Here are the biggest calls on Wall Street Wednesday:
“We are bearish on PBMs and expect 70% of prescriptions to ultimately move online. And we are initiating on CVS at Outperform with a PT of $76 (41% upside). We believe the current price doesn’t reflect Aetna’s solid MCO business and the LT value of a care delivery strategy at retail. We think the current valuation already reflects potential shock to PBM margins and future deterioration in the retail business…”
“We upgrade CCL shares to Buy from Neutral given: 1) accelerating net unit growth from ~2.5% over the past five years to 5% over the next three years should propel fundamentals; 2) Europe concerns appear overblown as even -3% net yields in the region would only drive a 1% difference in global net yield on our estimates, or 5% impact to EPS; and 3) CCL has set guidance well-below the 5-year average net yields providing a lower hurdle for beats and raises throughout 2019. In addition, valuation is compelling at 11.4X NTM EPS (vs. 5-year average of 16X), near trough absolute and relative levels to the S&P 500 and closest peer RCL even as management set a more conservative bar for FY19… If near-term trends are better than feared and beats ensue with ramping capacity growth, we expect an upward re-rating. Our revised 12-month price target of $65 implies 18% upside, relative to the average 9% upside for our coverage… We also update our estimates for CCL, RCL, and NCLH in this note…”
“Investor questions and conversation around Tesla have increased again following the company’s recent product announcements (introduction of $35k Model 3 variant, price cuts on Model S and X products, plan to unveil the Model Y), updated guidance for 1H19 quarterly earnings expectations, and 10-K ﬁling, among other newsﬂow… In the US, we think the amount of information points to declines in demand for Tesla’s higher priced vehicle variants following the start of the phase-out of the Federal Tax credit; and we believe moves by the company to continue to improve its cost structure in order to deliver lower priced vehicles and tap remaining consumer demand corroborate this… Meanwhile, International deliveries have begun and are not progressing without some delays; when combined with our expectation that Model S/Model X deliveries disappoint (we lower our 1Q19 delivery forecast), we now expect a meaningful working capital headwind in 1Q19 — and for quarter-ending cash to come closer to the $2bn mark. We maintain our Sell rating, and now expect 1Q19 deliveries/earnings to disappoint…”
Read more about this call here.
“Since October 2017, it has under performed our coverage universe by ~900 basis points… More recently, though, the shares have outperformed because of a) higher chicken prices and b) the prospect of China openings its border to US broilers… We now view the upside/downside risk as balanced… On the constructive side, industry bird weights are down, China indeed could open, and we now see upside to consensus estimates.. On the less constructive side, the US broiler industry is still planning on accelerating its capacity growth over the next couple of years, which could reverse currently positive pricing trends… All things considered, therefore, we view a Neutral rating as appropriate…”
“We downgrade CSG from OW to Neutral post strong YTD performance… We rate mgm’t under CEO Tidjane Thiam highly as they have continuously grown private banking and Swiss retail businesses while over-delivering on cost targets, generating positive operating leverage, but we continue to question the ongoing underperforming IB strategy. In 2019E, IB-related businesses consume 36% of group capital and generate 22% of group PBT – IB remains a drag on valuation… We estimate Equity business is already loss making and needs to be right-sized for WM but our concern is on credit business gearing, running at peak earnings and accounting for an estimated 23% of group PBT… In our view, inventory losses is not the issue in the new de-risked IB strategy, but we see high earnings volatility/losses in a scenario of a drying-up of illiquid HY/leveraged loan revenues considering a very fixed comp base (80%E of comp) and our estimate of overall credit related revenues at c15% of group… CSG valuation is a support at 8.3x P/E, 0.7x TBV for 9.0% RoTE in 2020E, but we do not see shares outperforming L-T with cost cuts fully discounted and credit likely as good as it gets in the current cycle…”
“Following significantly better-than-expected results so far this year, we believe the sell-off in AOBC shares has been overdone especially given the opportunity for the company to manufacture growth in FY20 independent of a major rebound in demand… Investors are unlikely to get excited about the stock in the absence of such a rebound, however, while the near-term outlook, which includes the toughest comps of the Trump era and a hazardous FY20 guide, is more likely to further spook investors than to bring them on board…”