Credit Suisse downgraded airlines United and Spirit while upgrading Southwest
Check out today's top analyst calls from around Wall Street, compiled by The Fly. TESLA DOWNGRADED ON CHINA RISKS: Morgan Stanley analyst Adam Jonas downgraded Tesla (TSLA) to Underweight from Equal Weight with a price target of $650, down from $680. He believes Tesla "deserves most of its market cap" as the world leader in electric vehicles, but he also thinks the recent run-up in the share price to over $1,000 may not reflect a number of important emerging risks that have the potential to impact both growth and profitability in a materially negative way, Jonas tells investors. In the nearer-term, he worries about risks to demand and pricing. Over the longer-term, Jonas said that among the many risks facing Tesla, he would "rank risks related to U.S.-China relations at the very top." Any potential deterioration of relations with China "could disproportionately impact Tesla" compared to other stocks he covers, said Jonas. His view is that Tesla shipments in China peak at just under 500,000 units by 2027 and decline from there, the analyst added, stating that he doesn't view China risks as being "in the price" of the stock at current levels.
Separately, on Thursday, Goldman Sachs analyst Mark Delaney downgraded Tesla to Neutral from Buy with a higher price target of $950, up from $925. The stock is now trading above his price target and its recent data points have been mixed, the analyst told investors in his own research note. Delaney sees the recent outperformance in the stock being due to Tesla's strong Q1 margins and increased investor awareness of the favorable long-term outlook for EVs. While the valuation has expanded for the entire market, the bar for Tesla's fundamentals is higher than for other stocks given its "premium absolute multiple along with its historically high volatility."
CATERPILLAR DOWNGRADED AT BMO: BMO Capital analyst Joel Tiss downgraded Caterpillar (CAT) to Market Perform from Outperform and maintained a $130 price target. The analyst expects a near-term recovery to be somewhat challenged by customers' budgetary constraints and stretched government finances, which will "overwhelm" the numerous improvements occurring at the company. Tiss is modeling net income and EBITDA in 22 that is well below levels seen in 2021, marking a decade of stagnant growth.
GM UPGRADED AT GOLDMAN: Goldman Sachs analyst Mark DeLaney upgraded General Motors (GM) to Buy from Neutral with a price target of $36, up from $25. The company is exposed to the solid position and improvement in U.S. and China, with opportunities to expand margins through "proactive" restructuring efforts and a mix shift towards pickups and SUVs, the analyst tells investors in a research note.
TAKE-TWO UPGRADED TO BUY AFTER GTA V REMASTER ANNOUNCEMENT: MKM Partners analyst Eric Handler upgraded Take-Two (TTWO) to Buy from Neutral with a price target of $160, up from $145, after the company's Rockstar Studio announced at Sony's (SNE) PS5 reveal event that a remastered version of Grand Theft Auto V would be released on the new console in 2021. The game release should have a positive impact on FY22 estimates and, "more importantly," provide a means to migrate current GTA Online players to next-gen consoles, contends Handler. CREDIT SUISSE DOWNGRADES UNITED, SPIRIT, UPGRADES SOUTHWEST: Credit Suisse analyst Jose De Sousa downgraded United Airlines (UAL) to Neutral from Outperform with a $41 price target citing a more balanced risk-reward. De Sousa's fundamental view that United remains a well-run carrier remains unchanged, but notes that the downgrade reflects the fact that United briefly overshot his price target last week following the recent sector rally. He is taking the opportunity to step do the sidelines and believes the recent rally is an opportunity for investors to prudently reduce their exposure to the network carriers. De Sousa also downgraded Spirit Airlines (SAVE) to Underperform from Neutral with a price target of $13, up from $12, citing a valuation that "clearly got ahead of itself" following the substantial increase in shares in recent weeks. He says the near-term recovery is playing out largely in line with expectations, but feels Spirit will face fierce competition until corporate demand rebounds for the legacies.
Meanwhile, peer Jose Calado upgraded Southwest (LUV) to Outperform from Neutral with a price target of $45, up from $35. Calado says Southwest is not only a good way to invest in the near-term recovery in leisure travel demand, but is also his favorite multiyear strategic investment with a best-in-class balance sheet that positions Southwest to stage an aggressive comeback.
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