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Netflix CEO Reed Hastings split the company in two in 2011, thinking that the growing ubiquity of high-speed Internet access would soon mean the end of their disruptive DVD mailing business. But neglecting the DVD business proved to be a mistake, and Netflix reversed course.
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Here are the biggest calls on Wall Street on Wednesday:
Evercore ISI raised its price target on Netflix to $380 from $350
Evercore said it thinks Netflix is showing “improving” profitability trends.
“Overall, we think the debate could be slowly shifting somewhat away from accelerating subscriber growth and towards improving profitability trends, as shares have traded range-bound over the last six months despite two consecutive quarters of record-setting subscriber additions. While 2Q global subscriber addition guidance of 5M (down ~10% y-o-y) looks acheivable (despite a price increase in the US), we expect focus on the release could center on 3Q expectations to get a more accurate sense of full-year and longer-term platform growth trajectory.”
Rosenblatt raised its price target on Netflix to $370 from $350
Rosenblatt raised its price target but said the company will need to step up its game with comedy content.
“With rising competition for scripted originals and key licensed content like The Office and Friends leaving the service soon, NFLX is increasingly pivoting towards comedies specials, documentaries to drive its share in viewing hours and fend off incoming competition. For us to get more bullish on the shares, we need to see either sustained 25%+ revenue growth through ’21E or a steeper FCF leverage trajectory. While our international sub estimates already imply aggressive penetration assumptions, NFLX would have to beat them by ~10% to drive these levels of growth. We increase our price target to $370 driven by a higher implied target multiple and slightly higher international estimates. “
SunTrust initiated Zillow as ‘buy’
SunTrust said in its new coverage of the online real estate company that it’s at the forefront of “digital disruption.”
“As a leading operator of real estate marketplaces and home-related information portals in U.S, (including Zillow, Trulia, StreetEasy, etc), Zillow Group is at forefront of the digital disruption of this ~$1.9T category (STRH ests). The company’s recent push to buy/sell real-estate as a primary facilitated by seamless end-to-end transaction (via mortgage origination/title svcs) should drive a 40%+ revenue CAGR over the next 7 yrs, in our view. While ongoing investments are likely to keep a lid on margins over the N/M term, we expect meaningful FCF/profitability LT from growing scale. “
SunTrust initiated Redfin as ‘buy’
SunTrust said the real estate brokerage offers a “differentiated” experience with its online tools.
“Redfin‘s innovative model brings cost savings to both home sellers and buyers and offers a differentiated home buying/selling experience by leveraging data, proprietary technology, and online tools. This, coupled with rising brand awareness, should enable the company to gain market share for the foreseeable future. “
Goldman Sachs initiated UPS and FedEx as ‘buy’ & added FedEx to the ‘conviction buy’ list
Goldman said that over the next year UPS and FedEx had “20% upside potential.”
“Our Buy-rated stocks offer better than 20% upside potential over the next 12 months…The two risks to focus on: 1) Further economic deceleration/trade wars could lead to additional EPS shortfalls, and 2) Widely reported overhangs from “big-name” entrants like Amazon and Uber Freight. We think the latter should not be the main focus currently, given the numerous self-help initiatives that could improve overall sector financials.”
Goldman Sachs upgraded Comcast to ‘buy’ from ‘neutral’ & added to the ‘conviction buy’ list
Goldman said in its upgrade of the stock that Comcast had “strong fundamentals” amongst other things.
“We estimate that CMCSA will sustain strong growth with estimated 3-year CAGRs in adjusted EPS of11%, FCF/share of 12% and dividends of 15% driven by healthy fundamentals across its key businesses. “
UBS downgraded Deere to ‘neutral’ from ‘buy’
UBS said in its downgrade that Deere stock “fairly reflects near term caution.”
“After a sharp rebound from May’s weakness, we think the stock now fairly reflects the balance of near term caution vs. the potential for a pick up in the large ag replacement cycle in 2020. Our proprietary Ag dealer survey’s preliminary results and our channel checks suggest demand in the next 1-2 quarters will weaken, as farmers withhold purchases amidst poor growing conditions and ongoing trade uncertainty.”
J.P. Morgan initiated S&P Global as ‘overweight’
J.P. Morgan initiated coverage of the business information and analytics company and said it would display “impressive” organic growth.
Evercore ISI raised its price target on Apple to $217 from $215
Evercore ISI said Apple remains a “”re-valuation” stock story.
“Heading into the June-qtr EPS call, we think there are several key points worth highlighting and we are updating our model for June-qtr and beyond to reflect various dynamics – a) iPhone units will likely remain muted impacting iPhone/product sales, b) commodity prices should be an incrementally larger tailwind, c) services we think accelerates in June-qtr and beyond (China driven), d) buybacks could be more sizable vs. current street models and e) China smartphone data is stable/less bad for AAPL in June-qtr vs. last 2-3 quarters. “
Deutsche Bank named Stanley Black & Decker as a ‘catalyst buy’ call
Deutsche said it likes where the maker of industrial tools and household hardware, stands in an environment where companies are “missing and lowering forecasts.”
“Expectations are low for SWK going into 2Q results, and we view a $0.02 beat as possible, driven largely by the Industrial segment (vs. our model). If a small beat is delivered, we expect management to also move full-year guidance higher by $0.05. We expect this to look very good in an environment where many companies are missing and lowering forecasts. “
