- Wells Fargo downgraded Caterpillar and Deere to market perform from outperform.
- D.A. Davidson initiated Peloton as neutral.
- Canaccord upgraded PayPal to buy from hold.
- Canaccord downgraded Square to hold from buy.
- Bernstein downgraded Hershey to market perform from outperform.
- Nomura Instinet upgrading Activision Blizzard to buy from neutral.
- UBS upgraded AbbVie to buy from neutral.
- Deutsche Bank initiated Anthem, Cigna, & CVS as buy; Walgreens Boots Alliance as sell.
Here are the biggest calls on Wall Street on Thursday:
Wells Fargo said in conversations with contacts the firm sees a "weakening" demand for new equipment, and "shrinking" manufacturer lead times.
"On a relatively lackluster Q3 19 construction dealer channel check feedback, we are downgrading CAT and DE to Market Perform from Outperform. This is mainly due to our perception that (1) US construction equipment demand is at or near peak and likely will decline during 2020 due to flattening activity and a shift to equipment rental from purchase and (2) other businesses within each company's portfolio will remain flat as a potential 2020 US construction equipment demand drop will put downward pressure on earnings power."
D.A. Davidson said ahead of the company's initial public offering, that profitability will likely be "muted" at least for the next few years.
"Peloton has shown impressive growth over the past few years, leveraging its team of world-class trainers to create a compelling platform for exercise enthusiasts. With that being said, recent investments across the company, combined with a very robust marketing spend, will mean that profitability will be muted for at least the next few years. While valuation is actually more agreeable than anticipated on forward estimates, it is still fairly robust, and we will wait for a better entry point."
Canaccord said it sees a "positive" risk/reward in PayPal shares.
"We view PayPal as a payments juggernaut. Growth in payment volumes at this scale is impressive. Active user count also continues torrid growth. One Touch is truly the magic touch in making online payments easy. Strategic relationships continue to be forged. Short term, we believe the guide-down post Q2 has de-risked the story into next year. Delays in large deal integration may actually become tailwinds for growth next year. Net net, with the pullback in the stock post last quarter's results, we see positive risk/reward in PYPL shares currently."
Canaccord said in its downgrade that while Square has done a "commendable job" of creating "competitive" payment products, competition was "increasing."
"We believe Square is further along than any other company in creating a virtuous payments circle ecosystem. Within this payment ecosystem, a dollar, via the velocity of money, is used over and over again for both merchant and consumer payments. Since the funds stay within the ecosystem, Square can generate repeated transaction fees on these funds. We think that Square has the most feature-rich product sets for merchants and consumers to drive this virtuous payments circle."
Bernstein downgraded the chocolate and candy maker on valuation.
"Although we believe that Hershey will continue to enjoy margin improvement and low-single-digit top line growth, we now believe that the benefits of improved input costs and upcoming price increases have largely been recognized by the market: Our thesis was that with the sharp decline in cocoa prices that occurred in late 2016, Hershey would start to see some margin benefit once longer term hedges rolled off. This started to happen in 2H:18 as gross margins began to surprise to the upside after a particularly difficult year with freight cost inflation in 2H:17 and 1H:18. Going forward, we expect that the 10% price increase on instant consumables, will benefit the company on both the top and bottom line in 2020 and beyond, although we also believe that this is now largely priced into the stock."
Nomura said the game-maker had momentum from the company's August launch of "World of Warcraft Classic" and positive reception surrounding the October launch of "Modern Warfare".
"We are upgrading shares of Activision Blizzard to Buy, as some of the concerns raised in our initiation in June have eased, namely 1) more sound trends at key Blizzard franchises, including World of Warcraft and Overwatch 2) a more promising outlook in the Call of Duty franchise with strong initial reception to 2019's Modern Warfare, the launch of city-based esports in 2020, and a potential developer reshuffle for the 2020 title giving increased prominence to the series' strongest developer, and 3) increased confidence in the strength of the company's upcoming release slate, with BlizzCon a key catalyst."
UBS upgraded the biopharmaceutical company based on optimism surrounding its acquisition of Allergan and the ability of key growth assets to offset the impact of declining Humira sales.
"We upgrade ABBV to Buy because its acquisition of AGN leads to a NEWCO generating $20B+ of annual free cash flow growing to a highly compelling, 9% FCF yield in '23E. Post '23 we estimate stable cash flows driven by ABBV's 5 key growth assets & AGN Aesthetics franchise."
Deutsche initiated the healthcare technology and services sector and said stocks like Anthem, Cigna, & CVS have "attractive" potential returns while stocks like Walgreens Boots Alliance are "structurally disadvantaged."
"We are initiating coverage on the Managed Care, Drug Supply Chain and Beneficiary Technology spaces with a positive sector view, and note generally attractive valuations, but we believe the shares could be range bound given the overhang of the 2020 election. Investors fear the bogeyman of healthcare reform will finally emerge from the Washington DC cellar, and this will likely weigh on share prices and valuations through November 2020. Against that backdrop, our preference is for diversified businesses with compelling valuations, as we believe a defensive perspective is warranted until the election occurs."