Raymond James is unsure that an activist investor’s ideas for Dollar Tree, Inc. (NASDAQ: DLTR) are going to work.

The Analyst 

Analyst Dan Wewer maintained an Outperform on Dollar Tree.

The Thesis 

Dollar Tree has prominent signs right on its store fronts proclaiming “Everything’s $1.” 

But the investor, hedge fund Starboard Value LP, wants Dollar Tree to explore changing that pricing structure and consider selling items that are more than $1, according to a Monday in The Wall Street Journal. Starboard also wants Dollar Tree to sell off its Family Dollar-branded stores, which have seen weak sales since being acquired by Dollar Tree more than three years ago, the Journal reported.

Wewer questioned both of Starboard’s ideas in a Monday note. 

Dollar Tree tested higher pricing about 12 years ago, trying out sales of items up to $5 in some stores. It didn’t work, the analyst said. 

“Dollar Tree quickly learned the multi-price strategy confused its customers and led to disappointing results.” 

Wewer did say Dollar Tree could try pricing adjustments. 

“Although we are skeptical of higher price points leading to stronger same-store sales for Dollar Tree (already an industry leader), we could be wrong,” he said, adding that offering items up to about $3 might be worthwhile.

Selling Family Dollar is a more difficult prospect due to the challenge of finding a buyer, the analyst said. 

The company’s main competitor Family Dollar isn’t a likely candidate, as government regulators would probably block such a deal, Wewer said.

That’s especially true because the sector is important to low-income customers, he said. 

Dollar General is the only viable strategic buyer, but if the government were to require it to divest a large number of stores, it wouldn’t make financial sense, the analyst said. 

Selling Family Dollar to a financier is more likely, but brings problems of its own, Wewer said.

“Although valuation is cheap enough to garner interest from private equity firms, we are concerned that potentially leveraging Family Dollar’s

Oracle Corporation (NYSE: ORCL) founder Larry Ellison is digging his claws deeper and deeper into his latest project.

What Happened

At the time of his appointment last month to the Tesla Inc (NASDAQ: TSLA) board, Ellison disclosed ownership of 3 million company shares, according to an SEC filing.

Tesla has long been his second-largest investment, but there’s little stopping him from making it his first. Ellison’s now $1 billion in shares represents a mere sliver of his $51.4 billion in wealth.

Why It’s Important

Even with his stake, Ellison is far from the firm’s largest shareholder. CEO Elon Musk still holds that title with 33.7 million shares — the most of any individual or institutional investor.

With 20 percent of the company, Musk’s superior investment, and his intended expansion of that position, ensures his continued influence over the automaker even as regulatory agents and some insiders seek to diminish his role.

Ellison’s swelling stake may prove of further importance to Musk in this time of vulnerability. The board member has been a close friend and ardent defender of Musk and Tesla in the wake of criticism.

What’s Next

Ellison’s intentions for the board and Tesla are not known, and neither are his ownership goals.

At time of publication Tuesday morning, Tesla traded up 2.7 percent at $344 per share.

Related Links:

Ives, Munster Like Tesla’s New Board Members

Tesla Names Oracle’s Larry Ellison, Walgreens’ Kathleen Wilson-Thompson To Board

Larry Ellison photo by Oracle via Wikimedia. 

Here’s a roundup of top developments in the biotech space over the last 24 hours.

Scaling The Peak

(Biotech Stocks Hitting 52-week highs on Jan. 7)

• Axsome Therapeutics Inc (NASDAQ: AXSM) (reported positive results for a mid-stage study of drug to treat major depressive disorder)
• China SXT Pharmaceuticals Inc (NASDAQ: SXTC)
• Loxo Oncology Inc (NASDAQ: LOXO) (agreed to be acquired by Eli Lilly And Co (NYSE: LLY)

Down In The Dumps

(Biotech Stocks Hitting 52-week lows on Jan. 7)

• AxoGen, Inc Common Stock (NASDAQ: AXGN)(fell in reaction to preliminary Q4 results)
• Diplomat Pharmacy Inc (NYSE: DPLO) (lowered FY18 revenue guidance and issued a not-so-encouraging FY19 guidance)
• La Jolla Pharmaceutical Company (NASDAQ: LJPC)
• Scpharmaceuticals Inc (NASDAQ: SCPH)

Stocks In Focus

Meridian Bioscience Expects Below-consensus Revenues For Q1

Meridian Bioscience, Inc. (NASDAQ: VIVO) expects a 2 percent year-over-year drop in Q’19 revenues to $51 million to $51.5 million, weighed down by weakness in Diagnostics segment. This is below the $53.5 billion consensus estimate.

