Meeting with Mattel executives in our Media & Entertainment department recently enabled us to solidify our opinion that Mattel is the best idea in Media & Entertainment in general. In addition to several key movie licenses and new product launches in the second half of 2022, Mattel (NASDAQ: MAT) has good visibility into this year’s input costs and is well-positioned to meet its forecast of 8 percent to 10 percent, constant-currency net sales growth, 47 percent gross margin, and 15 percent EPS growth. Furthermore, we expect Mattel’s EPS to expand at a 20% compound annual growth rate through 2024 as a result of planned growth efforts. The goal price is $34.
A 1.86 percent increase in Hershey’s stock price HSY-NYSE
On June 16, the price was $206.19.
Trade sources have told us that Hershey is instituting a price hike across the board, with an average rise of between 13% and 14%. King-size packs will see a 17 percent rise in price, while single-size packs will see an increase of 17 percent, and bags will see an increase of 9 to 14 percent. The price of seasonal items is expected to rise in 2023, according to our channel inspections. Given Hershey’s market share progress and the indulgent nature of the company’s portfolio, we see this as a good development. The goal price is $237.
Micron Technology, Inc. (MU) Mu-Nasdaq gained 1.35 percent on the day
On June 10, the Buy Price was $62.62.
We think investors are continuing to miss some important elements amid macro worries. Although the PC/smartphone end-market is weakening in the short term, we expect extremely strong pricing support going into 2023 as the industry increase in bit supply compresses dramatically. Second, demand should be cushioned by the cloud as new server platforms with big step-ups in-memory content ramp in 2023 (Genoa and Sapphire Rapids). First and foremost, MU’s execution on 1beta has almost wiped out Samsung’s DRAM technology advantage for now, and MU is also now the technological leader in NAND, bar none. We anticipate MU’s EPS to hold up well in light of all of these industry and MU-specific variables. The $115 price point is a good starting point.
Arista Networks, Inc. (ANET), up 58% ANET-NYSE
On the 13th of June, it outperformed the price of $91.86.
However, ANET remains a must-own brand in the networking/IT hardware area as the firm goes through its second phase of expansion—one that we believe will result in 20 percent-plus revenue growth, but with more vertical and product variety. ANET will be able to maintain double-digit growth by pulling on a variety of levers, as we see them. Furthermore, we appreciate ANET’s management team, which has a long history of conservatism, in this volatile industry (consecutively beating past 32 EPS prints). Strong purchase contracts totaling more than $4 billion provide evidence of substantial expansion over the next many years. The goal price is $160.
Raytheon Technologies RTX is down 71 basis points. Raytheon Technologies RTX-NYSE
On June 13, the Overweight Price was $91.95
We had a conference call with Raytheon Missiles & Defense (RMD) President Wes Kremer to explore the company’s future. RMD’s supply chain has been a source of concern lately, and these issues are far from being resolved. RMD, on the other hand, expects rising demand to lead to increased top-line growth, improved profitability, and a shift in product mix. Management’s confidence in meeting at least the midpoint of the 2025 RMD objectives given out in May 2021 has been bolstered by a brighter demand picture than one year ago. Aerospace and defense brands are well represented in RTX, which has a strong financial sheet and the potential to return capital. Our year-end price objective of $105 remains unchanged, as does our overweight rating for the stock.
CLR-NYSE: Continental Resources
On June 14, the Equal Weight Price was $74.22.
CLR said that it has received a nonbinding proposal from the Hamm family to buy for cash all outstanding common stock of the firm not already held by Harold Hamm, his trust, and other family members (17 percent of shares outstanding) for $70 per share. A competing offer for the stock, or potentially the whole firm, sparked early concern among investors. For the time being, we’d want to remain neutral in the event of a future deal.
Rather than being bound by the public stock markets, we regard Mr. Hamm’s decision as an opportunity to pursue a distinct approach to US shale. Our recent Energy conference found CLR management receptive to adopting a unique approach for shale-business acquisition, exploration, and development in “second-tier” areas with more geological complexity, such as the Powder River Basin and Southern Delaware. The goal price is $82.
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