Activision Blizzard
This company reported outstanding earnings recently and could be poised for a solid move higher. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer, video game console, handheld, mobile and tablet games worldwide. The company develops and publishes interactive entertainment software products through retail channels or digital downloads, as well as downloadable content to a range of gamers. The company’s Call of Duty franchise has propelled earnings for this industry powerhouse for years.
Jefferies thinks the guidance the company gave when it reported is very conservative. The team also thinks the content the company will release in the rest of 2015 is outstanding and not fully reflected in the guidance. The growth in the quarter was particularly impressive given two challenges: the strong dollar and unfavorable comparisons to the prior year quarter, which were lifted by strong sales of “The Amazing Spider-Man 2.” Much of that growth was fueled by Destiny, Heroes of the Storm and Hearthstone, which now have 70 million registered players combined. The three titles have generated over $1.25 billion in non-GAAP revenues to date.
Activision investors are paid a 0.8% dividend. The Jefferies price target for the stock, which is one of the firm’s Franchise Picks, is posted at $33. The Thomson/First Call consensus price objective is $31.55. The stock closed on Friday at $28.78.
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Adeptus Health
This stock was recently initiated with a Buy rating at Jefferies, which thinks earnings could grow meaningfully. Adeptus Health Inc. (NYSE: ADPT) is a leading patient-centered health care organization expanding access to the highest quality emergency medical care through its network of freestanding emergency rooms and partnerships with premier health care providers. In Texas, Adeptus Health owns and operates First Choice Emergency Room, the nation’s largest and oldest network of independent freestanding emergency rooms. In Colorado, in partnership with University of Colorado Health, Adeptus Health operates UCHealth Emergency Rooms. In Arizona, with Dignity Health, the company owns and operates Dignity Health Arizona General Hospital and freestanding emergency rooms.
The Jefferies analysts see the company delivering a 30% compounded annual growth rate over the next three years as the firm grows beyond the current three state markets that the currently do business in. They also anticipate strong gains from Medicare/Medicaid reimbursements. The analysts have the company 2017 EBITDA 17% higher than current Wall Street projections.
The Jefferies price target is $135, and the consensus target is $122.82. The stock ended last week at $114.19.
VMware
VMware Inc. (NYSE: VMW) actually reported very solid numbers but is down huge over the past year and a half. It is a global leader in cloud infrastructure and business mobility. Its industry-leading virtualization technology solutions deliver a brave new model of IT that is fluid, instant and more secure. Customers can innovate faster by rapidly developing, automatically delivering and more safely consuming any application. With 2014 revenues of $6 billion, VMware has more than 500,000 customers and 75,000 partners.
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Jefferies feels that the company is very well positioned for the rest of the year and should benefit from increased government spending and continued ramp up in new products and new and renewed enterprise license agreements (ELAs) in 2016.
The company is adding ELAs at a furious pace, and cloud management tools are now 16% penetrated into the customer base, with plenty of room to grow. The bottom line is that this company is back, and back with a vengeance. Despite the recent big move, the stock still is trading almost 22% below highs printed in April of 2014.
The Jefferies team thinks the possibility of EMC buying up the remaining 20% of the shares in the company that it does not own makes sense and could be accretive to the tune of as much as 13% for EMC. They also believe that maintaining the status quo of the EMC federation also makes some sense.
The Jefferies price target is $104, and the consensus target is $95.39. The shares closed Friday at $84.86, up over 2%.
Western Alliance
This is a top small-cap bank that the Jefferies team likes. Western Alliance Bancorp. (NYSE: WAL) is one of the fastest-growing bank holding companies in the United States. Its primary subsidiary, Western Alliance Bank, is the go-to bank for business and succeeds with local teams of experienced bankers who deliver superior, personalized services and a full spectrum of deposit, lending, treasury management and online banking products and services. Western Alliance Bank operates these full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank.
Jefferies says that despite slower than expected loan growth, the bridge loan business is good, and the team thinks the company’s access to the booming Silicon Valley economy is a big positive. They predict double-digit growth going forward.
The Jefferies price target is $40, and the consensus target is at $36.56. The shares closed on Friday $33.60.
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The Jefferies team is smart in recommending companies that have already come in with outstanding results and solid forward guidance. In a nervous market, staying with those already on a roll makes good sense.
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