Here are the biggest calls on Wall Street on Monday
Oppenheimer said Amazon is leading the way on artificial intelligence and cloud adoption.
“Raising target to $2,085 and maintaining Outperform rating after revisiting our AWS model to reflect our views on artificial intelligence and its impact on cloud adoption. We think AWS is well positioned as AI leads productivity improvements, forcing faster enterprise cloud adoption. The benefit for AWS is twofold: 1) most organizations will gain access to AI through their cloud platform, driving cloud adoption; 2) AI applications and services are high-margin recurring revenues that will help lock in enterprise providers. However, with each new successful AWS “vertical,” customers, regulators and investors will question whether AMZN should spin out AWS. We view this as possible when AMZN matures its advertising and video businesses.”
Morgan Stanley said the company is well positioned in the Permian Basin and should see “strong free cash flow.”
“Strong free cash flow with attractive growth. CVX can grow production by 3-4% annually for the next 5+ years while generating meaningful free cash flow. CVX is less exposed than peers to near-term headwinds in Downstream & Chemicals. Low risk capital program. CVX’s growth strategy is anchored predominantly on short-cycle, high return shale investments with low execution risk. Low-royalty Permian position is a key differentiator. ~80% of CVX’s Permian acreage is low or no royalty, improving returns and cash flow significantly. CVX’s Permian growth target of 900 Mboe/d by 2023 appears achievable.”
J.P. Morgan said its thesis on the food company has not been altered and is downgrading the stock on valuation.
“We are downgrading the HAIN shares to Neutral from Overweight. The stock is +30% since 2/28/19, the best in our coverage by nearly 1,000 basis points. When we upgraded earlier this year, we opined that HAIN’s valuation multiples were too low given the company’s potential growth. This no longer is the case, in our view, given that the P/E since rose by over 10x. Thus, while we boost our price target by $3 to account for the entire food group’s recent re-rating, we maintain our EPS estimates and downgrade to Neutral purely on valuation.”
Berenberg said UPS has built a strong business globally and will continue to show margin improvement.
“UPS has built a strong presence in European B2B delivery and we are increasingly confident that it will deliver margin improvement in both its International business and the US this year. Cash conversion remains strong and FCF guidance from UPS looks too conservative.”
Berenberg said FedEx is experiencing headwinds in some markets and issues from its TNT acquisition.
“We previously believed that FedEx could re-rate as margins increased and cash flow improved. Unfortunately, a slowdown in certain end-markets, indigestion from the acquisition of TNT and cost increases in FedEx Ground have pushed that objective out further than we would like. Until we have more certainty that the company is getting on top of these challenges, it is hard to see the shares outperforming. We therefore downgrade to Hold, with a new price target of $200.”
Guggenheim said Lyft requires “too many big assumptions to make a case for the stock.”
“We understand the excitement around LYFT given a large total addressable market and low penetration, positioning along the front lines of a shift in how we think about transportation and, of course, strong topline growth. That said, we simply have to look too far out with too many big assumptions in order to make a case for the stock. Key issues include limited visibility on the path to profitability, sustainability of revenue growth, scale of investments in bikes, scooters and self-driving cars, and valuation.”
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KBW said the lack of a permanent CEO and a shortfall in revenues will weight on the stock.
“Previously, we had viewed Wells Fargo as a self-help story based on expense saves and capital return but the expense leg of our investment thesis is no longer as meaningful based on our current forecast. The lack of a permanent CEO means that the anticipated 2020 expense savings will likely not materialize in full as previously planned. In addition, we believe there could be downside risks to our estimate as we had anticipated revenues inflecting in 2020 but a new CEO could decide to make large scale changes and revenues could be at risk. Overall, we felt WFC was moving in the right direction but without a permanent CEO the company has now moved to wait-and-see mode and in the current macro environment that is like a ship without engines in high seas. Ultimately, the company should be able to grow earnings in 2019 and 2020 and produce adequate returns with ongoing expense management this year and modest revenue growth next year which keeps us from moving to underperform. That said, we believe risks our more skewed to the downside as a new CEO could certainly opt to set targets lower and we believe a Market Perform rating is appropriate.”
Wedbush said the game maker should continue to see growth and outperform in 2019.
“Activision Blizzard is well positioned to deliver significant outperformance in 2019 and outsized growth in 2020. A flattish performance for Call of Duty units, King outperformance, and mobile strength could drive FY:19 EPS closer to $2.40, well above guidance of $2.10, before taking into account Call of Duty on mobile in China and a new Call of Duty esports league. A $3.00 EPS figure in 2020 is possible from multiple call options: Significant growth for Call of Duty: Mobile and/or Diablo Immortal in the West, a new World of Warcraft expansion, a frontline Blizzard release, substantial King growth, and Call of Duty Blackout and/or Overwatch going free-to-play. Even if Activision Blizzard does not achieve $3.00 in EPS in FY:20, the perception of that possibility could lift the share price. At a 20x P/E multiple, shares would be worth $60 on the potential of $3.00 in FY:20 plus net cash.”
Cowen is bullish on the pharmaceutical company’s deal for a breast cancer drug and says the stock offers a, “compelling entry point.”
“AZN is delivering a strong turnaround, which previously we viewed as largely reflected in stock. However, last week’s deal for a promising breast cancer drug, in tandem with 5% stock decline, offers a compelling entry point. Upcoming news and further P&L improvement should power AZN shares. We are upgrading AZN to Outperform; price target raised to $48, 22x 2020E EPS, on increased visibility.”