Consumer Products

Canaccord Genuity Ups Ratings on Playboy, BlackBerry, Illumina 

Analysts at Canaccord Genuity came out Wednesday morning with two rating upgrades, along with initiating coverage with a Buy rating on a third company. Each company operates in a different sector and the analysts see huge upside in one name in particular.

Playboy

Saying that “Playboy is one of the most recognized yet undervalued brands in the world,” Canaccord analyst Austin Moldow initiated coverage on PLBY Group Inc. (NASDAQ: PLBY) with a Buy rating and a price target of $28. PLBY stock closed at $17.40 on Tuesday and traded up more than 7% at $18.66 Wednesday morning.

Moldow says that investors need to “dispel” the notion that PLBY is a media company. Playboy magazine shut down last year. The company is, instead, a consumer products firm through a variety of licensing arrangements and, more recently, a direct-to-consumer (DTC) e-commerce business. In fact, Moldow expects that the DTC business “will drive the majority of growth going forward.”

PLBY’s contracted future cash flow from its licensing business is calculated to be around $375 million, a “solid baseline” from which the company can invest in its DTC channel. Canaccord estimates that revenue will grow at an annual rate of 17% through 2025 and estimates 2021 revenue at $205 million, slightly ahead of the consensus estimate, and reckons 2025 revenue will reach $322 million, about 12% above guidance of around $300 million.

Canaccord values PLBY at $28.00, based on 25 times a 2022 adjusted EBITDA estimate of $49 million. Based on Tuesday’s closing price, the potential upside on PLBY stock is a whopping 61%.

Illumina

According to Canaccord Genuity’s Max Masucci, genetic and genomic analysis firm Illumina Inc. (NASDAQ: ILMN) is the “dominant technology enabler” in the emerging field of genomics. Without the company’s technology, “at least $100 billion of genomic-based company market cap wouldn’t exist.” He mentions specifically companies such as Guardant Health, Natera and Adaptive Biotechnologies. Illumina’s market cap is around $53 billion.

Masucci raised his rating on the stock from Hold to Buy and raised his price target from $410 per share to $445. At Tuesday’s closing price of nearly $369, the new price target implies upside potential of 20.6%. The consensus price target is around $413.

Illumina trades at a discount of 35% to peers like Thermo Fisher, 10x Genomics, NanoString and Pacific Biosciences. Masucci thinks that’s “fair, given that [Illumina’s] 17% to 20% FY’21 revenue growth guidance is likely below the average revenue growth” of these higher growth peers.

Last September, Illumina announced that it had agreed to purchase GRAIL, a health care company focused on early cancer detection, for $8 billion. Shares plummeted by almost 25% before roaring back to add 43% between mid-September and mid-February. Over the past six weeks, the stock has plunged 27%. Basically, Canaccord sees an opportunity for medium-term to long-term investors to buy Illumina stock at a low price with an expectation of a 20% return in 12 months.

The stock traded up 4% at $383.71 in the late morning Wednesday, in a 52-week range of $251.14 to $555.77.

BlackBerry

When BlackBerry Ltd. (NYSE: BB) reported fourth-quarter 2021 and full fiscal year results late Tuesday, the company missed quarterly and full-year revenue estimates. According to Canaccord Genuity analyst T. Michael Walkley, the miss was “primarily driven by licensing headwinds due to ongoing negotiations for the sale of part of its mobile device patent portfolio.”

Because BlackBerry was negotiating the sale of these patents, it couldn’t license them to other parties. If and when the company reaches an agreement for the sale of its patent portfolio, Walkley believes “this could help unlock value and provide a capital infusion to drive accelerated software and services growth.” On that basis, Canaccord lifted its rating on the shares from Sell to Hold and lowered its price target from $10 to $9, some 3.6% below Tuesday’s closing price.

BlackBerry stock was among those caught up in January’s frantic bidding war. The stock spiked to a 52-week high of nearly $29, after a 10-month stretch of trading at around $6.00. In mid-February, Walkley dropped his rating on the stock from Hold to Sell while raising his price target from $8 to $10 a share.

Now, Walkley is upbeat on the potential for BlackBerry’s QNX software platform, which currently is embedded in some 176 million vehicles worldwide. As automobile computing architectures become more rational, dropping from some 60 to 100 control units to around 10 or 12 domain control units, Walkley sees a ” revenue opportunity for QNX per auto to potentially increase ~2-3x or more.” That said, Canaccord still expects new vehicle sales to decline for the next several quarters and “continue[s] to model QNX with a slow and gradual recovery.”

BlackBerry also struck a deal in December with Amazon to use the e-commerce giant’s AWS cloud service to access and analyze vehicle sensor data for third-party use. Canaccord sees this “as a longer-term positive for the company barring any operational setbacks and believe[s] it can meaningfully increase software revenue per vehicle opportunities as this new opportunity scales.” The platform is expected to be ready in time for model year 2023 vehicles.

On Wednesday, however, BlackBerry stock traded down about 10% to around $8.40, in a 52-week range of $3.18 to $28.77. The consensus price target on the stock is $7.69.