymond James Financial Inc. to US$151 from US$145.
The sell side wasn’t unanimous, however: Jefferies Group LLC cut its price target to US$131 from US$135, and Citigroup Global Markets Inc. went to US$149 from US$158.
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Rupesh Parikh of Oppenheimer & Co. Inc. raised his price target on retailer Costco Wholesale Corp. to US$250 from US$210. It closed Monday at US$227.35.
“We believe Costco remains best positioned in our entire food and grocery coverage to deliver sustainable top- and bottom-line performance,” Mr. Parikh writes. Costco should be able to post same-store sales-growth figures in the mid-single digit range thanks to “strong ongoing market share gains in the grocery category, coupled with continued momentum in the company’s more discretionary offerings.”
His target price is based on a price-to-earnings multiple of 28 on his fiscal 2020 forecast, plus US$24 per share in cash on the company’s balance sheet.
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BMO Nesbitt Burns analyst Troy Maclean raised his target price on Agellan Commercial REIT to $14.75 from $13.25. The shares closed Monday at $14.14.
Mr. Maclean says that with the sale of its Toronto office and retail Consumers Road properties, the REIT is getting closer to being a U.S. Industrial “pure play” — and deserves a higher multiple as a result.
He bumped up his net asset value estimate for the REIT to $13.50 from $13.25 and introduced a multiple that’s a premium to NAV based on its progress in the U.S.
Mr. Maclean says he believes there’s further valuation upside to the REIT’s units and the sale of a suburban Chicago property could also be a catalyst.
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Analyst Jenny Xanos of Canaccord Genuity Group Inc. offered ten reasons to own shares in Gran Tierra Energy Inc., a Calgary-based producer of Colombian oil. Among them: Ms. Xanos said the company has a self-funding business model with its core assets generating free cash flow and low debt that could allow for share buybacks or acquisitions. The company also has growth potential via land in the underexplored Putomayo basin and rapidly expanding production from its Acordionero property.
Gran Tierra trades at a small discount to peers on a net asset value basis, and it’s below its historical trading average on a price-to-cash flow basis. Ms. Xenos has a $7 price target versus Monday’s close of $3.16.
David Milstead