I last covered Home Depot (NYSE:HD) back in 2016, when I argued that the stock could have an upside to over $200 by 2020 assuming a 20% annual growth in dividends and free cash flow per share.
At the time, my valuation was deemed aggressive at best, and outright madness at worst. However, we saw the stock exceed my price target ahead of schedule back in January, before eventually reverting to a price of $187.42 at the time of writing:
At the time, my calculations were as follows:
Dividend Per Share Forecast (2016-2020) 2016 2017 2018 2019 2020 Projected 20% dividend growth 2.36 2.83 3.40 4.08 4.89 7% discount rate 2.21 2.47 2.77 3.11 3.49 Free cash flow per share Forecast (2016-2020) 2016 2017 2018 2019 2020 Projected 20% free cash flow growth 6.13 7.36 8.83 10.59 12.71 7% discount rate 5.73 6.43 7.21 8.08 9.06 Terminal price to FCF ratio 20.68 Terminal price to FCF ratio * Year 5 earnings 187.42 Present value of dividends per share through to Year 5 14.05 Target price in year 2020 201.47 Upside from price of $125.56 60.46% 5-year annualized rate of return 12.09%
Source: Authors Calculations
Top Value Stocks To Invest In 2019: Concho Resources Inc.(CXO)
Advisors’ Opinion:
- [By Matthew DiLallo]
Oil has continued its remarkable rise this year, rallying another 10%, to more than $65 a barrel in the U.S. That rebound has taken most oil stocks up with it. However, a handful managed to lose ground this year, including Laredo Petroleum (NYSE:LPI), Concho Resources (NYSE:CXO), and Cimarex Energy (NYSE:XEC), which are all down double digits. That sell-off makes them worth a closer look.
- [By Matthew DiLallo]
Crude prices in the U.S. continued their ascent today, rising nearly 3% to about $72.50 a barrel — the highest level since late 2014 — after the U.S. government reported a massive drawdown of oil storage levels. This news sent most oil stocks soaring, including Sanchez Energy (NYSE:SN) — up 12% at one point — and Concho Resources (NYSE:CXO), which rallied nearly 6% by the mid-afternoon and was one of the biggest gainers in the S&P 500. However, that rally in the oil market didn’t drive up the entire sector as CNX Midstream (NYSE:CNXM) and Mammoth Energy Services (NASDAQ:TUSK) both tumbled double-digits on the day.
- [By Matthew DiLallo]
Several well-respected oil CEOs have made it clear that they have no appetite for making a big acquisition, even though oil prices have improved dramatically. However, not all companies are against mergers and acquisitions (M&A). Concho Resources (NYSE:CXO) made waves earlier this year when it acquired RSP Permian (NYSE:RSPP) in a $9.5 billion deal. Concho CEO Tim Leach even saw his company’s transaction as a “roadmap for in-basin consolidation” in the Permian. While it has yet to set off an M&A boom, that doesn’t mean transaction activity won’t heat up.
- [By Matthew DiLallo]
According to a report by Bloomberg, pure-play Permian drillers have lost more than $15 billion in market value in the past few weeks as the difference between the two oil prices widened. Among the hardest-hit oil stocks has been Concho Resources (NYSE:CXO), which is in the process of becoming the largest shale producer in the Permian with its purchase of RSP Permian. In the past month alone, Concho’s market value has declined by nearly $4 billion to $19 billion. It’s not alone as several other pure-play Permian drillers have also shed billions of dollars in market value over the past few weeks due to falling oil prices in the region.
- [By Matthew DiLallo]
ConocoPhillips’ global portfolio is proving to be a big competitive advantage because 70% of its oil production sells at Brent pricing, which is the global oil benchmark. Currently, Brent fetches more than $75 per barrel, while WTI, the U.S. benchmark, sells for $10 less a barrel. In the meantime, due to the lack of adequate pipeline takeaway capacity in the Permian, oil in that region currently sells for less than $60 a barrel, thereby pinching producer profits. That lower oil priceis much less of a concern for ConocoPhillips, according to Bernstein, since it only gets 4% to 5% of its production from the Permian whereas pure-play Permian producers like Concho Resources (NYSE:CXO) only produce from that region. That’s why Bernstein downgraded Concho’s stock from outperform to market perform while slashing its price target from $180 a share all the way down to $130.
Top Value Stocks To Invest In 2019: International Business Machines Corporation(IBM)
Advisors’ Opinion:
- [By Michael A. Robinson]
I confess: I’d always hated IBM Corp. (NYSE: IBM); never could stand Big Blue. The company was always too unfocused for my taste.
Its boardroom underwhelmed, too, allowing Microsoft Corp. (Nasdaq: MSFT) and Amazon.com Inc. (Nasdaq: AMZN) to outmaneuver and shut it out of the outrageously lucrative cloud.
- [By JJ Kinahan]
After the close yesterday, “Big Blue,” otherwise known as IBM (NYSE: IBM), reported earnings per share of $2.45, beating Wall Street analysts’ consensus estimate of $2.40. Revenue of $19.1 billion beat the third-party consensus view of $18.7 billion, marking the second-straight quarter of year-over-year revenue growth after a more than five-year-stretch of revenue losses. However, a decline in gross margin led some analysts to conclude IBM's shift from legacy hardware and software businesses to cloud computing and "big data" — higher-margin businesses — is not happening fast enough. IBM shares fell over 5 percent in aftermarket trading.
- [By Keith Noonan, Chris Neiger, and Daniel Miller]
Chris Neiger (IBM): I have to get this out of the way first: IBM is not for everyone. The company’s top line has fallen for 22 consecutive quarters and in the third quarter of 2017, its earnings fell 4% year over year. It’s no wonder then, that IBM shares are trading at just 13 times the company’s trailing 12-month earnings, and 11 times estimated forward earnings — both ratios far below the tech industry’s average.
Top Value Stocks To Invest In 2019: Acadia Realty Trust(AKR)
Advisors’ Opinion:
- [By Joseph Griffin]
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