- BMO downgraded Intel to market perform from outperform
- J.P. Morgan added Hostess Brands to the focus list
- Morgan Stanley upgraded Ferrari to overweight from equal-weight
- Morgan Stanley upgraded Royal Dutch Shell to equal-weight from underweight
- RBC upgraded Ralph Lauren to outperform from sector perform
- RBC downgraded American Eagle Outfitters to sector perform from outperform
- Wedbush downgraded Nordstrom to neutral from outperform
- Wedbush downgraded Abercrombie & Fitch to underperform from neutral
- Goldman upgraded Match Group to neutral from sell
- Berenberg initiated Wayfair as sell
- Bank of America downgraded Office Depot to underperform from buy
Here are the biggest calls on Wall Street on Thursday:
BMO said semiconductor stocks do not do well in a decelerating gross margin environment.
"At its analyst Day, Intel provided an EPS target for FY22/FY23 of $6 and a three-year view on revenues and OM. And while the company provided plenty of details around factors that are important to us such as narrowing the gap between FCF and EPS, capital allocation, and OM (32%), the commentary around the lowering of GM to a range of 57%-60% leaves us with a discordant note."
J.P. Morgan upgraded the stock after the company's earnings and said it sees a 23% upside to target.
"Following last night's earnings we reiterate our Overweight rating, raise our price target, and add TWNK to the Analyst Focus List as a growth strategy pick. We upgraded the TWNK shares to Overweight last December on the thesis that (a) the Cloverhill facility would pivot from a headwind to a tailwind and (b) the losses at Walmart would abate or reverse. Both of these catalysts seem to be taking place; in addition, Hostess is gaining meaningful business in non-measured channels – beyond what we anticipated. Though we are only slightly upping our EPS estimates, we now model a greater contribution from sales and gross profit growth, rather than SG&A. Because (a) sales and gross profit are high quality drivers and (b) valuations have risen across food, we feel comfortable boosting our multiples and price target. Our new December 2019 price target of $16 implies 23% upside from yesterday's closing price."
Read more about this call here.
Morgan Stanley said it likes management's strategy and the company's increased earnings forecast.
"We upgrade RACE to OW & raise PT to $160 driven by (1) increased earnings forecasts after 1Q beat & (2) increased conviction in mgmt's strategy for growth & capital discipline. ~19x 2020 EBITDA is a premium to luxury goods but we fcst RACE grows EBITDA 69% through 2022 w/ strong cash conversion."
Morgan Stanley said that in the short term, shares are not likely to underperform.
"Looking ahead to Shell's investor day, we see a meaningful chance of a dividend increase - the first since 2014. Our long term concerns still stand but with this prospect, the shares are unlikely to underperform short term. We are neutralising our call and look to review our rating after June 4."
RBC said it sees the company's return to growth a year ahead of schedule.
"We upgrade RL to Outperform and raise our price target to $145 from $135. With the top-line recovery running ahead of plan, we expect further progress in FY20, with margin expansion led by gross margin improvement and a likely return to opex leverage. Despite the shares+20% YTD, we see another leg up in 2019 as RL's recovery continues."
RBC downgraded the stock on valuation.
"While we remain impressed by AEO's comp growth and share gains over the last few years, we see a more balanced risk/reward on the shares, particularly as AEO's positive comp run enters its 5th year. With valuation at 14x FY1 EPS, we expect the shares are pricing in aerie's growth prospects. Downgrading to Sector Perform w/PT remaining $24."
Wedbush said it likes the stock long term but that near term it sees "limited" room to run.
"While we like shares of Nordstrom over the long-term for deep value investors, our proprietary data shows no reason for shares to run in the near term. Transaction Data signals revenue deterioration and alarming discount trends, although our Promo Tracker signals weakness in merchandise margin, with incremental promotions in April indicating a weak exit to the quarter. In April, as Nordstrom closed out 1Q, promotions inflected negatively including "50% off men's" versus "40% off men's last year", and later in April the "50% off men's" promotion last year extended to entire store this year (figure 5). Additionally, Wedbush Big Data shows an inflection in assortment signaling meaningful increases in inventory levels. We are lowering our rating to NEUTRAL and see limited room to run in the near term with no positive data points evident in our proprietary products, and discounting up across the department store sector."
Wedbush said they have less visibility due to U.S. China trade talks and said shares are priced to "perfection."
"While our proprietary Big Data model shows strength in SSS, merchandise margins are showing an uptick in promotions – likely driving above-plan SSS. Near-term, we believe the company will meet or exceed first-quarter consensus expectations driven by above-plan revenue growth, though we have less visibility into the quality of revenue growth, and look for measured guidance when the company reports on May 29th before market open, as our data shows a sharp increase in discounting as the driver of revenues at quarter end, particularly at core Abercrombie brand."
Goldman upgraded the stock on momentum from Tinder subscribers.
"We upgrade MTCH to Neutral from Sell following 1Q19 results and raise our 12-month price target to $66 (from $48 prior). Although 1Q19 revenue and EBITDA were in-line with GS/consensus estimates, net additions were better-than-expected."
Berenberg said they do not see a path to profitability for the online home goods and furnishing retailer.
"We initiate coverage of Wayfair, one of the largest online furniture and home goods retailers in the U.S., with a Sell rating and price target of $121, reflecting 19% downside potential. While its websites offer customers a wide assortment of goods, our work shows that customers can buy many of the same or similar products at other online retailers at similar or cheaper price points. Furthermore, we think the company is over-investing in logistics in trying to compete on delivery speeds with, for example, Amazon, Home Depot, and Walmart, all of which have greater proximity to the consumer and loyal customer bases. Consequently, we do not see a sustainable path to profitability for Wayfair and believe these risks are not fully priced in."
Bank of America said the company's turnaround is not "imminent."
"After assessing the underlying trends in Office Depot's core business, we believe that the company's outlook for the rest of the year may be too optimistic and could be due for additional cuts. We downgrade ODP shares to Underperform from Buy and believe that the stock will continue to struggle until consistent improvement in organic growth is demonstrated. We cut our price objective to $2.00 from $4.00 as 1Q's issues curbed our confidence that ODP's turnaround is imminent."