Citigroup’s Top 3 Long Picks for 2014
Citigroup’s analysts have come up with their top stocks with a Buy rating for 2014, with Gilead Sciences leading the list
Analysts from Citigroup Inc (C) handpicked 50 stocks from the pool they cover, to select their long picks for the year. For the final line-up, a stock was judged on the following criteria— 1) global footprint measured by revenue generated outside the home market 2) market capitalization of at least $3 billion and 3) must be amongst the top three players by market share in their business.
Citigroup analyst, Robert Buckland, Robert Garlick, and their global equities research team said the selected companies have “leading business models and market share.” Citi analysts also looked at the companies’ historical financial performance and estimated earnings and revenues for the next two years.
Bidness Etc takes a look at the top 3 companies from the list.
The Blackstone Group L.P.
The Blackstone Group L.P. (BX) reported revenues of $6.89 billion for FY13, an increase of 64% year-over-year (YoY). Revenues are expected to decline 3.5% in FY14 to $6.6 billion. Earnings were up 72% over the last one year to $3.23 and are expected to increase 3.2% in FY14. Blackstone’s profit-before-provisions expanded by 21.3 percentage points to 45.4% and is expected to grow a further 13.8 percentage points to 59.2% in FY14. Citi’s target price for the company is $40.
Citi analyst William Katz said, "BX looks well positioned to capitalize on an improving macro environment, particularly across PE and RE, the latter where BX's platform is among the strongest in the business, we believe."
Facebook Inc (FB) generated revenues of $7.9 billion in FY13, an increase of 55% over the last one year while revenues are expected to increase 50% in FY14 to $11.8 billion. The social media giant recorded earnings of 60 cents per share in FY13, an increase of 15.4% YoY. Earnings are expected to increase 138% in FY14 to $1.43 per share. The company’s gross margins expanded by 3 percentage points last year to 76.2% and are expected to further expand 3.9 percentage points to 80.1% in FY14. Citi’s target price for Facebook is $85.
Citi analyst Mark May said: "Facebook has over a notably short period emerged as a clear global leader with significant potential given 1) its large, global and engaged audience; 2) its significant user profile and preference data asset; and 3) its relevance in the increasingly mobile-centric Internet universe. And, importantly, we see an opportunity for further growth and share gains as the company leverages its existing global user scale, identity-based data asset, >1mm advertiser base, and technical/product development capabilities to enhance existing business and expand into natural adjacencies."
Gilead Sciences Inc
Gilead Sciences, Inc. (GILD) saw its revenues increase by 15.5% in FY13 to $11.2 billion. Analysts expect revenues to increase 93% in FY14 to $21.6 billion. Adjusted earnings for the company came in at $1.91 per share last year, an increase of 10.4% YoY. For FY14, earnings are expected to increase almost 218% to $6.07 per share. The company’s gross margins remained flat in FY13 at 74.5%. Going forward, it is expected that the biotech company will see its gross margins expand by 8.8 percentage points to 83.3% in FY14. Citi’s target price for Gilead is $96.
Citi analyst Yaron Werber said: “Gilead is positioned to be the dominant player in the lucrative hepC market with a backdrop of a leading HIV franchise and a growing oncology franchise. We believe that Gilead will generate a significant amount of cash and will do (1) stock buybacks, (2) product/company acquisitions to grow its pipeline, and (3) potentially start giving a dividend in 2-3 years as means to bolster its stock."