Here are Monday’s biggest calls on Wall Street: Wells Fargo downgrades Costco to equal weight from overweight Wells said Costco is a “high quality” stock but that it sees a growing number of hurdles “We also are wary of how COST cycles the recent period of historic EBIT margin expansion given its typical stability and customer-first reputation. In the end, we see more risk to consensus estimates going forward than upside potential, not a good set-up for this name given its valuation.” Read more about this call here. Bank of America reiterates Synchrony as buy Bank of America said the financial services company is a “hidden” beneficiary of the PayPal-Apple partnership. “Last week, PayPal announced it was enhancing its offerings, including enabling US customers to add their PayPal and Venmo cards to Apple Wallets next year and to use them wherever Apple Pay is accepted. … .We have long highlighted SYF’s enviable merchant partner roster which includes many leading digital and physical retailers.” Read more about this call here. Morgan Stanley resumes AIG as overweight Morgan Stanley resumed coverage of the insurance company and said it has a strong franchise. “We view AIG’s P & C business as one of the strongest franchises in the industry, and expect the shares to earn a higher multiple over time now that the company has moved to become a more pure-play P & C carrier with the spin-off of its Life & Retirement business, Corebridge.” Bank of America downgrades Funko to neutral from buy Bank of America said in its downgrade of Funko that it sees a “challenging” holiday for the toy company. “We expect continued headwinds in top line revenue thru 1H given continued risks from retailer destocking. However, we believe gross margins should sequentially accelerate on price increases on exclusive lines & other products, and benefit from lower freight rates.” Atlantic Equities upgrades S & P Global to overweight from neutral Atlantic Equities said the global markets company is “high quality.” “Following 3Q22 results, we are upgrading S & P Global to Overweight due to its improved valuation, diversified and high-quality business, self-help opportunities, and supportive capital return program.” Oppenheimer upgrading DoorDash to outperform from perform Oppenheimer said it sees improving margins for the food delivery company. “We are upgrading DASH to Outperform from Perform and establishing a 12-18 month price target of $70. Increased disclosure shows improving US restaurant margins, and we’re now able to size Int’l. and US non-restaurant losses.” Oppenheimer downgrades Redfin to underperform from perform Oppenheimer said in its downgrade of the online housing company that its business model is flawed. “We believe Redfin’s core business is fundamentally flawed with fixed-cost model for agents vs. 100% commission for industry.” Deutsche Bank initiates Planet Labs as buy Deutsche said in its initiation of the space satellite company that it sees “substantial revenue” opportunities. “Our positive stance on EO (earth observation) companies is in part due to them not falling prey to these qualities. Planet and BlackSky are both generating substantial revenue now and have visibility towards future growth similar to software companies.” Citi opens a positive catalyst watch on Liberty SiriusXM Citi said it’s bullish on the media company heading into its analyst day. “Liberty Media is hosting an Investor Day on November 17th. We are opening a positive Catalyst Watch on LSXMA, as we believe Liberty may announce one or more steps to narrow the 37% discount to NAV.” Morgan Stanley initiates Boston Beer as underweight Morgan Stanley said in its initiation of Boston Beer that it is concerned about growth prospects. “Initiate coverage at UW due to downside to both ’23/24 consensus and LT growth expectations based on continued declines in malt-based hard seltzers and a dizzying array of new competition in the broader beyond beer space.” UBS reiterates Berkshire Hathaway as buy UBS said shares of the Berkshire represent a “meaningful discount to intrinsic value” after the company’s earnings report on Saturday. “Share buyback is dependent on whether Buffett and Munger believe BRK’s shares are trading at a big enough discount to its intrinsic value and other uses of cash.” Bernstein reiterates Apple as equal weight Bernstein said Apple estimates may be too high after Apple warned of supply chain challenges on Sunday. “Accordingly, yesterday’s announcement may reflect increased concern that current estimates are too high, although it is unclear if it is all attributable to incremental production challenges.” Read more about this call here. Guggenheim upgrades Okta to buy from neutral Guggenheim said Okta’s stock is “too compelling to ignore” “While we recognize the company is facing challenges that could take several quarters to effectively address, we find current valuation levels too compelling to ignore.” Read more about this call here. Bank of America reiterates Northrop Grumman as a top pick Bank of America said the company has a “best in class” space business. “As we highlighted in our 4Q22 top picks note, Northrop Grumman is the top beneficiary of the focus on space.” Wolfe initiates Splunk as outperform Wolfe said in his initiation of the software company that shares are attractive. “Look, we get it. Splunk has a lot of things going against it: pricing, competition, product fit, high-ticket item during a weakening macro, new CEO, no CFO, and a black box model that provides little conviction in numbers .” Read more about this call here. Berenberg downgrades Estee Lauder to hold from buy Berenberg said it has limited visibility on the stock. visibility. “While we recognize FY 2023 could mark the trough in Estée Lauder’s earnings in the current cycle, we do not have enough visibility on the timing and pace of a recovery to support a Buy rating on the stock.” Northcoast downgrades Papa John’s to neutral from buy Northcoast said it sees “increasingly difficult” sales and earnings momentum. “Though encouraged by the turn-around Papa John’s new management team implemented in 2019 and through the pandemic, we believe sales and earnings momentum will be increasingly difficult to generate going forward.” Canaccord reiterates Tesla as buy Canaccord said “autonomy” will be a key differentiator for Tesla. “This element of autonomy is a main driving force behind our view that it is a key contributing technology to a sustainable future.” JPMorgan upgrades Sea Limited to overweight from neutral JPMorgan said in its upgrade of the Singapore tech company that it sees a “swift” improvement in profitability. “SE’s urgency to achieve self-sufficiency and be cash flow positive supports positive earnings revisions, while the stock is pricing-in concerns regarding its ability to monetize and reduce losses.” Oppenheimer reiterates Walmart as buy Oppenheimer said investors should buy the dip heading into Walmart earnings next week. “Looking forward, we believe the defensive attributes of the WMT business model, grocery share gains, growing contributions from alternative revenue streams, and easy comparisons support an outperformance case from here. WMT shares have generally struggled on recent prints, and we would take advantage of any such dips.”
