SanDisk Corporation (SNDK), Johnson & Johnson (JNJ), HollyFrontier Corp (HFC): Thursday’s Top Upgrades (and Downgrades)

Page 1 of 2

Johnson & Johnson (NYSE:JNJ)This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, as earnings season gets under way in earnest, analysts are busy tweaking their price targets to track changes in earnings and guidance. We’ll be taking a look at three such tweaks today, for popular stocks: SanDisk Corporation (NASDAQ:SNDK), Johnson & Johnson (NYSE:JNJ), and HollyFrontier Corp (NYSE:HFC).

Good news first
Let’s take these in order, beginning with SanDisk Corporation (NASDAQ:SNDK), which is up more than 2% today after reporting $1.06 per share in profits on $1.5 billion in revenues — beating analyst estimates on both counts. Speaking of counts, the number of analysts upping their price targets on the stock had reached five at last count, with Needham & Co. leading the pack with a projection of $80 a share.

That target is close to $20 above where the shares now trade, suggesting a potential 31% profit in the stock. But can investors realistically hope to capture those profits?

Yes, it very well might. SanDisk Corporation (NASDAQ:SNDK) turned in a truly magnificent quarter yesterday. Thanks to the beaucoup profits, the company’s P/E ratio now stands just a hair below 21 — versus the near-31 times earnings valuation still being shown on Yahoo! Finance’s key statistics page. If the company succeeds in hitting the 28% annualized, long-term growth estimate that analysts have it pegged for, 21 times earnings is an absolute steal of a deal on this stock. Plus, with trailing free cash flow now clocking in at $940 million — versus “only” $718 million in GAAP net earnings — this stock’s arguably even cheaper than it looks.

Fact is, at a price-to-free cash flow ratio of less than 16 today, I think SanDisk Corporation (NASDAQ:SNDK) will be a great bargain if the stock even posts growth in the upper teens over the next five years. If it gets into the 20-percent range, though, look out … above!

Paging Dr. Profit
In contrast, I’m less enthused about Johnson & Johnson (NYSE:JNJ), the buy rating Argus Research is still assigning it, and the new $104 price target Argus has suggested.

Don’t get me wrong. Johnson & Johnson (NYSE:JNJ)’s report yesterday was fully as good as SanDisk Corporation (NASDAQ:SNDK)’s with revenues ($17.9 billion) and per-share profit ($1.32) both beating expectations. My objections to this stock center less on the success of the business, and more on the price that investors are being asked to pay to own a piece of that business.

Simply put, Johnson & Johnson (NYSE:JNJ) shares cost too much. Based on the most recent data the company has provided us (which does not include free cash flow data, tsk, tsk), Johnson & Johnson shares now trade for nearly 20 times earnings. That’s quite a lot to pay for a company that few analysts see growing earnings at much more than a 6% annualized rate over the next five years.

In fact, even Johnson & Johnson (NYSE:JNJ)’s generous 2.9% dividend yield isn’t enough to entice me to buy these shares. As great a company it may be, Johnson & Johnson (NYSE:JNJ)’s stock price is a prescription for portfolio underperformance.

And speaking of underperformance…
One of the very few stocks getting hit with a reduction in price target today is oil refiner HollyFrontier Corp (NYSE:HFC). Over at Imperial Capital, analysts just cut $10 off their target price for Holly shares. (And Holly didn’t even report earnings yesterday).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!