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Here are the biggest analyst calls of the day: Pinterest, Zoom, Merck, Exxon Mobil & more

Michael Bloom
  • PiperJaffray initiated Wendy's as overweight
  • Citi initiated Pinterest as buy
  • Baird initiated Pinterest as outperform
  • Atlantic Equities upgraded Merck to overweight from neutral
  • J.P. Morgan initiated Zoom as overweight and added to the focus list
  • PiperJaffray initiated Zoom as overweight
  • Bank of America initiated Zoom as buy
  • HSBC downgraded Exxon Mobil to hold from buy
  • PiperJaffray initiated Wingstop as overweight
  • Barclays upgraded KB Home to overweight from equal weight
  • Stephens named Tyson Foods as a best idea
  • RBC downgraded Intel to underperform from sector perform
  • Baird downgraded Deere to neutral from outperform
  • Evercore ISI resumed coverage of Chevron as outperform


Here are the biggest calls on Wall Street on Monday:

Piper initiated Wendy's as 'overweight'

PiperJaffray said Wendy WEN 's provides a "compelling" opportunity.

"We are initiating coverage of WEN WEN shares with an Overweight rating and $22 price target based on ~15x our FY20E EV/EBITDA estimates. From a stock perspective, we believe WEN shares offer compelling opportunity as the company works to leverage its made-fresh value proposition and continues to grow its asset-light base. The unit-level economics of the concept are healthy. Management has maintained a steady commitment to returning excess cash to shareholders via share repurchase and dividends. Potential catalysts include ongoing comp momentum, the company's October analyst day where unit growth (particularly internationally) is a likely focus and the ongoing re-rating of the multiple as we believe the valuation gap between WEN shares and its highly franchised peers can narrow following completed re-franchising efforts and ongoing remodel investments. Risks include heavy industry competition and commodity price volatility."

Citi initiated Pinterest as 'buy'

Citi said Pinterest PINS has done an effective job of growing its audience and monetizing its platform.

"The Pinterest PINS app is used every month by millions of people to discover new products, generate new ideas, organize projects and to get stuff done. Mgmt focused its first 5-6 years on developing the product and growing the audience, and in the last 3-4 years has rapidly developed its advertising monetization platform. The early-stage nature of its monetization engine combined with the high-intent nature of its audience use-case suggests meaningful opportunity for ARPU growth. As a result, we see the company producing $5 billion in revenue and over $500mn in FCF by 2024 (representing a 35% 5-year revenue CAGR), which we believe supports a 12-month price target of $34/share. As this represents 17% upside from current levels, we are initiating coverage of PINS with a Buy rating."

Baird initiated Pinterest as outperform

Baird said Pinterest PINS is a "compelling" investment.

"Building significant value at the intersection of search and social. We expect Pinterest PINS to surpass $1 billion in revenue this year, emerging as one of the most compelling consumer Internet platforms, leveraging an engaged and fast-growing audience that is still in the early days of monetization. With a strong foundation in technology and developing ad business, we believe that Pinterest represents a compelling investment with significant runway for growth (international monetization, improving ad tech, contributions from shopping/e-commerce) and operating leverage. Initiating at Outperform."

Atlantic Equities upgraded Merck to overweight from neutral

Atlantic Equities cited a number of positive factors for the drug maker including valuation and the ability for its new products to overcome patent headwinds.

"Amid oversold conditions in a sector we believe can provide a source of defensive growth that is insulated from trade-related volatility and a recent pullback in the shares, we upgrade MRK MRK to overweight. MRK is among the best positioned US large-cap pharma names given the ability of new products to overcome near-term patent headwinds, driving 5YR revenue/EPS CAGR of 4.2%/9.3%. The upcoming June 20 Investor Day could also spur consensus to revisit the pipeline, for which expectations are low. Despite above peer growth, MRK trades on just 14.6X FY20, a 2% discount to (ex-BMY) peers. Our DCF-derived price target remains $87."

J.P. Morgan initiated Zoom as 'overweight' and added to the 'focus list'

J.P. Morgan said it thinks Zoom ZM , which provides remote conferencing services, will change how business is conducted into the future.

"Zoom ZM is a technology that we believe will help fundamentally change the way that business is conducted going forward, similar to our views on DocuSign. The potential for much greater penetration in a bigger portion of businesses for its core video collaboration technology and add-on phone solution provides a foundation for growth and profitability at a scale not seen in software before. So even though the stock appears expensive, we are initiating coverage with an Overweight rating and a $113 December 2019 price target and adding ZM to our Analyst Focus List."

PiperJaffray initiated Zoom as 'overweight'

PiperJaffray likes the company's "triple digit growth and profitability profile."

"We see Zoom ZM as fulfilling the broken promises around decades old Unified Communication systems where the company has delivered an iPhone in a world of feature phones. While some may question the uniqueness of the offering or the barriers to entry in the market, we argue that when Fortune 50 CIOs become ardent fans of a technology vendor and a Digital Native firm like Uber makes the claim that Zoom is the highest rated enterprise application of any kind in their environment, we pay attention. Additionally, the company's triple digit growth and profitability profile makes the company, in our view, a unicorn among unicorns that should lead to a sustained premium multiple. We are initiating coverage with an Overweight and $90 price target, implying ~29x EV/Revenue on our CY21 estimates."

