Here are the biggest calls on Wall Street Monday:
Evercore ISI raising price target on Amazon to $1965 from $1800
"The pace of Amazon's YoY revenue growth often dominates headlines... Yet the shift in the investment thesis from one of revenue growth to one of profitability has us focused on a more important indicator: gross profit... In this note, we make the case that given Amazon's shifting business mix, the pace of gross profit growth has become a more relevant indicator of the health of the business, and as such, should be the key metric used to value the company... This comes as a function of: 1) the engine of growth for AZMN e-commerce is the 3P marketplace, where AMZN collects high gross margin fee revenue; and 2) The majority of profitability improvement is coming from high-margin revenue buckets like sub. Services (mainly Prime), AWS, and Advertising. As such, we remain bullish on AMZN at least in part because the company's gross profit is expected to grow ~400bps faster than revenue for AMZN over the next 3 years. Our analysis of gross margins allows us a more granular approach to AMZN SOTP valuation, and includes a number of key valuation implications, including: 1) AMZN's 1P e-commerce business is likely worth ~$120bn, or ~$230/share; 2) AMZN's 3P marketplace business is likely worth >$250bn, or ~$490/share, and; 3) Amazon advertising is likely worth ~$80bn, or ~$150/share. We continue to think AWS is worth ~$990, based upon EV/EBITDA analysis..."
Morgan Stanley upgrading Kraft Heinz to 'equal weight' from 'underweight'
"We are upgrading KHC to EW as our bearish LT fundamental outlook is now appropriately discounted in the stock... Near term, we see solid visibility into achievability of FY19 estimates, which along with the potential for further 3G involvement, limits further stock downside..."
Barclays downgrading Bed Bath & Beyond to 'underweight' from 'equal weight'
"We have remained on the sidelines over the past several years as the company has attempted to work through a broad restructuring, but we are increasingly disappointed with the results of these efforts... We believe there is limited, if any, visibility into a potential inflection point towards improving traffic trends and are less than optimistic that gross margin can stabilize in the foreseeable future... While we believe the company has several efficiency opportunities, we do not expect these to be large enough to overcome a continuation of declining sales pressures... We are lowering our 2019 and 2020 EPS estimates to $1.80 and $1.70 from $2.00 and $2.05, respectively... We are decreasing our price target to $13 from $15..."
J.P. Morgan downgrading Dillard's to 'underweight' from 'neutral'
"We are downgrading DDS to Underweight from Neutral lowering our price target to $57... Bottom-line, shares of DDS have rallied 25% year-to-date trading at 20x our FY20 EPS or double the mall-based Dept Store/Specialty average with the combination of company specific top and bottom-line P/L lead indicators turning negative by our work and the larger mall-based competitive backdrop reversing course (vs. 1H18) raising risk to the multi-year "E" (& multiple)..."
BMO upgrading Hasbro to 'market perform' from 'underperform'
"We are upgrading shares of Hasbro to Market Perform, from Underperform, with a revised target price of $88 (from $75)... While we still think earnings could be pressured by tiring core franchises, we also think that the stock's multiple will expand as we approach major theatrical events later in the year... Relief that the Toys "R" US disruption of 2018 is over and a lowering of near-term financial expectations have cleared the way for investor sentiment to improve, pushing the stock's multiple higher..."
Pivotal upgrading Foot Locker to 'buy' from 'hold'
"FL reported much-better-than-expected 4Q results, and its FY19 SSS/EPS growth outlook was also well above consensus... That said, we were wrong to downgrade FL early last week, as we underestimated how well the company was positioned in 4Q18 and overestimated the impact of 1Q19 headwinds... To our surprise, the stock was up only 6% on Friday, and it is currently trading at a lower relative-P/E than when we downgraded it... Given the strong 4Q results and what this portends for FY19, we're now more bullish on FL than we were going into the print... All told, given our improved view, we think we'd be wrong not to upgrade the shares back to BUY from HOLD..."
Guggenheim adding Dish to 'best ideas' list
"We believe DISH offers the most significant upside opportunity in 2019...In conjunction with this report, we are adding DISH to our Best Ideas list and removing TMobile...We still see meaningful upside for TMUS shares, but not the magnitude offered by DISH. In our view, far too much attention is placed on a weak video industry, but that issue is apparently well known... We think the market has become far to complacent on DISH shares, particularly in light of what could be a catalyst rich year. Further, we do not see meaningful debt maturity risk given various financing options.."
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