2023 Oct 17, US Market
Goldman Sachs upgraded Dollar Tree (DLTR) to Buy from Neutral with a price target of $137, down from $150. The firm sees strong earnings growth potential supported by continued market share gains from improving traffic trends with "sticky" new customers, an improving discretionary cash flow outlook for lower- and middle-income consumers in 2024, and better shopability after recent investments.
Exane BNP Paribas upgraded Mondelez (MDLZ) to Outperform from Neutral with a $75 price target. The firm says the company's lower exposure to the U.S. market is likely a positive.
Citi upgraded Progressive (PGR) to Neutral from Sell with a price target of $158, up from $120. The firm believes the case for an inflection in personal auto margins has strengthened.
Mizuho last night upgraded Lennox (LII) to Buy from Neutral with a price target of $460, up from $340. The firm says the company's earnings potential "too pronounced to ignore."
Wolfe Research upgraded FIS (FIS) to Outperform from Peer Perform with a $65 price target. The upgrade is driven by the stock's relative valuation and expected sentiment upon the Worldpay sale and underlying RemainCo fundamentals, the firm says.
Citi downgraded SunPower (SPWR) to Sell from Neutral with a price target of $4.50, down from $10. The firm expects residential solar to have "another tough quarter" and sees risk to the guidance from SunPower. Morgan Stanley also downgraded SunPower to Underweight from Equal Weight with a price target of $5, down from $8.
Goldman Sachs downgraded BJ's Wholesale (BJ) to Neutral from Buy with a price target of $73, down from $75. The firm sees limited earnings upside to consensus estimates for fiscal 2024, and sees a full valuation at current share levels.
Barclays downgraded NOV Inc. (NOV) to Underweight from Equal Weight with an unchanged price target of $20. The firm says NOV is at a "structural disadvantage" this cycle as service companies restrain capex and drilling contractors consolidate, as opposed to the build out of equipment and assets in the prior cycle.
Cantor Fitzgerald downgraded Crispr Therapeutics (CRSP) to Neutral from Overweight. Crispr owns 40% of exa-cel, an ex vivo autologous cell therapy being developed by partner Vertex (VRTX), and Cantor expects exa-cel to become the leading therapy for sickle cell disorder, though it could take time to break down the many potential barriers to adoption.
Baird downgraded H.B. Fuller (FUL) to Neutral from Outperform with an unchanged price target of $80. The firm cites year-to-date outperformance against a backdrop of "rapid volatility that has severely weighed on other portions of our coverage," stating that its margin expansion thesis for H.B. Fuller "has unfolded."
Loop Capital initiated coverage of Microsoft (MSFT) with a Buy rating and $425 price target. The company's growth is set to accelerate driven by its two most strategic businesses, Azure and generative artificial intelligence products, the firm tells investors in a research note.
Cantor Fitzgerald initiated coverage of Bluebird Bio (BLUE) with a Neutral rating and no price target. Cantor expects Bluebird's lovo-cel to be approved on or around its PDUFA date and believes its profile is more similar than different from Vertex and Crispr's exa-cel, but feels cell therapies face multiple barriers to penetrating the sickle cell disorder market.
Deutsche Bank initiated coverage of ViaSat (VSAT) with a Hold rating and $22 price target. The firm believes positives are overshadowed by ViaSat's recent satellite anomalies and high leverage, "which is further exacerbated by big capex spending plans."
Craig-Hallum initiated coverage of Potbelly (PBPB) with a Buy rating and $15 price target. Potbelly has significant momentum and vastly improved operations driven by an experienced management team positioned to succeed, the firm says.
Goldman Sachs initiated coverage of TripAdvisor (TRIP) with a Buy rating and $22 price target. The firm sees upside to Street estimates on the back of faster revenue growth at Viator/Experiences and operating efficiencies leading to better profitability.
Treasury yields rose and stocks fell after strong economic data bolstered the case for the Federal Reserve to keep interest rates higher for longer.
