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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.
Delta Air Lines
• DAL-NYSE
Buy • Price $46.09 on June 27
by Deutsche Bank
There was something for everyone at Delta’s investor day, held on June 27—the first in Atlanta since Covid—as management shed additional light on many of the projects they have been working on to transform the airline from a mere transportation company into a premium global consumer brand.
Delta provided many examples that are supportive of its transformation, including the fact that the airline now ranks as the fifth-largest U.S. e-commerce retailer behind
Amazon
,
Apple
,
Walmart
,
and
eBay
.
And the annual spend on its co-branded American Express SkyMiles credit card is now approaching 1% of US GDP. Airline demand continues to be very strong as the company heads into the peak summer travel period, as evidenced by Delta raising its June-quarter top-line guidance, from 15%-17% (year over year) to 17%-18%. Trans-Atlantic demand has been exceptionally strong.
We are raising our 12-month price target from $47 to $58.
Snowflake
• SNOW-NYSE
Buy • Price $177.02 on June 28
by Goldman Sachs
We reiterate our Buy rating on Snowflake and raise our price target to $210 from $185 following its investor day. The event bolstered our conviction in SNOW’s ability to potentially exceed its $10 billion product revenue target in fiscal 2029 owing to
1) durability of core data warehousing;
2) upside optionality predicated on several adjacent markets, with significant upside pivoted around generative AI;
3) best-in-class net revenue retention; and
4) large $140 billion data-cloud total addressable market.
Near term, consumption trends improved in May/June, which could position Snowflake for a stronger second quarter and second half of fiscal 2024 and eventual reacceleration in fiscal 2025.
CarGurus
• CARG-Nasdaq
Cars.com
• CARS-NYSE
Overweight • Prices $22.89 for CarGurus, $19.76 for Cars.com on June 29
by J.P. Morgan
We initiate on CARG and CARS at Overweight, as we believe the auto marketplace sector is a relatively safe place to hide in the current macro backdrop, given undemanding valuations and some cyclical support as new-car inventory builds and both dealers and consumers look to get increasingly efficient in buying and selling vehicles. We believe these businesses check many boxes:
1) asset-light;
2) right side of cycle;
3) software-as-a-service-like revenue streams;
4) flexible operating expense (as seen during the pandemic);
5) generative AI applications, internally and externally; 5) stable earnings and free-cash-flow growth in the near to medium term;
6) balance-sheet leverage within bounds;
7) not shy of buybacks; and 8) undemanding valuation.
Price targets: $29 for CarGurus, $23 for Cars.com.
Xponential Fitness
• XPOF-NYSE
Buy • Price $15.72 on June 28
by Jefferies
A short-seller report [by Fuzzy Panda Research] was recently released suggesting XPOF’s key metrics and unit economic performance could be inflated. Following our conversation with management alongside the company’s press release, we are comfortable that this report is nothing more than speculation and that XPOF should continue to execute upon its long-term growth initiatives. Therefore, we remain confident in the company’s ability to generate healthy results, and are buyers at current levels.
Target price: $45.
Texas Roadhouse
• TXRG-Nasdaq
Outperform • Price $110.35 on June 29
by Wedbush
Our checks point to Q2 same-store sales growth ahead of 8.2% consensus. Based on the strength of our checks, we increase our Q2 same-stores-sales growth estimate to 9.5% from 8.5%. Positive callouts included stronger dine-in traffic, increased sales due to higher levels of local marketing, and continued levels of elevated off-premise mix.
While we maintain our Q3 and Q4 same-store-sales growth estimates for now, given the trajectory of transaction trends, we believe upward revisions are probable, post-Q2 earnings. Our $123 price target is based on a 13.8 times enterprise value/Ebitda [earnings before interest, taxes, depreciation, and amortization] multiple on our 2024 Ebitda estimate, a 20% premium to TXRH’s five-year pre-Covid median. We believe such a premium is appropriate given our expectation of accelerating market share gains within casual dining for the foreseeable future.
Price target: $123.
Warner Music Group
• WMG-Nasdaq
Neutral • Price $26.66 on June 28
by UBS
We are initiating coverage of WMG with a Neutral rating and a $29 price target. We see WMG as a long-term beneficiary of secular trends in the music industry (including the adoption of streaming/emerging platforms driving revenue growth; a predictable business model supported by global IP) and improving operating leverage.
That said, WMG’s revenue growth has recently been below industry levels due to a delayed release slate and a choppy advertising market. The impact of artificial intelligence has also weighed on the group, a risk we expect the industry to manage through but which remains an overhang for now. Despite our expectations for gradual improvement in trends (and overall growth for the industry), we believe AI risks/uncertainty will limit multiple expansion in the near term, and see a balanced risk reward.
Price target: $29.
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Source: https://www.barrons.com/articles/delta-air-lines-snowflake-warner-music-cargurus-analyst-reports-52ac444d?siteid=yhoof2&yptr=yahoo