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LNKD : NASDAQ : US$176.95
BUY 
Target: US$200.00

COMPANY  DESCRIPTION:

LinkedIn is the world’s largest professional network on the Internet with more than 200 million members in over 200 countries and territories. LinkedIn generates revenue through selling Hiring Solutions to corporations, Marketing Solutions to Advertisers, and Premium Subscription to members and recruiters.

Investment recommendation

We areincreasingly confident in the company’s strategy, opportunity, competitive position and long-term outlook. We note greater interest in
the transition occurring within Marketing Solutions and the timing of when growth might reaccelerate, and we will be watching the company’s progress with feed-based Sponsored Updates advertising for signs of inflection later this year.
Investment highlights
 We continue to expect Marketing Solutions (MS) revenue growth to be relatively flat sequentially for Q2 and Q3, as ~$8-10 million per quarter in “legacy” ad revenue rolls out of the model; we believe Sponsored Updates can return MS to growth by Q4.
 Member engagement continues to climb, and our new engagement index shows a doubling of per-member activity over the past five quarters.
 The transition to in-house hosting could contribute to as much as 500 bps of gross margin expansion over the next four years, although we are only modeling 300 bps.
Valuation
Our $200 price target is unchanged and is based on 60x our 2016 EPS estimate of $4.96 discounted to present at 11%.

Related articles

• Why Your Professional Target Audience On LinkedIn Is Ignoring You (knogimmicks.com)
• IT Pros Are Using LinkedIn In A Surprising Way: To Shop For Enterprise Tech (LNKD) (businessinsider.com)

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WDAY : NYSE : US$65.75
BUY 
Target: US$75.00

COMPANY DESCRIPTION:
Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.

Investment recommendation

Workday delivered another of what we expect to be several more years of quarterly beat and raises. In a world of near-zero interest rates, a fast scaling firm like WDAY is likely to see its revenue growth exceed gradual multiple compression so that investors can logically expect 15%+ annual rates of return on the stock. Reiterate BUY and increasing price target to $75 (up $5).
Investment highlights
 Strong start to FY: another upside quarter. WDAY reported Q1/14 revenues of $91.6M, which was $4.1M ahead of our estimate and represented
normalized y-o-y growth of 75% (99% on the subscription line). Calculated billings of $107.3M were up 31% y-o-y and beat our estimate by $1.5M.
WDAY generated free cash flow of $15.3M (inclusive of several one-time gains), which was well ahead of our expectation for a material loss.
 Business highlights: large enterprises continue to select WDAY. During the quarter Bristol Myers and Levi Strauss chose WDAY for HR as well as
University of Miami for the full WDAY applications suite. Notable go-lives in the quarter included Johnson & Johnson, London Stock Exchange, and Cornell University. WDAY ended the quarter with more than 450 customers, of which 290 are live (up from 265 at the end of last quarter).
 Outlook: go-forward estimates inch nicely higher again. WDAY increased F2014 guidance by $5M and called for an operating loss that at mid-point was 250 bps better than last expected. We have increased our F2014 and F2015 revenue estimates by $8M and $10M, respectively, which are now 60% and 50% y-o-y revenue growth (and likely still a bit conservative

Related articles

• Workday’s Q1: boosts revenue 61% to $91.6m (zdnet.com)
• Workday reports sales up almost 61% (marketwatch.com)

The official logo for the ARM processor architecture (Photo credit: Wikipedia)

ARMH : NASDAQ : US$47.24
ARM : LSE
BUY 
Target: US$56.00

COMPANY DESCRIPTION:
ARM is a leading semiconductor IP supplier to the diverse global semiconductor market. ARM’s revenues are driven through a licensing and royalty business model, with a majority of the royalty sales driven by the mobile market
including handsets, smartphones, and tablets. ARM also supplies semiconductor IP to the server, PC, and embedded markets and physical implementation libraries and IP to semiconductor foundries.
All amounts in US$ unless otherwise noted.

Investment recommendation:
From ARM’s analyst day yesterday in London where ARM management highlighted strong longterm market and royalty growth opportunities in both high- and low-tier smartphones.

