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Robert Iger, Chairman and CEO at The Walt Disney Company speaks in Laguna Beach, California, October 22, 2019.
Mike Blake | Reuters
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Here are some of the best analyst calls on Wall Street this week:
Raymond James- Intelsat, upgraded to outperform from market perform
In a sharp blow to Intelsat, the FCC announced it planned to conduct a public auction for the company’s C-band spectrum, instead of a private auction. Raymond James upgraded the communication satellite provider’s stock after it tanked on the news and said it feels the risk/reward is “interesting.”
“We believe the pullback was first related to speculation, and then confirmation on Monday morning, that the FCC would run a public vs. private auction for 280 MHz (300 MHz including a 20 MHz guard band) of the total 500 MHz in the C Band. Then the other shoe dropped on Monday afternoon when a Senate Bill was introduced echoing the FCC tweets, plus requiring at least 50% of auction gross proceeds be deposited into the U.S. Treasury, with the remainder going to clearing costs and then the satellite companies currently using the band.”
Longbow- Herc Rentals & H&E Equipment Services, Buy ratings
Longbow said in a note to clients this week that construction equipment rental companies are not seeing a “meaningful impact” in their businesses despite the recent “pullback” in the oil and gas markets. The firm said its industry checks showed “healthy underlying demand trends even with the “sharp” reduction in drilling activity.
“The pullback in the oil & gas markets does not appear to be having a meaningful impact on the rental equipment providers. Recent checks with industry contacts, located in regions highly levered to fracking/drilling, confirmed healthy underlying demand trends and higher-than-expected fleet utilization levels during CY4Q. This implies limited near-term downside risk for companies in our coverage group including H&E Equipment Services and Herc Rentals.”
Craig-Hallum- Carrols Restaurant Group, Buy rating
Carrols Restaurant Group was initiated with a buy rating by Craig-Hallum this week. The firm told clients the stock is cheap primarily due to what it called a “self-inflicted wound.” The company which is the largest franchisee of Burger King restaurants accidentally ran a double discount promotion over the summer which resulted in $12.4 million in lost sales.
“Carrols has suffered from self-inflicted wounds, including an accidental double discount on a promotion from Jun-Aug in 2019 which depressed EBITDA by ~$11M and muddied underlying strength of what has historically been a strong restaurant business. As a result, the stock is now valued at a 30-40% discount to peers, almost like ‘it’s going out of business.’ We think management is not only righting the business but has an under-appreciated and significant opportunity to accelerate growth, boost profitability and see a material upward revaluation of the stock.”
Bernstein- Disney, market perform rating
Bernstein said in a note that while early Disney+ subscriber sign-ups looked promising, the firm is cautious going forward. The firm questioned whether the growth in subscribers being seen now will last as everyone that wants to sign up will do so now versus over a longer period of time. In addition, the firm said “exclusive” original content will be the key to “retaining” long-term subscribers for Disney+.
“While we are raising our ultimate sub forecast, we think part of the beat represents a ‘pull forward’ of the ultimate sub potential, although we recognize it will be essentially impossible to distinguish which is which in the short term. The service has an impressive library, but we continue to believe that the key to retaining long-term subscribers is exclusive original content, and in that department Disney +’s slate is comparatively light, with very specific targeted appeal.”
