Investing.com – Here’s a quick look at the top takeaways from Wall Street analysts over the past week.
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Ollies outlet with discounts
What’s happened? JPMorgan upgraded shares of Ollie’s Bargain Outlet Holdings, Inc. on Monday. (NASDAQ:) to Overweight with a price target of $105.
JPMorgan forecasts favorable near-term prospects for OLLI, supported by a strong closed-deal environment, an improved competitive environment and strong execution, which collectively support same-store sales growth. Looking ahead, the investment bank expects ‘organic’ unit growth to accelerate significantly, expecting it to reach double digits by FY25 and beyond. This growth trajectory is based on a 10-year plan to reach 1,300 stores, which is the estimated point of market saturation. The expansion is projected to lead to a compound annual growth rate in earnings per share of approximately 13%, driven by low-single-digit same-store sales growth.
In addition, the potential for lateral consolidation opens up additional opportunities for same-store sales improvement and wallet sales growth that are not currently captured in JPMorgan’s model.
The investment bank says there are no structural barriers to the unit returning to pre-pandemic growth rates of 13-14% within a few years. This bullish assessment is reflected in JPMorgan’s Outperform rating on OLLI, indicating confidence in the company’s potential for sustained growth and profitability in the coming years. The bank’s analysis shows that OLLI is well positioned to benefit from both organic expansion and strategic consolidation to strengthen its market presence and financial performance.
Overweight at JPMorgan means that “over the life of the price target contained in this report, we expect the stock to outperform the average total stock return of the coverage of a research analyst or team of research analysts.”
How did the stock react? Ollies Bargain Outlet opened the regular session at $90.55 and closed at $95.98, up 9.43% from the previous day’s regular close.
Kroger
What’s happened? On Tuesday, BMO Capital upgraded shares of Kroger (NYSE:) to Outperform with a $60 price target.
Analysts at BMO Capital noted a pullback in the stock market, citing concerns about rising investment prices in the industry. It is believed that this investment is mainly financed by suppliers, with a smaller portion covered by retailer promotions. Analysts are optimistic about domestic shipments in the first quarter, raising their forecast to 0.8% from the previous 0%. This is based on an assumption of 0.6% year-over-year gross margin growth excluding fuel, stable per-gallon prices at 45, and a favorable impact on last-in, first-out accounting. amounting to approximately US$90 million. Consequently, they expect earnings per share of $1.46, beating the consensus estimate of $1.35. This forecast assumes that Kroger could potentially hit the top end of its fiscal 2025 forecast.
Additionally, BMO Capital’s fiscal 2025 earnings forecast for the full year 2025 assumes essentially flat gross margin percentage, excluding fuel and stable retail fuel prices. With the stock trading at about 11 times consensus EPS estimates of $4.54, analysts believe this reflects a fair assessment of potential downside risks to earnings per share. They argue that Kroger’s gross margin prospects appear safer than previously thought.
In addition, BMO analysts predict a favorable outcome regardless of whether the deal goes through or not. As a result, BMO Capital increased its FY2025 EPS estimate to $4.49 (from $4.40), FY2026 EPS estimate to $4.65 (from $4.60) and set a price target of $60, applying 13-fold coefficient to two indicators. One-year forward P/E ratio, which was previously in the range of 12x to 13x.
The main risk identified by analysts is the potential for price investments driven by the increasingly competitive environment in the food retail sector.
“Outperform” in BMO Capital means “Forecast to beat analysts’ range of total returns.”
How did the stock react? Kroger opened the regular session at $52.52 and closed at $51.98, up 1.82% from the previous day’s regular close.
Wednesday – US markets closed June 16th.
Irhythm Technologies
What’s happened? On Thursday, Wolfe Research updated iRhythm Technologies Inc. (NASDAQ:) will outperform with a target price of 115.
Wolfe Research issued a call for an upgrade, citing the stock’s reasonable initial valuation, currently valued at $98. Wolfe analysts expressed increased confidence in the stock, expecting the key overweight to be resolved over the next 12 months, leading to a $115 price target. This target is supported by DCF analysis and EV/Revenue comparison suggesting $115 is approximately 5 times projected 2025 revenue.
Over the past year, IRTC’s EV/Revenue ratio has averaged 5.5 times and has increased nearly 9 times since the IPO. Compared to 30 small-to-midsize medtech companies currently averaging nearly 3.5 times, Wolf argues that a five times equity premium is justified. The basis for this premium is IRTC’s expected high percentage revenue growth over the next year, exceeding the low teens percentage growth expected for the comparison group.
Wolfe’s analyst rating system includes a comprehensive DCF model for IRTC, which has historically been complex but has become more manageable over time. Improvements in modeling could come from significant improvements in EBIT margins in the second half to 2025 and successful implementation of the FDA’s Zio AT risk mitigation roadmap. Moving beyond FDA concerns will bring IRTC closer to launching the next generation MCT device, potentially capturing greater market share in a significant market where IRTC is currently a minor player.
Ultimately, the DCF analysis shows that the NPV is consistent with the target of $115 using a 9% discount rate and a 5% terminal growth rate.
“Outperform in Wolfe” means: “The stock is forecast to outperform industry analysts over the next 12 months.”
micron
What’s happened? On Friday, Aletheia Capital downgraded Micron Technology Inc (NASDAQ:) to Hold without specifying a price target.
Aletheia Capital downgraded MU from Buy to Hold and removed its $120 price target. The first reason for this is that the stock has risen 2.1 times since the November 2023 upgrade and is now trading above its historical price-to-book ratio (PBR) of 2.5 times.
Second, Aletheia Capital believes there are issues with the execution of HBM3E MU that could negatively impact its near-term revenue target and profitability. A key customer may have to reschedule commercial shipments of new products. The research team believes that it may take some time for MU to improve and restore confidence in its HBM proposal. Consequently, they have withdrawn their previous forecast for HBM’s revenue of $500 million for 24FY.
Finally, Aletheia Capital believes MU needs to significantly increase its capex for capacity expansion in FY25/FY26E, which remains stagnant (or even declining) from 2021. This contrasts with well-known positives such as a continued upward trend in memory average selling price (ASP), strong demand for HBM from AI servers, upward earnings revisions and positive cash flow (for the first time since Q1FY2023).
How did the stock react? Micron opened the regular session at $138.08 and closed at $139.54, down 3.22% from the previous day’s regular close.