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The Morning Brief: Bank Raises Price Targets on Hedge Fund Favorites
Credit Suisse raised its price target on two of the hottest hedge fund stocks.
The investment bank lifted its target on the “A” shares of Alphabet (Google) from $850 to $900, noting that the company “recalibrated” its “product-by-product forecast model” to include contributions from YouTube Red, a paid subscription service. “While the initial investor reaction may be to dismiss the product, with over one billion users already on YouTube, we calculate that even a low-single-digit percentage rate conversion from free ad-supported to paid subscription will allow Google to monetize users” at a rate that is 10 times a measure used from advertising, Credit Suisse adds in a note. The stock climbed 1.7 percent, to close at $745.34.
On Tuesday Credit Suisse also increased its price target on Amazon.com from $777 to $800, “following extensive work to separate out the financial statements” for Amazon Web Services from the core e-commerce franchise, according to a separate note. The investment bank also increased its 2015 earnings per share estimate. The stock closed at $617.89.
Jeffrey Smith’s Starboard Value sold 1.3 million shares of Darden Restaurants, cutting its stake in the Lakeland, Florida-based operator of Olive Garden, LongHorn Steakhouse and other casual dining restaurants by 11 percent, or 8.1 percent of the total outstanding. In 2014, the New York activist hedge fund firm famously won its proxy fight with the company, replacing the entire board with its own slate of 12 directors. In a regulatory filing disclosing the stock sales, Starboard says it unloaded the shares to rebalance its portfolio “in light of the significant appreciation” in Darden’s stock price since it made its initial 13D filing in December 2013. Starboard adds that it plans to remain a large shareholder and that Smith continues to serve as chairman “and an active member” of the company’s board of directors.
Shares of Etsy sank to a new all-time low, closing Tuesday at $7.35. Chase Coleman’s Tiger Global Management is one of the largest investors in the Brooklyn, New York-based online retailer geared toward arts-and-crafts makers.
David Stemerman’s Conatus Capital Management is undergoing some management changes. President Kevin Burke left the Greenwich, Connecticut-based firm at the end of last year, according to a Reuters report. Meanwhile, Julie Trent was named chief operating officer after joining the firm late last year as head of marketing and investor relations. She previously worked for Julian Robertson’s Tiger Management. In addition, John Cunningham was tapped as chief financial officer, a position he previously held at Two Sigma Investments, according to the report. The firm currently manages $2 billion after running as much as $3 billion two years ago. Last year, the firm raised more than $160 million for Conatus Long Opportunities Overseas Fund. In a regulatory filing, Conatus said the new long-only fund would invest in the same longs as those found in its long-short fund, Conatus Capital Overseas, although it may determine that certain investments held in the long-short fund are “not appropriate” for the long-only fund. The long-short fund lost a little money in 2014. But, it was up in the low teens last year, according to Reuters. Stemerman founded Conatus in 2007. He previously worked for Stephen Mandel Jr.’s Greenwich, Connecticut–based Lone Pine Capital.