Banking on a more efficient Bank of New York Mellon
These reports, excerpted and edited by Barron’s, were recently published by investment and research firms. The reports are a sample of the analysts’ thinking; they should not be considered Barron’s opinions or recommendations. Some of the issuers of the reports have provided, or expect to provide, investment banking or other services to the companies analyzed.
Bank of New York Mellon
To buy Price $51.91 on March 16
by Seaport Research Partners
We recently caught up with Roman Regelman, CEO of Asset Services and Head of Digital at BK, and Frank La Salla, CEO of Issuer Services. Together they are responsible for BK’s largest business segment, securities services, which generated 45% of total revenue last year. Overall, management seemed confident in its ability to continue the recent organic growth momentum, reflecting both the strong return on investments and the accelerated outsourcing of complex front-to-back services that offer higher fees. Recent investments in technology and operations should also begin to improve BK’s efficiency and help securities services close their pre-tax margin gap with their peers (estimated at around 4%). The stock, at nine times estimated EPS for 2023 against a long-term average of 12, appears to have been oversold during the recent market correction. While the stock market decline will negatively impact asset management and custody fees, Bank of New York Mellon’s more diversified business mix and lower equity exposure relative to its peers should help mitigate the impact. Moreover, with [more Federal Reserve] expected rate hikes, net interest income is expected to [rise]. Price target: $72.
Overweight Price $114 on March 16
by JP Morgan
At six times our estimated Ebitda for calendar year 2023 [earnings before interest, taxes, depreciation, and amortization]— about 25% below the apparel company’s pre-pandemic multiple — we move RL to Overweight. the [stock market’s recent] the withdrawal provided the opportunity to own a business with a multi-year teen (+) margin profile, a reset distribution mode, and a [strong] revenue collection opportunity. The $1.4 billion of net cash on its balance sheet offers the possibility of a 30% reduction in free float over the next two years. Our price target for December 2022 is $142.
Surpass Price $155.09 on March 15
by Evercore ISI
[ticker: 2354.Taiwan], the largest assembler of iPhones, has ramped up production at its site in Shenzhen, China, after having to close it on March 14 due to the Covid outbreak in Shenzhen, according to media reports. Foxconn said it follows local rules that allow businesses to operate if they set up a self-contained bubble-like environment and keep workers inside. While we suspect the site is operating at limited capacity, it’s important to note that it only accounts for 20-25% of iPhone production. Apple’s main production site in Zhengzhou was not affected. Additionally, the shutdown is occurring at a time when seasonal demand is lower, which should mitigate any impact, and Foxconn has mitigation plans in place to move production to other locations to limit disturbances. We maintain our price target of $210.
Surpass Price $78.31 on March 14
Google has announced that it will move Google Domains, its domain registrar business, out of beta and into general availability in 26 countries. Investors are concerned about the impact this could have on GoDaddy’s domain business, but we don’t expect any significant short-term impact. GoDaddy is a much bigger player in domain registration, with Google having a much smaller share, and we expect that to continue to be the case. GoDaddy’s brand is synonymous with domain registration, and this brand recognition is essential for top-of-funnel traffic and driving businesses to GoDaddy over competitors for domain registration needs. We maintain our $100 price target on the stock.
Coterra Energy CTRA NYSE
Overweight Price $25.63 on March 11
by Wells Fargo
Coterra remains one of our top picks in the U.S. energy exploration and production sector, as we believe it meets the three Cs that we see as differentiators for E&P stocks in 2022: capital, cash margins and cash returns. We expect management to focus on Coterra’s compelling investment case for yield-seeking investors, while investors will likely focus on the sustainability of its “shale 3.0” business model. Price target: $37.
To buy Price $31.26 on March 16
by Mizuho Securities USA
WMB quickly strengthened its presence in the [Haynesville, Texas, natural-gas area], with plans to increase production from its upstream joint venture 15-fold by the end of 2022, a proposed project in Louisiana to deliver gas downstream to Transco and to the liquefied natural gas export docks, and the $950 million acquisition of Quantum Energy Partners’ Trace Midstream Gas Gathering Systems. WMB’s moves should help it diversify away from northeast natural gas markets, where pipeline constraints are likely to slow its growth. We are raising our price target to $35 from $33.
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