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Cans of Molson Coors Brewing Co. Miller Lite and Coors Light brand beer
Daniel Acker | Bloomberg | Getty Images
Here are the biggest calls on Wall Street on Friday:
MKM initiated Constellation Brands as ‘buy’
MKM said in its initiation note that it likes the “strength” of Constellation’s Modelo brand.
“The unrelenting strength, and resulting cash generation, of Modelo affords Constellation the flexibility to invest in innovation, adjacent industries and marketing. Most of its peers are facing the opposite: declining volumes and a P&L under fixed cost pressures forcing a tightening of the investment belt. Constellation has an occasion expanding opportunity behind cans and should enjoy better tailwinds from relative channel pricing (Spirits and Wine no longer at a CPI discount to Beer). Finally, since the Trump Administrations’ trade “deal” with Mexico, attention has shifted to the Fed and China.”
MKM initiated Molson Coors Brewing as ‘buy’
MKM said in its initiation note that the company’s new Coors Light ad campaign was very effective.
“Coors Light, at 25% of Molson Coors‘s U.S. portfolio, has been a consistent low-to-mid single digit decliner, offsetting any strength of Miller Lite. New CMO, Michelle St. Jacques, has partnered with Leo Burnett to create Coors Light’s new media campaign, invoking chill and relaxation. The ads began airing in July and both consumers and distributors have taken notice. In most recent data, according to Beer Business Daily, Coors Light is showing its first positive IRI four week period in years. The TV spots are scoring far above industry average and are generating outsized engagement vs. spend. With positive Coors Light and Miller Lite volume, fixed cost deleverage goes away and golden cases return. Given the already strong free cash flow generation, near-term revenue and earnings upside should cause multiple re-rating.”
RBC upgraded Etsy to ‘outperform’ from ‘market perform’
RBC said it thinks the company’s three recently announced initiatives will have a positive impact on the online crafts marketplace operator’s performance.
“Etsy shares are down -13%vs. S&P, which is up 2%, since the company’s Q2 EPS call on August 1st. Despite the pullback, we see fundamental thesis as largely unchanged for ETSY. The pullback, in addition to five Growth Curve Initiatives —Free Shipping Initiative, Etsy Ads, Reverb acquisition, product initiatives, and international markets—and generally positive intra-quarter data points, give us conviction that there is upside to Street’s FY ’20 & ’21 ests.”
Pivotal initiated Roku as ‘sell’
Roku said increasing competition in the streaming device business will most likely drive the cost of such devices to zero.
“We see dramatically more competition emerging that will likely drive the cost of OTT devices to zero and put material pressure on advertising revenue splits highlighted by Comcast’s recent moves with its free Xfinity Flex product that is likely to be copied by other distributors. ROKU receives a premium valuation for potential outsized subscriber growth and ARPU opportunities that we believe are materially reduced post the CMCSA move. While Roku management deserves credit for the asset they have created, everyone has realized the living room is too important and the big boys (led by CMCSA, BUY) with massive leverage are likely to make ROKU growth much more difficult.”
Read more about this call here.
Berenberg initiated Wayfair as ‘sell’
Berenberg began coverage of the online home goods retailer and said the company’s first-mover advantages are being eroded by intensifying competition.
“Wayfair has been a success story and a disruptive force in home and living retail. It has $8bn in sales and a 24% share of the US online market. But we think its first-mover advantages are being eroded as competition intensifies. In the home and living market, players must lead on price, choice or convenience. We believe Wayfair does not differentiate on any of those factors. With heavy investments set to continue for the foreseeable future, and competitive pressures weighing on marketing efficiency, the cost of growth is rising.”
Baird raised its target price on Alphabet to $1400 from $1360
Baird said it didn’t think Google cloud valuation was fully embedded in shares of the stock.
“We now estimate that Google Cloud Platform will generate roughly $5 billion in revenues next year – and along with G-Suite – total Google Cloud revenues in the $11 billion range. With AWS valued at approximately $400 billion in our sum of the parts, this implies a value of roughly $100 billion for Google Cloud., which we don’t believe is fully embedded in Alphabet’s valuation.”
