Here are the biggest analyst calls of the day: Target, Uber, Apple, Ferrari & more

“We are downgrading CMG to Underperform and lowering our target price to $620 (40x reduced 2020E EPS) in conjunction with our industry note on the implications of African Swine Fever (ASF). We believe the potential magnitude and duration of ASF impacts to margins is underappreciated and CMG is among the Restaurants most at risk. CMG could begin to recognize stronger protein inflation as early as 3Q19, but we are taking a conservative approach to layering ASF impacts into our model as we only raised 2020 food inflation by 100 bps. “

“UBS Evidence Lab’s 10th Global Smartphone Survey indicates more lengthening of smartphone upgrade cycles, especially in the US and UK. For iPhone, purchase intention appears to be stabilizing though at a low level in all regions, except China. Survey indicates a 6pt drop in China from Oct. and 5pts from a year ago and at the lowest level ever. We cut our iPhone forecasts to reflect the smartphone softness and see risk of potential demand destruction in China from backlash given Huawei situation. The survey indicates mix of iPhones at the high-end ($999+) improved two points YoY. ASP mix benefit would likely be offset by price discounts. China remains a risk but is likely in investor expectations and the focus would shift to new services. We lower our F20 EPS estimate 3% and price target from $235 to $225 but maintain our Buy rating as iPhone expectations are very low for this Fall and we think investors may look through near-term softness ahead of 5G upgrade next year.”

“We are moving to the sidelines given the uncertainty with Judge Koh’s FTC ruling on QCOM. We believe a potential change in the license model to royalty as a % of “chip” ASP at ~$50 versus “handset” ASP at ~$300 could be a SIGNIFICANT 50+% downside to EPS. The limited clarity as the case goes to appeals to the Ninth District and potentially the Supreme Court, and uncertainty if recent license agreements with Apple, Samsung and China NDRC can still be upheld, inserts a significant overhang on QCOM. Downgrading to Neutral and adjusting PT to ~$65 until we get clarity. QCOM has handily outperformed the SOX by 540 bps YTD even with the pullback.”

“(1) We believe the shares are undervalued and we see potential upside to consensus. TGT is currently valued in the lower end of the “middle bucket” of retail (existentially relevant but growth/margin trajectory questionable, see bullet below) while we believe it should revalue towards the best-in-class, AMZN-safe bucket, especially in light of its strong comps, now expanding operating income after three years of declines, and its +HSD EPS growth algorithm. (2) What brought us over the edge was the share gains in home and apparel, which comped up ~3% and >5%, respectively, in 1Q, well-above category growth rates of -1.5% and +0.2%, respectively, per the Census (see bullet below). This is critical as TGT is now lapping 100-150 bps of TRU benefit. Stepping back, TGT’s 4.8% comp is one of the best so far in large cap retail’s 1Q (HD 3.0%, LOW 4.2%, WMT 3.4%, TJX 5.0%). As we’ve been saying since last fall, we prefer share gainers in light of our constrained view of the consumer in 2019 (see 2019 Smells Like Late Cycle and Share of Wallet deep dive). (3) The inflection in margin is real with the GM dilution per unit of ecommerce growth improving and cost control remains strong, which biases margins and valuation to the upside.”

“1) We think investors should look at large caps again as some of them are returning back to stability/growth; 2) we do not favor large, late-stage M&As for growth as their utility in inducing biotech growth is debatable; 3) we favor early-stage bolt-on deals as we think large biotechs are still good at the development part of R&D; 4) we see large biotechs as good defensive plays as predictability is coming back to most of the names; and 5) we do not think the pricing debate will go away, especially in an election year. However we think it is in the valuations and large biotechs are more disciplined on price and less reliant on price increases.”

“We are confident Uber can quadruple bookings by 2025, driving margins as a percentage of bookings towards 7%. We use that forecast to set our $50 price target. It reflects uber trading on 20x Ebit in 2020, and also corresponds to 0.8x 2021 bookings, in line with Amazon’s trading range in 2005-2015. In the near term, the ride may be rocky. the KPI we will care the most about will be user growth, and should do well, while ride per user, ARPU, and take rate will drift down for another couple of years. At the same time quarterly performance may be lumpy as Uber invests in stabilizing local competitive landscapes. This will likely create some volatility, and we recommend investors to build positions over time, and for the long run. “

“In this turbulent period of declining sales/production, and with arguably the largest event risk the auto industry has faced this millennium sitting only months away (EU CO2 regs), we urge investors to seek solace (or “Hide”) in Ferrari‘s impressive earnings cadence (+12% EPS CAGR out to 2022), unrivaled pricing power, and unique ability to control its own destiny. We U/G RACE to Outperform and increase our PT to $155 (from $137). “

“Factors supporting our BKNG upgrade include the following: 1) With BKNG’s underperformance over the last year, the valuation now better reflects the business’ slowdown and is now attractive on a cash flow basis (e.g., 5-6% FCF yield). BKNG is currently trading at the low end of its historical EV/FCF range, and the stock has tended to perform well when hitting these levels historically (see Figure 2). 2) Management’s Q2 guidance suggests that top-line trends may be stabilizing (Figure 3). 3) Citi proprietary data suggests that trends in the European and LatAm travel markets may be improving (Figure 4-Figure 5). 4) BKNG has significantly upped its buybacks of late, and we believe that trend will continue and potentially increase further (we forecast as much as a 13% shrink between 1Q19 and YE20). 5) Recent news that BKNG will charge a commission on resort fees could provide a tailwind to estimate revisions. “

“Factors supporting our EXPE downgrade include the following: 1) Vrbo’s growth has disappointed and
slowed meaningfully (Figure 9), and this could persist (and weigh on EXPE’s overall growth) given Vrbo changes, Google changes, and heightened competition. 2) BKNG is stepping up its investments in the U.S., which could weigh on both Core OTA and Vrbo growth. 3) Improvements at TRVG are a key driver of EXPE’s EBITDA growth guidance this year (Figure 11), and TRVG’s performance has been unpredictable. 4) Citi proprietary data suggests that trends in the U.S. travel market may be softening. “

“Due to PMI’s decision to deconsolidate Canada, PMI EPS is no longer capturing the underlying economics of the company. The value of the Canadian business at ~$7bn, according to our estimates, is more than the liability ascribed to it ($2.4bn). This offsets the poor quality of constant currency earnings, which we have estimated boosts EPS by 2% (1% due to removal of transaction currency impact, 1% due to structural translation FX). PMI’s Canadian subsidiary value is more that the value of the liability, unlike BATS. While FDA’s IQOS PMTA approval doesn’t imply that IQOS is lower risk for consumers –that will happen only if FDA grants an MRTP – it is still a positive in the mind of global regulators and consumers. PMI has historically traded at premium to peers and should continue to do so. It has higher exposure to RRP’s than peers (except SWMA), higher ROIC, better management, stronger brands, and market share gains. Aligning target multiples across our coverage universe implies PM doesn’t have enough of a downside to merit an UW. “