Here are Wednesday’s biggest calls on Wall Street: KeyBanc initiates Lyft and Uber as equal weight KeyBanc said the ride-sharing companies need to prove that profitability is sustainable. “For Uber profitable growth is necessary to prove out. Investors already view Uber as a LT outperformer due to its scale. … . For Lyft , profitability and execution are the key variables to prove out.” Goldman Sachs upgrades Armstrong World Industries to buy from neutral Goldman said it sees “strong cash generation” for the office construction and renovation company. “In our view, Armstrong’s well-established history of pricing power within mineral fiber, digital initiatives to tap underserved customers and streamline the design process, along with its balanced approach to capital allocation and strong cash generation, should result in peer relative outperformance.” Read more about this call here . Wells Fargo initiates Gartner as overweight Wells said the tech research and consulting company has an “attractive model.” “We initiate coverage of Gartner at Overweight with a $305 price target. The stock’s YTD underperformance (-27% vs. the S & P -19%) creates an opportunity for a company with an attractive model in a large TAM with secular drivers.” Citi initiates Taiwan Semiconductor as buy Citi said it sees more upside in the stock. “We expect TSMC to report an upbeat 2Q and believe there is upside to consensus 2H22 and 2023 forecasts given the company’s solid share gains in HPC (high performance computing). Rosenblatt initiates Arista Networks as buy Rosenblatt said the computer networking company is a “high growth technology leader.” “We are initiating Arista with a Buy rating and $140 price target, based on ~30x 2024 EPS. We think this is an appropriate multiple for a high growth technology leader with market share expansion opportunities in Enterprise and Campus.” KeyBanc downgrades Caesars and SeaWorld to sector weight from overweight KeyBanc downgrades Caesars and SeaWorld due to “macro” concerns. “CZR (OW to SW): Macro; high leverage and commensurate FCF burden vs. peers. … SEAS (OW to SW): Macro; peeling off destination/Orlando exposure into 2H22/2023.” Baird initiates Snowflake as outperform Baird said the company has a “revolutionary platform.” “Positive on data cloud leadership. SNOW provides a revolutionary cloud-native platform for managing and analyzing data that is rapidly taking share from legacy data providers.” Read more about this call here . Wells Fargo downgrades Synchrony Financial to equal weight from overweight Wells downgraded the consumer financial services company due to a deteriorating macro. “As we take a more cautious view of the U.S. macro environment, we are lowering our rating on SYF to Equal Weight from Overweight. We now believe it will be difficult for the stock to outperform as investors worry about private label cards due to 1) skew to lower FICO, 2) higher reliance on late fees vs. general purpose, given CFPB risk, 3) less asset sensitivity to Fed rate hikes.” Citi downgrades Freeport McMoRan to neutral from buy Citi said in its downgrade of the metals and mining company that it sees macro weakness for Freeport. “The structural outlook for miners looks as good as we can remember based on a combination of supply challenges (underinvestment, resource nationalism and ESG) and demand opportunities (decarbonization and electrification). But macro weakness has interrupted — and thus Citi’s global commodity team has made significant downgrades to metals price forecasts.” Citi reiterates Apple as buy Citi lowered its price target on Apple to $175 from $200 but said it’s standing by the stock heading into earnings later this month. “We are lowering our estimates given consumer spending cuts amidst macro woes coupled with continued supply chain bottlenecks that are likely to weigh on near-term fundamentals.” Goldman Sachs reiterates Netflix as sell Goldman said the streaming giant remains a “show me” story heading into earnings next week. “In terms of the Q2 ’22 earnings report, we expect NFLX to remain in a soft demand environment with industry data pointing to an in line or weaker Q2 net add result.” Deutsche Bank downgrades Dave & Buster’s to hold from buy Deutsche Bank said in its downgrade of the stock that the macro overhang is likely to last longer. “We feel better about expecting sustainable medium to longer term unit growth out of PLAY (key word = sustainable), versus any time prior in our history of covering the company. We also continue to view the free cash flow generation ability of the business as a key positive attribute for PLAY ; one that has not changed as a result of the acquisition.” Canaccord reiterates Tesla as buy After a change in analyst coverage, Canaccord said in a note on Wednesday that Tesla is a “sustainability behemoth.” “The company also participates in several tangential businesses, including solar, energy storage, vehicle autonomy, and most recently robotics. We see these ancillary businesses adding duration and durability to the Tesla growth story. Tesla is the sustainability behemoth.” Raymond James initiates Bath & Body Works as strong buy Raymond James said the stock has been unfairly punished. “Retail stocks have been pummeled as the market assesses the extent of a potential slowdown, but even assuming a recession worse than that of 2008/2009, BBWI shares have been overly punished in our view.” Read more about this call here. Raymond James initiates Clorox as outperform Raymond James said in its initiation of the stock that it sees an “attractive” risk/reward. “Market sentiment has been negative on CLX post-pandemic, and rightfully so, but from here, we think that even with its challenges, we view risk/reward as attractive and see more potential for upside than downside.” Piper Sandler reiterates Twitter as neutral Piper lowered its price target on Twitter to $30 from $54.20 and said the path to a standalone business resolution looks “nebulous.” “We make no changes to estimates, but we reset our target price from $54.20 to $30 and reiterate our Neutral rating. We are now valuing the business on stand-alone fundamentals versus the value tied to the merger agreement. While the path to resolution looks nebulous, we’d expect activity in Delaware court over coming months.” Morgan Stanley reiterates Amazon as overweight Morgan Stanley said it sees minimal impact from rising fuel prices for Amazon. “The incremental impact of fuel is low, and remember too that AMZN has multiple levers at its disposal to influence the ~80% of costs within shipping that are not related to fuel.” Goldman Sachs downgrades DigitalOcean to sell from buy Goldman said in its double downgrade of the cloud infrastructure company that it sees slowing growth. “We are cautious on DOCN (rated Sell) given the potential for slowing demand, especially in international markets and in verticals/segments that benefited from tailwinds over the last 12-18 months (crypto/blockchain, SaaS startups, gaming, web agencies/ecommerce).” Deutsche Bank downgrades Gap to hold from buy Deutsche said in its downgrade of the stock that it sees “low visibility” for the company going forward. “We are downgrading shares of GPS to Hold from Buy given: 1) low visibility around the top-line recovery at the company’s largest brand Old Navy; 2) the elevated promotional environment that is likely to have an outsized negative impact on Old Navy and Gap; 3) potential for further risk to numbers.” Morgan Stanley reiterates Microsoft as overweight Morgan Stanley said in a note that its survey checks show demand is “moderating,” but that Microsoft is still one of the “most preferred” names in software. “Although 2Q22 CIO Survey indicated a moderating demand environment, it also showed Microsoft’s leadership position across key growth and defensive categories. The combination of strong secular positioning and a reasonable valuation keep MSFT as one of our most preferred names in software.” Mizuho reiterates Robinhood as buy Mizuho said in a note on Wednesday that it’s standing by shares of the stock app trading company. “We remain confident in HOOD’ s current business model. However, having a backstop value shouldn’t hurt.” Bank of America downgrades Sherwin-Williams to neutral from buy Bank of America said in its downgrade of Sherwin that it sees slowing growth. “We are trimming estimates and POs for much of our specialty chemical coverage on account of 1) slower macro growth, 2) tougher FX backdrop, and 3) lower valuation multiples (higher interest rates).”
