Investing

Deutsche Bank Raises Price Targets as Q1 Earnings Come in Red Hot

Lee Jackson

Published: April 26, 2019 6:40 am

Last Updated: January 30, 2020 9:32 pm

A month ago, there was palpable anxiety on Wall Street over first-quarter results. Everything from bad weather to a cyclical slowdown to slower tax returns had many fearing the worst. With more than half of the S&P 500 companies having reported, things are looking much brighter, as some of the biggest and best blue chip leaders have posted very respectable results.

The good thing for investors is the solid results are not just limited to one or two sectors; they are coming in across the board. In a series of new reports that cover the results for the quarter, the analysts at Deutsche Bank are raising their price targets on some of the top companies in the firm’s research universe. We picked four that look like solid ideas for the second quarter and the rest of 2019.

eBay

This top internet company has long been rumored to be in play as a takeover target. eBay Inc. (NASDAQ: EBAY) operates e-commerce platforms that connect various buyers and sellers worldwide. Its platforms enable sellers to organize and offer inventory for sale, and buyers to find and buy it virtually anytime and anywhere.

The company’s Marketplace platforms include its online marketplace at ebay.com and the eBay mobile apps, as well as StubHub platforms that comprise its online ticket platform at stubhub.com and the StubHub mobile apps, which enable fans to purchase tickets to the games, concerts and theater shows. Its Classifieds platforms include a collection of brands, such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Classifieds and others that offer online classifieds and help people find whatever they are looking for in their local communities.

eBay posted solid results, and the analysts said this:

In our view, eBay reported significantly better than feared results. Although unit growth was flat year-over-year and gross merchandise value declined ex-currency primarily on more rational marketing spend, revenue and operating income came in significantly better than Street expectations. The company also provided segment-level margins as well as visibility into the impact of the cross-sell efforts on Classifieds and StubHub, likely to dispel any expectations that a transaction may be imminent for the two businesses. Promoted Listings revenue continues to grow triple digits year-over-year and the company appears to be on track to achieve its objective of $1 billion in advertising revenue.

Shareholders receive a 1.47% dividend. Deutsche Bank lifted its price target from $39 to $42, which compares with the Wall Street consensus target of $37.48. The shares closed Thursday at $38.011.

Coca-Cola

This top Warren Buffet holding not only offers safety but an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. With coolers getting packed for picnics, parades and vacations you can bet that they will be stuffed with products from this iconic American company. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

The soft-drink giant posted solid numbers, and the analyst said this:

Although +1.5-2.0 points of the quarter’s top-line strength was timing-related (safety-stock shipments ahead of Brexit), the company stressed that underlying top-line strength (5%+ after backing out the safety-stock build, but adding back 1 point for one fewer selling day in the quarter) was encouraging versus plan (not to mention Street estimates of +3%-4%) and indicative of improved system execution due to improved Coke execution and bottler alignment.

Coca-Cola investors receive a 3.34% dividend. The $53 Deutsche Bank price target ticked up to $54, while the consensus price target is $50.33. The stock closed at $47.84 on Thursday.

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Stryker

This leading medical devices company is a big beneficiary in the aging of America thesis. Stryker Corp. (NYSE: SYK) operates in two business segments. Its orthopedic implants business produces implants used in joint replacement, trauma, spine and craniomaxillofacial procedures. The MedSurg segment produces surgical equipment (other than orthopedic hardware), as well patient handling and emergency medical equipment.

The company once again reported outstanding results, and the analysts noted this when breaking down the results:

Stryker remains one of the best positioned medtech companies in our coverage universe. While 1Q’s results were strong and Stryker raised the lower end of organic revenue guidance and EPS guidance, we also acknowledge that expectations were high into the print and we could see some short-term pressure. However, with a strong cadence of new product flows in all businesses, K2M integration tracking ahead of schedule, building momentum internationally (particularly EM where SYK’s revenue mix is currently well below peers), and continued visibility on further margin improvement, the company is well positioned for another year of strong organic revenue and EPS growth at the high end of large cap medtech peers – as evidenced by the bullish initial guidance.

The Deutsche Bank price objective was raised to $208 from $181. The consensus target was last seen at $197.67, and shares closed Thursday at $187.17.

Yandex

This is the top search engine in Russia, with almost 65% advertising and traffic share in paid search, and it continues posting solid growth.  Similar to China’s Baidu, Yandex N.V. (NASDAQ: YNDX) is one of the few players globally that managed to successfully compete against Google in paid search.

The company is geared to structural growth in internet advertising as the Russian market sees higher internet penetration and higher share of ad budgets moving away from traditional media to new media. Many on Wall Street expect rapid growth of internet advertising and that Yandex will stay in the lead in paid search.

Yandex Taxi is a fast growing segment, and analysts expect it to carry out as many as 2.2 billion rides and achieve a 20% take-rate (net) across Russia by 2022. Assuming 35 million users, which is 24% of the population, that could translate into 64 rides per user by 2022, which compares to 53 for Uber globally in 2018. A stunning growth rate.

Deutsche Bank has been bullish on the company for some time and said this:

Despite the IPO of Lyft (not covered) providing another play on ride sharing, we think Yandex stands out as a profitable play on ride sharing in addition to other related businesses that have greater long-term margin potential given market dominance. We do not expect much disclosure around capital structure but see this as an outstanding overhang on shares.

Deutsche Bank lifted its price target to $48 from $44. The consensus target is $42.83, and shares closed at $37.12.

These four top stocks are all rated Buy and the companies have posted outstanding results. For investors looking for ideas, these make sense because any potential headline issues over earnings results are out of the way for now, and they all seem to be trending higher with solid corporate metrics.