Merrill Lynch analysts chimed in today on domestic airline giant American Airlines Group Inc (NASDAQ:AAL) and security software maker Palo Alto Networks Inc (NYSE:PANW), with mixed ratings. While one analyst lowers his EPS estimates for AAL, the other sees impressive growth and margin expansion in PANW. Let’s take a closer look.
American Airlines Group Inc
Merrill Lynch’s Andrew Didora reiterated a Neutral rating on shares of American Airlines, with a price target of $45, after the company announced that it will provide a profit sharing program to employees to better align pay with its peers and improve employee morale as it integrates the airline.
Didora noted, “AAL is the last of the major carriers to offer such a plan, which will be paid out at 5% of pre-tax income. While this is a positive step to improving employee relations, it is another example of the industry-wide labor inflation we cited in our Year Ahead report.” The analyst added, “We are lowering our 2016 and 2017 EPS estimates by 5% to $7.09 and $7.02, respectively.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Andrew Didora has a yearly average return of -5% and a 30% success rate. Didora has a -12% average return when recommending AAL, and is ranked #2830 out of 3809 analysts.
Out of the 9 analysts polled by TipRanks (in the past 3 months), 8 rate American Airlines stock a Buy, while 1 rates the stock a Hold. With a return potential of 26%, the stock’s consensus target price stands at $51.17.
Palo Alto Networks Inc
Merrill Lynch’s Tal Liani was out pounding the table on Palo Alto Networks Thursday, reiterating a Buy rating and price target of $210, which implies an upside of 35% from current levels.
Liani wrote, “The company’s technical advantages, platform strategy, and go-to market investments are driving displacements, larger deployments and solid financial performance. We expect the strong momentum to continue, driven by share gains in the high-end from new products, rising subscription adoption, high renewal rates, and growing contribution from new solutions like Traps, Aperture, and Autofocus, which are expanding the total addressable market (TAM). Our PO of $210 is based on 28x the normalized CY17 EV/FCF, which we think is attractive given the growth profile, market share gain momentum, and our expectations for 61% and 41 % FCF growth in 2016/17, respectively.”
According to TipRanks.com, analyst Tal Liani has a yearly average return of 1% and a 48% success rate. Liani has a 5% average return when recommending PANW, and is ranked #1627 out of 3748 analysts.
Out of the 37 analysts polled by TipRanks, 34 rate Palo Alto stock a Buy, while 3 rate the stock a Hold. With a return potential of 26%, the stock’s consensus target price stands at $195.53.