Applied Materials, Lowe's added to Jefferies franchise picks list
narvikk
The Jefferies equity team is shuffling its Franchise Picks list of top-conviction buy-rated stocks, adding three new names.
Applied Materials (NASDAQ:AMAT), Lowe's (NYSE:LOW) and Exact Sciences (NASDAQ:EXAS) join the list of 21 stocks.
- AMAT, price target $140 - "We believe the semi-cap equipment industry has transitioned from flat to DD% secular growth, bolstered by bigger chips and more complex manufacturing," the team said. "We favor AMAT's deposition market exposure & view the stock as an undiscovered AI play. We think shares re-rate to a premium P/E vs. the SPX (SP500) (SPY) (IVV) (VOO)."
- LOW, $250 - "We have a favorable outlook on home impv't demand based on housing and demographics factors that we see bolstering R&R activity. Recent meetings with LOW mgmt. suggested company initiatives are poised to deliver near flat comps Y/Y. Shares trade at a 30% P/E discount to peers, and our '24 EPS forecast is ahead of consensus."
- EXAS, $82 - "We see the co generating a sustainable 10%+ organic revenue CAGR over the next 5+ years, largely driven by rescreening and the rollout of Cologuard 2.0. In addition, we expect '23 to be the year EXAS delivers significant operating leverage, achieving >$100M of adj. EBITDA and turning FCF positive for the first time. Shares trade at an EV of 5.5x our '24 revs, below other high-growth Dx/Medtech comps at 7.0x."
The remaining stocks:
- Amgen (AMGN), price target $325, -19.5% return to the S&P, "We sense a rising interest from generalists for 'new shiny assets' (i.e, AMG133 for obesity) as well as general macro and money flow rotation into large cap biotech/pharma."
- Boeing (BA), $250, +46.7%, "BA can leverage both availability and price with added benefit from the 737 MAX 7 (cert in 2023) and 737 MAX 10 (cert in 2024)."
- Baker Hughes (BKR), $40, -3.8%, "We remain optimistic that BKR will be able to execute and deliver on expectations for the remainder of '23."
- Blackstone (BX), $101, +27%, The "trend toward democratized retail is here to stay and regardless of pacing going forward, the retail investor remains under-allocated (<5%). This provides a multi-billion if not trillion dollar oppty as market penetration broadens and the recent ‘teaching moment’ for financial advisors normalizes."
- Caterpillar (CAT), $300, -16.6%, "Bottom-line: the potential revenue oppty is significant in our view and is still several years out as commodity capacity investments take hold."
- Crown Holdings (CCK), $108, -10.8%, "CCK has been able to deliver solid results in a tough macro backdrop, exemplifying the resiliency of its business, and we see the defensive business as undervalued with lagged contractual inflation recovery flowing through in '23 and volumes set to accelerate from CCK share gain and LME prices falling."
- Digital Realty Trust (DLR), $129, -0.6%, "We believe datacenter market is shifting in favor of landlords and think the market is underestimating DLR's ability to accelerate internal growth. With market supply at record lows and AI investment just ramping up, we anticipate the strongest pricing power in a decade."
- Dexcom (DXCM), $150, +18.1%, "DXCM has an opportunity for multi-year rev growth acceleration from a combination of price/mix HW’s sunsetting, new products and Basal reimbursement driving significant upside to numbers."
- Estee Lauder (EL), $270, -16%, "China remains key to sentiment, and we believe the updated COVID policies in China will accelerate the recovery of this key market for EL."
- Firstcash Holdings (FCFS), $115, +55.9%, "We believe consensus underappreciates pawn demand recovery (particularly in the Latin America segment), as well as AFF leased merchandise growth and the company’s defensive attributes."
- Freeport-McMoRan (FCX), $55, +34.1%, "The market continues to underappreciate copper market fundamentals. The China reopening (albeit at a sluggish pace) and a recovery from the cyclical weakness in the US combined with underappreciated supply constraints should lead to a higher-than-expected copper price over the next few years."
- Martin Marietta (MLM), $460, +6%, "Prices have already begun to accelerate with good visibility into public demand, and while the robust pricing in aggregates and cement was muted by inflation in '23, aggregates gross margin should inflect meaningfully higher in '23 as incremental pricing and the benefits from lower energy costs flow through the P&L."
- Topgolf Callaway (MODG), $56, -35.8%, "As MODG unlocks value from its transformation from traditional golf equipment manufacturer to preeminent golf entertainment platform, we look for upside to estimates and for multiples to expand."
- Nvidia (NVDA), $300, +78.6%, "We compare NVDA’s ecosystem to Wintel in PCs as NVDA owns both the future hardware and software value within data center parallel processing."
- Okta (OKTA), $105, +15.4%, "While we do not discount the amount of work in front of the company (likely to take a few quarters), we highlight a fantastic product, coupled with a large and underpenetrated market all while trading roughly in line with the base value of its recurring rev."
- Progressive (PGR), $159, +5.1%, "We do not believe that the Street fully appreciates the company’s ability to accelerate growth with reduced ad spend and its ability to quickly accelerate rate increase, resulting in our modestly below-Street combined ratio estimates for the out-years."
- Tenet Healthcare (THC), $95, +17.8%, "While we have seen labor metrics improve, including THC’s spending on contract labor as a percentage of total wages, we believe investors are not completely aware of the improvement in temp nurse bill rates that THC will see sequentially in Q2 and Q3."
- Take-Two (TTWO), $165, -32.2%, "Of the big three U.S. game publishers, we believe that Take-Two is set up to generate the most robust earnings growth. The company will see a significant increase in the quantity of titles launching over the next 2-3Y."