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Here are the biggest calls on Wall Street on Monday
“We believe many investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives, and with a 38% move in the stock year to date, and >50% cuts to forward fundamental FCF anchors, we are cutting our PT and moving to UW.”
Read more about this call here.
Bank of America downgraded the stock saying they now expect a longer delay with the 737 Max.
“On Friday after the market closed, Boeing announced it will cut 737 production rates from 52 per month to 42 per month effective mid-April. In our view, this likely means that the 737 delay could last longer than previously expected. We now estimate 6-9 months of disruption vs. our previous estimate of 3-6 months. The 737, which is Boeing’s most profitable program, accounts for about 40% of total company EBIT. We update our model and valuation to reflect our new base case scenario for Boeing. We lower our PO to $420 from $480. Considering the operating risks in Boeing’s business made apparent by recent events regarding the 737 MAX, we expect Boeing to trade at its historical 25% discount to the S&P 500 on a Price to Free Cash Flow Basis instead of closer to parity. We downgrade Boeing to Neutral from Buy.”
Read more about this call here.
UBS said they downgraded Starbucks on valuation.
“We are downgrading Starbucks to Neutral from Buy following the ~55% increase in shares since June as risk/reward now appears more balanced. Improved sss momentum & streamlined operations better position SBUX going forward, but we believe shares reflect this and expectations are now elevated. We’re raising our price target to $78 from $72 based on: 1) $2BN accelerated share repurchase program recently announced (Consensus ~$1BN in F3Q); and 2) modest upside to FY20E EPS (we now model EPS of $3.06 vs. Cons, $3.03). Shares trade at ~25x Cons. FY20 EPS, or the upper end of the 2-yr range of 18-27x. Repurchase activity & upside to forecasts could support further multiple expansion, but we see risks from downside to more elevated sales/earnings expectations as an offset.”
Raymond James downgraded the stock primarily on issues surrounding the 737 Max.
“Beyond the pressures in 2019 that are “one time” in nature (mechanics’ union dispute, MAX grounding), we remain confident in Southwest‘s ability to maintain its longer term superior margins, FCF profile, and low leverage while capitalizing on technology catch-up and international growth opportunities. Hence, while we are stepping onto the sidelines until further clarity on the timing of a MAX solution we are not negative on LUV shares. Moreover, beyond the near term, we believe some of the impact of the grounding of the MAX fleet is likely to be recouped in terms of maintenance credits or lower ownership costs of future aircraft.”
Wells Fargo upgraded PG saying they see upside in the stock.
“We are upgrading PG to an Outperform rating. We believe PG has changed and a sense of urgency & accountability has been infused into the organization, driven by CEO David Taylor. This is a far cry from the old PG, which we believe suffered from a lack of focus and agility, resulting in inconsistent execution. While it took a while for consistent results to show, fundamentals appear to have turned (highlighted by +4% org sales growth in F1H19).”
Wells Fargo said the risk/reward for HOG is “less attractive” at current levels.
“Downgrading HOG shares to Market Perform as we believe risk/reward is now less attractive at current levels amid (1) continued heavyweight motorcycle market weakness, (2) tariff uncertainty, and (3) long path to stabilization.”
RBC upgraded the stock saying fundamentals may have reached an inflection point among other things.
“We are upgrading SNAP to Outperform with a $17 PT based on several factors, incl. early evidence that Android platform improvements are finally gaining traction, our long-standing appreciation for the high level of product innovation @ SNAP, takeaways from Snap’s partner conference, and our belief that SNAP may have reached a fundamentals inflection point.”
Jefferies cut estimates and lowered their target price on Tesla on Model 3 worries.
“We adjust estimates and PT post Q1 miss in mix and delivered units. While Q1 disappointed, the critical tests in our view remain demand elasticity in Q2 as lower priced M3 versions become available and sorting out logistics. The announcement of an “Open Pool” with FCA to reduce calculated CO2 emissions in Europe could generate several $ million of cash income, possibly starting this year.”
Jefferies said they are more bullish on the stock after recent developments and events in Macau and China.
“Events and developments have occurred in China, Macau and for WYNN in the year to date and since our market tour in March that we believe warrant a more positive view. These include better than expected GGR results, regulatory developments for competing companies/markets, and increasing evidence of a Chinese economic rebound. As we have noted previously, valuation sensitivity is reduced in accelerating periods.”
Cowen upgraded the stock and said they are bullish on the internet, media, & technology section of Zillow‘s business.
“ZG‘s IMT franchise has enduring value and leadership a compelling pedigree. Our analysis finds Internet segment targets conservative and Homes attainable. Management has a cogent plan, experienced personnel, and ample capital to deploy. Our SOTP suggests $46/share in value, and meaningful upside if IMT returns to historical growth rates. Therefore we upgrade to Outperform from Market Perform.”
Cred Suisse said Allstate said pricing for auto insurance will have trouble keeping up with expense inflation.
“All gauges point to broader auto insurance profitability being restored to levels that are now slightly better than long-term averages, particularly when taking into account lowered corporate tax rates in the US. When this healthy profitability dynamic is combined with significant market share losses for industry heavyweights State Farm (from 18% to 17% in 2018) and Nationwide (from 3.2% to 2.7%), we estimate auto insurance pricing will remain competitive and hover in low-single-digit territory (1-3%) throughout 2019.”
J.P. Morgan downgraded the stock saying they see are seeing a deterioration in consumer trends.
“For CLX, consumer takeaway trends seems to be worsening in tracked channels, with Nielsen sell-through data showing a sequential slowdown, turning negative as volume has been pressured by distribution declines. We believe shelf space losses in Charcoal during 3QFY19 (TDP -16%) will be particularly challenging for CLX ahead as the company enters peak grilling season in the coming months. We see little room for CLX to offset the revenue challenges of Charcoal and Bags & Wraps as the company has already raised prices across its portfolio, and therefore see downside to earnings estimates ahead.”
Credit Suisse said the company’s reinvestments are “showing signs of traction.”
“We are raising Smucker to Neutral, our target price to $120/share, and our EPS estimates in line with consensus for FY20 and FY21 (to $8.38 and $8.67, respectively). We continue to harbor long-term concerns about the company’s competitive positioning in the pet and coffee categories, but recent improvement in retail sales trends (+2.6% YTD vs 1.1% in 2018) and the margin expansion in its Coffee division have exceeded our expectations. These trends increase our confidence that the company will achieve its 3-4% EPS growth guide for FY20.”
Evercore said they now see “modest upside for shares” of the data storage company/
“We upgrade STX to In Line rating, and raise our price target to $45 – equating to 1.5x EV/ Sales (our updated CY20 revenue estimate – at midpoint of 2yr range of 1.0-2.0x). Recall we downgraded STX to Underperform in September 2018 (at ~$56 share price) based on a vision for (i) worsening storage demand, (ii) expectations for lower NAND ASP’s to stimulate a faster SSD replacement cycle (particularly in Client), and (iii) GM’s tracking below the low end of the targeted range — which in aggregate would lead to a material reset to consensus EPS.”
Citi said they downgraded because the stock is near an all-time high.
“Following a 110% increase in shares YTD and with the stock near its all-time highs, we are lowering our rating to Sell from Neutral. This is not necessarily a call on the Q1 earnings report (five main reasons discussed below). In fact, we acknowledge the general secular tailwinds in the OTT space and the potential risk from investors continuing to reward Roku with a premium multiple.”
