Thursday top Wall Street calls: Tesla, Lululemon, Apple, Amazon
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The following are Thursday’s top Wall Street calls: Morgan Stanley reiterates Apple’s overweight status. Wednesday evening, Morgan Stanley wrote that the reports about iPhone 14 delays were exaggerated. According to our supply chain checks, delays don’t occur. Looking at previous flagship iPhone launches, we see that there is minimal impact on FY shipments and stock performance if a model launches is delayed. Evercore ISI downgrades Dow from outperform Evercore downgraded Dow primarily on valuation. We see this as an opportunity for us to decrease exposure following strong performance over the past year in a name that is not well-loved in our sector. UBS reduces Kraft Heinz’s stock price to neutral UBS reduced Kraft Heinz’s stock price due to “inflationary pressures”. KHC will be facing one of the most severe inflationary pressures in the next twelve months. This is increasing the need for them to raise their price. We believe this is unlikely given WMT and TGT comments last week. This call is more detailed here. Jefferies confirms Tesla’s buy Jefferies has lowered Tesla’s price target to $1,050 from $1,250, and stated that Tesla is at high risk. Tesla has a higher risk profile than previously believed, due to long-held fear of internal disruption. However, Tesla’s operational performance and return on investment continue to exceed expectations. You can read more on this call. Bank of America reiterates Starbucks’ claim that Starbucks enjoys the highest margins in the industry. The EBITDA margins at Starbucks restaurants are some of the highest in the sector, and they also reflect the company’s position as the market leader for its particular segment. Restaurants that – for all intents and purposes — operate in a ‘market of one’ tend toward mid-20s EBITDA margins, irrespective of industry.” Morgan Stanley elevates Lululemon’s weight from the equal-weight category. Morgan Stanley claimed that Lululemon can be considered a long-term “long-term compounder” on sale. ” LULU trades at a discount vs. history on growth decel & recession/consumer fears. But risk seems priced in, & we think the biz could be more resilient thru industry/macro headwinds than the mkt discounts.” This call is more detailed here. JPMorgan upgrade Sysco from neutral to overweight JPMorgan stated that Sysco’s confidence has grown after several meetings with management. SYYY shares offer relatively low-risk upside at current prices. Our recent meeting with the CEO/CFO has given us confidence in upcoming supply chain changes and delivery changes that will help increase US market share. Loop reiterates McDonald’s’ as buy Loop stated in a note, that the company’s latest surveys show McDonald’s is well on its way to beating same-store sales growth for the second quarter. Our latest McDonald’s U.S. franchisee checks show that same-store sales growth is on track to exceed expectations in the second quarter. Bank of America lowers Centene from neutral to buy. Bank of America stated that there is too much uncertainty surrounding the health-care provider. “The industry must manage rapidly falling Medicaid members and expiration of extended ACA subsidies. These factors will not only slow down the growth but also could lead to a risk pool shift within both Medicaid-exchange businesses. CNC is undergoing a margin turn around, which gives it some levers that can be pulled to support EPS growth. It’s better positioned than other peers in our opinion. Stephens initiates CrowdStrike. Okta was initiated by Stephens because Stephens, a overweight Stephens, stated during CrowdStrike’s initation that CrowdStrike has compelling risk/reward. Okta was also covered by the firm, which called it a market leader in identity access. As a market leader for Endpoint Security, with a wide tech base and the largest product range in security, we believe there is a clear risk/reward ratio for a quality company that has a unique blend of FCF/high-growth. OKTA has the potential to benefit from three important secular trends. These are Zero Trust Security, Digital Transformation, Cloud Adoption and Hybrid IT. This call is more detailed here. Cowen initiates Coinbase as an outperform Cowen claimed that Coinbase is built to last when he initiated it. With an Outperform (1) rating, and a $85 price target, we are initiating coverage for Coinbase. The company holds a dominant spot volume exchange position in the U.S. with a burgeoning subscription & services platform we believe can grow at a +DD% CAGR for the foreseeable future.” This call is more detailed here. Bank of America reiterates Charles Schwab’s purchase. Bank of America claimed that Charles Schwab was an “inflation fighter”, with a favorable valuation. “SCHW is our only coverage name that expects to increase quarterly EPS (each quadrant, sequentially) in the coming 2-3 years against high inflation/rising rate backdrop (even though there are modestly less public equity markets). Stephens rates J.B. Hunt a “best idea” Stephens has named J.B. Hunt a trucking company a Best Idea on Thursday. He believes J.B. Hunt offers a strong risk-reward ratio. We find this risk-reward ratio compelling, even though there is potential for volatility in the stock’s near term due to uncertainty around the freight cycle. Evercore ISI lowers Union Pacific’s rating to “in line” from “outperform.” Evercore ISI lowered Union Pacific’s stock based on its valuation and “volume gaps.” We are upgrading Canadian National from In Line to Outperform due to its commodity exposure and safe-haven status here in Canada. Union Pacific is now In Line, as a result of recent relative outperformance against U.S rails and 2Q22 volume deficits. A likely guidance reset lower will also affect Union Pacific. Cowen reiterates Amazon’s outperform status. Cowen stated that Amazon Web Services offers more potential for Amazon. Amazon’s global growth drivers include (i) continued B2C eCommerce market share gains, (ii), emerging eCommerce verticals such as B2B, (iii), significant opportunities in new Int’l markets, like India, Mexico and Australia, (iv). AWS should experience years of secular tailwinds that will drive a revenue CAGR between 30% and 30% in the ’22E and ’27E, as more workloads move to the Cloud.
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