We believe ARM is well positioned to benefit from quickly increasing emerging market feature phone to smartphone upgrades, ramping low-tier tablets, and high-tier smartphone platform refreshes that should drive royalty TAM growth and rate expansion. Further, with a growing number of ARM partners moving toward multi-core Cortex-A, big.LITTLE, and ARMv8 designs at leading edge process nodes, we anticipate strong license sales in the near to medium term will drive strong royalty revenue growth and both operating and earnings leverage long term. We reiterate our BUY rating and raise our price target to $56.
Investment highlights
 Our Q1/13 monthly handset sales surveys and recent March quarter results and June quarter guidance for ARM mobile chipset partners are consistent with ARM’s estimates for very strong growth of the low- and mid-tier smartphone markets and also resilient growth of the high-tier market driven flagship launches and 4G/LTE upgrades.
 At its analyst day, ARM shared its target of 15-25% smartphone royalty sales CAGR through 2017 and anticipates smartphone unit CAGR of 20% for the industry during the same period. In fact, this estimate includes growth in both the high- and lower-tier smartphone markets, and we believe ARM will generate significant royalty revenue growth from both tiers driven by a royalty rate expansion multiplier in the slower-growing high-tier market and upgrades
from lower royalty feature phones in lower tiers.
 Due to increased royalty estimates from lower tier smartphones and tablets, we are increasing our 2013 earnings/ADS estimate from $1.01 to $1.02 and our 2014 estimate from $1.31 to $1.35.

Valuation:

Our $56 price target (from $52) is based on shares trading at
roughly 42x our 2014 normalized earnings/ADS estimate.

Related articles

• ARM’s Sales Beat Analysts’ Estimates on Demand for Smartphones (bloomberg.com)

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ACRX : NASDAQ : US$6.40
BUY 
Target: US$11.00 

COMPANY DESCRIPTION:
AcelRx Pharmaceuticals is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain. AcelRx’s lead product, ARX-01, is designed to provide patient-controlled analgesia (PCA) and overcome the issues currently
encountered with IV PCAs.
All amounts in US$ unless otherwise noted.

RAISE TARGET TO $11 ON POSITIVE
PHASE 3 DATA; REITERATE BUY
AcelRx reported  that it has achieved its primary endpoint (SPID-48) for its placebo-controlled Phase 3 study in major orthopedic surgery (knee or hip replacement) for its sublingual Sufentanil NanoTab PCA System.
This is the third (of a total of three) Phase 3 studies the company has completed, and NDA submission remains on track for Q3 2013. We continue to see an attractive market opportunity for ARX-01 in the hospital setting, with un-risk adjusted peak sales of $577 million in 2022.
Post positive data we have reviewed our model and are lowering our risk adjustment and WACC rate given the further de-risked outlook. We
reiterate our BUY rating and raise our price target to $11.
 EPS and ARX-01 NPV move higher on lower risk-adjustment. Our EPS (risk-adjusted) estimates move to ($0.68), ($0.62), $0.11, $0.77, and $1.18 on a 70% risk-adjustment (from 60%), which reflects a derisked outlook post data. Our ARX-01 NPV also moves higher on a lower WACC rate (20% from 26%), which delivers a ~$10.77 value.
Our underlying ARX-01 assumptions remain unchanged, which still drives peak sales of $577 million (un-risk adjusted) in 2022.
 Study achieves primary endpoint with mild to moderate adverse events. The study enrolled 426 adult patients at 34 US sites and showed a significantly greater SPID-48 versus placebo-treated patients (+76.1 vs -11.5, p<0.001) while also hitting secondary endpoints. Adverse events were mild to moderate and were similar in both placebo and treatment groups for majority of AEs.
 Reiterate BUY, raising target to $11. Our $11 target is based on both our ARX-01 NPV (un-risk adjusted) and a 17.0x P/E multiple applied to our risk-adjusted 2017 EPS discounted back.

Related articles

• Why AcelRx Pharmaceuticals Shares Spiked Temporarily (dailyfinance.com)
• Stock rises for AcelRX as pain management drug device succeeds in late-stage study (medcitynews.com)

English: The new Conn’s logo (Photo credit: Wikipedia)

CONN : NASDAQ : US$47.37
BUY 
Target: US$63.00

Conn’s is a specialty retailer selling home appliances, consumer electronics, furniture and mattresses, home office, and lawn and garden  quipment. The company operates approximately 70 retail stores located primarily in Texas, as well as Louisiana, Oklahoma, Arizona, New Mexico and online. Conn’s provides its own proprietary inhouse credit program, including sales of related credit insurance products.

All amounts in US$ unles

Consumer & Retail — Specialty Retail
TOP-LINE GROWTH AND  EXPANDING RETAIL GROSS MARGINS REMAIN SIGNIFICANT ATALYSTS

Investment recommendation

We expect Conn’s to generate average annual revenue growth of 21% over the next five years supported by the company’s proprietary in-house financing program. We believe Conn’s square footage growth potential is the highest in the retail group, and increasing penetration of the higher-margin furniture and mattress business should continue to expand retail gross margin.
We are raising our FY14 retail gross margin forecast of by 120bps to 37.7% driven by our expectation for a faster mix shift to the furniture assortment. As a result, our FY14 EPS estimate moves $0.13 higher to $2.63, $0.14 above consensus and the highest estimate among sell-side analysts. We are raising our FY15 projection by $0.18 to $3.61, which is $0.43 ahead of consensus and the high estimate.

