- Morgan Stanley is lowering its price target on Amazon to $2,200 from $2,300.
- Piper Jaffray is initiating Lululemon as overweight.
- Nomura Instinet is upgrading Chewy to buy from neutral.
- Barclays is downgrading Clorox to underweight from equal weight.
- Barclays is upgrading Kimberly-Clark to overweight from equal weight.
- J.P. Morgan is downgrading U.S. Steel to neutral from overweight.
Here are the biggest calls on Wall Street on Monday:
Morgan Stanley lowered its price target on Amazon due to the impact of 1-day shipping which has led to "accelerating unit and retail revenue growth."
"Focusing on the long-term while acknowledging the near-term could be volatile. Our lower near-term profitability drives down our sum-of-the-parts-driven AMZN PT to $2,200 per share (from $2,300 per share) as we remain OW (with ~20% upside). This is because over the long-term, AMZN's push toward 1-day (effectively raising shopper expectations) will likely only deepen their moats and share-gains against competitors."
Piper said in its initiation note of Lululemon that it predicted market share gains for the athletic apparel retailer.
"We see the brand as a share gainer in a secularly growing category with accelerating opportunity in men's and international. While shares are close to their 52-week high and investors expect on-going DD growth in women's and steady mix shift to higher-margin digital, we believe men's, better-than-expected performance in China (28 stores today of 460 total), improving profitability in Europe, success in recently launched selfcare, and loyalty program adoption could be upside catalysts."
Nomura said concerns about company profit margins are overblown, and that Chewy's fulfillment network is not easily replicated.
"The stock has traded off since reporting 2Q19 earnings last week driven, in part, by higher-than-expected SG&A. We feel these concerns are overblown; normalizing for certain new and/or non-recurring items (such as fulfillment center buildout and public company costs), the company's SG&A as a percent of revenue was in line with 2Q18, while gross margins expanded 300bps year over year. Considering 2Q19 and 2Q18 were both quarters in which new FCs were launched, we remain confident that the core business continues to perform."
Barclays downgraded the stock as it said it sees earnings "risk" over the next 12 months due to "softer" revenue growth.
"Though the company has discussed several troubled categories in recent quarters, the latest data suggests the issues at hand are increasing both in terms of breadth (moving to other key categories such as bleach, litter, salad dressing and cleaners) and depth (affecting sales, shares, and distribution). While we have long admired Clorox's capabilities to maneuver through cost & pricing cycles, we find this one is proving to paint a different picture."
Barclays upgraded Kimberly-Clark on a widening of the stock's relative discount to that of its peers.
"We believe a widening of the stock's relative discount to peers beyond historical levels does not mirror what we expect to see in terms of relative operating performance over the next 12-18 months. More specifically, we expect improved revenue growth coupled with a more favorable cost environment to yield EPS growth that is among the strongest across our Staples coverage universe in 2020."
J.P. Morgan downgraded U.S. Steel as it sees steel prices heading lower.
"The U.S. steel stocks and steel prices have been under pressure this year, which we believe is largely due to concerns about supply additions planned for the next several years, continued uncertainty surrounding trade, and some softening in demand. Additionally, after a brief rebound, steel and scrap prices are now heading lower. If current economic and trade conditions hold, we think steel prices will likely fluctuate between $500 and 600/ton over the near to medium term, with prices likely easing somewhat further over the next couple of months and then rebounding modestly heading into 2020."