Check out today's top analyst calls from around Wall Street, compiled by The Fly.
ALTRIA CUT TO NEUTRAL AT PIPER JAFFRAY: Piper Jaffray analyst Michael Lavery downgraded Altria Group (MO) to Neutral from Overweight and lowered his price target for the shares to $49 from $64. Following discussions between Altria and Philip Morris (PM) of a potential merger of equals, the analyst has less confidence in Altria's outlook. The analyst said any interest in a deal without a premium could suggest more stress on the underlying fundamentals and management's outlook for the future than he had appreciated. Further, the analyst added that while potential earnings from the Juul stake may be underappreciated, he's also less confident on Altria's approval from the FTC and FDA. He prefers more clarity from regulators before getting more bullish on the vapor outlook.
WENDY'S CUT AT TWO FIRMS ON BREAKFAST RISKS: Guggenheim analyst Matthew DiFrisco downgraded Wendy's (WEN) to Neutral from Buy following the company's announcement of plans to enter breakfast with a nationwide offering. The analyst, who noted that management reduced its 2019 outlook to account for a $20M upfront investment relating to launching breakfast across the U.S. system, views the day-part expansion as a sign of slowing near-term momentum in the lunch and dinner business. He also noted that Wendy's previous attempts to establish a breakfast business in 1985, 2006 and 2010 were unsuccessful and pressured franchise margins, calling the new attempt "a potentially risky way to add topline growth." Additionally, BTIG analyst Peter Saleh downgraded Wendy's to Neutral from Buy following the company's breakfast announcement, citing his view that the launch could prove to be an "uphill battle much like the previous attempt."
WELLS FARGO CUT TO NEUTRAL AT UBS: UBS analyst Saul Martinez downgraded Wells Fargo (WFC) to Neutral from Buy and lowered his price target on the stock to $49 from $51. The analyst attributed the rating change to his reduced estimates for earnings and lower net interest income along with the continued uncertainty and low visibility around the progress in the management's efficiency improvements. Martinez also cited Wells Fargo's relative valuation, with shares trading at 11.3-times expected FY20 earnings - a premium to JP Morgan's (JPM) 10.8-times, Bank of America's (BAC) 9.2-times, and Citigroup's (C) 7.9-times.
DOLLAR GENERAL CUT TO MARKET PERFORM AT BERNSTEIN: Bernstein analyst Brandon Fletcher downgraded Dollar General (DG) to Market Perform from Outperform as he believes its future story is well understood, and the upside is probably priced into the stock already. The analyst argued that Dollar General store growth has limits, while the move into food is smart, inevitable, and empirically destructive to margins for some time. Additionally, Fletcher believes valuation is much higher than in the last decade while the growth runway is a bit lower.
NETFLIX APP DOWNLOADS REBOUNDING, SAYS CREDIT SUISSE: Credit Suisse analyst Douglas Mitchelson said that his tracking of app downloads data through the first 7 weeks of Q3 suggests a broad-based rebound in global Netflix (NFLX) trends, reversing its mysteriously poor Q2 performance. A more marketable content slate appears to be contributing, based on the timing of downloads improvements in certain countries, including Saudi Arabia cracking the top-10, he added. Of note, the analyst pointed out that Google search data correlated with his app download analysis. While original slate continues to ramp, Mitchelson argued that for Netflix shares to rebound, Q3 results would have to come in well ahead of expectations. He reiterates an Outperform rating and $440 price target on Netflix's shares.
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