Investment highlights
 Store surveys indicate Conn’s is on track to grow square footage in line with our +31% FY14 estimate. Furniture penetration appears as high as 75% at new locations.
 We are raising our price target from $53 to $63 using an equal blend of the peer group multiple, our sum-of-the-parts valuation, and our DCF valuation model.

Related articles

• Can Conns Beat These Numbers? (dailyfinance.com)

COMPANY DESCRIPTION:
Based in St. Paul, Minnesota, Ecolab is a leading international provider of advanced technologies and services helping to optimize the use of resources such as water, energy, food and the environment

PRICE TARGET TO $100
Investment recommendation

We find Ecolab very well positioned to benefit from the convergence ofpopulation growth, resource volatility and rapid industrialization across
the world. The company’s recurring services model drives high visibility (even in an uncertain macro environment), while the energy platform
looks positioned for strong earnings growth post Champion. Maintain BUY.
Investment highlights
 We recently attended the National Restaurant Association (NRA) show in Chicago, including an impressive booth tour with CEO Doug Baker and presentation from Global F&B President Jill Wyant.
 In short, from food and beverage “factories” all the way to the food court and fine dining, Ecolab offers a comprehensive portfolio of solutions to ensure food safety/regulatory compliance and optimize operational efficiency, among other benefits (environmental sustainability, etc.). Full details below.
 The commitment to innovation is clear (including recent product introductions and healthy pipeline), while the outlook for Nalco cross-selling stays encouraging (3D TRASAR for clean-in-place, etc.).
Valuation
Our 12 month target of $100 (from $93) equates to an EV/EBITDA multiple of ~11.8x from (~11.2x) our 2014 estimate.
Risks
Global macroeconomic conditions, seasonal sales patterns, commodity
costs, competition, regulatory dynamics and M&A integration

Related articles

• #NRAShow Ecolab Offers Top Cleaning, Sanitizing Solutions (osercommunicationsgroup.typepad.com)
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COMPANY DESCRIPTION:
The largest carrier-neutral Internet data center service provider in China, 21Vianet hosts customers’ servers and networking equipment and provide interconnectivity services. The company also provides managed network services through its data transmission network

Investment recommendation

We maintain our BUY rating and $15.00 price target following 21Vianet’s Q1/13 report that demonstrates its ability to sustain its growth
momentum and overcome some of the temporary disruptions from capacity upgrades. We believe that the incremental investments in new
data centers, network capacity and cloud computing, while temporarily dampening margins, will result in higher growth and profitability in 2H13
and beyond. Priced at 5.7x 2014E adj. EBITDA, the shares of VNET offers compelling risk/reward for investors, in our view.
Investment highlights
 Solid revenue, slightly soft margin on investments – Q1/13 revenue came in stronger than expected (RMB 435.7M vs. 433.3M CGe) with
slightly lighter-than-expected EBITDA (RMB 80.1M vs. 82M). We note that higher-than-expected operating costs were attributed to higher
bandwidth costs with greater network capacity and continued investments ahead of revenue contribution from cloud computing.
 Signs of hope from Q2/13 outlook – Although Q2/13 guidance is not as strong as we had hoped, it nonetheless confirms our view that the
disruption from recent capacity upgrade is now behind and that the company’s growth momentum is picking up again. Following two quarters of decelerating growth, we believe the change in trajectory  marks an important inflection point for investors.
 shift to higher MRR cabinets in large cities and revenue contribution from Microsoft cloud will likely improve both revenue and margins

English: Bombardier CSeries mockup Italiano: Modello dimostrativo del Bombardier CSeries (Photo credit: Wikipedia)

BBD.B : TSX : $4.64

Shares of Bombardier were higher after press reports indicated that EasyJet is on the verge of a large new order that may include BBD’s CSeries commercial jets. As reported by LesEchos, the British company, which reported a significant improvement in half-yearly results, is preparing a new giant order of more than 100 aircraft in the coming weeks, which would incorporate Airbus A320 or Boeing 737, as well as Bombardier CSeries. “Our future order will focus on Airbus or Boeing, but also on Bombardier,” said Carolyn McCall, Executive Director, at the presentation of the half-year results.

Recently, BBD reported its Q1/13 report where the company reiterated its 2013 and 2014 guidance.

Key points include: BBD expects 190 business jet deliveries, up from 179 in 2012, and 55 regional airliners, an increase from 50 units in 2012.
BBD’s Q1/13 business jet orders of only 27 units were on the low side.

