Analysts downgrade stocks like Roku and Johnson & Johnson as busiest week for earnings continues

Published Tue, Apr 28 20209:18 AM EDTUpdated Tue, Apr 28 20209:30 AM EDT

Key Points

Morgan Stanley upgraded Quest Diagnostics to overweight from equal weight.
UBS downgraded Johnson & Johnson to neutral from buy.
Guggenheim downgraded Roku to neutral from buy.
Compass Point downgraded Square to sell from neutral.
Jefferies downgraded Ferrari to underperform from hold.
Benchmark upgraded IMAX to buy from hold.
Wells Fargo upgraded Six Flags to equal weight from underweight.
Citi downgraded Regeneron to neutral from buy.

(This story is for CNBC PRO subscribers only.) A rough earnings season continues as Wall Street analysts downgraded a bunch of stocks on Tuesday. They include Johnson & Johnson, Roku, Square, Ferrari, and more. Here are the biggest calls on Wall Street on Tuesday: Morgan Stanley upgraded Quest Diagnostics to 'overweight' from 'equal weight' Morgan Stanley said in its upgrade of the lab company that it sees more upside in the stock due to the coronavirus. " DGX positioned to meaningfully benefit as market shifts to phase II of COVID-19 testing. While shares have outperformed since earnings, we see more room for upside. Our updated 2021 estimates are 12% above consensus. Raising price target to $139 and rating to OW." UBS downgraded Johnson & Johnson to 'neutral' from 'buy' UBS said in its downgrade of the stock that it sees a more balanced risk/reward. " JNJ has outperformed the SPX by 17% YTD and now largely discounts a scenario where 2021 and beyond returns to a normalized pre-COVID environment. We see risks to this view, particularly within the Medical Device and Pharma segments. Our new Revenue and EBIT estimates for 2021 and 2022 are 11% and 10% below our prior estimates and are now 2%+ below consensus. We acknowledge JNJ is considered a defensive stock (2.6% dividend, strong balance sheet), but we see a balanced risk/reward here." Guggenheim downgraded Roku to 'neutral' from 'buy' Guggenheim said in its downgrade of the stock that it sees a risk to advertising revenue if consumer behavior changes after the lockdown orders expire. "Investor sentiment on Roku has strengthened in recent weeks, fueled by active account growth, overall streaming video usage tailwinds, and appeal as a play on the 'stay-at-home' economy. With lockdown orders expiring, we see incremental investor interest in ideas that have underperformed to date and that can benefit from this dynamic. If consumer behavior falls short, we see risk to Roku advertising revenue relative to investor expectations." Compass Point downgraded Square to 'sell' from 'neutral' Compass Point downgraded the financial and merchant services aggregator and said the company has too much exposure to sensitive industries given the current economic climate. "We expect Square may be a beneficiary once the pandemic eases, however, given its exposure to some of the most sensitive industries we believe shares are not adequately reflecting the magnitude of the potential decline in volume. Given the current environment, we expect continued material headwinds to Square's total payment value and revenue given its significant exposure to small businesses and particularly those in the hard-hit food services and retail industries. We are concerned that current Street estimates do not adequately take into account the precipitous decline that should be expected given in the current environment." Jefferies downgraded Ferrari to 'underperform' from 'hold' Jefferies downgraded the stock on limited visibility. "With the autos vs luxury debate long settled, Ferrari has lost the ability to surprise positively. Consensus has been above targets through 2022 for a while and RACE has been micro-managing expectations to deliver increasingly small 'beats'. However high, returns are quite cyclical - 2022 targets would take JEFe post tax return on invested capital back to 2017 peak of c.75%. " Benchmark upgraded IMAX to 'buy' from 'hold' Benchmark said it is confident consumers will return to movie theaters once the coronavirus passes. "We are optimistic that over time COVID-19 treatment options will improve, a vaccine will be produced, rapid testing options will emerge and/or will have a test to measure immunity. We are also encouraged to see IMAX' s key exhibitor partners take measures to enhance liquidity, demonstrate a commitment toward new theater builds in China and the gradual reopening of theaters in U.S. We suspect that over the long-term movie-goers will return to the cinema, buoyed by a strong slate of films, a behavior trend toward normalcy and a need for escapism where cinema growth has proven countercyclical." Wells Fargo upgraded Six Flags to 'equal weight' from 'underweight' Wells said in its upgrade of the theme park company that shares are balanced at current levels and expects parks to be re-open in July. "We believe SIX downside concerns (1) liquidity, and (2) risk of significant minority partnership units being put (annually in Apr) to SIX and creating a liquidity event, are appropriately discounted. Combined with our outlook and SIX's need for higher operating expense reinvestment (post COVID-19 recovery) lead us to believe shares are generally balanced at current levels." Citi downgraded Regeneron to 'neutral' from 'buy' Citi downgraded the biopharmaceutical company mainly on valuation. "Outside of COVID-19, near term upside may be limited. ... In longer term, we remain cautiously optimistic on the potential of bispecific platform – Early data appear promising but the field is becoming highly competitive. Incremental data over 2020-21 should help investors get more comfortable with the platform. We also continue to believe in the REGN research engine and expect incremental early to mid-stage pipeline assets to emerge, especially after the recent conclusion of Sanofi collaboration."

Johnson & Johnson products on a shelf in a store in New York.

Lucas Jackson | Reuters

(This story is for CNBC PRO subscribers only.)

A rough earnings season continues as Wall Street analysts downgraded a bunch of stocks on Tuesday. They include Johnson & Johnson, Roku, Square, Ferrari, and more.

Here are the biggest calls on Wall Street on Tuesday:

Morgan Stanley upgraded Quest Diagnostics to 'overweight' from 'equal weight'

Morgan Stanley said in its upgrade of the lab company that it sees more upside in the stock due to the coronavirus.

"DGX positioned to meaningfully benefit as market shifts to phase II of COVID-19 testing. While shares have outperformed since earnings, we see more room for upside. Our updated 2021 estimates are 12% above consensus. Raising price target to $139 and rating to OW."

UBS downgraded Johnson & Johnson to 'neutral' from 'buy'

UBS said in its downgrade of the stock that it sees a more balanced risk/reward.

"JNJ has outperformed the SPX by 17% YTD and now largely discounts a scenario where 2021 and beyond returns to a normalized pre-COVID environment. We see risks to this view, particularly within the Medical Device and Pharma segments. Our new Revenue and EBIT estimates for 2021 and 2022 are 11% and 10% below our prior estimates and are now 2%+ below consensus. We acknowledge JNJ is considered a defensive stock (2.6% dividend, strong balance sheet), but we see a balanced risk/reward here."