- J.P. Morgan downgraded Beyond Meat to neutral from overweight
- Moffett Nathanson upgraded Facebook to buy from neutral
- Atlantic Equities initiated Live Nation as overweight
- Citi upgraded JetBlue to buy from neutral
- Susquehanna upgraded Lyft to positive from neutral
- Needham initiated Luckin Coffee as buy
- KeyBanc initiated Luckin Coffee as overweight
- J.P. Morgan upgraded Dollar Tree to overweight from neutral
- Atlantic Equities downgraded Wells Fargo to underweight from neutral
- Barclays initiated Allergan as overweight
- Morgan Stanley downgraded Symantec to underweight from equal-weight
- Credit Suisse lowered its price target on FedEx to $184 from $241
Here are the biggest calls on Wall Street on Tuesday:
J.P. Morgan said Beyond Meat's above-the-Street estimates now appear to be priced into the stock.
"We are downgrading the BYND shares to Neutral from Overweight. When we raised our price target to $120 from $97 last Friday morning, the shares most recently traded at $99.50; yesterday they closed at $168.10, a +69% move in two days (SPX +2%). As we wrote last week, "At some point, the extraordinary revenue and profit potential embedded in BYND… will be priced in" – we think this day has arrived. Our above-the-Street estimates remain unchanged and our price target is more-or-less the same (up $1 merely to reflect lower rates – we value BYND via a DCF). In other words, this downgrade is purely a valuation call."
Read more about this call here.
Moffett Nathanson said Facebook was showing "improved underlying fundamentals."
"When we downgraded Facebook from Buy to Neutral in September 2018, we were primarily concerned about four core issues. First, we were worried that the shift in monetization from News Feed to Stories would weigh on revenue growth. Second, we assumed operating costs would remain elevated as Facebook invested to clean up its platform, which would depress margins going forward. Third, we were concerned that the market was ignoring the increasing global regulatory risks. Finally, we held a longer-term concern that Facebook lacked a "third act" after Facebook and Instagram monetization. Now, less than a year later, each of our main concerns around the health of Facebook's business has been addressed."
Read more about this call here.
Atlantic Equities said it sees "multiple growth opportunities" for the concert promoting company.
"Industry dynamics are exceptionally strong with artists incentivize to tour given the vast majority of their earnings come from live shows while the globalization of music is also driving strong demand. Over the past eight years, global concert revenues have grown by an average of 6% while Live Nation has outpaced this with average growth of 11% through leveraging all areas of the industry along with selective M&A. As well as being the world's largest promoter, LYV manages artists, owns Ticketmaster (the world's largest ticketing company) and has successfully grown sponsorship monetization. We see no let up to strong structural trends and estimate high teen FCF growth over a multiyear period. We are initiating at Overweight with a $75 PT."
Citi said if JetBlue management executes, that it could be the "stock to own."
"Short and longer term catalysts —JetBlue has positive catalysts to support incremental buyers with a range of time horizons and investment styles, in our opinion. We upgrade JBLU to Buy from Neutral and move our PT to $26 from $19.50. Short term - Positive pricing trends with lower fuel prices — With fuel prices down sharply and unit revenue (RASM) looking healthy, near term EPS estimates are likely headed higher. Longer term - A different cost trajectory with a better fleet — The huge opportunity is for JetBlue to have flat to down costs over a number of years. However, flat to down unit costs is neither typical nor required for shares to move nicely higher, in our view. Our analysis suggests if JetBlue can become just average relative to industry peers at controlling unit costs, shares could be worth $26. JBLU could be THE stock to own – IF mgmt. executes well."
Susquehanna said Lyft is showing more evidence of "marketing and insurance cost leverage."
"We like the secular ridesharing market opportunity and more longer-term transportation-as-a-service vision. And now with the US rideshare market becoming more rational, LYFT showing clear evidence of marketing and insurance cost leverage, and UBER's IPO out of the way, this is the time to buy the stock. Our price target of $80 is based on ~7x EV/2020 revenue (vs. ~5x previously), which we believe more appropriately reflects the company's growth profile and path to profitability… and is supported by relevant marketplace and higher growth comps. We see the multiple re-rating higher as revenue continues to outperform, profitability improves (particularly contribution margins), and the market gets more comfort with the competitive dynamics."
Read more about this call here.
Needham said Luckin is "disrupting" the coffee industry in China.
"Luckin is China's second-largest coffee network in terms of numbers of stores and cups of coffee sold (after Starbucks China) and is the only local brand with strong national exposure. By utilizing its new technology-driven retail model and providing high-quality coffee products, affordability, and convenience to customers, we believe Luckin is disrupting the coffee industry in China. Considering the rapid growth of China's coffee market and transition from instant coffee to freshly brewed, Luckin is servicing and gaining market share from an underserved mass market. Its technology and innovative business model allow it to have a lower cost per cup of coffee than other premium brands in China. We are initiating coverage with a Buy rating and $27 Price Target."
