Monday’s top Wall Street analyst calls: JPMorgan & First Republic

“LRCX is more expensive, and it has been near our target price for some time; given we believe there remains considerable uncertainty around memory it feels prudent to move to the sidelines for now though we continue to like the longer term story.”

“COVID is approaching its tail, as evidenced by expectations for >$5B. MRNA will be a leader in RSV, and we expect flu A VE data by month’s end to be superior.”

“We downgrade British American Tobacco (BAT) to Neutral. Competitive & regulatory risks are building in Vapor, while BAT’s US cigarette trends remain weaker than expected.”

“However, as we look beyond the near-term, we see a catalyst-rich event path over the next 12 months that is underappreciated by investors, including reaccelerating iPhone and Services growth record gross margins (we see the greatest inflection in F1H24), two new product launches (AR/VR headset and iPhone 15), and the potential introduction of an iPhone subscription program.”

“Continued high macroeconomic uncertainties have led the company to provide guidance only for H1 and not for full FY24, which it plans to return to in the future.”

“We’re still convinced of Tesla’s impressive cost trajectory, which should propel impressive growth over time. However, we’ve also become incrementally more concerned about macro challenges.”

“SVB is also a facilitator of RUN’s interest rate hedges and represents <15% of the overall hedging facilities, however, the bank is not the backer of those derivatives, according to RUN.”

“Regional bank risk/reward trade-off improving, and we would get more aggressive on the regional bank side, upgrading TFC to Outperform.”

“We are downgrading shares of FRC to Market Perform from Strong Buy. While the bank is better positioned for potential deposit outflows on Sunday evening than it may have been earlier in the weekend, if there are net deposit outflows, it will shrink the EPS power of the bank. Therefore, we have a negative bias to our EPS estimates.”

“We proactively lower 2023 estimates below Street ahead of 4Q earnings on 3/22 due to continuing weakness in discretionary, the potential for “trade down” in pet (=share loss for Petco), and EPS dilution from higher rates.”

“JPM epitomizes our theme of ‘Goliath is Winning’, which should benefit both offense (market share gains) and defense (more diversified) in these less certain times. We increase ests., PT, and rating to Overweight from Equal Weight.”

“While the news should be positive for the stocks, it is unclear to us how they will perform tomorrow. We do think it makes sense to add to exposure here, so of our Holds the most attractive name here for us is PNC.”

“We are upgrading LLY to Overweight as recent weakness creates a buying opportunity. We think fundamentals of the company remain the same, and at current levels risk / reward into donanemab Alzheimer’s trial may be skewed to the upside.”

“We rate AMGN Overweight, as we think the company’s near-to-medium-term growth profile, including HZNP major product drivers delivering modest sales, can achieve a 6% top line and 10% bottom line CAGR from 2023 to 2026.”

“GEHC is a recent spin, with 18 Bn of revs and a market cap of ~34 Bn is a sizeable new entity in Medtech.”

“There is scope for Airbnb further to monetize traffic to its site, by instigating partnerships with food delivery, car rental, ride-share, and airline platforms Airbnb could both add incremental revenue from charging referral fees and enhance the user experience.”

“Many people will blame the SI/SBNY fallout to be a crypto problem, and use this as an example. The collapse of SIVB shows that cash influx in 2020/2021, rapid rate hike in 2022, asset liability mismanagement, and run on the bank are the likely actual causes. We reduce our PT of COIN from $84 to $70 to reflect revenue and ecosystem risks.”

“Given PACW’s financial update largely in-line with our 1Q expectations, continued execution of the balance sheet contraction strategy, valuation of 73% of TBV, and a positive bias reflected in our recent update, we think last week’s sell-off represents a more attractive entry point for investors, particularly on the heels of Sunday’s announced Bank Term Funding Program (BTFP) by the Fed.”

“The significant rise in short-term interest rates over the last 12 months is creating major issues in financial services as the cost (rising) and duration (shrinking) of liabilities are now changing rapidly, which is putting capital intensive financial institutions with long-term assets in difficult situations.”

“We applaud the company’s efforts to drive further efficiency during economic uncertainty, and FY23E consensus implies Reality Labs to incur expenses at 12% of revenues in FY23 (or $14bn), so the capacity for cost optimization is meaningful.”

“However, we continue to see strong data and technology advantages for Google, and see potential for stable search metrics and LLM-based (large language models) product releases over the next few months to help alleviate an overhang in the stock.”

“On Friday Roku disclosed that it has $487mn of uninsured deposits at Silicon Valley Bank (SVB) which was closed by the California Department of Financial Protection and Innovation.”

“Overall, we believe that with each round of negative incentives/pricing, buyers are becoming increasingly conditioned to expect additional negative pricing actions, in our view.”

“We are upgrading SCHW to Buy from Neutral. After a 23% decline over the last two trading days, we see a compelling risk/reward at current levels.”