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A Tesla Model S (L) and Model X are displayed at a shopping mall in Hong Kong on March 10, 2019.
Vivek Prakash | AFP | Getty Images
Here are the biggest calls on Wall Street on Thursday:
Barclays lowered its price target on Tesla to $150 from $192
Barclays said Tesla has “stalled as a niche automaker.”
“Two years ago, we outlined our ‘reality’ based view of why we disagreed with the optimistic dreams of TSLA admirers, and saw TSLA as overvalued (see Red-pilling the Tesla bull case, 7 April 2017). While for much of the two intervening years the market disagreed with our view, recent price action – even in the face of a successful fund raise – indicates that more market participants are coming around to our view. In this note, we revisit the key tenets of the red pill/blue pill debate. In addition, we are updating our probabilistic valuation model to reflect a higher probability of TSLA stalling as a niche automaker, reducing our PT to $150 from $192 and reiterate our UW rating.”
Read more about this call here.
Morgan Stanley lowered its price target on Apple to $231 from $240
Morgan Stanley expects Apple share to be “choppy.”
“Given the risk of further restrictive trade measures, we answer investors’ top questions. We expect shares to remain choppy, with a near-term floor around $160. Our estimates are unchanged but peer multiple contraction drives our PT to $231 (from $240).”
Goldman Sachs upgraded Citi to ‘buy’ from ‘neutral’
Goldman said it sees “21% upside potential.”
“We upgrade C to Buy from Neutral, as we see a realistic path to a 13% ROTCE in 2020E (100bps ahead of market expectations) which is not contingent on either higher interest rates or strengthening global growth trends. While there is a risk that C may back away from their 13.5%+ ROTCE target, neither consensus expectations for 2020 (12% ROTCE) or the current valuation discount C achieving the target. “
UBS downgraded Verizon to ‘neutral’ from ‘buy’
UBS sees “difficult comps ahead’ for Verizon, but does say stock is well-positioned as a defensive investment.
“We are downgrading Verizon to Neutral and maintaining our 12-month PT of $59/sh. We continue to believe Verizon is well-positioned as a defensive investment with LSD core growth and sustainable yield. We expect wireless fundamentals (85% of EBITDA) to remain healthy, supported by a rational pricing environment and cost savings. That said, with valuation back in-line with historical levels and more difficult comps ahead, we see a more balanced risk-reward skew.”
Guggenheim upgraded Comcast to ‘buy’ from ‘neutral’
Guggenheim upgraded the stock noting growth in the broadband business and saying that NBCU is operating at a very high level.
“The telecom and cable services industries are experiencing seismic change, with winners and losers emerging. For Comcast, the pivot from primarily a video distributor to a connectivity company has been fairly smooth. Comcast’s strong broadband gains underscore the company’s successful pivot to broadband, providing expanding margins and lower capital intensity. The Wireless business is showing steady gains, and NBCU continues to operate at a very high level. Comcast’s best-in-class uFCF yield further supports our upside case for the shares. Upgrade to BUY, PT to $52. “
Stephens upgraded Zynga to ‘overweight’ from ‘equal-weight’
Stephens said it likes Zynga‘s management and is bullish on the company’s new game launches.
“Under Frank Gibeau, Zynga has had a three-pronged approach to growth, 1) live services, 2) new game launches, 3) M&A. We feel significantly more confident in each one of these areas now than we did when we launched equal-weight in January. With the stock up 57% ytd, one could point out that the market agrees with this view. In order to make sure that we are not too late to the story, we decided to reunderwrite Zynga by valuing each of the above areas separately. In our view, this “sum-of-the-parts” analysis shows that at the current price, the risk/reward is highly skewed to the upside and you are getting a nearly free call option on the company’s robust new game slate and likely accretive M&A.”
Deutsche Bank downgraded U.S. Steel to ‘sell’ from ‘hold’
Deutsche Bank said the company has margins “below” some of its peers.
“Our 2020E EV/EBITDA based valuation is $9/sh (using 5.0x EV/EBITDA vs the past 15 year average of 5.5x) and our DCF based valuation is $13/sh (using a discount rate of 9.0%). Using a 50/50 blend of the two valuations results in a PT of $11/sh and an implied 17% downside to the current share price. While the share price has already retreated from recent highs, we are concerned that ND/EBITDA increases to a peak of 4.5x on our forecasts (higher than 4x indicated as comfortable by the management, and well above 1.3x in 2018), the company longer term still has margins below some peers on our forecasts and in an overall steel market lacking discipline, we believe X’s share price will remain under pressure. By 2023, X still has the lowest FCF Yield of our 7 stocks under coverage as well as the highest Capex/EBITDA ratio. The company is committing to large scale projects that once started will be hard to back out of.”
Deutsche Bank downgraded Nucor to ‘hold’ from ‘buy’
Deutsche said the steel maker’s fundamentals are “deteriorating.”