Bank of America initiated Zoom as 'buy'

Bank of America initiated Zoom ZM and said the company "changes the way people collaborate."

"We are initiating coverage on Zoom ZM with a Buy and $89 PO. In our view, Zoom is the leader in the video conferencing market. Zoom is a video-first enterprise communication platform that addresses customer pain points with legacy conferencing solutions. Zoom's goal is to provide a video-first solution that "just works" and fundamentally changes the way people collaborate. Our $89 PO is based on 60x EV/FCF (FY26) + net cash and discounting back, and implies 31.4x CY20E revs, premium to the SaaS group at 10x."

HSBC downgraded ExxonMobil to 'hold' from 'buy'

HSBC said that while Exxon XOM is a great long term investment, it has concerns about the "weakness of current cash generation."

"We still think Exxon XOM is an excellent longer-term investment. However, we are concerned at the weakness of current cash generation. The shares have been the strongest performers of the integrated oils over the past 12 months and, while cash flow should improve sharply, we're not convinced there will be enough evidence of this in the next 1-2 quarters to drive more outperformance."

PiperJaffray initiated Wingstop as 'overweight'

PiperJaffray said Wingstop WING offers a "compelling long-term growth opportunity."

"We are initiating coverage of WING WING shares with an Overweight rating and $88 price target based on ~47x our FY20E EBITDA estimates. From a stock perspective, we believe WING shares offer compelling long-term growth opportunity within an asset-light operating structure. The brand has a solid unit-level economic profile and management has a solid track record of operations and commitment to returning cash to shareholders. Potential catalysts include positive same-store sales from recent marketing and digital transaction initiatives and execution of the company's development pipeline supported by human capital investments. Risks include new-store development execution in terms of the demands placed on human and financial capital, volatility in core chicken wing commodity prices, and while the company has a history of successfully managing leverage that is above peer levels."

Barclays upgraded KB Home to 'overweight' from 'equal weight'

Barclays said it sees an improving housing market for KB Home KBH .

"We are lifting our KBH KBH estimates and moving to OW given our view of realistic growth and margin drivers that are not dependent on significant market acceleration from here. Our MSA-level exposure analysis indicates that KBH's product is second only to DHI within our coverage when comparing price positioning vs. resale. This is supportive in an affordability-constrained environment, including in the otherwise problematic California housing market, and a key point of contrast vs. UW-rated TOL."

Stephens named Tyson Foods as a 'best idea'

Stephens said the company is "well positioned" and the valuation remains "compelling."

"We are naming Tyson Foods TSN (OW - $95 PT) as our new 2019 Best Idea, replacing our prior pick, Calavo Foods (OW/Vol. - $105 PT). We think that TSN is very well positioned to continue beating/raising estimates in the intermediate term and we think valuation remains compelling when considering management's strong execution in each of its business segments coupled with a number of favorable macro factors at play that create tailwinds for the company. Capital allocation is focused on balance sheet deleverage in the near-term, management continues to make progress on improving international operations and supply/demand dynamics in each of the company's major protein segments are setting up favorably for the remainder of FY19 and into FY20."

RBC downgraded Intel to 'underperform' from 'sector perform'

RBC thinks Intel INTC 's earnings per share will be down in 2020 versus 2019.

"We assume coverage of Intel INTC with an Underperform rating and a $41 price target. While cost controls could come into place and the company could sell its money-losing memory business, we think 1) share losses on PC and servers, 2) gross margin headwinds, and 3) necessary spending to move to 7nm will cause 2020 EPS to be down relative to 2019."

Note: This call involved a transfer of coverage.

Baird downgraded Deere to 'neutral' from 'outperform'

Baird said Deere DE 's fundamentals have "weakened."

"Downgrading DE DE to Neutral, new $150 price target. Early-cycle NA Large Ag is a primary reason for valuation premium vs. machinery peers, but a confluence of factors detailed below illustrate a demand environment which seems to deteriorating with downside risk (elevated dealer inventories exacerbate OEM impact of retail demand pause). At the same time C&F doesn't provide much of a buffer with moderation in legacy Construction markets and Wirtgen softness driven by China. Our new $150 price target assumes 14x P/E (historical range 8-25x) and 9.5 EV/EBITDA (historical range 6-15x) on our unchanged CY19E estimates (plus estimated future BV of finance subsidiary) with lower multiples embedding increased uncertainty on trajectory of US Large Ag demand recovery and moderating C&F, which together should reduce DE's valuation premium relative to machinery peers."

Evercore ISI resumed coverage of Chevron as 'outperform'

Evercore says that investors "stand to be rewarded" from Chevron CVX .

"We are resuming coverage of Chevron CVX with an Outperform rating and price target of $140. Chevron remains committed to capital discipline, with continued focus on costs and emphasis on efficiency and reliability. This is the path to higher returns and valuation with Chevron's "pledge" for greater capital discipline and enhanced corporate governance, one of the most advanced in the peer group, in our view. Shareholders stand to be rewarded and we remain buyers of CVX."




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