It’s
not
just
US
that
does
catchy
group
names.
The
“Magnificent
Seven”
is
made
up
exclusively
of
US
tech
stocks, but
Europe’s
GRANOLAS
offer
their
own
benefits
through
smaller
market
caps,
diversification,
profitability,
and,
on
average,
cheaper
valuations.
In
2020,
investment
bank
Goldman
Sachs
released
its
first
iteration
of
the
GRANOLAS,
an
acronym
for
the
following:
• GSK
(GSK)
•
Roche
(ROG)
•
ASML
(ASML)
•
Nestle
(NESN)
•
Novartis
(NOVN)
•
Novo
Nordisk
(NOVO
B)
•
L’Oreal
(OR)
•
LVMH
(MC)
•
AstraZeneca
(AZN)
•
SAP
(SAP)
•
Sanofi
(SAN)
As
these
companies
report
their
Q2
and
half-year
results,
Morningstar
analysts
will
be
updating
their
assessments
of
how
attractive
each
share
is
to
investors.
Novartis:
Diverse
Drug
Portfolio
with
a
Strong
Cash
Flow
Pipeline
• Fair
Value
Estimate:
CHF
96.00
• Morningstar
Rating:
★★★
•
Morningstar Economic
Moat
Rating:
Wide
•
Morningstar Uncertainty
Rating:
Medium
Analyst:
Damien
Conover,
sector
director,
Morningstar
Novartis’
(NOVN)
earnings,
released
on
July
18,
beat
analyst
expectations
with
operational
sales
growing
11%
and
sales
of
key
drug
Entresto
up
28%.
The
company’s
share
price
however
fell
slightly,
but
overall,
Novartis
is
still
up
17%
this
year.
We
are
holding
steady
to
our
$105/CHF
96
fair
value
estimate
(ADR/local
share
class)
following
solid
second-quarter
results
that,
although
slightly
ahead
of
our
projections,
were
not
enough
to
move
the
valuation.
We
believe
the
market
is
appropriately
valuing
the
stock,
with
a
balanced
view
of
the
strength
of
the
pipeline
offsetting
patent
losses,
setting
up
moderate
growth
over
the
next
three
years
while
also
supporting
a
wide
moat
over
the
long
term.
LVMH:
Growth
to
Slow,
Fair
Value
Maintained
• Fair
Value
Estimate:
€670.00
• Morningstar
Rating:
★★★
•
Morningstar Economic
Moat
Rating:
Wide
•
Morningstar Uncertainty
Rating:
Medium
Analyst:
Jelena
Sokolova,
senior
equity
analyst,
Morningstar
LVMH’s
(MC)
share
price
fell
4%
when
the
company
published
its
half
year
earnings
on
July
23.
The
luxury
sector
is
facing
weakening
demand
with
the
less
affluent
developed
market
consumers
being
particularly
hit.
However,
sales
to
Chinese
nationals
is
up
about
10%
and
Morningstar
argues
that
demand
in
the
country
has
pent-up
upside
potential.
Sales
for
the
group
increased
3%
in
local
currencies
(and
were
down
with
a
4%
currency
headwind).
Sales
for
its
most
profitable
and
largest
division,
fashion
and
leather
goods,
came
at
2%.
Revenue
growth
for
fashion
and
leather
goods
was
price-driven,
with
mix
and
volumes
largely
offsetting
each
other.
We
are
maintaining
our
fair
value
estimate
of
€670
for
wide-moat
LVMH
as
the
company
reported
an
expected
slowdown
in
growth
trends
in
the
first
quarter.
We
view
shares
as
modestly
overvalued
at
current
levels.
ASML:
Shares
Hit
by
US
Restriction
Concerns
• Fair
Value
Estimate:
€900.00
• Morningstar
Rating:
★★★
•
Morningstar Economic
Moat
Rating:
Wide
•
Morningstar Uncertainty
Rating:
High
Analyst:
Javier
Correonero,
equity
analyst,
Morningstar
ASML
(ASML)
reported
sales
and
gross
margins
slightly
above
guidance
in
Q2,
at
€6.24
billion
and
51.5%,
respectively.
The
company
reported
on
July
17
while
simultaneously,
reports
of
potential
US
restrictions
on
chip
sales
to
China
broke,
and
the
company’s
(and
other
semiconductor
companies’)
share
price
fell.
ASML
reiterated
its
long-term
guidance,
which
will
be
updated
in
the
November
capital
markets
day.
Our
long-term
forecasts
are
at
the
high
end
of
management’s
2030
guidance.
Although
we
don’t
discard
incremental
trade
restrictions
for
ASML,
a
heavy
crackdown
is
not
our
base
case,
and
we
are
maintaining
our
€900
fair
value
estimate.
Even
if
more
ASML
systems
are
targeted,
we
expect
China
will
continue
ordering
nonrestricted
DUV
machines
at
high
levels
and
exploit
any
loopholes
in
the
supply
chain.
If
the
US
wants
to
effectively
curb
China’s
advancements,
it
would
also
need
to
focus
on
other
technologies
beyond
lithography
such
as
advanced
packaging,
deposition
or
etching
equipment,
among
others.
SAP:
Fair
Value
Hiked,
Customer
Retention
Risk
• Fair
Value
Estimate:
€141.00
• Morningstar
Rating:
★
•
Morningstar Economic
Moat
Rating:
Narrow
•
Morningstar Uncertainty
Rating:
Medium
Analyst:
Julie
Sharma,
equity
analyst,
Morningstar
SAP
reported
a
solid
second
quarter
on
July
22,
with
broad-based
growth
and
cloud
revenue
continuing
to
increase
forcefully.
Total
revenue
in
the
quarter
was
€8.3
billion,
marking
a
10%
year-over-year
increase
in
constant
currency.
The
firm
stressed
that
60%
of
its
RISE
with
SAP
customers
were
net
new.
However,
we
continue
to
view
this
stat
as
a
risk,
as
it
implies
a
substantial
base
of
existing
customers
that
could
churn
off
SAP
when
moving
to
the
cloud.
With
earnings,
SAP’s
roadmap
for
margin
expansion
showed
more
promise
with
detailed
internal
artificial
intelligence
directives
and
commentary
on
streamlining
their
digital
marketing.
As
a
result,
this
increased
our
fair
value
estimate
to
€141
per
share
from
€132.
We
have
moderately
raised
our
midcycle
operating
margin
assumptions
based
on
a
more
precise
roadmap
for
operational
efficiencies.
Despite
our
fair
value
adjustments,
we
view
the
stock
as
overvalued
–
as
we
believe
SAP’s
ERP
market
share
will
continue
to
decline
due
to
fiercer
competition
from
the
likes
of
Workday.
This
article
will
be
updated
as
fresh
earnings
results
arrive
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