Here are the biggest calls on Wall Street on Monday:
Evercore ISI lowered its price target on Alphabet to $1200 from $1250
Evercore said the antitrust investigation into Alphabet by the DOJ, will weight on the company.
“Since Friday afternoon, WSJ, NYT, and Bloomberg have reported that the US DOJ is preparing to open an investigation into Google’s compliance with antitrust laws. For investors, the investigation comes at a time when the stock’s bull case is challenged by concerns of an abrupt revenue slowdown last quarter. Importantly, GOOGL has successfully navigated an antitrust investigation before (2011-2013), and emerged unscathed after a two year inquiry, as the FTC voted 5-0 not to pursue further action. That said, Android and the Play Store have not been pressure tested in a precedent US-led investigation, adding to the complexity of assessing the spectrum of outcomes. Our conclusion is that the announcement of an investigation adds to the near-term challenges facing GOOGL. While precedent suggests that Google enjoys broad discretion over the direction of search results, the questions arising from an investigation will challenge the possibility of multiple expansion.”
RBC upgraded Waste Management to ‘outperform’ from ‘sector perform’
RBC cited the company’s unique positioning within its sector.
“We attended Waste Management’ s Investor Day in New York and came away more confident around the company’s unique sector positioning and management’s ability to capitalize on evolving industry trends. We see Waste Management delivering out-sized earnings growth, driven by sustained organic growth rates and further enhanced by the announced acquisition of Advanced Disposal. Upgrading to Outperform. “
Bank of America downgraded Big Lots to ‘underperform’ from ‘buy’
Bank of America double downgraded the stock and said the company needs to show more “consistent” earnings growth.
“After assessing the underlying trends in Big Lot’s business, we believe that the company’s outlook for the rest of the year may be too optimistic and could be due for additional cuts. We are downgrading BIG shares from Buy to Underperform and believe that the stock will continue to struggle until consistent improvement in earnings growth is demonstrated. We are cutting our price objective from $45 to $23 as 1Q’s issues curbed our confidence that BIG’s turnaround is imminent.”
UBS upgraded Brinker to ‘neutral’ from ‘sell’
UBS upgraded the multinational restaurant company mainly on valuation.
“We are upgrading Brinker to Neutral from Sell as shares have fallen below our price target. Valuation now appears to reflect challenges highlighted in our April initiation and risk/reward looks more balanced. We continue to believe sales will decelerate over the next few quarters, while cost headwinds could pressure FY20 margins and earnings (UBSe $3.81 FY20 EPS vs Cons. $4.03). We maintain our $39 PT and estimates, but at ~7x NTM EV/EBITDA, shares appear to be largely pricing in potential headwinds. “
J.P. Morgan removed Salesforce from its analyst ‘focus list’
J.P. Morgan removed the stock from its “Analyst Focus List”, based on current valuation following a 2-1/2 year gain of 121 percent.
“We still view CRM shares positively relative to SMID-Cap high-fliers trading at 20-35x revenues, but with software valuations reaching 15-year highs for both SaaS and On-Premise, and the peak period of Tax-Reform-driven IT spending likely behind us, we remove salesforce from our Analyst Focus List following a run of 121% (vs +23% for S&P 500) for CRM shares in the last ~2.5 years. “
Oppenheimer upgraded Teva Pharmaceutical to ‘outperform’ from ‘perform’
Oppenheimer said even though Teva’s legal issues remain an “overhang,” it sees a buying opportunity.
“With TEVA trading at its 19-year low, we see a buying opportunity and move to an Outperform rating (from Perform) and a price target of $12 (from $17). We believe business fundamentals continue to improve and management’s execution on the operational front is generally in line with expectations. However, we acknowledge legal uncertainties could remain an overhang and update our model to reflect theoretical legal penalties and increase our discount rate to ~10% (from ~8%). Based on our discussion with a legal expert, we estimate TEVA’s opioid liability exposure at $500- $700M and believe its price-fixing exposure could be substantially higher. In our view, TEVA’s balance sheet (assuming refinancing of certain debt tranches) could sustain ~ $400M in average annual penalties over time. “
Morgan Stanley initiated DuPont as ‘overweight’
Morgan Stanley said it sees value in DuPont whether its segments are separated or whether it becomes a “true multi-industry” company.
“We have long indicated our view that DuPont’s valuation peer set should include multi-industry companies such as 3M but we believe that the equity market has yet to be convinced of such and we recognize that this will likely take some time. We have also long indicated our view that DuPont could be separated from its current conglomerate structure one way or another into four individual companies. “