These are the biggest calls on Tuesday on Wall Street: Morgan Stanley reiterates Apple is overweight Morgan Stanley says it stands by its overweight rating for Apple and notes it sees an app store with “Growth”. “App Store net revenue growth accelerated to +1% year-on-year in December, a sustained improvement after five consecutive months of year-on-year declines.” Barclays downgraded Capital One and Ally to par with overweight Barclays said in downgrading Capital One and Ally that it was concerned about inflation and rising interest rates. “As a result, we are becoming less constructive for those with excessive asset sensitivity and the areas where we believe loan losses will correct the fastest – namely consumers. low-end usage (most affected by much reduced stimulus, rising inflation and higher interest rates) and commercial real estate (uncertainty in the office, retail, healthcare segments) . We are lowering our relative ratings for ALLY, COF, and MTB from Overweight to Balanced and ZION from Weight to Balance.” Goldman Sachs Reiterates Tesla Purchase “We view Q4 22 deliveries as an incremental negative, although we continue to see Tesla well positioned for long-term growth thanks to its leadership in Full cost and solution in clean mobility/electric vehicles and we maintain a Buy on Stock rating.” RBC downgraded Traeger to a better performing level RBC said in downgrading the barbecue company that it saw a slowdown in the recovery. “We continue to believe in Traeger’s long-term opportunity in the broader outdoor cooking space and believe the brand is well-positioned to capitalize on its technology, innovation and strong engagement. themselves to continue to increase household penetration in the long term.” Truist Upgrades PayPal to Buy from Holds Truist said during the PayPal upgrade that the estimates now appear reasonable. “We upgrade to Buy, from Hold, and increase our PT to $95 (15.6x C24E EPS), from $75. Our more upbeat view reflects: 1) our belief that the level down on the Street is now reasonable.” Baird Upgrades Block to Outperform Neutral Baird said during the inventory upgrade that it is ready for a comeback. “SQ is a leading large-cap growth franchise with both profitability and net cash, while benefiting from macro trends such as rising interest rates (on large cash/subscription funds) and inflation.” Read more about this call here. Baird Names Yum and Chipotle’s Top Picks for 2023 Baird said they prefer restaurant stocks that can perform in times of weak demand. “Top picks for 2023 include YUM and CMG; we also like the risk/reward equation on WING, MCD, DPZ, PTLO.. … We generally favor franchisor shares. (i.e. the most sustainable cash flow and earnings model; includes YUM, WING, MCD, DPZ), as well as those with specific drivers and/or brand profiles that can support economic dynamics positive business even in the event of weak industry demand.” Loop Calls Amazon a Top Idea for 2023 Poor utilization combined with inflationary pressures has reduced profitability in AMZN’s first-party and order fulfillment services businesses.” Piper Sandler upgraded Coty from equal weight to overweight Piper said during the beauty company upgrade that it saw “winds of recovery” for Coty stock. “We believe increased exposure to China and travel retail will facilitate the recovery.” Read more about this call here. Evercore ISI downgrades CVS to consistent with outperformance Evercore downgrades the stock primarily based on valuation. “We see a relatively range-bound valuation in 2023 until we see more certainty on CVS’s final portfolio composition and see a larger share of double-digit EPS growth.” long-term numbers come from operating income.” Stephens named Wendy’s top pick for 2023 Stephens said it enjoys the fast food chain’s “unit growth and effective sales”. “We believe Wendy’s low tickets, high event profile and high franchise ownership structure position the brand to drive sales and unit efficiency.” Bank of America Reiterates Buying Starbucks Bank of America said the opportunity to buy Starbucks stock if very attractive. “In our view, SBUX’s transient challenges in China and US margin pressure create a particularly attractive buying opportunity. Compared to the S&P, SBUX’s valuation is above average. 5 year average but in line with its 10+ year average, more consistent giving a return to the higher growth algorithm of the previous part of that period.” Bank of America recalled Citi when it bought Bank of America, saying that Citi stock has an “interesting” risk/reward. “While the near-term EPS outlook remains uncertain due to the macro backdrop and ongoing business divestments (mgmt’s 2023 guidance should help in this regard), we believe the The combination of potential signature catalysts and discounted pricing creates an interesting risk /reward for investors looking to add exposure to the restructuring narrative.” Bank of America downgraded XPO to neutral from purchase Bank of America said in downgrading the shipping company that it was concerned about decelerating demand. “We downgraded our XPO to Neutral from Buy and our PO to $35 from $60 (prior to the RXO fork), following the shift of RXO, its truck brokerage segment, as well as the environment. The LTL (less than truckload) market is deteriorating (60% of sales) and is unlikely to sell its European Truck operations.” Wells Fargo Upgrades Wynn to Overweight Wells said during the casino company upgrade that it sees a significant reopening opportunity for the stock. “WYNN’s smaller scale and premium mass offering will allow for a rapid recovery.” Read more about this call here. Jefferies names Delta a top pick for 2023 Jefferies says the airline is their favorite idea for 2023 and the setup for airlines is positive. “We are modestly optimistic about airlines entering 2023, as the revenue setup will continue to offset cost pressures.” Wells Fargo started Mondelez when he was overweight Wells says the food company has “out-of-the-box” fundamentals. “We think MDLZ can hit its growth algorithm, even if the price headwinds ease.” RBC downgraded Gilead on industry weight due to overweight RBC said in downgrading the stock that the thesis will take time to “take effect”. “GILD management has done an admirable job of eliminating risk to the HIV revenue stream in the medium term, revitalizing the cell therapy franchise and laying a solid foundation for LT diversification. into new areas of cancer.” KBW picks KKR as top pick in 2023 KBW picks KKR as top idea in 2023 and says the private equity firm has “fundamental strength”. “Our priority is for companies with unique underlying strengths at a valuation that’s not too high.” Wolfe downgraded T-Mobile to peer-to-peer performance Wolfe said it’s concerned about slowing industry growth. “While T-Mobile remains a great story, we are concerned about slowing subscriber growth in the industry, dwindling Sprint benefits, long-term capital needs for home Internet, the consensus “fair but adequate” and downside risk in multiples.” Wells Fargo downgraded the Molson Coors rating to the same level as the overweight Wells said in downgrading the stock that it noticed a downside to its estimate. “We downgrade TAP to Underweight from Balanced as we see a significant decline in Street estimates in 2023 and potential valuation back to the low end of the historical range.” Guggenheim named Dollar General a top idea Guggenheim said the company is in a favorable position for a recession. “We designate DG as our new Best Idea, replacing PFGC, with the belief that an exceptionally well-run and value-driven consumer goods retailer will excel in the early stages of the recession. economic downturn.” Baird picks Wells Fargo as top pick in 2023 Baird said it prefers the risk/reward for the banking giant in 2023. “We generally prefer the cheaper names, where expectations are lowest. and believe that the most negative and therefore opportunity exists in the consumer finance sector (COF and AXP), and believe that CMA, FITB and WFC represent a bank risk/return trade-off better at current prices.”