KeyBanc said it sees the company with strategic "advantages" that will help it transform into a profitable business.
"Luckin Coffee's rapid ascent toward becoming one of China's largest consumer brands has attracted its fair share of skeptics. However, we believe the company has several strategic advantages that should support its transition into a profitable business. These include: 1) exposure to a rapidly evolving coffee culture in China; 2) limited direct competition; 3) low development costs; 4) better tech and data analytics than peers; and 5) low per-unit cost structure. Our $22 target equates to 1.5x and 13x our 2021 revenue and EPS estimates."
J.P. Morgan upgraded the stock based on good metrics and improvements being implemented at the discount retailer.
"Following a period of restriction, we are upgrading DLTR to Overweight and establishing a $122 December 2020 price target (from Neutral / $82 December 2018 PT prior to restriction) from a Not Rated designation. Our top-line and margin builds across banners support an inflection to high-single net income growth and low-double-digit consolidated EPS growth beyond FY19 with the combination of Dollar Tree stability (+2-3% SSS / 13%+ EBIT margins) and FDO "self-help" (remodels, closures, re-banners) driving $1B+ annual free cash flow generation by FY20+ in a stable/rational low-end backdrop (wages/employment) translating to an attractive fundamental risk/reward with 20x (commensurate w/ peer DG noting .92 10 year stock price correlation) pointing to ~30% upside (versus 15x or 100bps discount to DLTR's trailing 3-year avg equating to ~$96) in current list 3 tariff scenario (w/ list 4 moving 9% China exposure in current guide to 20% by our math)."
Atlantic Equities downgrade the stock based on a decreased outlook for interest rates and increased competition for deposits.
"Since the 1Q19 result, the outlook for rates has deteriorated substantially and the US10Y yield has fallen 40bp. Combined with increased deposit competition, NIM pressure is clearly intensifying, which is likely to result in WFC delivering net interest income at the bottom of its current guidance range of -2% to -5% (with consensus actually above the range). In addition, the ongoing search for a new CEO creates uncertainty around expenses for 2020 with an external appointment likely to implement a modified strategy which could postpone WFC's recovery to 2021. Lastly, with so much focus on compliance and cost reduction, there is an increased risk that revenue growth will disappoint. Given these substantial headwinds, we believe that WFC will underperform peers over the next 12-18 months, hence we move to an Underweight recommendation."
Barclays started the stock with an underweight rating on rising competition, amongst other things.
"We initiate coverage on AGN at UW with a $133 PT: We think AGN is in an unenviable position of seeing material competitive risks to half of its revenue base. Botox in Aesthetics (25% of revenues) is set to change from a 3-player market to a 4 or 5 player market. Despite overall market growth, we see Botox share declining if RVNC's DAXI lands on the market. Therapeutic Botox which is currently facing anti-CGRPs will have the added pressure of a long-acting Toxin, which we believe will make significant headwinds in the prescription market. These overlay on the multiple year LOEs that AGN faces currently; ~20% of revenues will face Generics entry over the next four years. This will necessitate that AGN fires on all fronts (grow Botox market further, advance pipeline, commercial success on launches), a challenging task. With this multi-year overhang, we expect flat earnings over N3Y, and do not see any scope for multiple expansion. Our SOTP-based PT of $133 yields 6% potential upside from current levels."
Morgan Stanley said it sees risks for the company such as management "turnover" and "increased" competition.
"While underperforming the broader software universe year to date (+1% vs. software average up 29%), we see further downside for SYMC as: 1) estimates hold risk – our recent survey of Chief Security Officers (CSO) shows Symantec losing share in its two core enterprise markets (endpoint security and web security), suggesting risk to management's guidance for +1% revenue growth in FY20 vs. -4% in FY19; and 2) multiple has room to move lower — while not expensive on an absolute basis at 10x consensus CY20 EPS, SYMC still trades above trough levels and ahead of other large cap tech assets with limited growth like HPE and INTC. As such, we remain below consensus with FY20 EPS of $1.61 vs. consensus of $1.81 and our new $14 Price Target assumes SYMC trades at 9x EPS. Even if we're wrong and Symantec does achieve management's guidance of accelerating revenue growth plus margin improvement in FY20, we see only 21% upside to this Bull Case scenario."
Credit Suisse said FedEx is seeing "temporary volume" and "cost headwinds."
"In light of the deceleration in the U.S. and global macro (trade uncertainty with China notwithstanding) and temporary volume and cost headwinds (7-day Ground; non-renewal of the AMZN Domestic Express contract), we lowered our revenue, margin and EPS forecasts going forward. We trimmed our FY19 estimate to $15.40 from $15.46. Our FY20 and FY21 forecasts fall to $16.66 and $18.64 from $18.24 and $21.16, respectively. Our DCF-derived TP decreases to $184 from $241, due to lower base year (FY20) EBIT. Risks include a macro slowdown, the TNT integration and trade policy uncertainty."