Gap, Apple, Tesla, Netflix, Citi, CVS, Ulta
The following are Friday’s top Wall Street calls: Jefferies Upgrades Ulta To Buy From Hold Jefferies indicated that the company is now more positive on Ulta shares. “We are reframing our thesis, upgrading to Buy with an ‘all clear’ signal re: make-up recovery, favorable channel shift, share gains, leverage on tighter costs & inventory, embedding freight cost reality, and well positioned if a trade down into mass/masstige occurs.” You can read more on this call. Evercore ISI reiterates Netflix’s in-line status. Evercore stated that it believes there will be upside to a Netflix-sponsored service. “We see two primary implications for Netflix’s fundamentals from an Ad-Tier – reducing Churn, and driving incremental new subscribers that are currently priced out.” JPMorgan reduces American Eagle Outfitters from overweight to neutral and Gap from underweight to neutral. JPMorgan also downgraded several fashion retailers Friday due to a lack in visibility. “Multi-Year Visibility Increasingly Clouded by Supply Chain & Inflation: A key take from both AEO and GPS is lack of visibility from management into multiyear business plans at this time.” Needham upgrades Boston Scientific to buy from hold Needham said the medical device company has “numerous” growth drivers and that it could be a good candidate for M & A. “There is increasing speculation about Johnson & Johnson’s (JNJ – Not Rated) M & A plans especially as it spins off its consumer business. If JNJ plans to purchase a large medtech company, we think BSX might be a suitable fit. You can read more on this call. Loop: Amazon is still a buy. Loop has lowered the price target for Amazon stock to $2825, from $3750. But, it said that Amazon was a solid stock with a “defensible Moat”. Valuation of growth assets has been relegated to ten-decade-old norms because markets are correcting in anticipation for recession. Investors are encouraged to seek out opportunities for purchasing in stables with strong moats, well-managed innovators, and other stalwarts. We believe this is Amazon. Bernstein reduces UnitedHealth from market perform to outperform Bernstein reduced the company’s valuation primarily for its health insurance business. “We believe that UNH’s two greatest strengths have been strategic vision and strategic capital deployment, which has contributed to ~19% growth over the 2015 – 2021E time period.” Credit Suisse lowers Citi from outperform to neutral Credit Suisse stated in its downgrade that there is “limited upside” right now. “Risk vs reward… we realize that the downside to C shares may prove more limited given a valuation within reach of prior cyclical troughs; but we believe the upside, relative to peers, will also prove more limited given the long road ahead in Citi’s transformation process.” You can read more on this call. Morgan Stanley drops Gap to belowweight, from equal weight. This was after the company’s Thursday earnings report. It noted it saw “consistent misexecution”. “The 1Q22 EPS miss materialized, & updated FY guidance proves the downside EPS risk we’ve highlighted YTD has been well-founded. Consistent mis-execution & a likely decelerating macro/industry headwinds leaves room for further negative revisions.” You can read more about the call here. Bernstein drops CVS from market perform to outperform Bernstein indicated in its CVS downgrade that there is limited potential for price gains improvement. We believe that CVS has a clear strategy to develop an omnichannel, value-based healthcare business. This includes a primary care clinic at retail and virtual care, as well as home and mobile care. Pivotal raises Roku stock to sell Pivotal raised the stock mainly because of valuation. While our concerns have not been addressed, there are signs that chip shortages may be easing. It appears NFLX might move quicker to provide an ad-based solution (that would allow Roku to profit), the value of the stock has dropped to levels we find reasonable. JPMorgan reaffirms Apple as overweight. JPMorgan stated that after analysing China’s smartphone data, Apple appears to be experiencing a slowdown in iPhone shipments. The monthly data is lumpy. It may also have been triggered by shut downs. But, we interpret the softening of the YTD trend to reflect the effects of consumer spending slowdowns in China. Although iPhone share remains high, shipments won’t be immune to a larger market slowdown. Morgan Stanley raises Macy’s weight to the same from belowweight. Morgan Stanley believes that Macy’s is capable of “outshining” its peers in the industry. “Compared to peers, M’s ’22 guidance appears prudently conservative and embeds uncertain macro & industry headwinds. This means that we expect a reduced risk of future earnings reductions, and could see relative outperformance in comparison to our peers. The higher multiple could also be supported by balance sheets de-risking. Morgan Stanley drops Urban Outfitters from overweight to an equal weight. The company said that it expects a slower margin recovery after Thursday’s earnings report. “The 1Q miss & 2Q guide-down suggest sales & margins appear constrained amid inflationary pressures, rising costs, and increasing promotions.” Credit Suisse reiterates Tesla’s outperform status Credit Suisse stated that it believes there is an “attractive entry level” for Tesla shares right now. We see the pullback in stock price as an appealing entry point, but the long-term opportunities for TSLA remain intact. UBS confirms McDonald’s, Yum and Yum Brands as UBS stated that Yum Brands and McDonald’s are executing well. We think that bigger scale competitors who have strong absolute value perceptions will be best positioned for profitably and effective execution against value platforms like MCD and YUM. Atlantic Equities mentions Coinbase in its note. Although shares were down significantly last year, the valuation currently reflects the opportunity that Coinbase has for long-term growth as the cryptocurrency economy evolves.