Canaccord s Analyst David Tyerman think this is temporary. Management reiterated that it is cautiously optimistic about order prospects
given the company’s pipeline, especially in larger aircraft types. Regional airliner orders were very weak in Q1/13, with no regional jets ordered and only four turboprop orders secured. However, as with business jets, these orders are lumpy.

BBD continues to believe it has a good shot at larger U.S. airline orders as those airlines up-gauge smaller regional jets. In addition, the company is positioned to capture further orders from Garuda from option conversion and Russia, China and Africa hold some promise.

Related articles

• Bombardier Confirms CSeries June Target Amid Profit Increase – Bloomberg (bloomberg.com)
• Bombardier CSeries on track; adjusted profit rises (bnn.ca)

Jack in the Box (Photo credit: Wikipedia)

I’m All Right Jack ?

JACK : NASDAQ : US$36.82

Jack in the Box‘s second-quarter profit fell 39% as the restaurant operator posted weaker sales, and the year-earlier was boosted by a large gain on the sale of restaurants. For the quarter ended April 14, Jack in the Box reported a profit of $13.3 million, or 29 cents a share, down from $21.6 million, or 48 cents a share, a year earlier.

The latest period included a loss of three cents a share that was mainly attributable to refranchising, while the year-earlier period saw a 21 cents ashare gain from refranchising. Excluding such items and restructuring charges, operating earnings were 33 cents, up from 30 cents. Revenue declined 3% to $355.6 million. Analysts surveyed had projected a per-share profit of 31 cents and revenue of $359 million. Same-store sales rose 0.9% at Jack in the Box company restaurants and slipped 2% at Qdoba company restaurants.

The company in February anticipated same-store sales will be flat at Jack in the Box and flat to down 2% at Qdoba. Restaurant operating margin widened to 15.8% from 15.5%, as company restaurant costs decreased 5%.

For the year, Jack in  the Box lifted its operating earnings guidance for the year, now expecting $1.55-1.65 a share, compared to its earlier forecast of $1.48-1.63 a share.

Related articles

• Jack in the Box Beats on EPS But GAAP Results Lag (fool.com)

The improved global economy has helped to drive up the spending habits of consumers, and an area that has really benefited from the income creation is the travel sector.

Airlines around the world have reaped the benefits from the improved travel sector.

The airline sector is estimated to earn $10.4 billion in profits this year, up from the previous estimate of $8.4 billion, according to the International Air Transport Association (IATA). (Source: “Small Boost to Airline Profitability – Industry Profit Margin Improves to 1.6%,” International Air Transit Association web site, March 20, 2013.)

According to the IATA report, the top market in the airline sector is predicted to be the Asian-Pacific airlines, with estimates calling for $4.2 billion in net profits this year, up from $3.9 billion in 2012 and accounting for a 40.4% share of the total global airline sector.

The North American airline sector is also looking good, with profits estimated at $3.6 billion this year, well ahead of the $2.3 billion recorded in 2012.

Coming in third is expected to be the Middle Eastern airline sector, with $1.4 billion in profits, more than 50% higher than the $900 million in 2012.

The airline sector has been improving since the end of the recession. Lower fuel costs and increased bookings and travelling have helped to drive up the sector.

Take a look at the Dow Jones US Airlines Index  Notice the beautiful uptrend since November 2012 in correlation with the S&P 500 In the low-cost discount side, a carrier that I frequently fly with and like is JetBlue Airways Corporation (NASDAQ/JBLU). I have followed the stock for over a decade and continue to feel the company has what it takes to be a major player in the discount airline sector.

First formed in 1998, JetBlue Airways is a discount air carrier serving markets in the United States, Puerto Rico, and Mexico; along with 10 countries in the Caribbean and Latin America region. JetBlue offers services to 77 cities via 800 daily flights.

In April, the airline’s key revenue passenger miles reading came in at 11.5 million for an 83.8% load factor, up 6.8% year-over-year. (Source: JetBlue Airways Corporation, last accessed May 16, 2013.)

Following a decline in revenues from 2008 to 2009, JetBlue came back with growth in 2010 to 2012 and Thomson Financial estimates call for the growth to continue in 2013 and 2014.

For more of a global airline sector play, United Continental Holdings, Inc. (NYSE/UAL) is worth a look. The company formed from the merger of Continental Airlines and United Airlines in 2010.

United Continental offers around 5,446 flights daily to 370 airports on six continents.

Revenues are predicted to rise three percent to $38.3 billion this year, followed by $39.7 billion in 2014, up 3.9% year-over-year.

Related articles

• The American/US Airways Merger Solves Nothing (beta.fool.com)
• The Results Are In, And Airline Revenues Are Growing (forbes.com)