The stock shed 6.4 percent to $15.50 in after-hours trading.

Illumina Announces Positive Guidance At JP Morgan Healthcare Conference

Presenting at the JPMorgan Health Care conference, Illumina, Inc. (NASDAQ: ILMN)’s CEO Francis deSouza said 2018 revenues grew 21 percent year-over-year to $3.3 billion, with Q4 revenues at $865 million, 11 percent growth. The results compared favorably to estimates. The company expects 2019 revenues to be more backend loaded, with revenues estimated at $3.76 billion to $3.8 billion and non-GAAP EPS at $6.50-$6.60. The consensus estimates call for revenues of $3.81 billion and non-GAAP EPS of $6.37.

Following a down year in 2018, investors could seek out bargains that offer the highest growth potential. Baird sees education technology company 2U Inc (NASDAQ: TWOU) as one such opportunity.

The Analyst

Analyst Jeffrey Meuler maintained an Outperform rating on 2U with an $80 price target, suggesting about 50-percent upside potential.

The Thesis

2U’s share price undervalues its portfolio and contract structure as well as its market position and capabilities, Meuler said in a Monday note.

The company exited 2018 with 48 operating programs, with an incremental 16 programs due for launch in 2019, the analyst said. 

The implied target of $5.5 million-$6 million per program per year adjusted EBITDA at a “steady state” is achievable, Meuler said. This suggests the company’s 24 programs that are more than two years old are likely to generate over $135 million in adjusted EBITDA in coming years, he said. 

“We also believe 2U is well-positioned to sell additional graduate programs, short courses and potentially new services as a preferred provider for universities, and by leveraging its existing attractive client base.” 

2U is likely to see sustained strong 30-percent-plus organic growth with attractive unit economics, the analyst said. Current challenges are client-specific and are not directly caused by 2U, he said. 

Baird sees the following as being sources of competitive advantage and differentiation for the company: 

• Technology capabilities.
• The MPV marketing efficiency benefits of its portfolio.
• Clinical placement capabilities and relationships.
• Services and support.

The Price Action

2U shares were down 0.34 percent at $53.12 at the time of publication Tuesday.

Related Links:

For-Profit Education Stocks Could Be Back In Play As Trump May Scrap Obama-Era Rules

Fed Chair Powell: ‘We Will Be Patient’

Companies Reporting Before The Bell

• Commercial Metals Company (NYSE: CMC) is projected to report quarterly earnings at $0.36 per share on revenue of $1.33 billion.

• BMO Capital raised the price target for Nokia Oyj (NYSE: NOK) from $5 to $7.50. Nokia shares closed at $5.57 on Thursday.
• Goldman Sachs lowered the price target for Fortinet Inc (NASDAQ: FTNT) from $95 to $59. Fortinet shares closed at $67.57 on Thursday.
• RBC Capital cut United Technologies Corporation (NYSE: UTX) price target from $139 to $119. United Technologies shares closed at $103.48 on Thursday.
• UBS lowered FedEx Corporation (NYSE: FDX) price target from $205 to $171. FedEx shares closed at $157.19 on Thursday.
• RBC Capital cut the price target for SPX Flow Inc (NYSE: FLOW) from $35 to $27. SPX Flow shares closed at $29.79 on Thursday.
• Citigroup cut the price target for Apple Inc. (NASDAQ: AAPL) from $200 to $170. Apple shares closed at $142.19 on Thursday.
• RBC Capital lowered the price target on Emerson Electric Co. (NYSE: EMR) from $68 to $61. Emerson Electric shares closed at $58.46 on Thursday.
• Goldman Sachs cut the price target for Snap Inc (NYSE: SNAP) from $10 to $6. Snap shares closed at $5.68 on Thursday.
• Barclays cut the price target on Avanos Medical Inc (NYSE: AVNS) from $59 to $36. Avanos Medical shares closed at $41.49 on Thursday.
• Nomura lowered Skyworks Solutions Inc (NASDAQ: SWKS) price target from $100 to $70. Skyworks shares closed at $60.72 on Thursday.

