Here are the biggest calls on Wall Street on Tuesday:
J.P. Morgan initiated Beyond Meat as ‘overweight’
J.P. Morgan called Beyond Meat an “extraordinary” growth opportunity.
“We initiate coverage of Beyond Meat with an Overweight rating and a $97 price target. We view Beyond’s growth opportunity as extraordinary: We model a Total Addressable Market (TAM) for plant-based meat in 15 years of $100B, up to 100x larger than today’s. And we think Beyond’s sales ultimately could exceed $5B versus $88MM last year (though our price target does not rely on this). We see many other reasons to be constructive on the shares, including that a) BYND only needs to capture a fraction of this expansive TAM to be successful, b) Beyond is a true disruptor with a differentiated product and a commitment to innovation, c) the margin upside is underappreciated, and d) at least one major QSR chain likely will become a customer by the end of the year. All in, we are strongly favorable on the story and see 21% upside to our DCF-based price target.”
Read more about this here.
Goldman Sachs upgraded Activision Blizzard to ‘buy’ from ‘neutral’ and added to the ‘conviction buy list’
Goldman said it sees an “inflection” in the game-maker’s earnings trajectory.
“We upgrade ATVI to Buy and add to Americas Conviction List (from Neutral) as we see a potential inflection in ATVI’s earnings trajectory given (1) the recent release of new content to improve engagement for core titles (e.g., Storm Rising and Workshop mode for Overwatch, Rise of Shadows and The Dalaran Heist for Hearthstone, Rise of Azshara and Classic for WOW); (2) the upcoming release of Diablo Immortal and COD Mobile; and (3) the potential for to-be-announced new content from several undermonetized Blizzard franchises in 2020 and beyond.”
Evercore ISI downgraded Southwest Airlines to ‘in line’ from ‘outperform’
Evercore said Southwest was “let down” by key partner, Boeing.
“We see LUV shares as range bound until MAX formally returns. Furthermore, while the initial reaction to the lifting of MAX grounding when it finally occurs may be positive, investor expectations for unit revenue growth will likely moderate as planned capacity growth accelerates. Lastly, while declining ex-fuel unit cost in ’20 feels like it should be a layup given the magnitude of Boeing-imposed operational inefficiency this year, company remains non-committal. Adding it all up, our rating is lowered to In Line from Outperform.”
Note: This call was after the bell on Friday.
Citi lowered its price target on Apple to $205 from $220
Citi said the U.S.- China trade war is likely to cut China sales in “half.”
“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands. Our independent due diligence now shows a less favorable brand image desire for iPhone and this has very recently deteriorated. We are materially lowering our sales and EPS estimates below consensus as China represents 18% of Apple sales which we believe could be cut in half. Within China Apple has 12% unit share (exiting Dec 2018 and ~10% market share for FY18) and we believe these unit shipments could be cut in half. We remain optimistic on Apple services with Apple Arcade to launch in 2H 2019.”
Read more about this call here.
Cowen lowered its price target on Tesla to $140 from $150
Cowen lowered its price target mainly on lower demand for the Model 3.
“Tesla’s stock price is beginning to reflect the lower demand picture in 2020 that we have been forecasting for some time. 2020 was supposed to be the year where we’d see the full potential of the financial leverage provided by producing one million vehicles, and as recently as August of last year management indicated it was still aiming for one million and would probably produce 750k vehicles. Our estimates have long considered this ramp to be overly aggressive and it appears that consensus is beginning to join us. While estimates have steadily come down for 2020, the rich multiple Tesla commands compared to automotive peers has remained. We see more room for downside to 2020 estimates as the steady state of demand becomes evident in 3Q19 when the backlog of the lower priced standard range plus Model 3 is exhausted in Europe and China, where orders did not begin until last month.”
Cowen raised its price target on Amazon to $2,500 from $2,400
Cowen raised its price target and said it is bullish on Amazon Web Services.
“We raised our AWS forecast given positive results from a survey of 570+ respondents from our 7th annual Public Cloud report. In total, 42% of existing AWS customers expect accelerating spend on AWS in ’19 vs. overall survey avg. of 35% across diff. cloud platforms. Given L-T AWS estimate increase, rolling our AMZN DCF to ’20, & supported by our new SOTP analysis, AMZN PT rises to $2,500/share.”
Stephens downgraded Roku to ‘equal-weight’ from ‘overweight’
Stephens said the “recent run” in ATVI shares creates increased risk.
“We are downgrading from OW/V to EW/V and maintaining our $84 PT. Although we remain very positive on Roku as a LT nexus play on growth in smart TVs and streaming/OTT video, we believe the recent run and higher valuation (10.2x EV/20E Platform rev. and 18.5x 20E EV/gross profit) combined with raised expectations (especially hold/sell rated analysts) creates increased NT risk. Everything we are tracking on the fundamental side – brick/mortar retail positioning, Amazon best sellers, key OEM partnerships, AVOD channel partner commentary, etc. – continues to look strong in our view. Our $84 PT assumes the stock will trade at 8.9x 20E Platform revenue and 16.2x 20E total gross profit. We view speculation about Roku as a potential acquisition target, investor focus on active user growth, progress on the international front and scarcity of investible streaming names as the biggest risks to our tactical downgrade.”
Susquehanna initiated JetBlue as ‘positive’
Susquehanna initiated coverage and said consensus was “overly bearish.”
“JBLU is the fifth largest U.S. carrier by capacity, but continues to grow as a still “youngish” airline, with its multi-year profit improvement plan (“Building Blocks,” outlined in late 2018, with related EPS guide of $2.50-$3.00 for 2020) emphasizing sustainable, profitable growth. While not an easy task given the industry’s cyclical nature and sometimes commodity-esque characteristics, we believe Building Blocks (and EPS guidance) is largely achievable. Furthermore, while certain revenue initiatives might take longer to play out, we see consensus as overly bearish in its outlook for JBLU’s earnings potential in 2020, and are ~13% above the Street.”
Goldman Sachs initiated Pfizer, Eli Lilly, and Johnson & Johnson as ‘buy’
Goldman Sachs called Pfizer, Eli Lilly, and Johnson & Johnson, “core holdings.”
“We initiate with Buy ratings on PFE (on the CL) and JNJ and see these as diversiﬁed/core holdings, LLY (growth from new product cycles), and BMY (preferred value over GILD), as well as Neutral ratings on ABBV, AGN, and MRK.”