- J.P. Morgan downgraded Starbucks to neutral from overweight
- Atlantic Equities initiated Coca-Cola and Pepsi as overweight
- Deutsche Bank initiated Domino's as sell
- Barclays downgraded Dish Network to underweight from equal weight
- Stifel downgraded UPS to hold from buy
- Evercore ISI upgraded NXP Semiconductors to outperform from in line
- Citi raised its target price on Chipotle to $955 from $797
- Guggenheim downgraded PayPal to sell from neutral
- Macquarie downgraded American Airlines to neutral from outperform
- RBC upgraded Gilead Sciences to top pick from outperform
- Bank of America upgraded Anheuser-Busch InBev to buy from neutral
- Raymond James downgraded Aflac to outperform from strong buy
- Goldman Sachs initiated Chipotle as conviction buy; McDonald's, Starbucks, Shake Shack as buy
- Wells Fargo initiated Dell Technologies as outperform
- UBS raised its price target on Apple to $235 from $225
Here are the biggest calls on Wall Street on Monday:
J.P. Morgan downgraded Starbucks mainly on valuation.
"In a few recent cross-sector industry notes, we suggested investors "add lower" to SBUX as we believed peaking 3Q19 comps (based on unusually one-off-driven, easy year ago comparisons) would allow an easing in the share price. In fact, the opposite occurred with post-EPS performance propelling the stock up 9% – its biggest one-day gain since November 2, 2018 – and to levels well above even our $91 December 2020 price target."
Read more about this call here.
Atlantic Equities said in its initiation that Coke and Pepsi have "attractive" and "sustainable" growth.
"Global consumer companies are enjoying a return to form in 2019 helped by a positive global consumer backdrop, rational pricing and easing commodity cost inflation. However, another element is easy comps as 2019 results cycle against 2017/2018's challenges when the sector's core fundamentals came under intense scrutiny. We believe that such issues have not been sufficiently addressed and as comps begin to toughen, sentiment may likely shift. Only those companies that can offer attractive and sustainable growth will merit premium valuations. We see The Coca-Cola Company and PepsiCo Inc as two such names and we are launching coverage on both with Overweight ratings."
"The call here is really about the competitive intrusion of the third-party delivery aggregators, which we expect to increase in magnitude over the next two-to-three-year period, before it potentially levels off or gets better. Simply put, we believe the aggregators are a problem for DPZ because they enable a material increase in delivery supply availability of additional restaurant menu types outside of QSR Pizza, which, in turn, creates an increase in delivery choices for DPZ's existing customer base."
Barclays said the Sprint and T-Mobile deal is unlikely to create "major upside" for Dish equity holders.
"In the case of Dish, the present stock price implicitly assigns a $20bn value to a zero revenue wireless business, roughly a third of Sprint which has 42mm retail subs and a premium deal valuation. Also, Dish's capital structure is likely to undergo major changes to fund the venture which is likely to be dilutive for existing equity holders. Therefore, while the deal is a strategic positive and takes away downside risk, it is unlikely to create major upside for Dish equity holders. Consequently, we downgrade the stock to UW."
Stifel said in its downgrade that UPS's long term initiatives will take "extra investment" in 2020.
"Now that UPS shares have run through our target price, we have to decide whether our earnings estimates are too low, our valuation is too conservative, or both. Given the company spoke on its earnings call of a challenging macro environment heading into year-end and that we believe its long-term initiatives will likely require extra investment in 2020 that could limit margin expansion and earnings growth next year, we are stepping to the sidelines with respect to the stock."
Read more about this call here.
Evercore said it was bullish on the Dutch semiconductor company into its earnings report next week.
"Ahead of NXP's earnings next week we are upgrading the stock to Outperform and increasing our price target to $125 (from $110). We expect the company's report to likely be good enough for investors given the current demand backdrop, with a strong self-help story and a solid pipeline of Automotive design wins driving upside to estimates longer-term."
Citi raised its price target on Chipotle after the company's strong earnings report.
