Check out today's top analyst calls from around Wall Street, compiled by The Fly.
COSTCO CUT TO UNDERPERFORM AT BERNSTEIN: Bernstein analyst Brandon Fletcher downgraded Costco Wholesale (COST) to Underperform from Market Perform with a price target of $230, up from $220. "Membership exhaustion" poses risks to the company's U.S. and international growth, Fletcher said. The analyst believes Costco members could reevaluate their spending and membership fees competitors get more aggressive. Further, he sees the company's growth in China coming in slower than most investors think.
U.S. STEEL DOUBLE DOWNGRADED TO UNDERPERFORM AT MACQUARIE: Macquarie analyst David Lipschitz double downgraded U.S. Steel (X) to Underperform from Outperform and halved his price target for the shares to $9 from $18. The analyst expects steel prices to stay weak and the company's cash flow to be under pressure in a weak pricing environment. U.S. Steel's Q3 EBITDA guidance of $115M came in below Lipschitz's estimate of $162M and consensus of $195M. U.S. Steel could burn over $1B of cash unless the steel market supply demand dynamics significantly improve, the analyst said. He added that steel price momentum has reversed on lack of demand growth and the fact that scrap prices are expected to stay weak towards the end of the year.
TWILIO BOOSTED, BANDWIDTH CUT AT MORGAN STANLEY: Morgan Stanley analyst Meta Marshall upgraded Twilio (TWLO) to Overweight from Equal Weight with a price target of $135, up from $130. The company is building out a next-generation communication platform, with multiple expansion markets "still in their infancy," Marshall noted. The analyst believes Twilio continues to remove the constraints of traditional business-to-consumer communication, and thinks the recent pullback in the shares provides an opportunity. The company takes top placement in Marshall's newly introduced unified communications framework.
Marshall also downgraded Bandwidth (BAND) to Underweight from Equal Weight with a price target of $67, down from $74. The company is a good play on the growth of next-generation communications but its relative valuation versus peers "gives too much credit for platform depth," Marshall said. Bandwidth's software capabilities are more limited than communication platform names like Twilio, which should limit its valuation, said the analyst. Marshall sees better opportunities in the unified communications space.
KKR RAISED TO CONVICTION BUY AT GOLDMAN SACHS: Goldman Sachs analyst Alexander Blostein added KKR (KKR) to his firm's America's Conviction List with a price target of $35, up from $34. KKR is entering a period of accelerated earnings growth, driven by its upcoming fund-raising cycle and maturing investment portfolio, which should yield above-consensus incentive income and earnings, Blostein said. He pointed out that while KKR shares are up 43% year-to-date, it still trades at a 40% discount to Blackstone (BX). At current share levels, the market is ascribing a ~35% discount to KKR's private on-balance sheet investments, which is "too punitive," added Blostein.
CHECK POINT DOUBLE DOWNGRADED TO UNDERPERFORM AT BOFA: BofA/Merrill analyst Tal Liani issued a double-downgrade of Check Point (CHKP) to Underperform from Buy and lowered his price target on the shares to $116 from $130. The analyst noted that the company's response to market dynamics has been slow for several years relative to competitors like Cisco (CSCO), Palo Alto (PANW), and Fortinet (FTNT), but the reluctance of users to avoid integrating a new platform has diminished while the impact of the "intense competition" has started to become more visible with Check Point's contracting market share. Liani warned that Check Point growth could reemerge with the launch of the new Infinity platform, but the recent increase to investments may pressure the company's margins and possibly require a "downward reset" in his model.
Costco
-7.16 (-2.45%)
U.S. Steel
-1.54 (-12.37%)
Twilio
+3.57 (+3.17%)
Bandwidth
-1.16 (-1.61%)
KKR
+0.795 (+2.84%)
Check Point
-1.09 (-0.98%)