Here are the biggest analyst calls of the day: Target, Delta, Tesla, Apple, Zoom & more

“We are raising our rating for two main reasons. First, we think TGT‘s margin erosion (a core tenet of our prior Underweight view) is likely to moderate in the near-term. We are modeling flattish EBIT margins in 2019, below guidance for ~10 bps expansion yet an improvement from 35 bps decline in 2018. Second, we think the risk that TGT misses its margin guide is appropriately reflected in the stock’s relatively inexpensive valuation (~6.7x 2020 EV/EBITDA and ~11.5x 2020 P/E). We see limited multiple downside at these levels given our view that TGT is establishing itself as a Retail “survivor” alongside AMZN (covered by Brian Nowak), WMT and COST.”

“DAL shares are off to a good start YTD and up ~10% versus a flattish group and Legacy peers. In addition, as we look at our refreshed 2020 estimates, which are moderately below consensus and reflect pilot step-ups, higher oil, elevated supply growth (3-4% 2019/2020), and healthy LSD RASM, shares are trading closer to an appropriate multiple (of ~9x). This compares to history of 9-10x over the last several years and the group at ~8x, thus the airline is now better reflecting its premium margins and balance sheet relative to the long-run. Moreover, with capex still elevated, the FCF yield is falling below double-digit levels of recent years. Accordingly, we move to a more neutral stance, downgrade to EW, and adjust our PT to $61 (from $62). “

“AAL faces the most labor risk within the group, which we assume will be reset higher over the next 6- 18 months and drive CASM-Ex Fuel up 2.5-3.5% on average between 2019 / 2020, and further compounded by jet fuel prices rising ~10% next year per forwards. In addition, though RASM should hang in around the LSD as management focuses on high margin hub growth and capex eases, we see considerable downside risk to 2020 consensus EPS of $5.76 (vs. MSe of $3.45). When applying P/Es consistent with the last ~5 years at ~7.5x on 2020, shares have downside potential of ~18% per our updated PT of $26 (vs. $40 prior). “

“Over the last 12-18 months, United has done a solid job of executing on its mid-continent strategy, which we foresee continuing as the competitive backdrop remains benign in a high cost environment. Moreover, with opportunities around the loyalty program (of 1-2 points on RASM) and largely stable costs (CASM-Ex Fuel up ~0.5% 2019 / 2020), we believe the 2020 EPS target has a higher probability of being met, thus we shift our estimates to the upper-end of guidance ($11-13 in EPS). And when applying a P/E consistent with the last several years at 8-9x, and still at a discount to DAL, we see potential upside of ~35%. Accordingly, we are upgrading UAL to OW (from EW) and establish a PT of $110 (vs. $101 prior). “

“We upgrade General Dynamics to Buy from Neutral. GD relative valuation has derated vs. defense peers to the low-end of historical ranges, while the challenges behind that derating are now inflecting positively or have seen management capitulation. GD now trades at 12.7X CY20E P/E which we think is too low vs. the returns on capital and cash flow compounding we see ahead. We think higher Gulfstream margins, the G500/600 ramp, IT organic growth, and a large improvement in free cash flow can all act as catalysts to reverse sentiment and valuation. “

“Deutsche remains a levered market play vulnerable to external events and rising rates are currently a distant hope. Additionally, strategic optionality seems even more limited for the time being with M&A options stopped or stuck. We leave our 2019E EPS largely unchanged but we cut 2020E, 2021E and 2022E by 25%, 18% and 12%. This is predominantly driven by lower revenue assumptions as we delay rate hike assumptions in-line with market implied levels (a triple digit mio delta). The current share price implies a 2020E ROTE of 3.7%, 50bp above UBSe. This would imply EUR300m higher revenues for 2020E. Even with our above-consensus estimates, we derive a fair value below the current share price. We cut our PT to EUR5.7 (-27%).”

“With an inexperienced CFO at the helm, micro management of expenses now a focus (e.g., Musk employee email/memo from last week per media reports), and demand issues a dark cloud over Fremont, we have continued concerns around Tesla‘s ability to balance this “perfect storm” of softer demand and profitability concerns which will weigh on shares until Musk & Co. prove otherwise in terms of delivering solid results over the coming quarters. Additionally, with a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound. As such, we are lowering our price target from $275 to $230 to reflect our reduced confidence in the company’s ability to hit its 2019 unit demand guidance and thus concerns that profitability targets in 2H could be lofty and “at risk” where things stand today. We maintain our NEUTRAL rating on Tesla.”

“Zoom is a leading provider of video conferencing solutions, with a focus on end-user experience and innovation that has driven industry-leading revenue growth rates, high customer addition count, and best-in-class net dollar expansion rates. Zoom’s video-first cloud architecture is elegantly designed, provides an intuitive interface, and most importantly “just works.”

“The tariff hikes on import of China-produced goods into the US and the subsequent retaliation pose two types of threats to Apple. First, if tariffs affect Apple products imported into the US this will mean that a) Apple could increase prices, with dire consequences on demand given the evidence of price elasticity (late 2018 iPhone launches have already been seen as too pricey by consumers) and lengthening smartphone upgrade cycle and/or b) the company could take the hit on margins. Second, there is a risk that in the Chinese market, consumers accelerate the shift to smartphone substitutes notably by going to local brands with comparable functionality (Huawei, Xiaomi). “

“While the shift to retail only started in FY2015, the brand now generates more than c50% of its sales in retail. Moncler (Hold, EUR35.23) should not necessarily be seen as CG‘s key competitor from a positioning standpoint but the fact that the Italian high-end down jacket brand has 197 stores and that CG has only 12, is telling; CG’s development plan could take a page from the Moncler playbook. One does not even necessarily need to have a positive view on CG to see how much more potential there is in retail for a number of years ahead in terms of sales and margin expansion. Management recently announced six retail projects for 2019 and there are likely more in the pipeline with, importantly, fierce opposition to selling the brand in outlets. Because of this, we disagree with those investors who fear there is a risk the brand overextends. This is not a short-term risk in our view. “