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Packages of Beyond Meat plant-based burger patties are displayed for a photograph in Tiskilwa, Illinois.
Daniel Acker | Bloomberg | Getty Images
Here are the biggest calls on Wall Street on Wednesday:
Evercore initiated McDonald’s as ‘outperform’
Evercore said it likes how far the company has come under current management.
“We are initiating coverage of McDonald’s with a $225 target (+11% upside) and Outperform rating. McDonald’s stock and its company have come a long way in the transformation under Steve Easterbrook since 2015, and to some degree we believe this is already recognized with the stock trading at 23.8x 2020 EPS. “
Evercore initiated Yum Brands as ‘outperform’
Evercore said it sees the company with “underappreciated near-term” momentum.
“We are initiating coverage of Yum! Brands with a $120 target (+11% upside) and Outperform rating. We believe there is still some underappreciated near-term momentum and long-term sustainability at Yum! Brands. The company is beginning to enjoy the fruits of a more focused organization that is focused on driving accelerating unit growth (EVRe: 4% in 2019/2020 vs. 3.2% in 2017) and consistent low- to mid-single digit SSS growth. Yum! Brands’ competencies in digital/delivery and ability to co-exist with an improving. “
Evercore initiated Chipotle Mexican Grill as outperform
Evercore said it sees Chipotle sales helping drive 23% annual earnings per share growth.
“Over the next five years, we forecast 23% annual EPS growth, which we believe could be conservative as the chain has recently begun driving rapid mobile app adoption, with other sales driving initiatives to follow. While we are taking a conservative view for 2019/2020 earnings (given potential trade related food cost headwinds) we see sales drivers as margin accretive. These drivers include mobile order mix, rising digital make line utilization, and supply chain productivity.”
Morgan Stanley upgraded NXP Semiconductors to overweight from equal-weight
Morgan Stanley said it sees “structural improvement” in the company’s margins.
“We have been on the sidelines in NXPI since QCOM bid for the company in September 2016. But with the stock underperforming the SOX by 102% and peers by 73% during the last 3 years, and importantly structural improvement in the company’s margins along with capital allocation optionality, it’s time to revisit the name. Given the ongoing risks of the cycle, we recommend an opportunistic approach when adding to positions in NXPI. We are increasing our target multiple by 2 turns to 15x (including stock based comp), which is less than the 4x turn expansion seen at analog and MCU peers the last few years. We think this multiple could prove conservative as NXP’s margins expand, as it would only bring it back to the stock’s median despite improving mix and higher margins. “
William Blair downgraded Cisco to ‘market perform’ from ‘outperform’
William Blair said it thinks upside to consensus estimates, amongst other things, will be more “challenging” going forward.
“We are downgrading the shares of Cisco from Outperform to Market Perform based on: 1) signs of tightening demand across the IT infrastructure universe, which could pressure growth in Cisco’s fiscal 2020, especially when compared against unusually strong demand in fiscal 2019; 2) the expiration of one-time tailwinds to fiscal 2019 revenue growth, including ASC 606 and tariff-driven price hikes; 3) a lower mix of software revenue than meets the eye, once hardware-integrated software is excluded; 4) long-term threats from Arista’s entry into the campus market; and 5) a forward P/E multiple that has already expanded by seven turns over the past six years. While we are not lowering our fiscal 2020 estimates, we believe that upside to consensus estimates, as well as multiple expansion, will be more challenging from here. “
Rosenblatt upgraded Juniper Networks to ‘neutral’ from ‘sell’
Rosenblatt said the networking & cybersecurity solutions company will see “improved margins” and is taking a more “constructive” view of the company’s 12-month outlook.
“We take a more constructive view of JNPR in our 12-month outlook given these industry trends, notably a more positive view of carrier routing relative to our historical bearish outlook. JNPR should see slowing deceleration in its routing segment, benefiting from metro upgrades to its massive installed base of MX routers ahead of 5G deployments. Improved margins for upgrades should further benefit EPS. “
Bank of America initiated Wyndham Hotels as ‘buy’
Bank of American said it likes the hotel chain’s lower volatility from its “franchise-heavy exposure”
“We initiate coverage of Wyndham Hotels & Resorts with a Buy rating and a $62 price objective. Given where we are in the cycle, we favor the lower volatility from Wyndham’s franchise-heavy exposure, along with upside from low-end chain scale outperformance and increased scale benefits from its recent acquisition of La Quinta. “
Bernstein downgraded Beyond Meat to ‘market perform’ from ‘outperform’
Bernstein downgraded the alternative meat company mainly on valuation.
“We are downgrading Beyond Meat from Outperform to Market Perform with a target price of $123. The downgrade is driven by valuation considerations as the stock has traded in a highly volatile manner since its IPO likely due to its limited public float and is now trading at ~31x EV/NTM Sales, implying limited upside potential from a valuation perspective. “
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KeyBanc initiated Farfetch as ‘overweight’
KeyBanc said the luxury online retail platform will see a “secular tailwind” as luxury shifts to a bigger online presence.
“Farfetch has established a leading position in the secularly attractive luxury e-commerce industry and we think can sustain 30%+ GMV growth for the medium-term. Online luxury penetration is a mere 10%, well below apparel, and we think is poised to exceed 25% over the next five years. FTCH is helping to unlock luxury e-comm growth by offering expansive SKU assortments, a full suite of high-touch service (fast delivery, stylists), and a trusted platform. “
Keefe, Bruyette & Woods downgraded Marsh & McLennan to market perform from outperform
Keefe, Bruyette & Woods downgraded the insurer mainly on valuation.
“Our downgrade mostly reflects valuation – MMC‘s shares have returned 24.7% YTD, versus the S&P 500’s 15.1% – along with slightly lower EPS estimates. Reflecting, MMC’s recently published JLT-related pro forma data, we lower our 2019E/2020E EPS to $4.50/$5.00 from $4.55/$5.10 and our 2019E/2020E cash EPS to $4.99/ $5.58 from $5.14/$5.84, and we introduce our initial 2021E EPS of $5.60 and 2021E cash EPS of $6.18. We raise our target price to $100 (17.9x our 2020E cash EPS) from $99; we remain optimistic about MMC’s medium- and long-term prospects, but see the shares as fully valued for the near term. “
