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Deutsche Bank Raises Price Targets on Top Stocks Before and After Earnings
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Wall Street is notorious for being the quintessential Monday morning quarterback, often raising or lowering price targets and stock ratings after the fact, which to be frank anybody could do. At 24/7 Wall St. we keep a close eye on the analyst calls across the many firms we cover, and one thing is for sure: The higher the market trades, the more analysts seem to be trying to get it right, as there is little room for error at current levels.
In a series of new reports, the analysts at Deutsche Bank raised price targets on two red-hot tech stocks that report earnings this week, and another tech and a top health care name that already reported stellar results. All are rated Buy at Deutsche Bank.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. 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 analysts point to Google Cloud, which is the largest cloud infrastructure and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
Deutsche Bank noted this in its report:
We like shares on Google’s 1) improving core-search monetization 2) YouTube opportunity, 3) underappreciated Pixel story, and 4) Artificial Intelligence/Machine Learning product enhancements. We would take any pullback driven by the European Commission noise or otherwise as an opportunity to add to long-term positions.
The Deutsche Bank price target was raised to $1,258 from $1,250. That compares with the much lower Wall Street consensus estimate of $1,065.67. The shares traded early Monday at $993.30. The company reports after the close on Monday.
The huge social media leader has continued to post gigantic numbers, and it is the top internet media pick for 2017 at many Wall Street firms. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.
Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Top analysts feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. Deutsche Bank noted this:
We see Wall Street estimates likely moving higher for 2018 as the company ramps monetization in Instagram including Stories ads, rolls out more Facebook original video content, begins to monetize Messenger, and sees slightly lower than forecast operating expense and capital expenditure growth.
Deutsche Bank raised the price target to $189 from $185. The posted consensus price target is $171.38. The stock traded Monday morning at $164.80.
Microsoft
This top old-school technology stock was a year-ahead top pick at Merrill Lynch, and it has a massive $121.8 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the recent report.
After the company released solid second-quarter results, the analysts noted this:
Against very high Street expectations, Microsoft posted a modest overall revs beat ($24.7 billion and slightly above our $24.6 billion estimate) and a modest adjusted earnings-per-share beat (GAAP EPS of $0.75 ex an unusual Phone tax benefit, above the $0.71 Street consensus) but the real upside came in the all-important Cloud business, with Azure growth accelerating to 97%, total Cloud revenues growth ramping to 56% (and now 22% of the total mix) and Cloud gross margins up a full 10 points to 52%.
Microsoft shareholders currently receive a 2.11% dividend. The $80 Deutsche Bank price target was raised to $85, and the consensus price objective is $75.51. The shares traded early Monday at $73.50.
Abbott Laboratories
This top pharmaceutical and med-tech stock has very solid growth potential, but the shares have lagged the sector. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions.
The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals (31.0% of revenues), Vascular (13.0%), Generic Pharmaceuticals (20.0%), Diagnostics (25.5%) and Diabetes (10.5%).
Abbott Labs recently agreed to acquire the equity in Minnesota-based Tendyne that it does not already own for $250 million plus future payments tied to regulatory milestones. Wall Street likes the purchase and the way the company is putting its substantial balance sheet to work.
The company posted strong results, and the analysts cited the potential for continued growth:
Abbott reported another quarter with sales and earnings-per-share that beat Street expectations. Excluding the Goods and Services Tax, sales increased 3.7% on a comparable, operational basis. Sales growth is a sequential step up from the first quarter of 2017 and we believe trends should continue to improve, resulting in further sales acceleration in the back half of the year. With an increase in the guidance range (+$0.03), which we believe signals management’s confidence in double digit EPS growth this year, we continue to see opportunity for multiple expansion and stock price appreciation
Investors are paid a 2.08% dividend. The Deutsche Bank price target was raised to $56 from $49, and the consensus target is $52.63, and shares were last seen at $50.65.
Four top companies to buy, two that have reported solid results and two that are expected to this week. It is important to remember that all these stocks are up big this year, so it may make sense to buy partial positions and see what the rest of the summer brings as trading slows down in August.
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