Two-year US yields reached their highest level since 2006, while 10-year yields rose 13 basis points to 4.83%. Swap contracts tied to Fed rate decisions revealed that traders are pricing in more than 60% of policymakers raising interest rates by a quarter percentage point in January after holding them steady in November. A December move is considered possible, but less likely than a January move.
The S&P 500 lost ground, led by losses in its most influential sector, technology. Nvidia fell as the US restricted the sale of chips designed for the Chinese market.
Goldman Sachs fell after reporting a 33% drop in profit. Bank of America rose after reporting its best third-quarter results in more than a decade.
Retail sales exceeded all forecasts last month, and industrial production increased, providing new evidence of a resilient American consumer whose spending is helping to stabilise manufacturing. The reports prompted a slew of economists, from Goldman Sachs to JPMorgan and Morgan Stanley, to raise their third-quarter GDP tracking estimates.
Fed Bank of Richmond President Barkin stated that policymakers "have time" to determine whether they can keep interest rates steady or if they need to raise them further to achieve the 2% inflation target.
Traders also kept a close eye on recent geopolitical events, with President Joe Biden scheduled to visit Israel on Wednesday as a show of solidarity following the Oct. 7 attack by Hamas, which is designated as a terrorist organisation by the US and the European Union. After ordering people to seek refuge in the south of the Gaza Strip, Israel launched an attack.
“There’s hope that the U.S. and some of its European counterparts can keep this from spiraling and potentially drawing Iran in. But I don’t think anyone in markets has a good way to price that,” Vaillancourt said.
Oil prices rose. Brent crude, the global oil benchmark, closed slightly higher at $89.90 a barrel.
★Johnson & Johnson (JNJ) provided a "beat and raise" report for Q3
★Bank of America (BAC) reported better-than-expected Q3 earnings and revenue, though said U.S. consumer spending is continuing to slow
Choice Hotels (CHH) proposed to acquire Wyndham (WH) for $90 per share in a cash and stock deal, though Wyndham has rejected the offer, calling it "underwhelming" and "highly conditional"
Thermo Fisher (TMO) agreed to acquire Olink (OLK) for $26 per share in cash
☆Nvidia (NVDA) shares slid after the U.S. Department of Commerce's Bureau of Industry and Security strengthened restrictions on advanced semiconductors
Netflix (NFLX) is deepening its push into the videogame industry, WSJ says
☆TSMC (TSM) drops plan for Taiwan advanced chip plant site, Nikkei Asia reports
Rolls-Royce (RYCEY) intends to announce plans to cut roughly 2,500 jobs, Sky News reports
Chesapeake (CHK) is exploring a deal to buy natural gas rival Southwestern (SWN), Reuters reports
★General Motors (GM) has delayed electric pickup truck production as EV demand slows, WSJ reports
Fortrea (FTRE) rises after the Wall Street Journal reported that Starboard Value has taken a stake in the company
News Corp. (NWSA) increases after Bloomberg reported that Starboard called the company "significantly undervalued"
Allstate (ALL) higher after Reuters reported that Nelson Peltz's Trian Fund is targeting the insurer
VF Corp. (VFC) up after Engaged Capital sees potential to triple its share price in under three years
Fyber Communications (FYBR) higher after Reuters reported that Jana Partners has built a stake in the company and is calling on it to explore a sale
Goldman Sachs (GS) reported upbeat Q3 results, with FICC net revenue down 6% year-over-year
Lockheed Martin (LMT) reported Q3 results, with CEO Jim Taiclet commenting, "our third quarter results were at or above our expectations across the board"
BNY Mellon (BK) reported Q3 results, with its EPS and revenue beating consensus
Albertsons (ACI) reported Q2 results, with CEO Vivek Sankaran commenting, "we continued to execute against our Customers for Life transformation strategy and drive solid operating results"
Adtran (ADTN) reported preliminary Q3 revenue
