Netflix, Tesla, Visa, Warby Parker, Penn, Disney
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The Wall Street’s top calls Wednesday include Goldman Sachs upgrading Endeavor Group to purchase from neutral Goldman indicated that the company sees a attractive entry into media and talent companies. Endeavor shares have fallen 30% and 45% YTD since the IPO. This is due to i) fundamental fears that a weakening economic environment will affect demand for live events, talent representation and advertising products, as well as iii) technical worries such as higher interest rates and IPO lockups and investor positioning. Piper Sandler calls Tesla an overweight stock. Piper Sandler reduced its target price on Tesla to $1.035 per share, from $1.260. However, the stock was still considered a core holding. We are reducing our price targets and estimates to account for COVID-related weakness, higher WACC (weighted average capital cost) assumptions in our DCF model. We still consider TSLA a key holding for any portfolio that focuses on ‘advanced mobile’. Goldman Sachs launches Visa and Mastercard. Goldman stated that it believes there is more upside to Visa and Mastercard and also said the stock was undervalued. “We are most constructive on V/MA, as we believe these businesses are under-earning given cross-border revenues are on recovery trajectories but still depressed, which along with higher inflation should provide an idiosyncratic growth impulse and a partial offset to any macro weakness. This call is available here. Wells Fargo calls Disney overweight. Wells stated in a note sent to clients that the bank sees greater upside for Disney shares because of its continued growth in streaming subscribers. “We are excited about the potential upside for streaming net add estimates over the next couple quarters and we already see these two companies have the highest net-add forecasts in Q2/Q3. Wells Fargo is reaffirming Netflix’s “equal weight” and said Netflix shares need to be put under further pressure. While the stock is already in serious trouble, we believe that NFLX will face further negative revisions to its estimates due to increased staff cash compensation, investments in AVOD, restructuring and other factors. The rebuilding year 2022 is expected to be NFLX v2.0, which will not emerge until at least next year. We fear that the stock will be under more pressure if investments continue to drag on margins. Evercore ISI upgrade Cardinal Health to exceed in line Evercore stated that Cardinal Health stock was an “underpriced return.” While we are in agreement that there must be significant improvements made to the Medical section for FY’23, Evercore ISI upgrades Cardinal Health. Our new price target at $68 per share is a better valuation and still takes into account structural differences between peers. Berenberg buys U.S. Foods Berenberg claimed that US Foods has “superior frontend technology, compared with peers, and a differentiated omnichannel presence.” USFD, a national food distributor, offers a wide range of products as well as technology and business solutions to its customers. We have scale, superior front end technology and a distinct omnichannel presence. This is our upside. Guggenheim named Paramount and Meta Platforms as top picks. Guggenheim stated that it is bullish about Paramount’s potential margin expansion prospects. Guggenheim also named Meta as a top choice, stating that it was bullish about its metaverse growth. Paramount sees the potential for more margin expansion than is currently being reflected in current consensus estimates. … The company [Meta]The company remains focused on long-term goals (i.e. exiting 2030s), and is continuing to develop its metaverse-focused initiatives. However, it is increasing its control over current investments. Bernstein says Monster continues to increase its market share. “We found that U.S. persistent market share loss was concerning and we wanted to see better data on U.S. market share before we bought. MNST gained share during the most recent period, and performance has improved rapidly in the three months since then. Baird picks Block Baird picked the former Square company as a new pick, and stated that it was a long-term winner in large-cap technology. Although there are still uncertainties (afterpay impact from consumer weakness/ rising rates; Seller hitting law large numbers; CashApp tough comps), this is a long-term winner in large-cap technology with likely 20-25%+ revenue growth over the years. Wells Fargo launches ServiceNow after being overweight Wells indicated that ServiceNow’s “balanced Growth Profile” was appealing to it. Given the widespread sell-off, Wes Fargo continues to invest in the best franchises. This is why we will continue our focus on businesses with strong platforms and balanced growth profiles. Jefferies Upgrades Penn to Buy From Hold Jefferies noted in an upgrade that Penn is now a “benefactor” in these uncertain times. We upgrade PENN from Hold to Buy From Hold due to recent weakness. The shares have been reduced to $30 which comfortably reflects stable cash generation by the land-based casino business while assigning minimal value to the digital prospects. Goldman Sachs lowers Warby Parker’s rating to neutral, from buy Goldman stated that it believes there is “less upside potential for” the eyewear business. “While we continue to see several of these drivers as longer-term opportunities, we have fading confidence in the outlook for revenue outperformance and timeline to underlying GAAP profitability following several earnings releases where the revenue growth and profitability outlook have disappointed versus our expectations, driving a more balanced risk/reward with less upside potential to valuation.” This call is more detailed here. Bank of America lowers Carrier from buy to neutral. Bank of America stated in the downgrade of Carrier, an air conditioner, heating and refrigeration business that it believes there are residential headwinds. Carrier’s relative exposure is residential HVAC equipment has been the most prominent among all HVAC stocks that we have covered. … . CARR shares have been sold (down 26% so far in the year), and their valuations are roughly at our level. UBS reiterates Peloton sale UBS has lowered the price target for Peloton shares to $13 from $30. It stated the business is too capital-intensive and needs to cut marketing expenditures. We are dropping our Peloton price target to $13 from $30. This is due to lower EBITDA and sales in the outer years and less than anticipated Q4 profitability. Roth launches Five9 to buy Roth claimed that the current valuation of the cloud contact solution software company was more “palatable”. “We believe FIVN remains one of the premier publicly-traded SaaS (service-as-a-software) players. After ignoring all the drama surrounding FIVN’s mid-2021 acquisition, when we stopped coverage, we now consider its 9.3x valuation to be more acceptable.”
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