A trader works next to a Grubhub Inc. paper bag on the floor of the New York Stock Exchange (NYSE) in New York.
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Here are some of the best analyst calls on Wall Street this week:
Maxim – Apple, downgraded to sell from hold
Maxim downgraded Apple to a rare sell rating and said it was worried about lower iPhone sales in 2020. The firm cited proprietary survey data and said it also expects operating profit to decline, despite continued growth in Apple’s services and wearables segment.
“We are reducing our F2Q20E (Mar) iPhone revenue estimate to $27.0B, 14% below the current consensus estimate of $31.5B. We expect operating profit to decline y/y due to our below consensus iPhone view, despite ongoing growth in services and wearables. We expect overall FY20E operating profits to decline 2% y/y, as ongoing growth in services and wearables will only partially offset iPhone declines.”
Evercore ISI – Live Nation, upgraded to outperform from in line
Evercore upgraded the events promoter and venue operator after the company’s earnings report and said shares pulled back “needlessly.” The firm said the company has a “recession-resilient model” and that it doesn’t see any recession-type impacts “on the horizon.”
“We think Live Nation Entertainment shares have pulled back needlessly post-3Q19 report. It seems that the 3Q19 revenue miss (due to light stadium activity, which was misunderstood due to its outsized revenue contributions) despite the adjusted operating income beat, led to the sell activity in LYV shares. … No recession-type impacts currently or on the horizon; concert going is a recession-resilient business model. We believe LYV management has gone out of its way to tell investors that they are not feeling any recession-type pullbacks by concertgoers anywhere globally.”
Jefferies – Grocery Outlet Holdings, Buy rating
Jefferies reiterated its buy rating on Grocery Outlet Holding Corp. after the company’s strong earnings report. The firm said chains in the value space continue to make inroads with bargain minded consumers. The analyst also said the supermarket discounter has the “potential” for an even larger national expansion.
“Value retailers continue to gain market share across the consumer space, speaking to the increasingly pervasive bargain-mindedness among consumers. Given Grocery Outlet delivers a WOW! shopping experience, selling products at 40-70% off conventional retail prices, we believe Grocery Outlet is well-positioned to benefit from this growing trend.”
Barclays – Grubhub, upgraded to overweight from underweight
In a note to clients, Barclays addressed the board of the online delivery service and laid out several reasons the firm believes stock has declined 75% in 15 months. The company reported poor earnings and dismal guidance in late October. The firm blamed “ill-timed strategic investments and poor execution” among other things.
“We have been close followers of the online food delivery space for several years and have found the rapid transformation in the last two years extremely fascinating. Caught in the middle of this whirlwind, shares of GRUB declined by 75% in 15 months, due to what we believe is irrational competitive landscape, ill-timed strategic investments, and poor execution. A significant amount of value is destroyed already and we think it is time for you, the board, to prevent further erosion.
Citi – Huntington Ingalls Industries, Buy rating, price target to $290 from $255
After a visit with management, Citi raised its price target on the military shipbuilding company to a street high $290. The analyst came away impressed with the company’s 5-year modernization project and said shipbuilding is in a “renaissance” due to generational investments.
“Ingalls is 30-40% of HII earnings & exemplifies a broader shift underway at HII as its 5-year modernization project winds down in 2020. These investments have resulted in tangible changes adding capacity & enhancing efficiency. It doesn’t help margin as much as it helps the Navy afford more going forward; critical for shipbuilding longevity & visibility which we think are important as budget growth slows. These generational investments also reflect something of shipbuilding renaissance as the shipyards resume previously idled capacity & position for the next 15-20 years.”