Barclays upgraded Target to ‘overweight’ from ‘equal weight’
“Despite our previous Equal Weight rating on TGT, we have spent considerable time over the last year writing extensive deep dive research on the ongoing transition at the company, as we have firmly believed there is considerable upside should success occur. We had got over our last major concern, which was related to the long-term margin outlook. However, we were reluctant to upgrade the stock because we were fairly convinced there would be weakness following AMZN’s 1Q19 results; not due to anything fundamental, but rather because we expected meaningful short-selling pressure on a basic investment thesis that “TGT is finally going up against difficult comparisons in 2Q19″. For reference, TGT performed a 6.5% comp in 2Q18, which was the highest comp that the company has done since 2Q05. Our belief was based on how the market treated BBY following a similarly difficult situation in 2Q last year, as both companies are largely treated as structurally challenged retailers (i.e. they trade at depressed valuation multiples in the 10-12x range). However, we have now decided with the pullback in the stock due to recent AMZN fears, our expected downside from this near-term view is meaningfully de-risked, and as a result, we are upgrading TGT to Overweight from Equal Weight and raising our price target to $115.”
Read more about this call here.
“While we appreciate attention will justifiably remain largely focused on the Disney+ launch on November 12, the underlying engine of the company appears well positioned to outperform and deliver strong profit growth this year. We continue to see upside to shares even after an impressive ~20% increase since the Investor Day on April 8 given notable catalysts ahead, and we bump up our December 2019 price target on higher estimates to $150 from $137.”
Read more about this upgrade here.
“American’s lowering of its EPS guidance range from $5.50 - $7.50 to $4.00 - $6.00 was not unexpected given the recent rise in fuel prices and grounding of its MAX fleet. The company estimates those two items will impact its 2019 pretax profits by $1 billion ($650 million due to fuel and $350 million due to the MAX) and assumes that its MAX aircraft will return to service by late August. We think the resetting of expectations by management essentially establishes a “floor” for AAL’s share price and provides the company a bit more “cushion” around its earnings targets. In that regard, our revised EPS forecast (now $5.00 vs. prior $5.30) reflects the “full bore” effect of higher fuel prices and the impact of the MAX grounding without giving American much credit for revenue recapture or any sort of “compensation” from Boeing. Both of those could spell upside to our 2H 2019 and 2020 outlooks. Based on last close of $33.06, the stock is trading at an undemanding 6.6x P/E multiple (given its leverage, it trades at a pricier 6.8x on an EV/EBITDAR basis, but the compa-ny’s financial leverage has peaked and should decline over the next several years). Furthermore, American looks to be on the cusp of being a true deleveraging and free cash flow story. We’ve been waiting for this for a long time. As such, we are upgrading AAL shares from Hold to Buy. ”
“At 7.4x our 2020 EPS est., the stock discounts many of the headwinds CVS faces. However, with leverage historically high, we are looking for visibility on earnings growth to improve. Our $61 PT is based on 8.5x our 2020 EPS est. Risks to our rating include further challenges in PSS & Retail/LTC and AET deal integration risk. ”
“With a potential synergy-enhancing merger with Commerzbank ruled out, 1Q19 operating divisions below consensus, and structural issues (low profitability, high funding costs) unaddressed by any larger change in strategy, we are cutting 2020/2021 EPS estimates again by c10-15%, taking our price target down from E8.0 to E6.5, and downgrading DBK to Underperform from Neutral. ”
“Oxy’s hostile counter-offer for Anadarko is a risky but perhaps necessary move against a better-capitalized bidder for a company that rejected its initial overtures. We expect that Oxy’s stock could come under further pressure regardless of whether it is ultimately successful in its APC bid or not, and downgrade the stock to Hold. We believe the market has already priced in a higher bid from Chevron and maintain our Buy rating. ”
“Bottom Line: Our bearish ABBV thesis has mostly materialized. What’s changed is that we’re now more bullish on Skyrizi and Upa because we believe AbbVie can leverage its rebates to secure superior access in the U.S. and drive strong launches. We’ve raised our forecasts for both, and that drove our valuation change. After a flat 2019, Skyrizi, Upa, Imbruvica/Venclexta and Orilissa should drive 4-6% revenue growth during 2020-2022, which should improve sentiment. However, we still have many uncertainties that could weigh on the stock and still expect revenue to decline after 2022. ”
“We expect solid FQ2 results relative to expectations with services increasingly the key driver. Apple appears poised to tap into a deep reservoir of services opportunities, capitalizing on the 900 million global iPhone users. Driven by its strong eco-system, we believe growing services contribution can help drive its valuation multiple higher. Raising our target price from $200 to $225. ”
“We are upgrading Colgate-Palmolive to Neutral from Underweight as organic growth is finally starting to show consistent improvement, despite mixed signals from most recent scanner data in the US. For the first time in two years, CL delivered both volume and pricing growth. ”
“We are downgrading AXP to Neutral for two reasons: 1) We no longer see significant upside to consensus EPS forecasts over a two year horizon; this view contrasts with our prior thesis, which was that AXP’s volume growth and operating leverage would drive positive revisions. And 2) the shares’ current valuation of ~14.7x P/E is approaching +1 standard deviation above their post-Crisis average (13.3x); based on historical experience, we believe rising credit losses will impede incremental revaluation. ”