"Chipotle reported better-than-expected SSS growth and raised comp guidance for 2019. Traffic also accelerated sequentially, and digital sales increased +99% in the quarter and now represent ~18% of sales (recall that digital sales are also margin accretive to Chipotle). Although the company will start lapping tougher SSS compares in the next few quarters, we think that there are still levers management can pull to successfully maintain momentum, and we're encouraged by today's results."
Guggenheim said it sees headwinds for the company after management lowered its 2019 guidance.
"We see management's lowered 2019 guidance as unwelcome ahead of what we expect will be a challenging 2020 for PYPL – headwinds include the eBay separation, Brexit, and regulatory changes in Europe (PSD2/SCA). We expect these factors will cause a deceleration in TPV and revenue growth next year (we're below consensus); new partnerships are unlikely to be enough to fully offset these significant headwinds in 2020. Net: core (ex-investment related gains) non-GAAP EPS will likely slow materially. We see the departures of key executives for PYPL (Braintree, Venmo) as further negatives."
Macquarie said it thinks there will be an "overhang" on the company's stock due to union issues and customer performance metrics amongst other things.
"We think there is likely to be an overhang on American's stock, given the ongoing mechanics union slowdown and lagging operational and customer performance metrics such as on-time performance, mishandled bags, and customer complaints that persist. We also think that we need more clarity on what percentage of American's domestic performance (its strongest performing entity, representing 60% of mainline capacity) can be explained by Southwest not being able to be as aggressive due to constraints on capacity from their own MAX groundings."
RBC named the biotech company a top pick and said it liked the new leadership at the company and that a number of previously noted overhangs are now out of the way.
"We are upgrading GILD to Top Pick, given our high conviction that with new leadership and many overhangs out of the way, shares will begin to better reflect the value of future cash flows from their marketed products and pipeline, which we believe is worth $91. We see limited downside risk and a compelling opportunity to build a long-term position."
Bank of America said it saw a continually improving macro environment for the beer maker and that the shares provide investors with an opportunity for growth at a reasonable valuation.
"In our upgrade to Neutral from April, we flagged a better Macro environment and an improving narrative on the shares, but remained concerned on weak earnings trends.... As investors scramble to find big and liquid Consumer stocks that offer some growth at a reasonable valuation, we see ABI as the best positioned to continue to outperform the Consumer Staples sector."
Raymond James said the insurance company is still a "great" asset but said the near-term sales outlook in Japan will be "challenged."
"While 2Q19 results were ahead of target and suggest positive earnings momentum, the near-term sales outlook in Japan will be challenged as one of its strategic partners works through compliance issues. Japan Post sells a substantial amount of insurance in Japan from a range of different companies through its 20,000 postal outlets and allegations of agent misconduct have emerged that could limit new sales through the end of the year. Japan Post accounted for ~25% of Aflac Japan's third sector sales in 2018."
Goldman said in its initiation of the restaurant sector that its buy rated companies are "leveraging technology" amongst other things.
"We are buyers of stocks that: (1) best capture a strong macro, (2) are better insulated from rising costs, (3) are leveraging technology, and (4) are exposed to above average benefits from third party delivery. We marry these factors with valuation (based on relative growth, franchise mix and market multiples) and positioning to arrive at our top ideas. Buy: CMG (on CL), MCD, SBUX, SHAK and WING."
Wells said the multinational technology company has an "attractive risk/reward" ratio due to the company's deep portfolio.
"While we see more downside risk than upside potential to estimates near term, e.g., toughening comparisons, the pass-through of deflationary component costs, and a maturing Windows 10 commercial PC upgrade cycle, we view Dell as presenting a long-term attractive risk / reward ratio given the company's broad-based portfolio / software-to-hardware depth favorably positioning Dell to capitalize on the long-term architectural shift to software-defined hybrid multicloud. Dell's portfolio also allows the company to participate in a multiyear core-to-edge to digital transformation."
UBS said that in conversations with investors, it had "low expectations" for Apple's upcoming earnings report.
"Our conversations with investors suggest low expectations for the Q and Fall iPhone builds. UBS Evidence Lab data meanwhile supports general malaise in sentiment with only 19% "bullish" (down from 30% in April) and China demand/tariffs and services growth are predictably the top investor issues."