- Evercore ISI initiating Apple as outperform
- Longbow upgraded Goodyear Tire to neutral from underperform
- Bank of America initiated Kontoor Brands as underperform
- Morgan Stanley upgraded Advanced Micro Devices to equal-weight from underweight
- Evercore ISI downgraded Fiat Chrysler to in line from outperform
- Keefe, Bruyette & Woods downgraded The Travelers Companies to market perform from outperform
- Stifel initiated Canopy Growth as buy
- Nomura initiated Electronic Arts as buy
- Goldman Sachs upgraded United Continental to buy from neutral
- KeyBanc upgraded Whirlpool to overweight from sector weight
Here are the biggest calls on Wall Street on Thursday:
Evercore said that despite the various issues swirling around the company, it expects the stock to "grind higher."
"We are initiating on AAPL w/ an Outperform rating as we see several catalysts that should enable the stock to grind higher from current levels. While we understand iPhone units (and sales) will remain muted through FY20 (5G launch) the narrative has and continues to shift towards services and a higher mix of recurring revenue for AAPL. Key levers for upside include: a) services growing double-digits with potential acceleration given new revenue streams, b) gross margins inflecting higher for the remainder of the year given easing commodity costs and better leverage, c) cap allocation enables 2-4% share reduction, and d) non iPhone hardware sales inflect higher and have better margins."
Read more about this call here.
Longbow said that it doesn't expect the Mexico tariff to have a major effect for now.
"We are upgrading GT to NEUTRAL from UNDERPERFORM as shares now trade in line with our $14 price target. Our 2019 price/mix vs. raw material spread outlook is intact based on this week's pricing feedback from the channel. Also, raw materials are stable vs. our last check in mid-May. The Mexico tariff looks to be a modest $0.02-$0.03 EPS drag for now."
Bank of America said it expects the maker of Lee and Wrangler jeans to miss growth forecasts due to a tough retail environment amongst other things.
"We expect multiple contraction as growth misses plan due to a tough retail environment and underinvestment in the Lee and Wrangler brands. Kontoor was spun-off from VF Corp. on May 23. It includes the Wrangler, Lee, Rock & Republic denim brands, as well as the VF outlet business. Our PO is based on a 6x our 2020E EV/EBITDA. This compares to the rest of our vendor coverage at 8x. We think a discount is warranted given our outlook for below peer growth and because we think the company is over-earning in the near-term. We're modeling a (1)% 2018-21 EBITDA CAGR at Kontoor, vs. 6% for peers."
Morgan Stanley upgraded AMD but said it is still concerned about what it considers optimistic projections for the second half of the year.
"While our earnings concerns over the last 12 months have played out and 2H numbers still look high, the table is set well for 2020 and there are positive near-term catalysts. We still think there is too much short-term optimism, but we struggle with catalysts to remain UW."
Read more about this call here.
Evercore reversed its earlier upgrade of the stock after Fiat Chrysler withdrew its merger proposal.
"We had upgraded both FCA in Renault to Outperform on May 28 based on three core components: 1. Upside to FCA Core Value – Increased clarity/an answer to the long questioned technology path forward/scale for FCA in EU. 2. RNO Core value – Closing of the negative stub gap. 3. Synergies – ~10% accretive even assuming a -35% discount. Originally we saw a VERY high chance of a merger happening. Even though FCA's retreat doesn't necessarily mean that a merger is completely off the table, the likelihood of it happening has materially fallen. Consequently, we are moving back to old recommendations and updating Price Targets for current negative macro (poor production, Mexico, EU 232, EU CO2, China): for FCA (In-Line; TP €11) and Renault (In-Line; TP €50). For both companies this implies ~5x 2019E earnings."
"We're downgrading TRV's shares to Market Perform from Outperform; YTD, the shares have returned 25.9% versus the S&P 500's 12.7% return, and are now just over 2% below our unchanged $153 target price. We're nudging down our 2019E/2020E EPS to $11.35/$11.70 from $11.40/$11.75 (reflecting QTD adverse weather and declining interest rates), and introducing our initial 2021E EPS of $12.45."
Stifel said Canopy represents the best investable opportunity among its peers to capitalize on growth in the industry.
"We are initiating coverage of Canopy Growth with a Buy rating and target price of C$64 which we derive by assigning a 12x EV/Sales multiple to our FY21 sales estimate of C$ 1.6 billion. This premium relative to its peers underscores our contention that Canopy Growth represents the best investable opportunity for capitalizing on the growth of the global cannabis category with definitive Canadian leadership, multiple avenues for attacking the U.S. market, a solid balance sheet position (C$ 4 billion in cash), and largest shareholder Constellation Brands which owns nearly 40% of the company. This partnership offers large company capabilities providing invaluable expertise to meet the demands of growing the business 5x over the next two years. Canopy is positioned well to fully capitalize on the global growth potential of this burgeoning segment and is especially positioned well for the launch of the second wave of products expected this Fall."
In new coverage, Nomura pointed to EA's product pipeline and strong competitive advantages in key sports franchises.
"Initiating coverage of Electronic Arts with a Buy rating and a $120 target price: Electronic Arts is a leading publisher of video games across platforms whose franchise portfolio includes leading series, such as FIFA, Madden NFL, Battlefield, and Apex Legends. We are positive on EA due to the company's strong competitive advantages in its key sports franchises, its ongoing IP diversification (licensed vs. owned), and its robust pipeline."
Goldman Sachs said the airline has one of the "highest levels" of upside potential in its coverage world.
"Expect UAL shares to appreciate on current forecast, but see further upside risk if a new credit card agreement is reached; Upgrading to Buy from Neutral. Given UAL's share price decline since we initiated in November 2018, it now has one of the highest levels of upside potential to our price target in our coverage universe. We believe that the company's more difficult second half 2019 unit revenue comparables, investor concerns around its loan to Avianca, and its relatively larger exposure to China have weighed on shares. We think that the more difficult second half comparables are appropriately incorporated into our forecast and consensus forecasts and believe that the potential downside risks associated with China and Avianca are priced in at these levels. Additionally, we are of the view that United is likely within 12 to 36 months of signing a new contract with improved economics with its co-brand credit card partner Chase."
Read more about this call here.
KeyBanc said that it thinks a lot of the "negative sentiment" is already priced in.
"We upgrade Whirlpool to Overweight from Sector Weight, with a $150 price target, equal to ~10x our FY19 EPS (9-11x is 1- and 5-year average) and ~8x our FY19 EBITDA (~7x is the 1- and 5-year average). We readily admit obvious upside catalysts are lacking, yet our U.S.-centric thesis, coupled with already reduced expectations for North America volume (guidance flat to down 2%), a LT European margin recovery only now starting, a lot of negative sentiment and news flow is priced in. From the $190 level in January 2018, when tariffs were put on LG/Samsung for large residential washers, the North America margin of ~12% held steady, absorbing higher costs through price, with FY19 guidance benefiting from falling costs, offsetting the lowered N.A. outlook."