Tesla downgrade and Snap upgrade also among notable calls
Check out today's top analyst calls from around Wall Street, compiled by The Fly.
SUBSCRIBER GROWTH 'AS GOOD AS IT GETS': Raymond James analyst Justin Patterson downgraded Netflix (NFLX) to Outperform from Strong Buy with a price target of $480, up from $415, saying the company is off to a "phenomenal" start in 2020 and is on pace for 23M paid net adds in the first half of 2020. However, while he continues to view Netflix as a long-term winner in Direct-To-Consumer video, Patterson believes the potential for positive estimate revisions and multiple expansion are limited until he observes post-COVID-19 retention rates.
Stifel analyst Scott Devitt also downgraded Netflix to Hold from Buy with a price target of $460, up from $440. The analyst noted that the company reported meaningfully higher paid subscriber growth in the first quarter as global lock-downs and social distancing measures have accelerated demand for in-home entertainment. However, "some form of trend reversal" will materialize as lock-downs are lifted and a portion of recent demand proves to have been pulled forward, the analyst contended. As such, Devitt feels now is "as good as it gets" for Netflix and sees a more balanced risk/reward profile at current share levels.
Meanwhile, Wells Fargo analyst Steven Cahall upgraded Netflix to Equal Weight from Underweight with a price target of $460, up from $305, saying the company's quarterly results demonstrate the unique value of Netflix in these even more unique times. Cahall argued that "as long as hand sanitizer is sold out," Netflix should outperform, and called its execution "outstanding." Cahall does not think Netflix is risk-free for 2020, however, as the first half of the year strength could mean second half of 2020 net adds are down year over year, with management suggesting light adds in the third and fourth quarters.
SELL TESLA ON VALUATION: Bank of America analyst John Murphy downgraded Tesla (TSLA) to Underperform from Neutral with a price target of $485, down from $500. The analyst cited valuation for the downgrade following the stock's recent rally. Tesla faces several hurdles, including production challenges, a burnout pattern for new models, continued cash burn, and the prospect of new competition, Murphy contended. In addition, the analyst cut his global volume forecasts for autos, believing the recovery will be "tepid" U-shape as economies are reopened.
BUY SNAP: Oppenheimer analyst Jason Helfstein upgraded Snap (SNAP) to Outperform from Perform with an $18 price target. The company is "executing on all metrics," Helfstein contended, adding that pre-COVID-19 revenue of up 58% year-over-year in January and February suggests the company has overcome its monetization issues. Further, the analyst noted that Snap's revenue per hour gap versus peers remains at 55%, suggesting a "multi-year tailwind if user metrics remain stable."
HOME IMPROVEMENT UNCERTAINTY: Gordon Haskett analyst Chuck Grom downgraded Home Depot (HD) to Hold from Accumulate with a price target of $215, down from $267. While optimistic that same-store sales trends remained positive in the first quarter, Grom is concerned moving into second and third quarters. He has lowered his same-store sales and EPS estimates across the board for Home Depot, Lowe's (LOW) and Floor & Decor (FND) citing his view that comps will turn negative in April and stay in that range through late Summer. Grom also downgraded Floor & Decor to Hold from Accumulate with a price target of $35, down from $63.
BUY J&J ON DEFENSIVENESS: Bank of America analyst Bob Hopkins upgraded Johnson & Johnson (JNJ) to Buy from Neutral with a price target of $175, up from $150. In the current unprecedented environment, the most defensive names will continue to outperform and J&J "has a long history of outperforming during difficult times," Hopkins contended. The analyst pointed out that the company's strong first quarter results and dividend hike suggest it should deliver solid results again in these challenging times. Additionally, he views J&J's decision to distribute its COVID-19 vaccine, if successful, on a non-for-profit basis "as a master stroke."
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