Rivian, Amazon, Apple, AMD, Maxar
These are the top Wall Street calls Tuesday: Barclays reiterates Microsoft’s overweight status. Barclays stated Tuesday in a note that Microsoft Teams was an “$85 Billion opportunity.” “Recently, we have seen increased investor nervousness regarding the future growth opportunities for the Microsoft Oﬀice franchise. These concerns should be put to rest if the company recognizes the huge opportunity it has and focuses on deeper penetration of Teams. This should confirm Microsoft’s status as an investment choice in the software industry. Piper Sandler elevates Advanced Micro Devices to neutral from overweight. Piper noted that AMD is competitive and that it should have a positive impact on the investor day. According to our view, core companies of the company are doing very well. They continue to profit from secular trends. In PCs we are seeing continued market share gains and strong traction within the commercial market. You can read more about the call here. Credit Suisse reaffirms Fisker its outperform Credit Suisse claimed that Fisker was well placed to capitalize on the “rising global inflection towards electric vehicles.” After the launch of FSR in November last year, we have reviewed our investment thesis for FSR. FSR stock is still a positive investment as it can capitalize on global EV growth and benefit from a risk-free strategy. UBS drops Workday from buy to neutral UBS stated Tuesday that Workday, an on-demand software company for human capital management was vulnerable to economic downturns. We’ve spoken with 9 partners and assessed the market conditions, as well as Workday’s potential vulnerability during a recession. You can read more on this call. Goldman Sachs lowers Nerdy rating to neutral. This is after Goldman Sachs said that in downgrading the online education platform, it saw too many obstacles for Nerdy shares. “We are lowering our rating from Buy-to Neutral to $3 and lowering our PT by $8 to $3 because of lowered financial projections. These forecasts reflect revenue headwinds, investments, and a slightly higher multiple to growth (on lower estimates). Morgan Stanley reiterates Eaton’s status as a top choice. Morgan Stanley stated that the “electrification potential is still charging up”. The multiple energy transitions go through electric equipment. We now see ETN growing 6.5% through 2030. Growth has increased as solar penetration increases and EVs have grown faster than our initial research in 2021. Stronger growth is offset by market devaluation and greater expectations. Morgan Stanley refers to Rivian again as an overweight Morgan Stanley reduced its price target of the electric car company to $60 per shares from $85, but stated that it believes there is a good risk/reward ratio. RIVN spent plans for 1 to 2 mm of volume at the decade’s end were part of November’s IPO. Now, it is taking 6 months for the company to be able to source parts that can run one full shift. The stock currently trades at 1x 2030 EV/EBITDA (vs. Tesla’s 8x). This creates a favorable risk/reward skew that keeps us OW. KeyBanc calls Apple overweight KeyBanc stated that the tech giant is capable of growing users. The biggest threat to Apple’s F3Q performance is China and the supply shortfalls. However, U.S. consumer demand seems to have remained strong. These risks are embedded in consensus. Apple, even though iPhone could decline, can still grow its users which, to our mind, is more important. Bank of America reiterates its support for Nvidia’s purchase and says it expects an increase in earnings. We expect NVDA will beat FQ1 in Apr and F2Q guide in Jul, if there are no unforeseen supply problems. This is consistent with consensus expectations. Bank of America lowers Maxar’s performance from neutral. Bank of America has downgraded Maxar, stating that there are too many risks to Maxar. Capex will not reach the $100mn per year holiday, as we don’t believe it. Also, we see risks to the management’s 2023 EBITDA goal. Based on the relative EBITDA/EV ratio based upon revised 2023 estimations, we lower our PO by $25. You can read more about the call here. Benchmark buys J.B. Hunt. Benchmark gave J.B. Hunt a buy rating and said it had “competitive benefits.” As rail congestion improves, and JBHT takes on additional containers to expand its fleet, we believe that intermodal volume growth can turn positively in 2022. With a good bid season, the intermodal pricing trend should remain strong in the first half. Bernstein lowers Molson Coors’ market performance to outperform. Bernstein stated in the downgrading of Molson Coors that “European recovery is mostly over.” Our Outperform thesis, which we began coverage on Molson Coors one-year ago, was based upon the European recovery that is deemed important and not well appreciated by the market. Because socializing over alcohol is a natural human desire that has been ingrained in culture for millennia, we were certain the on trade would come back. Truist purchases Ball Corp from neutral Truist claimed that Ball Corp’s pullback in the can and container company was excessive. BALL raised a variety of issues during reporting that were temporary but did not change our basic thesis regarding tight beverage can supply/demand. Morgan Stanley calls Home Depot overweight. Morgan Stanley wrote to clients Tuesday morning, stating that Home Depot’s earnings results had been “solid.” The market perceives a slowdown as a threat and is relieved by better Q1. The ’22 estimates are rising at least by 2%. Although this is a positive outcome, it doesn’t alter the storyline at present. Wolfe selects Amazon and Alphabet as the best stocks in the second half 2022. Wolfe selected Amazon and Alphabet to be top stocks and stated that their balance sheets are strong and they offer favorable cost structures. “Given this backdrop, we are basing our stock selection criteria on four themes: a) diversified revenue streams & competitive leadership, b) stable profit margins and favorable cost structure, c) healthy balance sheet, and d) val support under EPS/FCF. Our top choices for 2H22 based on this criteria include AMZN and GOOGL as well as BKNG and FFB.