Wall Street analysts see buying opportunities in wake of market plunge

Published Mon, Mar 23 202010:38 AM EDT

Key Points

Goldman Sachs upgraded Boeing to buy from neutral.
Morgan Stanley upgraded Colgate-Palmolive and Pepsi to overweight from equal weight.
JPMorgan upgraded Coca-Cola to overweight from neutral.
Cowen downgraded AT&T to market perform from outperform.
MKM downgraded Starbucks to neutral from buy.
Piper Sandler upgraded CyberArk and Palo Alto Networks to overweight from neutral.
Morgan Stanley downgraded Honeywell to equal weight from overweight.
Baird upgraded Netflix to outperform from neutral.
SocGen downgraded AbbVie to hold from buy.
JPMorgan added Dollar General to the focus list.
Wells Fargo downgraded Carnival Corp. to underweight from overweight.
Bank of America upgraded Southwest Airlines to buy from neutral.
Bank of America upgraded Charles Schwab to buy from neutral.
Needham upgraded Lululemon to buy from hold.

(This story is for CNBC PRO subscribers only.) Market volatility continued on Monday, but Wall Street analysts say there are still plenty of stocks with upside. Analyst upgrades include Boeing, Coca-Cola, Southwest Airlines, Netflix and more. Here are the biggest calls on Wall Street on Monday: Goldman Sachs upgraded Boeing to 'buy' from 'neutral' Goldman Sachs upgraded Boeing and said it sees a buying opportunity as "substantial fear is priced in." "We think Boeing will remain a going concern. We think travel by flight will be as popular as ever once COVID-19 is resolved. We therefore think shares of BA should be procured at the current price that is down 70% YTD, 80% from 2019 highs, and that makes it the worst performing S & P stock over $50bn in cap YTD. We upgrade the stock to Buy from Neutral." Read more about this call here . Morgan Stanley upgraded Colgate-Palmolive and Pepsi to 'overweight' from 'equal weight' Morgan Stanley said it sees a compelling buying opportunity for Pepsi and Colgate. "On the other hand, names with high leverage and/or a large degree of macro risk still lack visibility despite large stock underperformance. We would argue that a buying opportunity has emerged in some of the names in between these two extremes, as they have sold off steeply despite strong underlying EPS visibility. This includes Pepsi and Colgate , which we are upgrading today to Overweight from Equal-weight, as well as Mondelez and Procter & Gamble, existing OWs that have become more attractive in our minds post a pullback. JPMorgan upgraded Coca-Cola to 'overweight' from 'neutral' JPMorgan said in its upgrade of the beverage maker that its balance sheet remains solid. "We have adjusted our assumptions for the negative impact of out-of-home consumption, unfavorable FX in EM tempering both sales and margins ( KO hedges G-10 countries), and headwind from the operating de-leverage from lower volumes. While there is limited visibility on sales and margins at this point as management removed guidance for now, we model KO sales to be down -1.3% on flat organic sales in 2020 which embeds a sharp contraction in sales in Q2 (-7.8%, -6.2% organic), driven by the shortfall in on-premises consumption in most regions of the world." Cowen downgraded AT & T to 'market perform' from 'outperform' Cowen said it sees increasing risk for AT & T due to the coronavirus. "We are downgrading T to Market Perform and reducing our PT to $37 (from $43) given increasing risk driven by the COVID-19 induced environment. We expect fundamentals particularly within WarnerMedia to be pressured including HBO Max. Valuation is admittedly cheap and our call is admittedly reactive, but in our view T is unlikely to beat the market either on a continued selloff or eventual recovery." MKM downgraded Starbucks to 'neutral' from 'buy' MKM said in its downgrade of the stock that the risk/reward has become negative. "We continue to view SBUX as one of the preeminent restaurant concepts globally and applaud the management team's ethos, which has always tried to focus on humanity over profits (although they have been successful in accomplishing the latter). In these uncertain times, we feel the prudent course of action is to step back from the shares at this time as the uncertainty will impact sales and cost trends along with the in store "third place" experience SBUX offers being negated by an increasingly stay-at-home culture. We believe the risk-reward at this point has turned negative and may continue to skew that way until a return to in-store sales materializes." Piper Sandler upgraded CyberArk and Palo Alto Networks to 'overweight' from 'neutral' Piper said in its upgrade of the security companies that the sell-off has created a buying opportunity. "In this difficult environment, security budgets will likely show more resilience than others given it is not a discretionary spending category - but few companies will escape the certain economic recession completely unscathed, in our view. As such, we are making modest adjustments to numbers and targets. We do believe there remain some compelling thematic opportunities within our coverage list. We continue to prefer OKTA as a longterm beneficiary of "remote worker" trends, and we believe that the sell-off has created opportunity for names such as CYBR (upgrading to Overweight), FTNT, PANW (upgrading to Overweight), PFPT and RPD. Morgan Stanley downgraded Honeywell to 'equal weight' from 'overweight' Morgan Stanley said it sees a less certain recovery for Honeywell than some of the other names in the firm's coverage. "The company has a strong operating acumen and a pristine balance sheet to weather a recession. The company's end markets, including well above-average exposure to oil & gas and commercial aerospace, will likely have a longer period of consolidation and less certain recovery than some of our other names. We believe the V-shaped recoveries potentially found in other industrial markets." Baird upgraded Netflix to 'outperform' from 'neutral' Baird said in its upgrade of the stock that its checks show strong current subscriber trends. "We believe the lack of live sports, even if short-lived, coupled with growing consumer economic pressures, could accelerate video cord cutting, with CMCSA exposed in the U.S. and Europe, and AT & T saddled with DirecTV. We expect Netflix to be a key beneficiary, with our latest checks suggesting strong Netflix adoption globally. Additionally, media assets for CMCSA and T are likely to face nearto medium-term challenges, with T's strong dividend yield providing somewhat of a backstop. SocGen downgraded AbbVie to 'hold' from 'buy' SocGen said in its downgrade of the biopharmaceutical company that it saw "material downgrade" to the company's discounted free cash flow. "We don't dispute that the $60bn Allergan acquisition will mitigate the impact of near-term 'generic' competition to Humira, shore up the dividend and make short-term multiples look even more attractive. But, despite the recent sell-off, our DCF still signals material downside; we think 'the market' is underestimating the impact of a subsequent major patent expiry. We would prefer ABBV to narrow its pipeline gap by combining organic R & D with niche M & A, but given management's track record, another big deal looks more likely, in our view." JPMorgan added Dollar General to the 'focus list' JPMorgan said it sees a favorable risk/reward for the discount retailer. "By our recent work, DG stores notably remain open and continue to benefit from consumer stock-up offering essentials at extreme value in rural, convenient boxes w/ mgmt noting no supply chain disruption fallout from the virus to date. Importantly – beyond the near-term consumer stock-up boost, we see DG's long-term business model as emerging from this crisis stronger w/ DG notably "recession resilient" w/ the last recession resulting in a tradedown by consumers DG and sustained customer acquisition thereafter w/ value-based chains set to be market share beneficiaries." Wells Fargo downgraded Carnival Corp. to 'underweight' from 'overweight' Wells Fargo said in its double downgrade of the stock that the coronavirus has "decimated" the cruise and travel industry. "To say COVID-19 has decimated the cruise and travel industry is an understatement – 3 months CCL (80%) vs. SPX (25%). However, based on CCL's FQ120 preliminary results (post close 3.19.20 no scheduled release date/call), comments on bookings/pricing, expectations for a FY20 adjusted net loss, significant on-going uncertainty (COVID-19 duration/depth, subsequent demand recovery) and pursuit of additional financing, we feel CCL will soon need to issue $4-$5B of equity. While somewhat expected, this will be meaningfully dilutive to existing shareholders." Bank of America upgraded Southwest Airlines to 'buy' from 'neutral' Bank of America said Southwest was best-positioned to weather the coronavirus crisis. "We view LUV as the highest quality airline in the group with a very conservative balance sheet and low earnings volatility. As such, we believe it is best positioned to weather the current coronavirus outbreak given its significant liquidity and low net leverage entering the year." Bank of America upgraded Charles Schwab to 'buy' from 'neutral' Bank of America called Charles Schwab a "quality franchise" with "strong" organic growth. "Given that stocks are on sale and some of the pressures are being discounted in some shares, we are also upgrading SCHW to Buy from Neutral. Despite lower rates and expectations for weaker retail engagement, SCHW is a quality franchise with strong relative organic growth, rising cash balances and AMTD deal synergies ahead." Needham upgraded Lululemon to 'buy' from 'hold' Needham upgraded the athletic apparel retailer and said it was bullish on the stock over the long term and sees a "good entry point." "We've written frequently about being bullish on LULU 's LT potential while awaiting a pullback. LULU's (36%) change in the last month provides a good entry point to buy shares, in our view, while its strong balance sheet and FCF generation position it well to face NT headwinds. Its digital channel is > 25% of sales, which helps to cushion the hit from recent store closures."

