Wedbush plays catch-up as it whacks up price target for Autodesk Inc

Broker wrap: Ur-Energy Inc, Shopify Inc, Autodesk Inc, Coach Inc, Kate Spade & Co

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Sharess in CAD software specialist Autodesk are up 28% this year

Uranium explorer Ur-Energy Inc (TSE:URE) “handily beat expectations” with its first quarter results, according to Eight Capital.

Earnings per share of four cents topped the Street's consensus forecast of one cent and Eight Capital's own forecast of flat earnings.

“ A strategy of buying cheap uranium at spot and selling into high priced contracts is working very well,” Eight Capital said, as it reiterated its 'buy' recommendation and a price target of C$1.75 based on a discounted cash flow model.

“We don’t believe the market has caught on to Ur-Energy's simple buy low, sell high business plan. We see excellent decisions being made by management that include: maximizing margins (leading to positive earnings in H1/17), decreasing production without having to waste resources at low prices while mitigating operating costs, and deferring capital spending by running existing well-fields longer,” the broker said.

Head grades are expected to fall and cash costs rise, but the broker thinks this will have less effect than the development of new well-fields.

“This strategy has differentiated URE from its peers. It has reduced operations as much as possible and selling only into higher priced contracts. URE can likely do this for several years yet. If cash is required, it has the ability to tap the spot market given a large finished uranium inventory,” the broker said.

Expect continuing revenue growth at Shopify Inc (TSE:SHOP, NYSE:SHOP), the cloud-based e-commerce platform, says Mackie Research.

The broker has lifted its target price from US$95 a share to US$101, some C$12 above the current share price in New York.

Mackie has plugged revenue growth of around 36% in 2018 into its model. Its peers are clocking up growth of 20-30%, but Mackie still thinks its forecast for Shopify might be conservative, as the company continue to provide new solutions that “reduce e-commerce friction”.

Wedbush has cranked up its price target for Autodesk Inc (NASDAQ:ADSK), the computer-aided design (CAD) software and services company.

The new price target is US$120, which is quite a leap from the old target of US$78, and reflects the casting off by Wedbush of some misgivings about the “lumpiness” of Autodesk's revenues.

“Several recent developments make us more positive that the transition can settle into a more consistent, predictable pattern and that the company can hit its long-term targets. Specifically, we're encouraged by ADSK's accelerated pace of share buybacks, initial maintenance price increases, and 1Q checks pointing to an upturn in Collections sales and strong customer interest in an upcoming M2S program to boost new model subs,” the broker said.

Like most software companies, Autodesk is addressing its lumpy revenue stream problem by switching to a software-as-a-service (SaaS) model.

“Qualitatively, we're seeing signs that larger channel partners are embracing subscriptions as a better business model. End-market conditions have stabilized over the last twelve months, and any progress on US infrastructure legislation could be a catalyst,” the broker said.  

Broker Jefferies is clearly happy that the acquisition of Kate Spade & Co (NYSE:KATE) is now in the bag for Coach Inc (NYSE:COH).

Jefferies has long argued that Coach is the right buyer for Kate Spade, partly because of Coach's track record in integrating previous acquisitions.

“Since their acquisition of Stuart Weitzman, COH has done a solid job in leveraging the team's technical expertise and effecting a seamless transition of Stuart Weitzman under new ownership. COH plans to follow a similar play-book with KATE, by running the brand independently with no change to creative direction, but leveraging common infrastructure and corporate functions,” Jefferies notes.

The acquisition brings a much younger demographic to Coach's customer base and there are plenty of revenue synergies to be grabbed.

Jefferies rates Coach a buy and has a price target of US$53, some US$10 above the current trading level.  

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