HALISTER: BARRON’S ROUNDUP: Bullish on Regeneron; Retailers May Rebound

BARRON’S ROUNDUP: Bullish on Regeneron; Retailers May Rebound

(Bloomberg) -- Biotechnology company Regeneron (REGN), down 38% from its August 2015 peak amid an industry selloff, is poised to rebound as it adds as many as three new blockbuster drugs by 2020, Barron’s reports in its May 16 edition.
  • Regeneron develops its therapies in-house, unlike many of its competitors that grow through M&A; the shares, which closed Friday at $369.46, could rebound 35% to $500 over the next year, Barron’s said.
  • A partnership with French drugmaker Sanofi, which reimburses Regeneron for cost of developing drugs using technology based on mouse genetics, removes financial risk for investing in research while allowing for a generous share of the profits from new drugs.
  • Eylea, a Regeneron eye drug, may add billions in new revenue by the end of the decade because it’s as effective as other treatments even when used less frequently, allowing it to take market share from other drugs for a range of diseases, RBC Capital analyst Adnan Butt said.
  • Insurance providers may begin approving use of cholesterol- reducing Praluent as new data shows the drug leads to fewer deaths from heart disease, adding billions to revenue in coming years, Barron’s said.
Other highlights from this week’s Barron’s (subscription required):
  • Retail stocks have dropped after weak first-quarter earnings, setting the stage for a recovery, Barron’s reported. Burlington Stores (BURL) could rise 23% as stores improve productivity, while Nordstrom (JWN) could rebound to $44 from Friday’s $39.16 and Macy’s (M) to the $40s from its current $31.22. Barron’s is bearish on Ralph Lauren (RL), despite cost cutting and a better-than-expected earnings report last week.
  • Nexstar Broadcasting Group (NXST), a television station owner that plans to merge with Media General, could surge 40% from Friday’s close of $49.32, Barron’s said. The company may generate average annual free cash flow of $539 million in 2016-2017, indicating the shares could be worth $70, Benchmark analyst Daniel Kurnos said.
  • Office Depot (ODP) shares look cheap after they plunged following the collapse of a planned merger, Barron’s reported. The office-supply company could use its $250 million breakup fee from the failed Staples deal to buy back stock, Aston/Fairpoint money manager Thyra Zerhusen says. Goldman Sachs analyst Matthew Fassler recently cut his price target to $5.80, though that’s still almost 60% above Friday’s close of $3.68.
  • Axalta Coating Systems (AXTA), which makes paints for cars and trucks, could be worth $35 a share, 25% more than its current price, Barron’s said. Earnings before interest, taxes, depreciation and amortization is poised to grow 19% by the end of 2017 with improvements in efficiency, RBC Capital Markets analyst Arun Viswanathan said.
  • Alleghany (Y), a property and casualty insurer, trades at only a small premium to book value and a discount to peer Markel (MKL), Barron’s reported. The shares, currently about $525, should rise almost 20% to $625 in a year if book value continues to grow.
  • Investors face another six months of unsettled conditions before the U.S. presidential election. Bespoke Investment Group has observed an “uncanny correlation” between the movement of the S&P 500 index and the probability of a Democratic candidate winning in November, as tracked by the Iowa Electronic Markets. When bets on a Democratic win fell at midweek to 62% from 74%, it was the Iowa index’s biggest one-day drop of the year.
  • Eaton’s (ETN) Sandy Cutler, who’s retiring from the industrial-products company after 15 years as CEO, says the U.S. will avoid recession but faces slow growth because of high debt levels, Barron’s said. Cutler argues the U.S. must reduce government debt of $19 trillion, or else within 15 to 20 years federal tax revenue will cover only interest payments, Medicaid, Medicare and Social Security.
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
REGN US (Regeneron Pharmaceuticals Inc)
Y US (Alleghany Corp)
AXTA US (Axalta Coating Systems Ltd)
BURL US (Burlington Stores Inc)
ETN US (Eaton Corp PLC)

People
Adnan Butt (RBC Capital Markets)
Alexander Cutler (Eaton Corp PLC)
Arun Viswanathan (RBC Capital Markets)
Daniel Kurnos (Benchmark Co LLC)
Matthew Fassler (Goldman Sachs Group Inc/The)

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