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Here are the biggest calls on Wall Street on Thursday:
Credit Suisse said recent headwinds for Monster such as rising competition are overblown.
“We make Monster our top pick with a $75 target. We believe the confluence of recent events—i.e., rapid share gains by new competitor Bang, a miscalculation on Red Bull’s intention to take pricing, and unfavorable weather in California—does not put the Monster story at risk. At 26x, Monster shares are trading near levels seen before aligning with Coke.”
Goldman Sachs added the retail discounter to its conviction buy list due to an expanding brand awareness among other things.
“We add Five Below to the Americas Conviction List and reiterate our Buy rating, with 22% upside to our unchanged $147, 12-month price target. We believe shares are trading at a discount to growing intrinsic value as building brand awareness, robust new store performance, and tailwinds from initiatives such as remodels as well as a strong 2019 IP calendar should sustain double-digit top- and bottom-line growth. Separately, we see significant upside optionality longer-term from a successful “10 & less” rollout that isn’t currently being reflected in shares or estimates, in our view.Within this report we outline our expected benefits from growing brand awareness, update our saturation analysis which implies upside to 2,500 stores, highlight several potential near-term top-line tailwinds, and provide a long-term growth analysis that suggests a powerful earnings trajectory with long duration, similar to other successful consumer compounders. In addition, we illustrate the growth potential if FIVE were to introduce the “$10 & less” concept across its entire store portfolio. Finally, we update estimates for 4Q18 results/FY19 guidance, and provide thoughts on the quarter.”
Citi upgraded the tobacco maker saying it has a large pipeline of next generation products and strong leadership.
“BAT has and is launching many next generation products, so we expect about 50% growth in NGP sales this year. In addition we expect the worries about menthol to subside. We think the new CEO’s approach will help too. The stock has risen about 28% YTD, but we think that is more to do with the decline in credit spreads than a reappraisal of fundamentals.”
Susquehanna downgraded the stock primarily due to uncertain macroeconomic environment and rising capex.
“When we upgraded FDX shares to Positive in March 2017, our call was that the potential tailwind of a mid-term re-rating from upside in earnings or free cash flow (Ground and TNT integration spend moderating) was greater than downside risk from poor execution or macro. Since then, the crippling NotPetya cyberattack drove TNT integration investment higher and Europe market share lower, U.S. tax reform’s 100% bonus depreciation provided substantial cash incentives to pull-forward longer-term facility and aircraft fleet modernization projects, and more recently global trade flows have hit some turbulence. Today, we see a far lower probability of a near/mid-term upside surprise to free cash flow for three reasons: 1) lower visibility into an eventual TNT payoff, 2) general macro uncertainty, and 3) clearer visibility into a rising capital envelope in F2020 that should remain elevated through at least F2021. While we view the capital investment plan as strategically right-minded for the long-term, we believe it will be difficult for shares to re-rate without clear visibility into a mid-term cash flow inflection, and are downgrading FDX to Neutral.”
RBC said the semiconductor device company will continue to see challenges in 2019 but will be helped by non-Apple smartphones and spending on data center recovery.
“In line with our current view of the Semi-cap equipment space, we assume coverage of Micron with an Outperform rating. Our positive bias is based on: 1) a bottoming of expectations; 2) a ramp in non-Apple smartphones in 2H; and 3) Data Center recovery as hyperscale spending ramps up in the back half.”
RBC said the hard disk manufacturer and data storage company has “operational excellence,” and will see improving data center demand.
“We assume coverage of Western Digital with an Outperform rating and a $55 price target. Overall our positive bias is predicated: on 1) better than expected hyperscale spending; 2) notable growth in Chinese/ Asian handsets; 3) operational excellence with the company’s core HDD business; and 4) implied long-term EPS of ~$11.00+ (based on WDC’s long term targets).”
