Investing
Jefferies Makes First Big 2017 Change to Franchise List Portfolio
Published:
Last Updated:
Well its sure didn’t take long for the rating changes to start, and it should probably come as no surprise. Many of the top firms we cover here at 24/7 Wall St. are already tweaking their high conviction stocks lists for 2017, and many are trying to take into account macro changes that could make a difference this year. Changes could include higher inflation, a stronger dollar and rising interest rates. They are also trying to factor in positives like lower nominal tax rates and less of the ever burdensome regulations that some feel have stifled business.
A new Jefferies research report includes its first big change for 2017. The analysts removed leading consumer discretionary stock Coach Inc. (NYSE: COH) from the Franchise Picks list.
Coach is a leading New York design house of modern luxury accessories and lifestyle brands. The Coach brand was established in New York City in 1941 and has a rich heritage of pairing exceptional leathers and materials with innovative design. Coach is sold worldwide through Coach stores, select department and specialty stores, and through company’s website. In 2015, Coach acquired Stuart Weitzman, a global leader in designer footwear, sold in more than 70 countries.
The stock has been hit hard since printing highs back in the late summer. The analyst continues to like the stock and maintains the Buy rating, but it feels the company already has succeeded in turning around sales. Jefferies expects progress from here to be more gradual than in the past and sees more near-term catalysts in other consumer discretionary stocks.
Coach investors are paid a very solid 3.8% dividend. The Jefferies price target for the stock is $53, and the Wall Street consensus target is posted at $43.40. Shares closed Friday at 35.54 apiece, so there may indeed some value in the stock.
We also screened the Franchise Picks portfolio for the top telecom and technology companies and found three that look like outstanding stocks to pick up now.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) provides online advertising services in the United States, the United Kingdom and rest of the world. It offers performance and brand advertising services, and it operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The Google segment also sells hardware products, comprising Chromecast, Chromebooks and Nexus. The Other Bets segment includes businesses such as Access/Google Fiber, Calico, Nest, Verily, GV, Google Capital, X and other initiatives.
The company reported quarterly earnings in October that topped analysts’ estimates and revenue that beat expectations, and it announced a more than $7 billion stock buyback plan. Google’s parent company posted third-quarter earnings per share of $9.06, adjusted, on revenue of $22.45 billion.
Jefferies has a whopping $1,000 price target for the stock, while the consensus target price is listed at $968.55. The shares closed last Friday at $824.21.
NVIDIA
This top chip stock reported strong earnings all last year, and the picture continues to grow brighter. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.
NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.
Top analysts feel the stock is maturing to a platform company from a pure chip company, and many agree that the stock should continue to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units in the cloud.
The company reported incredible quarterly numbers in November, and forward guidance also came in to the upside. Revenues beat consensus estimates by 19%. Core gaming grew 62%, but data center grew 193% and auto grew 61%, and the latter two now account for 18% of growth, a significant amount but a number that could get much bigger.
Some analysts estimate $5 earnings-per-share power in three years. Tesla announced that the company’s GPUs will power its deep learning system in every Tesla car. If Tesla is successful, many top analysts feel that every major auto maker will follow with similar capability.
Jefferies raised its price target to $125 from $115, and the consensus target is at $91.91. The stock closed on Friday at $103.10 per share.
T-Mobile
Top Wall Street and Jefferies analysts believe this carrier should be bought on an increasing cash flow and valuation thesis. T-Mobile US Inc. (NYSE: TMUS) provides mobile communications services in the United States, Puerto Rico and the U.S. Virgin Islands. It offers voice, messaging and data services in the postpaid, prepaid and wholesale markets. It also provides wireless devices, including smartphones, tablets and other mobile communication devices, as well as accessories that are manufactured by various suppliers.
The company offers services, devices and accessories under the T-Mobile and MetroPCS brands through its owned and operated retail stores, as well as through its websites. T-Mobile also sells its devices and accessories to dealers and other third-party distributors for resale through independent third-party retail outlets and websites. It serves approximately 63 million customers.
Top analysts think the network investment appears well positioned as churn has stabilized. The company announced recently that from here on out its T-Mobile One plan will be the only one sold to new customers and it will encourage existing users to switch to it. While the plan does have some options, it’s basically a flat-rate, unlimited plan with a price guarantee.
The $60 Jefferies price target compares with the consensus target of $58.78, as well as a share that closed last Friday at $56.77.
2017 is here, and so are the additions and subtractions to the high-conviction stock offerings from the top firms on Wall Street. We will be keeping a close eye to see what other firms make changes, especially with fourth-quarter earnings upon us.
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
