AT&T and T-Mobile coverage resumptions and Pinduoduo upgrade also among notable calls
Check out today's top analyst calls from around Wall Street, compiled by The Fly.
VERIZON, AT&T COVERAGE RESUMPTION: Wells Fargo analyst Eric Luebchow resumed coverage of Verizon (VZ) with an Equal Weight rating and $60 price target. Luebchow believes Verizon remains the undisputed network leader for 4G LTE, enabling them to claim industry-leading margins, wireless free cash flow generation and network performance. With only about 40% of its postpaid phone subscribers on unlimited, the analyst believes can continue to steadily grow wireless service revenues at a 2%-3% clip, with contributions both from subscriber growth and ARPU/ARPA increases. However, Luebchow thinks Verizon's lack of mid-band spectrum will likely continue to be a thorn in its side until it can procure spectrum at the C-band auction.
Luebchow also resumed coverage of AT&T (T) with an Underweight rating and $25 price target. Luebchow feels AT&T is in a difficult position as it struggles to balance investing in its core business segments while deleveraging and paying a sizable dividend and that this balancing act is made more difficult by continued declines in legacy business segments and the COVID-19 impact on its WarnerMedia business, which will continue to be a headwind into 2021. In wireless, the analyst believes AT&T is at risk of falling behind T-Mobile (TMUS) and Verizon in the 5G race and will have the most limited mid-band and ultra-high-band spectrum portfolio relative to its peer pro-forma the C-band auction.
Additionally, Luebchow resumed coverage of T-Mobile with an Overweight rating and $150 price target. Luebchow feels T-Mobile remains the only true growth story in the relatively mature and saturated wireless market, and expects them to be an industry share-taker and grow service revenues, cash EBITDA and free cash flow significantly faster than peers. The analyst believes T-Mobile can achieve mid-50% EBITDA margins by FY24.
BUY TAPESTRY: JPMorgan analyst Matthew Boss upgraded Tapestry (TPR) to Overweight from Neutral with a price target of $35, up from $25. The shares have underperformed the S&P 500 Index by 80% the past three years, Boss told investors in a research note, adding that Tapestry CEO Joanne Crevoiserat showed "clear confidence" in the company's multi-year earnings acceleration during recent meetings.
'SOLID' QUARTER: Nomura analyst Jialong Shi upgraded Pinduoduo (PDD) to Buy from Neutral with a price target of $192, up from $85. The company reported "solid" third quarter results despite the fact that competition in China's e-commerce industry "remained intense" from the likes of Alibaba (BABA) and Vipshop (VIPS), which the analyst views as "solid proof" of Pinduoduo's strong execution and the effectiveness of its subsidizing strategy. The aggressive spending from competitors has so far failed to derail Pinduoduo's top-line growth and user retention, the analyst added.
Meanwhile, China Renaissance analyst Charlie Chen upgraded Pinduoduo to Buy from Hold with a $197 price target following "an exciting quarter" that he sees removing "a lot of concerns." In particular, the third quarter results should alleviate "one of the market's major concerns," namely that Pinduoduo might not be able to sustain its high gross merchandise value growth with lower sales and marketing spending, Chen said.
NEW ENERGY VEHICLE SECTOR SALES GROWTH: Citi analyst Jeff Chung upgraded Li Auto (LI) to Buy from Neutral with a price target of $45.60, up from $27.10. China new energy vehicle sector sales should grow over 100% year-over-year into the first quarter of 2021, Chung told investors in a research note. The analyst expects Li's January 2021 shipments to hit around 6,000 units and his "sensitivity analysis" suggests the stock could be worth $111.38.
'STRONGLY' POSITIONED TO GAIN CUSTOMERS: Needham analyst Rick Patel initiated coverage of Chewy (CHWY) with a Buy rating and $75 price target. The analyst contended that the company is "strongly positioned" to gain new customers, drive retention rates through subscription, and "capture wallet share" with maturing "cohorts." Patel added that while the pandemic has "undoubtedly accelerated" Chewy's growth and margin progress, he continues to see the backdrop for the company remaining favorable post-COVID given the growing total addressable market for the pet product and services market as well as the ongoing digital adoption.
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