How Analysts Size Up Companies

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.

Shift4 Payments -- FOUR-NYSE Buy -- $112.99 on Nov. 26 by Seaport Research Partners Shift4 Payments is one of the best stories we see among financial-technology companies. We like Shift4 right now, and continue to view the shares as being undervalued. Looking ahead, we see 1) a multiyear catalyst path, 2) growth in revenue and Ebitda that will be above its peers (with upside versus consensus), and 3) an investor day in early 2025 that will help level-set investors about the company's "model" and unique value proposition in the market.

We are raising our 2025-26 estimates for gross revenue less network-fees and adjusted Ebitda. We are increasing our price target to $138 from $106, based on 16 times 2025 Ebitda, and maintain our Buy rating.

Applied Industrial Technologies -- AIT-NYSE Buy $278.55 on Nov. 26 by BofA Global Research We upgrade Applied Industrial Technologies shares to Buy from Neutral. We have more conviction on mergers and acquisitions into calendar-year 2025 and beyond. M&A drove more than 70% of Applied Industrial's earnings-per-share growth in the past decade.

After slower capital deployment out of the Covid pandemic, Applied Industrial announced on Nov. 22 that it would acquire fluid power distributor Hydradyne for $272 million (nine times estimated 2025 enterprise value to Ebitda). We think the conversion of this deal from Applied Industrial's pipeline reflects a better M&A environment and suggests more deals going forward.

Applied Industrial is the most cyclical of distributors that we cover. End markets/products remain soft. But given how quickly similar distributor M&A has closed historically, we think this deal bridges the gap to a year-over-year cyclical EPS inflection in fiscal-fourth-quarter 2025 (ending in June), with fiscal-second-quarter 2025 likely the last of Y/Y declines.

We raise our price objective to $315 from $285.

Old National Bancorp -- ONB-Nasdaq Strong Buy -- $22.94 on Nov. 26 by Raymond James We are upgrading our rating on Old National Bancorp shares to Strong Buy from Market Perform following its announced acquisition of Bremer Financial. The financial terms of the transaction create material 2026 earnings-per-share accretion; other similar size early-in-the-cycle deals have been well received, and investors appear to be moving down in market-cap size as they become more open to improving economic growth and less credit risk.

While the announcement comes somewhat as a surprise, this deal checks the box as passing a high hurdle rate that management had discussed in potential future deals. Old National shares responded favorably to the announcement, and we expect positive momentum to continue as the steep EPS accretion continues to garner investor attention. Target price: $28.

AppLovin -- APP-Nasdaq Buy -- $333.31 on Nov. 25 by BofA Global Research We raise our price objective on AppLovin to $375 to reflect numerous bullish events that have occurred since it reported third-quarter results on Nov. 6: 1) Investor participation has broadened as fundamentals become better understood and investors reconsider their allocations among online advertising stocks; 2) AppLovin joined the Nasdaq 100 index on Nov. 18; 3) AppLovin announced a transition to an all-unsecured debt capital structure on Nov. 19; and 4) Standard & Poor's upgraded AppLovin to investment grade on Nov. 7.

We now see potential for AppLovin to become a diversified online advertising stock as it begins marketing its tech to e-commerce merchants this year; we estimate that its target advertisers, mid-to-small-size merchants, spent from $40 billion to $50 billion on advertising in 2023.

We reiterate our Buy rating.

Exxon Mobil -- XOM-NYSE Buy -- $121.79 on Nov. 24 by UBS While Exxon Mobil's core upstream and downstream units remain the near- to medium-term growth drivers, we see the low-carbon unit as an increasingly important long-term growth engine. Driven by unit spending forecast to increase from $1.7 billion in 2023 to $6.5 billion in 2027 on projects across six different verticals, we see opportunity for $1.5 billion-plus of earnings power by the end of the decade, assuming a 15% internal rate of return.

Exxon Mobil's growing low-carbon business is a key driver behind our view that Exxon Mobil is the best stock across our coverage to own for the next five years. Target price: $149.

Tesla -- TSLA-Nasdaq Outperform -- $338.59 on Nov. 26 by Wedbush We believe that a Donald Trump presidency will be an overall negative for the electric-vehicle industry, as the federal EV rebates/tax incentives are now set to get pulled.

However, for Tesla, we see this as a potential positive. Tesla has the scale and scope that is unmatched in the EV industry, and this dynamic will give CEO Elon Musk and Tesla a clear competitive advantage in a non-EV subsidy environment starting in 2025, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players from flooding the U.S. market over the coming years.

We maintain our Outperform rating and $400 price target.

To be considered for this section, material should be sent to Research@barrons.com.

To subscribe to Barron's, visit http://www.barrons.com/subscribe

(END) Dow Jones Newswires

November 29, 2024 21:30 ET (02:30 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.