With Elon Musk Buy More Likely, Twitter Stock Can Go to $50

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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.

TJX

Cos. TJX-NYSE

Outperform • Price $63.03 on Aug. 11

by Telsey Advisory Group

TJX will report second-quarter results on Aug. 17 before the market open. We look for second-quarter earnings per share of $0.69, versus $0.79 last year, the consensus estimate of $0.67, and guidance of $0.65 to $0.69. Given the uncertain macro environment and record inflation, we believe that TJX is well positioned to capture more traffic than other retailers (primarily department stores), given its value positioning and the potential for consumers to trade down to its banners. Additionally, we have seen a fairly pronounced shift across retail with customers returning to shopping in physical stores after two years of pandemic-driven online shopping. In our view, TJX should benefit from this trend as consumers return to its bricks-and-mortar locations. Price target: $86.

Darling Ingredients

DAR-NYSE

Outperform • Price $73.98 on Aug.10

by Baird Equity Research

Darling Ingredients results beat estimates and were led by the core business. We think the results again demonstrated the resiliency of the business and the importance of controlling feedstock used in the production of renewable diesel. We continue to recommend shares, as free cash flow will be substantial next year, opening up options including share repurchases, a permanent dividend, and additional acquisitions…Darling continues to generate cash from operating activities and carries a strong cash position into the second half. Cash will be allocated to delevering below 2.5 times and share repurchases. Darling has repurchased $65.9 million worth of shares to date and continues to seek mergers-and-acquisitions opportunities. A permanent dividend also has been discussed as cash flow increases. Price target: $109.

Arch

Resources ARCH-NYSE

Buy • Price $126.59 on Aug. 9

by Jefferies

The strength in coal prices over the past year has been a blessing to an industry that had been perceived to be in significant structural decline. In an environment of high prices, we believe that coal companies should focus on operating well, generating strong cash flow, paying down debt, and delivering capital returns. That is exactly what Arch has done and is doing. Arch has a substantial capital-return program; it plans to return to shareholders approximately 50% of its prior quarter’s discretionary cash flow, which is defined as cash flow from operations less capital expenditure less thermal mine reclamation fund contributions, in the form of a variable dividend. The remaining 50% will be used for further special dividends or buybacks. This is essentially a 100% cash-flow payout policy. Price target: $225.

Planet Fitness

PLNT-NYSE

Buy • Price $76.45 on Aug. 9

by Stifel

Planet Fitness reported solid second-quarter results, including better-than-expected comps and earnings in line with the Street mean. Total membership was roughly in line with pre-Covid seasonality (16.5 million), and the company disclosed solid enrollments in its Summer Pass program, more than tripling the number of enrolled teens compared with the 2019 program. The company essentially reiterated its full-year guidance, with steady comp performance and improving corporate store-level margin offsetting lower equipment margin and incremental national marketing fund expenses. The mature store base also continues to progress toward recovering to prepandemic levels, with 34% of mature locations now at or above prepandemic levels compared with 30% pre-Covid. Price Target: $85.

Roblox

RBLX-NYSE

Sell • Price $47.35 on Aug. 10

by Benchmark

Roblox [a videogame company] delivered disappointing fiscal second-quarter financial results—an in-line revenue result versus consensus and a meaningful miss on profit. Key performance indicators in the quarter should have benefited from a seasonal engagement lift, but instead delivered some of the worst metrics on record. July bookings result was less than buy-side consensus and could again pressure the third-quarter consensus view lower. Roblox expense growth is driving significant negative operating leverage, and free cash flow has gone negative, the worst result on record. We think that Roblox has been misbranded as a metaverse opportunity and continues to trade at what appears to be very aggressive valuation multiples; and growth has been dramatically failing. Price target: $21.

Twitter

TWTR-NYSE

Neutral • Price $42.94 on Aug. 10

by Wedbush

Elon Musk sold another $7 billion of

Tesla

stock [TSLA] and then tweeted that this sale was done “in the (hopefully unlikely) event that Twitter forces this deal to close.” With the chances of a Twitter deal now more likely, in our opinion, and the Street seeing through this poker move by Musk, we are raising our price target from $30 (fair value, fundamentally) to $50.

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