A pilot waves as a Boeing 777X airplane taxis during its first test flight from the company's plant in Everett, Washington, U.S. January 25, 2020.

Terray Sylvester | Reuters

(This story is for CNBC PRO subscribers only.)

Market volatility continued on Monday, but Wall Street analysts say there are still plenty of stocks with upside. Analyst upgrades include Boeing, Coca-Cola, Southwest Airlines, Netflix and more.

Here are the biggest calls on Wall Street on Monday:

Goldman Sachs upgraded Boeing to 'buy' from 'neutral'

Goldman Sachs upgraded Boeing and said it sees a buying opportunity as "substantial fear is priced in."

"We think Boeing will remain a going concern. We think travel by flight will be as popular as ever once COVID-19 is resolved. We therefore think shares of BA should be procured at the current price that is down 70% YTD, 80% from 2019 highs, and that makes it the worst performing S&P stock over $50bn in cap YTD. We upgrade the stock to Buy from Neutral."

Morgan Stanley upgraded Colgate-Palmolive and Pepsi to 'overweight' from 'equal weight'

Morgan Stanley said it sees a compelling buying opportunity for Pepsi and Colgate.

"On the other hand, names with high leverage and/or a large degree of macro risk still lack visibility despite large stock underperformance. We would argue that a buying opportunity has emerged in some of the names in between these two extremes, as they have sold off steeply despite strong underlying EPS visibility. This includes Pepsi and Colgate, which we are upgrading today to Overweight from Equal-weight, as well as Mondelez and Procter & Gamble, existing OWs that have become more attractive in our minds post a pullback.