“In our view, this is not a transitory ‘Covid Bump’ for these 10 stocks,” Morgan Stanley said. “Many companies have obtained exceptional results an increase in earnings in 2020 and 2021, as their business models were leveraged for the sharp shifts in the economy and consumer behavior during the peaks of the pandemic, and saw their stocks perform strongly as a result. »
Morgan’s equity strategy team said in a note that it “has observed that certain stocks have underperformed in recent months amid market fears these companies have only done well amid the pandemic. of Covid”.
“Our analysts view these names not as narrowly defined Covid beneficiaries, but rather as solid companies that are structurally positioned for long-term outperformance. We believe this disconnect has left many of them at a significant discount by relative to their intrinsic value.
The actions are:
- Bath & Body Works (BBWI): “This growth and margin profile is best in class among our coverage. But BBWI is currently trading at 7x EV/EBITDA forward, which is less than half the level of companies with similar growth and margin trajectories (e.g. Off-Price, CPG, etc.) As such, we see multiple revaluation opportunity in the mid-teen+ EV/EBITDA range, this which would give a share price more than double current levels.
- Dick’s Sporting Goods (DKS): “It is clear that some reversion in sales and margins is inevitable, but we believe that this reversion may be slower and shallower than is generally expected.”
- Five Under (FIVE): “While we believe some degree of downgrade is warranted based on higher interest rates, we believe the stock is unfairly classified as a recession-prone retailer – even whether the company performed well during the financial crisis (delivering +6%/+12% comps in 2008/2009) and should benefit from lower pricing given its low-cost, value-driven offering. »
- New York Times (NYT): “While news cycle variability remains a driver of quarterly net additions volatility, the NYT actually delivered digital net additions in 2021 ahead of 2019 levels, and we expect expect net additions to accelerate further in ’22E pro forma for Athleticism.”
- Nike (NYSE: NKE): We “believe that Covid has permanently accelerated NKE’s transition from a traditional wholesale business to a digital-focused, direct-to-consumer (DTC) brand, which is expected to grow revenue, margin and EPS growth trajectory over time.”
- On Running (ONON): Spending on activewear looks robust year to date, and we see plenty of opportunities for ONON to continue to grow the top line by at least +DD% over the next 15 years and more, as the brand remains at a nascent stage across all channels, products, and geographies. This makes ONON a rare compound growth opportunity, in our view.
- Simon Property (SPG): “At current levels, the stock’s valuation looks attractive in several respects: 1) It is trading at an FFO multiple of around 10x on the 23 MSe FFO at $11.87, versus 2 / 5 / 10 10.6x / 12.0x / 15.0x 1-year average FFO NTM multiples; 2) In our published model (prior to incorporating actual 1Q22 results), our DCF of FCF using a cost equity of 7.7% (0.9 beta, 5.23% ERP, and 3% risk-free rate) suggests an intrinsic value of $141 per share; 3) SPG is trading at a dividend yield of around 5% (and in our view will continue to grow their dividend), 5 above the MAC of the nearest par at around 4.5% (which probably won’t grow their dividend).”
- Sonos (SONO): “While we recognize that revenue growth has accelerated during the pandemic – at a 2-year CAGR of 17% between FY20 and FY21 – we believe that Covid has contributed to permanently accelerate underlying trends in demand and engagement, aided by the proliferation of audio and video streaming.”
- Wingstop (WING): changes “in the business that have improved unit economics, digital mix, scale and brand awareness for what is still a relatively early growth company.”
- Zoom (ZM): Our survey “shows that 96% of key office strategy decision makers note that video conferencing is a key part of future work plans, to be leveraged to enable hybrid working and reduce travel costs.”
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