Check out today's top analyst calls from around Wall Street, compiled by The Fly.
RESTAURANT CLOSURES: Barclays analyst Benjamin Theurer double downgraded Beyond Meat (BYND) to Underweight from Overweight with a price target of $115, up from $100. The analyst noted that near- to medium-term headwinds related to foodservice channels being closed for the COVID-19 pandemic are not reflected in estimates and as such, he believes near-term expectations for Beyond Meat are "too high," with risks not being reflected in the shares. With foodservice channel accounting for "basically half" of Beyond Meat's revenue in 2019, Theurer pointed out that pandemic-related closures of restaurants have hurt Beyond Meat's volume. The "hit in this channel might be too high for the retail channel to fully offset," the analyst contended.
FASTER RECOVERY POST-COVID: Goldman Sachs analyst Catherine O'Brien upgraded Southwest Airlines (LUV) to Buy from Sell with a price target of $47, up from $35. The analyst believes the company's predominantly domestic network and "industry-leading" balance sheet will drive a relatively faster recovery post-COVID-19 versus peers. Further, Southwest shares have historically been relatively less volatile than the industry, said the analyst, who sees 43% upside from current share levels.
NASH CRL: Oppenheimer analyst Jay Olson downgraded Intercept (ICPT) to Perform from Outperform with a price target of $46, down from $124. The analyst noted that the Food and Drug Administration issued a Complete Response Letter to Intercept in response to the NDA seeking approval for OCA to treat fibrosis due to NASH. The FDA's decision to issue a CRL is based on its assessment that the predicted benefit of OCA does not sufficiently outweigh the risks to support accelerated approval for treatment of fibrosis due to NASH, he added, pointing out that the FDA has also requested post-interim analysis efficacy and safety data from REGENERATE while the long-term outcomes phase of the study continues. While Olson recognized that a CRL was possible based on the submission of additional data and resulting cancellation of an advisory committee meeting, he did not expect this explanation from the FDA.
Meanwhile, Wells Fargo analyst Jim Birchenough also downgraded Intercept to Equal Weight from Overweight with a price target of $46, down from $146, following the complete response letter for obeticholic acid as a treatment for NASH. With FDA uncertainty on predicted benefit of OCA and concern that benefit doesn't outweigh risk, the analyst sees an extended process to resolve FDA questions and a higher bar for approval than originally assumed. While opportunity for approved OCA brand OCALIVA should provide downside support at current valuation, he expects shares to be range bound for an extended period of time pending resolution of the CRL in NASH.
SELL SPOTIFY: Guggenheim analyst Michael Morris downgraded Spotify (SPOT) to Sell from Neutral with a price target of $223, up from $170. While he thinks Spotify is "doing many great things," with its investment in podcast content strengthening its streaming audio leadership position, Morris also believes the market is now pricing shares for blue-sky growth and potential podcast dominance. He recommends reducing exposure with the risk-reward now unattractive.
RE-OPENING CONCERNS: Credit Suisse analyst Meghan Durkin downgraded AMC Entertainment (AMC) to Underperform from Neutral with a price target of $2, down from $4, and Cinemark (CNK) to Neutral from Outperform with a price target of $13, down from $20. Durkin downgraded the U.S. theater operators owing to concerns around their re-opening, which was previously expected by mid-July. COVID-19 cases are surging in states that had already begun to re-open, including California, Texas, and Florida, the top three states for theaters and 35% of the U.S. box office, the analyst noted. Durkin now assumes a "much softer" return for the box office and would not be surprised if the film studios take an even more cautious stance and push back any films still slated for July/August.
Regarding AMC, the analyst assumes the company will be successful in its bid to exchange $2.3B of subordinated debt for a combination of new second-lien debt and some common stock. If so, AMC will have liquidity through March if theaters were to remain closed, Durkin contended. However, the analyst sees more risk to AMC's business model "if there is a slow recovery." More positive on Cinemark, he continues to view the company as well positioned to endure this crisis, with liquidity into late 2021 if theaters are closed.
Beyond Meat
-15.68 (-11.07%)
Southwest
+0.73 (+2.28%)
Intercept
-30.52 (-39.35%)
Spotify
-6.16 (-2.32%)
AMC Entertainment
-0.41 (-9.86%)
Cinemark
-0.595 (-5.23%)