Here are Tuesday’s biggest calls on Wall Street: Citi upgrades JPMorgan to buy from neutral Citi said in its upgrade of the banking giant that it’s a “high quality” franchise. “We are upgrading JPM to a Buy as the stock no longer reflects premium valuation and higher capital levels (and limited buybacks) now seem priced in while we still see upside on EPS.” Read more about this call here. Wells Fargo downgrades Gap to equal weight from overweight Wells said there have been too many negative catalysts for the stock. “We are downgrading GPS to EW. The string of downbeat results from GPS continues. The company has now negatively pre-announced/missed the past two quarters, while CEO Sonia Syngal is stepping down.” Read more about this call here. Morgan Stanley downgrades American Express to equal weight from overweight Morgan Stanley downgraded American Express due to rising recession risks. “Cutting estimates as recession risks rise, taking some consumer chips off the table. Taking our 2023 EPS down median 7% and target multiples down median 8%, resulting in a median 15% cut to price targets. Our Base Case bakes in slowing economic growth, while our Bear Case bakes in a recession with trough multiples.” Read more about this call here. Morgan Stanley reiterates Netflix as equal weight Morgan Stanley lowered its price target on Netflix to $220 per share from $300 and said it sees “risk to consensus net adds and margin estimates as we expect rising churn” heading into earnings next week. “We remain EW as we see risk to consensus estimates as rising macro headwinds drive consumers to pare back their streaming spending.” JPMorgan downgrades Union Pacific and Norfolk Southern to neutral from overweight JPMorgan said in its downgrade of the railroad companies that it sees a more “balanced” risk/reward outlook. “We are downgrading Union Pacific and Norfolk Southern to Neutral and removing NSC from the US Analyst Focus List as we take a below consensus view of U.S. rail earnings based on persistently weak operations and lower economic forecasts.” Oppenheimer downgrades Capital One to perform from outperform Oppenheimer said in its downgrade of Capital One that the stock’s valuation is “not exciting.” “Near its historical operating TBV (tangible book value) multiple average, we believe mounting pressure on the consumer is getting closer to a break point as inflation-adjusted income growth slows, and layoffs are likely to creep higher as employers find it harder to pass through inflation input/funding costs and as margin pressure needs to be offset.” Bank of America reiterates Apple as buy Bank of America said its checks show iPhone demand remains healthy. “In addition to helping stimulate iPhone sales, we think Apple can benefit in the following ways from the trade-in programs: (1) high residual value of the iPhone helps customers buy a new high-priced phone, (2) robust and vibrant trade-in plans offered by Apple.” JPMorgan downgrades Lennar to neutral from overweight JPMorgan said it sees softening housing demand. “Moreover, following LEN and KBH’s earnings commentary last month as well as our conversations with private builders, we believe housing demand has begun to soften over the last 1-2 months, resulting in sales pace declining 10-15% sequentially in stronger markets and 20-25% in weaker markets, along with incentives up 100-300 bps.” Jefferies reiterates Netflix as hold Jefferies said in a note to clients that Netflix has the “brand strength” to weather a recession. “With many alternatives (cheaper too), fewer household formations (+ cracking down on password sharing), and likely need to invest in content to keep churn low, investors may assume Netflix isn’t well positioned for a recession. Our work indicates it has the brand strength to weather a downturn, but it will likely take several quarters to prove this out.” Morgan Stanley reiterates Microsoft as overweight Morgan Stanley lowered its price target on Microsoft to $354 from $372 and said the stock is “not immune to macro” risks. “Signs of decelerating IT Budget growth expectations and a weakening consumer warrant increased focus on the durability of growth. Microsoft screens well relative to many software peers, but is not immune to macro.” Citi reiterates Nvidia as buy Citi lowered its price target on Nvidia to $285 per share from $315, but said gaming weakness is priced in. “We previously valued NVDA using 35x P/E and lower our multiple to reflect lower market multiples. We remain Buy rated as the stock is trading at 24x P/E vs. 20x prior trough levels, showing majority of the gaming weakness is mostly priced-in.” Oppenheimer reiterates Tesla as outperform Oppenheimer said in a note to clients previewing Tesla earnings that artificial intelligence is the “key driver” of upside to shares. “We anticipate Covid-19 precautions in China along with production disruptions in select geographies impacted by the Russia/Ukraine conflict could have a lingering impact on component availability. We expect headwinds to be largely resolved by 4Q22, but would not be surprised by some margin pressure in the meantime.” Bank of America reiterates Netflix as underperform Bank of America said in a note to clients that it sees soft data points heading into Netflix earnings next week. “Weak engagement, seasonal churn have us maintain U/P. Data checks show mobile app downloads and DAUs (daily active users) remain under pressure on easing of Covid restrictions and seasonality.” JMP reiterates Robinhood and Coinbase as market outperform JMP lowered its price target on Robinhood to $28 per share from $36, but said it’s anticipating strong cash flow in the next few years. The firm also lowered its price target on Coinbase to $205 per share from $250. “In our coverage, several companies with strong cash positions that we estimate will be operating at positive cash earnings within the next two years (with modest, if any, cash burn relative to the current net cash position) include Robinhood (HOOD, MO, $28 PT), Coinbase (COIN, MO, $205 PT), and MarketWise (MKTW, MO, $10 PT).” Susquehanna upgrades Southwest to positive from neutral and downgrades JetBlue to neutral from positive Susquehanna said in its upgrade of Southwest that it has “ample” liquidity to survive a downturn. The firm also downgraded JetBlue, noting it sees a “tough road” ahead. “Furthermore, we believe LUV has ample liquidity to weather a downturn with our conservative operating assumptions for FY23 implying a pre-pandemic leverage profile into 2024. … .While JBLU has made progress on its unit cost control since the launch of its Structural Cost Program in 2016, we see a tough road ahead for the LCC if JBLU acquires SAVE or in a stand-alone scenario.”
Tesla, Apple, Gap, JPMorgan, Nvidia