Fortinet Inc (NASDAQ: FTNT) investors missed out on the market rally on Friday after the stock got a high-profile Wall Street downgrade.

The Analyst

Goldman Sachs analyst Gabriela Borges downgraded Fortinet from Buy to Sell and lowered her price target from $95 to $59.

The Thesis

According to Borges, after a 7-percent upward revision to 2019 Wall Street revenue estimates, a 41-percent upward revision to EPS estimates and a 50-percent gain in share price, the bullish catalysts are likely all played out for Fortinet stock in the near term.

“An elevated multiple relative to history and peers, coupled with the likelihood of decelerating product revenue over the next two years, suggests that at best, upside is priced in, and at worst, any volatility in estimates may also drive multiple compression,” Borges wrote in a note.

Borges said the current firewall refresh cycle may be peaking, and Fortinet stock has a history of experiencing earnings multiple contraction during periods of product revenue growth declines.

She said Goldman has identified many similarities between the company’s current environment and a similar period of underperformance back in 2015. One key unknown at this point is how long the refresh cycle will last, with management previously indicating it will continue into 2020. Borges said that Fortinet was able to continue to gain market share throughout the previous cyclical downturn and may do so again during the next downturn, but the stock will still likely underperform.

Price Action

Fortinet stock traded mostly flat around $67.14 on an extremely strong day for the tech sector.

Related Links:

Raymond James: Palo Alto Networks Continues To Gain Share

What You Need To Know About Marriott’s Starwood Data Breach

Gainers

• Kitov Pharma Ltd (NASDAQ: KTOV) rose 33.3 percent to $1.00 in pre-market trading after the company reported signing of a marketing and distribution deal with Coeptis Pharma for Consensi in the US.
• Alliqua BioMedical, Inc. (NASDAQ: ALQA) rose 33.2 percent to $2.65 in pre-market trading. Alliqua Biomedical said after satisfying merger expenses, the company plans to pay $1-$1.20 per share special dividend.
• Celgene Corporation (NASDAQ: CELG) shares rose 32.2 percent to $88.11 in pre-market trading after Bristol-Myers Squibb announced plans to buy the company at $50 per share in cash in a $74 billion deal.
• IZEA Worldwide Inc (NASDAQ: IZEA) rose 26 percent to $1.31 in pre-market trading after the company announced it won multiple significant contracts in December.
• DBV Technologies S.A. (NASDAQ: DBVT) rose 12.2 percent to $7.84 in pre-market trading after the company expanded and strengthened its leadership team.
• Tel-Instrument Electronics Corp. (NYSE: TIK) rose 6.2 percent to $4.50 in pre-market trading after surging 11.18 percent on Wednesday.
• BRF S.A. (NYSE: BRFS) rose 6.1 percent to $6.25 in pre-market trading after gaining 3.70 percent on Wednesday.
• GW Pharmaceuticals plc (NASDAQ: GWPH) rose 5.9 percent to $106.94 in pre-market trading after gaining 3.72 percent on Wednesday.
• Celyad SA (NASDAQ: CYAD) rose 5.8 percent to $20.90 in pre-market trading after climbing 8.20 percent on Wednesday.
• Resonant Inc (NASDAQ: RESN) rose 5.3 percent to $1.60 in pre-market trading after the company reported signing of 4 new license deals with existing Tier 1 filter customer.
• Capstone Turbine Corporation (NASDAQ: CPST) rose 4.8 percent to $0.80 in pre-market trading after the company disclosed that it has secured an order to upgrade multiple microturbines to a C200 microturbine for Benz R&D.
• Gilead Sciences, Inc. (NASDAQ: GILD) rose 3.3 percent to $65.50 in pre-market trading.

Find out what’s going on in today’s market and bring any questions you have to Benzinga’s PreMarket Prep.

Check out these big penny stock gainers and losers

Losers

• Aevi Genomic Medicine Inc (NASDAQ: GNMX) fell 65 percent to $0.27 in pre-market trading after the company announced its top-line results from its placebo-controlled ASCEND trial of AEVI-001 in children with ADHD did not achieve statistical significance

Equally weighting securities is one of the oldest and most widely used alternatives to weighting securities by market capitalization. There are hundreds of equal-weight exchange traded funds on the market today.

