Williams-Sonoma initiation and Church & Dwight upgrade also among notable calls
Check out today's top analyst calls from around Wall Street, compiled by The Fly.
VALUATION 'HIGHLY UNATTRACTIVE': Berenberg analyst Stuart Gordon downgraded Carnival (CCL) to Sell from Hold with a price target of $10, down from $14.50. The analyst argued that Carnival's valuation is "highly unattractive" and its capital structure looks "unsustainable" and in need of an injection of new equity. The risk of further suspensions of cruises remains high, Carnival's net debt will likely rise significantly and a breakeven analysis suggests the company needs a high proportion of its fleet sailing to generate positive EDITDA, he contended. Gordon does not see enough cash flow to make shareholder returns until at least 2025.
SECURITY ARCHITECTURE CHANGES: Morgan Stanley analyst Keith Weiss upgraded Cloudflare (NET) and Zscaler (ZS) to Equal Weight from Underweight with price targets of $34 and $104, respectively. The analyst believes that adoption of public cloud and remote computing will likely accelerate coming out of the COVID pandemic. Weiss sees Cloudflare being well-positioned through a broadening portfolio of cloud-based security, access and performance solutions, and sees Zscaler's Cloud Security platform as a leading beneficiary of changing security architectures as "the control point of security moves away from the traditional corporate network." Nonetheless, the analyst highlighted the “still” uncertain macro, particularly for SMBs.
'FLUID' OPERATING ENVIRONMENT: Wells Fargo analyst Zachary Fadem initiated coverage of Williams-Sonoma (WSM) with an Equal Weight rating and $90 price target. The analyst views the company's operating environment as "fluid" with "potentially underappreciated execution risks" from store re-openings and COVID-19 costs. Further, Williams-Sonoma's valuation is largely reliant on sustainable upside throughout fiscal 2020, Fadem contended, adding that he prefers to wait for a better entry point.
'BUILT TO WITHSTAND' RECESSION: Credit Suisse analyst Kaumil Gajrawala upgraded Church & Dwight (CHD) to Outperform from Neutral with a price target of $85, up from $74. The analyst believes that the company's operating model is "designed to thrive in this environment." Church & Dwight offers a value-oriented portfolio with a "clean" balance sheet and favorable acquisitions and has a history of stability through difficult periods, he added. Further, Gajrawala told investors he believes that with roughly 37% of sales derive from value-priced brands, Church's portfolio is "built to withstand a recession."
ON THE SIDELINES: Deutsche Bank analyst Jeriel Ong initiated coverage of Pure Storage (PSTG) and NetApp (NTAP) with Hold ratings and price targets of $17 and $43, respectively. While the analyst believes Pure Storage is well positioned to continue to outgrow the external storage industry, he thinks storage spending could be constrained in the near-term. Regarding NetApp, Ong also believes the company is well positioned within the external storage array market from both a product and customer perspective based on channel checks. However, in the present spending environment, the storage market is not well positioned, and the company' singular exposure to this end market places it in a bad position, Ong contended.
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