These reports, excerpted and edited by Barron’s, 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 Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Nvidia
• NVDA-Nasdaq
Overweight • Price $674.72 on Feb. 21
by Piper Sandler
After high expectations into the print, Nvidia surpassed both January-quarter results and April guidance. [The stock climbed 15% in the morning after the earnings release, to $777.] Most of the beat was driven by the data center segment, as expected.
Commentary indicated that Nvidia has a strong presence in inference applications, which made up roughly 40% of data center revenue in the quarter. Also, large cloud providers accounted for greater than 50% of data center revenue in January.
Notably, the company is sampling and shipping a chip in China, which is contributing to some of the upside that we weren’t expecting until a couple of months later. While supply for the Hopper architecture has improved dramatically, Nvidia reaffirmed that it expects continued supply shortages as demand for compute forges ahead.
We reiterate our Overweight rating and top large-cap pick. Price target: $850.
Palo Alto Networks
• PANW-Nasdaq
Outperform • Price $366.09 on Feb. 21
by William Blair
Palo Alto delivered solid quarterly results that beat all metrics, but it also lowered billings guidance by $600 million for fiscal 2024. [The stock fell 28% on the day of the earnings release, to $262.] The company attributed weakness to delays in a very large U.S. federal government program (Thunderdome), which represented half of the lower outlook, and a surprise shift in its platform-based strategy, which accounted for the other half. The focus of the platform-based strategy is to accelerate adoption of Palo Alto’s solutions by offering customers the ability to switch from their existing platforms to Palo Alto’s suite without having to pay for subscriptions. While the company expects a negative impact to near-term billings, we believe that the move will meaningfully accelerate the pace at which customers commit to the Palo Alto platform over time….While there are clearly challenges and risks to executing on its strategy, investors that balk may be missing out on a significant inflection point in the company’s history. Palo Alto appears to be a step closer to achieving its strategic goal of becoming a single platform-vendor solution for the cybersecurity space.
Plug Power
• PLUG-Nasdaq
Outperform • Price $3.73 on Feb. 21
by Evercore ISI
Plug was awarded a contract to supply a major U.S. automobile manufacturer with hydrogen infrastructure and fuel cell solutions to support material handling operations. The customer’s entire material handling fleet across its automobile manufacturing campus (six-plus square miles) will be integrated with Plug’s fuel cells, and the company is expected to deploy on-site hydrogen infrastructure, including two liquid hydrogen storage tanks and 10-plus hydrogen dispensers. Plug is anticipated to commence installation and commissioning of the hydrogen infrastructure at the manufacturing campus in 2024, which is expected to be fully operational in the first quarter of 2025. Price target: $9.
DraftKings
• DKNG-Nasdaq
Buy • Price $44.46 on Feb. 16
by Guggenheim
DraftKings reported fourth-quarter revenue of $1.23 billion, up 44% year over year. Revenue growth was driven by strong customer engagement and retention, efficient acquisition of new customers, new products driving higher hold percentages, and expansion into new jurisdictions. Management raised 2024 guidance for both revenue and Ebitda on strong customer trends and higher structural hold. Underlying consumer demand for DraftKings products remains strong (no discernible macro impact to date), and management remains focused on cost discipline and driving efficiencies.
We continue to believe that DraftKings is well positioned to capture a significant share of the rapidly growing North American online sports betting and online-gaming markets. Price target: $53.
BrightSpring Health Services
• BTSG-Nasdaq
Buy • Price $10.71 on Feb. 16
by UBS
We initiate coverage of BrightSpring with a Buy rating and a $15 price target. Bottom line, BrightSpring offers attractive organic growth and exposure to a variety of healthcare end markets. We further believe that shares are discounted versus a sum-of-the-parts valuation and that there is valuation upside if the company delivers on its growth plan and delevers over time. BrightSpring is a diversified post-acute services platform operating in two segments: pharmacy and provider.
The pharmacy segment provides services to a diversified range of end markets and clinical settings such as specialty/oncology, infusion services, long-term care, hospice, and behavioral health.
BrightSpring’s provider segment offers services including skilled home health and hospice, personal care, neuro rehab, and care services for the intellectually/developmentally disabled.
Transocean
• RIG-NYSE
Buy • Price $4.68 on Feb. 21
by Benchmark
The stock is down 25% year to date, which is extreme when compared with the revised 2024 Ebitda outlook and Ebitda growth trajectory through 2025….The company is in discussion with multiple customers for longer-duration contracts at progressively higher rates. Before the end of 2024, the company expects to have 23 rigs contracted through 2025, up from 17 currently. Price target: $8.
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