Some go beyond equally weighting stocks or bonds, offering investors exposure to an equal-weight basket of other ETFs. The ALPS Equal Sector Weight ETF (NYSE: EQL) is one of the most venerable names in that group.

What Happened

The $140.6 million EQL, which debuted in July 2009, “delivers exposure to the US Large Cap Equity market by investing equal proportions in each of the 10 Select Sector SPDRs and rebalances quarterly,” according to ALPS.

EQL holds 10 of the 11 sector SPDR ETFs, including the Health Care Select Sector SPDR (NYSE: XLV), Technology Select Sector SPDR (NYSE: XLK) and the Financial Select Sector SPDR (NYSE: XLF).

Weights of the sector SPDR ETFs in EQL range from 8.68 percent for the Utilities Select Sector SPDR (NYSE: XLU) to 9.24 percent for XLV, as of Dec. 31, 2018.

Why It’s Important

Rare are the occasions that EQL has a comparable rating to the traditional S&P 500, but AltaVista Research currently rates EQL Neutral, the same rating the research firm has on the S&P 500. EQL’s ALTAR score of 7.1 percent is slightly higher than the 6.9 percent AltaVista has on the S&P 500.

AltaVista’s Neutral rating implies average appreciation potential and “indicates that valuations adequately reflect the fundamentals of stocks in these funds,” according to the research firm.

EQL lost about 8 percent last year.

What’s Next

As an equal-weight sector ETF, EQL is underweight technology relative to the S&P 500 and doesn’t include the Consumer Discretionary

Gainers

• OHR Pharmaceutical Inc (NASDAQ: OHRP) shares climbed 68.2 percent to $0.1850 after announcing a merger with NeuBase. Ohr shareholders will own 20 percent of the combined company.
• Kitov Pharma Ltd (NASDAQ: KTOV) gained 57.3 percent to $1.18 after announcing a marketing and distribution agreement with Coeptis Pharma. Kitov will receive $3.5 million of milestone payments.
• BioXcel Therapeutics, Inc. (NASDAQ: BTAI) shares gained 32.9 percent to $4.77 after the company disclosed that it has met primary endpoint in Phase 1 study of IV dexmedetomidine for acute agitation in Senile Dementia of the Alzheimer’s Type (SDAT) patients.
• Celgene Corporation (NASDAQ: CELG) shares surged 26.9 percent to $84.53 after Bristol-Myers Squibb announced plans to buy the company at $50 per share in cash in a $74 billion deal.
• Estre Ambiental Inc (NASDAQ: ESTR) jumped 19.8 percent to $2.60.
• Alliqua BioMedical, Inc. (NASDAQ: ALQA) jumped 19.1 percent to $2.37. Alliqua Biomedical said after satisfying merger expenses, the company plans to pay $1-$1.20 per share special dividend.
• IZEA Worldwide Inc (NASDAQ: IZEA) rose 16.6 percent to $1.2125 after the company announced it won multiple significant contracts in December.
• Park Electrochemical Corp. (NYSE: PKE) climbed 11 percent to $20.45. Park Electrochemical posted Q3 earnings of $0.10 per share on sales of $12.853 million.
• Avadel Pharmaceuticals plc (NASDAQ: AVDL) gained 9.7 percent to $3.05. Avadel Pharma reported the resignation of its CEO Michael Anderson.
• FTE Networks, Inc. (NYSE: FTNW) rose 9.3 percent to $3.0500. FTE Networks completed 2018 with approximately $572.4 million in new infrastructure contract awards.
• DBV Technologies S.A. (NASDAQ: DBVT) gained 8.5 percent to $7.58 after the company expanded and strengthened its leadership team.
• Corbus Pharmaceuticals Holdings, Inc. (NASDAQ: CRBP) gained 8 percent to $7.07 after the company announced a strategic collaboration with Kaken Pharmaceuticals to develop and commercialize Lenabasum in Japan. Corbus is set to receive $27 million upfront.
• Veracyte, Inc. (NASDAQ: VCYT) rose 7.6 percent to $12.91 after the company announced a strategic collaboration with J&J Innovation for lung cancer detection.
• Verrica Pharmaceuticals Inc. (NASDAQ: VRCA) climbed 6.9 percent to $8.50 after reporting top-line results from 2 pivotal Phase 3 trials of VP-102 in patients with molluscum