We did not have any new trades last week, but I did increase my target on Systemax (NYSE: SYX). I describe the details of that change below.

You should have seen the sell alert on PRA Health Sciences (NSDQ: PRAH) this morning. The stock is being sold only on a valuation basis. (more details below)

I am also increasing the target and buy limit price on Carbonite (NSDQ: CARB). The price target increases from $37 to $50 and the buy limit increased from $28 to $35. Carbonite’s 2018 and 2019 estimates have risen dramatically since its last quarter.

I am sadly recommending a sale of PRA Health Sciences from the portfolio. It’s had a monster run in the past month (up 20%), but estimates have not budged. I still like the fundamentals but cannot justify a higher target. Subscribers who want to hold on to this stock might consider placing a $92-94 stop loss on their position. The stock generated a 35% gain in the 13 months since recommendation.

After earnings season I review all estimates for the stocks in our portfolio. When we hit the middle of the fiscal year (June), it’s time to start shifting my sites out to the next fiscal year. This idiosyncrasy means I put more weight on fiscal 2019 estimates when calculating price targets.

This year the adjustments when looking forward are unusually tricky. The majority of U.S. based companies are seeing an outsized increase in earning per share in fiscal 2018 vs. 2017. While part of this growth is due to improvements in operating metrics (i.e., increasing sales and better profits), the lower tax rate due to the tax cut passed earlier this year is responsible for a large part of the jump.

Because the tax rates for many companies show a dramatic drop in fiscal 2018 but stay at that same low rate in fiscal 2019, it is more difficult for companies to show accelerating earnings growth in fiscal 2019. Note the critical word here is accelerating growth. Earnings will still grow, but many investors like to see the rate of earnings growth rising. The jury is out on how investors will view this temporary slowing of the earnings growth rate.

Around the Portfolio:

ANI Pharmaceuticals (NSDQ: ANIP) stock received an Overweight and an $85 price target by an analyst at Cantor Fitzgerald. The analyst, Brandon Folkes, initiated coverage on eight specialty pharma stocks with ANI being one of his top three favorites.

In light of the continued weakness in Ichor (NSDQ: ICHR), mostly due to sustained selling in the stocks of its two largest customers, Applied Materials (NSDQ: AMAT) and Lam Research (NSDQ: LRCX), I received this question from a subscriber:

“ Regarding Ichor, often it seems semi stock values peak (other industries too) into record revenues as a new cycle begins to form. Curious if that is what you think is occurring or how long we have until that happens. I guess another clue will be Micron’s numbers this coming week.”

I issued some comments last week on Ichor reiterating that I expect Ichor to grow its business despite any temporary weakness at Applied Materials and Lam Research. I base this expectation on the continued trend of expanding usage of Ichor’s products in more processes in the semiconductor cycle.

The question of how valuations will correlate to this new wrinkle in the cycle is another question. It is obvious why investors choose to link Ichor’s value directly to these large customers. I still love the fundamentals of the company but will be watching it carefully to see if it can stand on the merits of its own earnings.

I also do not see the weakness in orders by customers like Micron (NYSE: MU) and Intel (NSDQ: INTC) to Lam and Applied as longer-term trends. I agree that the tiptop of a cycle corresponds to the top in these stocks, but I do not believe we are at that point in the cycle. Based on my research there is still significant demand for the next wave of semiconductor manufacturing and the dip in orders is a pause in a more extensive demand wave.

Micron reports earnings this Wednesday, June 20th, after the close and will give us a bit more insight as to the length and depth of any slowdown in orders for new semi manufacturing equipment. I believe any positive news from Micron will spur Ichor back up.

Steven Madden (NSDQ: SHOO) had a positive boost from an analyst at Susquehanna who attended the annual NY shoe show held by the Fashion Footwear Association of New York.

Sam Posner of Susquehanna came away more favorable on a couple of shoe names including Steve Madden and VF Corp. (NYSE: VFC), the owner of Vans sneakers. He also said he sees improvement at Nike (NYSE: NKE) and remains concerned about Under Armour (NYSE: UAA). He noted the importance of controlling the supply-demand model, and that comfort is permeating all footwear categories. Madden manufactures many of its brands and sells its shoes via wholesale and retail which gives the company more control over its supply and demand forces.

I increased my target on Systemax (NYSE: SYX) from $36 to $44. Coincident with that action the buy up to price rose to $36.

Estimates for Systemax have been creeping up over the past two quarters. The company is still quirky, with no questions and answers period allowed on quarterly conference calls.

However, the company presented at a KeyBanc conference in late May and the stock reacted with a nice jump. Unfortunately, the transcript from that presentation is not publicly available, but the stock certainly got a jolt post the May 31 meeting. I can only suspect that management is giving off positive vibes.

Current estimates now look for $2.05 in fiscal 2019 earnings, up from my prior estimate of $1.80. The new target is based on a 21.5 P/E multiple on that 2019 estimate. The company also declared $1.00 per share special dividend. The company generates plenty of cash flow to cover its small capital expenditure budget, so this is a wise use of its cash.

Target (NYSE: TGT) increased its quarterly dividend to $0.64/share from $0.62/share. The stock now carries a 2% yield, a respectable dividend yield for a company growing earnings 10-12%.