$NFLX: Bulls will continue to bet on Netflix, Barron's says
Jan 25 at 14:14
As long as Netfilx continues to deliver on subscriber additions, bulls
will keep betting on it, Barron's contends in its Technology Trader column.
$URBN: Urban Outfitters could rise over 30% in FY14, Barron's says
Jan 25 at 12:51
Urban Outfitters stock could gain over 30% in FY14 if the company can
improve merchandizing of the core brand, while building on the momentum of
Anthropologie and Free People brands, Barron's contends in a feature article.
$DB $DBK: European Trader: Deutsche Bank's Housecleaning -- Barron's
Jan 25 at 00:06
Deutsche Bank investors had a rocky start to the week after the German
bank surprised them with a hefty fourth-quarter loss instead of the healthy
profit most had expected. Its shares fell over 5% on Monday after it said
various charges and weaker-than-expected earnings from its investment bank
caused a 1 billion euros ($1.37 billion) loss for the quarter compared with
consensus forecasts of nearly 700 million euros in profit.
Despite the toxic headlines, a number of fund managers and analysts
believe Deutsche Bank ( (ticker: DBK.Germany) offers plenty of upside. Its stock
currently trades at a discount to book value of around 30% even after enjoying a
mini-rally that drove it up more than 13% in the first two weeks of the year.
Daniel Pasini, a portfolio manager with London-based ACPI Investment
Managers, attributes the discount to long-standing worries about the bank's
capital strength, some potentially costly legal tangles, and its need to trim
its enormous balance sheet. Pasini reckons Deutsche Bank is likely to fare
better this year than it did in 2013 and that investors will see its stock
price's discount to book value steadily narrow. "Gradually, attention should be
drawn to the bank's improving earnings performance and its success in shedding
underperforming assets," he says.
Investors should see this loss as prudent housecleaning that will position
Deutsche Bank for years. Like most big European banks, it has been trimming its
balance sheet, shedding assets, and refocusing on core activities. Pasini thinks
the bank cut its risk-weighted assets by 11% last year to 301 billion euros
and should continue through 2014.
Reducing its balance sheet eases pressure to raise more regulatory
capital. At the same time, its written-down noncore assets may be gaining value,
offering potential for further gains. Some analysts believe Deutsche Bank has
pre-empted possible demands from European regulators. That could explain why the
bank set aside 689 million euros worth of new provisions against bad loans
just as the euro zone appears to be picking up. Regulators expect to complete an
investigation into euro-zone banks later this year that could force some to
increase their defenses against souring loans.
Deutsche Bank for years disputed analyst claims that it needed to raise
more capital. Last year it moved to put those concerns to rest by issuing almost
3 billion euros worth of new shares. It now boasts a Basel 3 fully loaded
capital ratio of 9.7%, within spitting distance of the 10% it will need by the
end of 2015. When that occurs, investors are likely to be rewarded with a full
Meanwhile, Deutsche Bank earnings will benefit if the euro zone's nascent
recovery gains momentum. The European Central Bank's monetary policy may help.
ECB Governor Mario Draghi is giving forward guidance on monetary policy by
saying the ECB plans to keep interest rates at historic lows for an extended
period. Deflationary risks have led to speculation that the ECB could dip into
the uncharted territory of negative rates or engage in an asset-purchasing
program like the Federal Reserve.
Citi analyst Kinner Lakhani rates Deutsche Bank at Buy with a 45 euros
target price. Bank of America Merrill Lynch analyst Michael Helsby agrees, with
a 44 euros target. He says litigation costs will continue to be a drain in
2014 but could be offset by cost savings. The stock closed at 36.80 euros