“Our 2020E EV/EBITDA based valuation is $46/sh (using 6.5x EV/EBITDA vs the past 15 year average of 6.8x) and our DCF based valuation is $60/sh (using a discount rate of 8.0%). Using a 50/50 blend of the two valuations results in a PT of $53/sh and an implied 4% upside to the current share price. NUE has outperformed its closest peer STLD (-14% vs -26% the past 6 months vs. S&P500’s +5%) with some differences in product sales mix (e.g. NUE has more plate exposure which has been a relatively better performing market). Despite its heavy capital spending (spread over 10 projects in total -$3.5bn capex with $2.9bn over 2019-22), the company is forecasted to generate excess cash, thereby able to maintain its dividend and deliver modest buybacks and the company can therefore maintain a relatively flat ND/EBITDA profile overall. By splitting capex across a large number of projects the company can manage timing/balance sheet moves/capital management. However with market sentiment likely to be negative for sometime and fundamentals deteriorating we believe the stock could be rangebound for sometime. “
Bank of America downgraded Canada Goose Holdings to ‘neutral’ from ‘buy’
Bank of America downgraded the stock after the company’s earnings saying it saw a slowing of “revenue growth” in the U.S.
“We are downgrading Canada Goose to Neutral (from Buy) and lowering our PO to C$54/US$40 (from C$93/US$70) based on 25X our F2021 EPS of $2.15 (rolling forward our valuation base to F21 from F20) as we believe an outlook for slowing momentum in GOOS’ Direct-to-Consumer channel warrants a lower P/E multiple. GOOS reported F4Q19 adjusted EPS of C$0.09 (vs. our C$0.03) driven primarily by upside in wholesale revenue +12.6% (vs. our 5.0%) while Direct-to-Consumer growth of 29.1% was in line with our model but broke a pattern of significant DTC revenue upside that GOOS had been posting since its IPO (Mar. 2017). In addition, U.S. revenue growth slowed to just+6%, a significant deceleration from 40%+ growth the last 2Q’s despite an additional company owned store on top of 3 U.S. stores last year. “
Bank of America downgraded Teva Pharmaceuticals to ‘underperform’ from ‘buy’
Bank of America called the ongoing litigation, an “overhang.”
“We are downgrading TEVA to Underperform (from Buy) for three reasons: 1) legal exposure – TEVA has exposure to various ongoing opioid litigation. Though we are not legal advisers, we believe TEVA has credible defenses in the opioid suits, but financial downside is difficult to bracket. While this has been a known risk factor for months, the recent sector de-rating indicates to us a definitive ‘clearing event’ is needed for the stock to work. However, the highly fragmented nature of opioid lawsuits creates an impediment for a global master settlement. While the majority of cases have been consolidated in the multidistrict litigation (MDL) proceeding, only track 1 (Ohio cases) could yield a binding ruling (potentially 1H20) the rest of cases could extend to 2021+; 2) updated valuation – our updated DCF valuation of $9/shr includes $3.5bn in present value ($5.1bn gross) for potential litigation exposure from separate opioid and price fixing lawsuits still reflects a one-turn premium (EV/EBITDA) vs. levered, distressed spec pharma peers; 3) catalysts – lack of upside for key brands and US generic pipeline that is interesting but insufficient upside optionality. Our new PO is now predicated on DCF (was EV/EBITDA). “
Raymond James downgraded Toll Brothers to ‘market perform’ from ‘outperform’
Raymond James said the homebuilder has experienced a “greater degree of pricing pressure” than the firm realized.
“We are lowering our rating on Toll Brothers to Market Perform (from Outperform) following a review of last week’s F2Q19 results, which leaves us concerned that reduced estimates, a lack of upcoming catalysts, and lingering West Coast issues will leave shares range-bound near term. Unfortunately, a greater degree of pricing pressure than we expected has emerged in TOL’s markets, leading to higher selling incentives and reduced FY19 gross margin guidance. Also, our updated analysis of re-sale market conditions suggests that heightened y/y re-sale inventory at TOL’s price points will remain a lingering issue this summer, most noticeably in California, Seattle, and Dallas. Moreover, with added construction delays, we find TOL’s new guidance projecting FY19 operating results well below our prior expectations and implying a deteriorating level of forward ROIC and ROE (now just 9% and 11%, respectively). TOL’s current valuation still remains intriguing on both an absolute and relative basis (1.1x/1.3x GAAP/adjusted book value vs. 1.6x peer average). However, we feel until TOL can demonstrate margin stability and re-accelerating ROIC metrics, TOL will remain a “show-me” story.”
Credit Suisse lowered its price target on Kraft Heinz to $26 from $33
Credit Suisse lowered it’s price target on Kraft Heinz due to the ongoing SEC investigation.
“We are lowering our TP to $26 from $33 and our forward estimates on KHC below management guidance due to the possibility that the SEC’s investigation into the company will continue to reveal breakdowns in the company’s internal controls and negatively impact the company’s forward outlook. There is also significant uncertainty related to potential dilution from divestitures and reinvestment needs. We are lowering our FY19 and FY20 EPS well below consensus to $2.68 (from $2.80) and $2.61 (from $2.85). “
BMO named Boston Scientific as a ‘top pick’
BMO said the medical device company has the “richest pipeline” in its coverage.
“We are adding BSX to our Top Picks list, joining PODD and WMGI, and increasing our target to $46 from $44 (based on 24-25x 2020E EPS or a $44-46 range). BSX weathered a 1Q19 miss and the reset of its 2019 guidance, yet there are several upcoming catalysts including: 1) the FDA Paclitaxel Panel (June 19/20), 2) its June 26 Analyst meeting (and pipeline update), and 3) the close of BTG (mid-2019E). We reiterate our Outperform rating: BSX stands out with high-single-digit organic revenue growth, operating leverage, and double-digit EPS. “
