Here are the biggest analyst calls of the day: Boeing, Chipotle, Papa John's, Square & more
- Citi resuming coverage of Boeing as buy
- Stifel upgraded Papa John's to hold from sell
- Wells Fargo upgraded Ralph Lauren to outperform from market perform
- Baird raised their price target on Chipotle to $760 from $650
- Susquehanna upgraded Skechers to positive from neutral
- BMO initiated Wingstop as outperform
- Mizuho initiated Palo Alto Networks as buy
- Mizuho initiated CyberArk as buy
- Macquarie initiated Square as outperform
Here are the biggest calls on Wall Street on Wednesday:
Citi resumed coverage of Boeing as 'buy'
Citi said if the company manages to fix the 737 Max within months Boeing shares could return to $400 or higher.
"A lot has happened since our research restriction went into place in July 2018. Obviously, the near-term narrative is focused on getting the MAX back in the air following two tragedies. We don't claim to know what happened or what will happen. But we offer context for thinking about various scenarios using our FCF tool which lets you adjust production rates & profitability. Our low probability (5%) downside case suggests a $220 stock. However, our base case is a multiple-month grounding punctuated by a manageable fix; meaning the stock can resume its move into the $400s with a path >$500. There's likely to be volatility ahead and we doubt the stock can work until it's clear the MAX will fly again (could take weeks or months). But risk/reward still skews positive."
Stifel upgraded Papa John's to 'hold' from 'sell'
Stifel said the worst is over for the pizza maker and that "investor optimism" is rising.
"We believe the PZZA turnaround has entered a phase where investors believe the worst is behind them and are willing to accord the company a hall pass to see whether the sales plan can work. The more optimistic sentiment stems from the view that a new, highlyengaged board of directors coupled with a new brand spokesperson (Shaquille O'Neal) can reverse the declining SRS/traffic and EBITDA trend. We remain concerned low franchisee profits will require ongoing financial support from the company and declining transactions will pressure commissary profits, but in the near-term, investor optimism will likely outweigh these fundamental issues; therefore we believe a Hold rating is appropriate."
Wells Fargo upgraded Ralph Lauren to 'outperform' from 'market perform'
Wells Fargo said Ralph Lauren is a "rare standout" in its space and the turnaround is starting to take hold.
"We are upgrading shares of RL to Outperform from Market Perform, as we view the company as a rare standout in our space today – a business that is gaining visibility, running ahead of plan and has the potential for accelerating growth in the years ahead. Looking back, the initial turnaround story had previously been focused on RL "playing defense" - cleaning up distribution, reinvesting back into their digital business, shutting money losing stores and managing inventory/AUR much more tightly. This all began to create a higher-margin model for RL, as profitability levels started to increase despite top-line being under pressure (in FY 18 organic sales declined 8.4% while EBIT fell just 2.1%). Today, the story seems to be shifting to RL "playing offense" given YTD top-line acceleration (organic sales have grown in each quarter this year after more than 3 years of declines)."
Baird raised their price target on Chipotle to $760 from $650
Baird said Chipotle was gaining momentum amongst investors throughout the rest of 2019.
"Although CMG may be due for a short-term breather following the robust year-to-date return (+60% vs. S&P 500 +12%), we continue to see a path for the shares to outperform over the next 12 months based on potential for the company to show strong operating momentum throughout 2019, which in our opinion, should help to support investor confidence in sizable long-term earnings power scenarios and keep the multiples on near-term estimates elevated."
BMO initiated Wingstop as 'outperform'
BMO said the company has the perfect model for cash returns to investors and long-term growth.
"We initiate coverage of Wingstop with an Outperform rating and $85 target (15-20% potential upside). Wingstop is unique – a unicorn – as it offers the desirable combination of long-tailed unit growth and superior operating/growth metrics, but in an asset-light model that enables cash returns to shareholders at levels usually reserved for slower growth mature peers. This makes Wingstop among the most attractive long-term growth investment opportunities in Restaurants, in our view. We expect WING to modestly exceed consensus 2019/2020 EBITDA/EPS estimates with strong comp momentum and better restaurant margins."
Susquehanna upgraded Skechers to 'positive' from 'neutral'
Susquehanna said the footwear company is gaining momentum and seeing its first positive inflection in years.
"Proprietary checks and recent results from wholesale partners indicate Skechers' business is gaining momentum. Men's and women's fashion athletic styles and men's non-athletic styles sellthrough rates are accelerating, even as the suggested retail price of targeted styles are being raised. Skechers' aggression to expand its business remains, but management appears more willing to forego some sales for increased profitability."
Mizuho initiated Palo Alto Networks as 'buy'
Mizuho said the company has an outstanding strategy and is their top name in cyber security.
"In our view, PANW's overall strategy – inclusive of not only its technology but also a world-class sales force, a remarkably strong marketing program, and a thriving add-on subscription model – is superior in this market. The Cortex strategy is a SaaS-based, data-centric consumption model that spans network, endpoint and cloud and contains an open ecosystem. We believe Cortex - while admittedly still early - gives PANW a legitimate chance to further separate from its peers. We view PANW's pending acquisition of Demisto, a leading Security Orchestration, Automation and Response vendor, as an important extension of the platform. In our view, PANW possesses the strongest array of cloud assets among firewall vendors. PANW currently has ~8,000 cloud customers, but we expect this number will grow materially over the next couple of years."
Mizuho initiated CyberArk as 'buy'
Mizuho initiated the cyber security software provider and said CYBR is a leader in the privileged account security market and will benefit from consolidation in the space.
"We believe that CYBR is benefiting from being an early mover in the secure DevOps space, owing to its acquisition of Conjur in 2017.We don't believe that any privileged account security vendor has established a clear lead in the cloud and, given CYBR's unmatched scale, the co. has a very good chance to have a successful pivot to cloud (thus enabling a more recurring revenue stream as well). We expect CYBR will benefit greatly from the massive amount of consolidation in the privileged account security market."
Macquarie initiated Square as 'outperform'
Macquarie initiated coverage on the stock saying it will see robust growth and greater profitability.
"Square makes accepting payments as easy as signing up for a Netflix account, removing obstacles for individuals to start and run their business. In addition, the Company provides transparent pricing (2.75% of sales) and deposits proceeds into the merchant's account within a day. Initiating coverage with an Outperform rating and $94 target price, based on 13x 2020E Ev/Sales."