Netflix Earnings Are in 10 Days. Analysts Are Mixed on the Stock.

/ / Consumer Discretionary /

Netflix stock was downgraded by one analyst and upgraded by another on Monday, 10 days before the streaming company reports third-quarter earnings. Netflix stock has gained 48% this year, and that increase has helped push its valuation higher. Shares are now trading at 32.6 times the earnings expected over the next 12 months, which is higher than the S&P 500’s 21.7 times. Barclays analyst Kannan Venkateshwar wrote in a research note on Monday that the stock’s valuation is based on the assumption that Netflix’s revenue growth will remain in the low double digits for the foreseeable future. “Even if the company gets to its revenue growth goal, valuation is implicitly pricing in more than a doubling of sub [subscriber] base from present levels,” Venkateshwar wrote. He downgraded shares to Underweight from Equal Weight while maintaining a target of $550 for the price. Netflix introduced major changes to its business model […]

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Lockheed Martin’s $3 Billion Buyback Increase to Drive Positive Sentiment, RBC Says

/ / Industrials /

Lockheed Martin’s (LMT) recently approved $3 billion increase in its buyback program will drive positive investor sentiment as it supports the company’s confidence in improving free cash flow, RBC Capital Markets said in a note Monday. The investment bank increased its price target on Lockheed’s stock to $675 from $600. “We believe a shareholder-friendly capital allocation strategy on the back of the strong FCF generation will continue to be a positive for sentiment,” RBC said, noting that the company is guiding to $6.2 billion free cash flow for 2024, just flat from a year earlier. This comes alongside major margin opportunity from Lockheed’s ongoing deliveries of the F-35 fighter jets, and as defense stocks are expected to outperform at a time of lower interest rates, RBC said. Additionally, Lockheed’s Q3 results are expected to be positive and well-received by investors, according to the note. The results are scheduled for release

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Apple’s Stock Draws a Downgrade as AI Optimism May Be Very Premature

/ / Technology /

By Emily Bary A Jefferies analyst says it will take time for smartphone technology to truly support AI. That means sales expectations for the iPhone 16, and perhaps even the iPhone 17, may be too high. Hoping the iPhone 16 will drive a big wave of device upgrades? That view looks “premature,” in the view of one analyst. Jefferies’ Edison Lee assumed coverage of Apple Inc. shares (AAPL) over the weekend, and in doing so, downgraded the stock to hold from buy. By his assessment, it will take some time for artificial intelligence to improve the smartphone experience. “Smartphone hardware needs rework before being capable of serious AI, with likely timeline of 2026/27,” Lee said. He noted that “smartphones lack high-speed memory and advanced packaging tech” that facilitate rapid data transfers, and he said that while companies are trying to improve in this regard, it could take several years before

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PepsiCo Third-Quarter Results Unlikely to Post ‘Material’ Upside to Expectations, RBC Says

/ / Consumer Staples /

PepsiCo’s (PEP) third-quarter financial results are not expected to see a “material” upside to projections, while its full-year organic sales outlook could face some pressure amid continued sluggish domestic trends, RBC Capital Markets said Friday. The beverage and snacks company is scheduled to report third-quarter results Tuesday. RBC lowered its adjusted earnings expectations to $2.28 a share from $2.31 and its revenue outlook to $24.02 billion from $24.34 billion. Wall Street is looking for $2.30 and $24 billion, respectively. “We are expecting (PepsiCo’s) quarter to look like recent prints, with modest topline results and in-line to slightly better EPS, and don’t see material upside overall,” RBC co-Head of Global Consumer and Retail Research Nik Modi said in a note to clients. The company’s international business is once again expected to lead the growth amid “muted” domestic trends,” Modi wrote. Although Frito volumes have improved sequentially, they’re still not “overly robust”

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Pepsico Faces Questions Over FY Organic Revenue Guidance

/ / Consumer Staples /

Pepsi seems to be facing growing investor pressure, with its 2024 organic revenue guidance close to potentially proving to be aspirational, UBS analysts say in a research note. The embedded improvement in trends isn’t playing out as many would have anticipated, the analysts say. There are also questions as to whether the maker of soft drinks and owner of snack brands such as Lay’s and Doritos will need to pull additional levers to drive an improvement in volume consumption, which may result in greater investment/lower bottom line growth looking ahead, the analysts add. Shares fall 0.6% to $167.45.

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Nike’s Q1 Earnings Beat Overshadowed by Weak Q2 Outlook, Withdrawn Full-Year Guidance, Morgan Stanley Says

/ / Consumer Discretionary /

Nike’s (NKE) Q1 earnings beat was overshadowed by a disappointing Q2 outlook and the withdrawal of full-year guidance, Morgan Stanley said in a Wednesday note. “Decent [Q1] headline overshadowed by downbeat tone & forward outlook, in our view leaving bears with more to point to than bulls exiting 1Q,” Morgan Stanley said, adding that “FY guidance withdrawal & postponed Investor Day, in our view, highlight limited visibility & ongoing strategy uncertainty.” Morgan Stanley said recent developments reinforce its equal-weight thesis and suggest “a range-bound stock for some time.” While Nike beat Q1 earnings per share expectations at $0.70, challenges like weak retail sales and excess inventory led to a projected 8% to 10% year-over-year sales decline and an implied EPS of about $0.63 for Q2, below Street estimates, Morgan Stanley said. The Wall Street firm now projects fiscal 2025 EPS at $2.60, down from the previous $2.77, mainly due to

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Alphabet’s Stock Has Never Been This Cheap Relative to Meta’s. How to Play That.

/ / Technology /

By Emily Bary A Bernstein analyst says it’s still ‘difficult to defend’ pitching Alphabet shares with conviction given various regulatory and competitive risks Are Alphabet Inc. shares a bargain – or justifiably cheap? That’s a question Bernstein analyst Mark Shmulik recently explored, as he noted some striking data points. For one, Alphabet shares (GOOG) (GOOGL) are trading at nearly their largest-ever discount to the S&P 500 SPX when looking at forward price-to-earnings multiples, and the actual record discount was set just a few weeks ago. The stock is also trading at its largest discount to Meta Platforms Inc. shares (META) on record. If you looked at the Google parent company’s forecasts without knowing the company behind them, you would likely be tempted to buy, Shmulik said. Shares are trading at 19 times forward earnings estimates but the company is projected to grow revenue at a 11% annual clip through 2027.

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Buy Salesforce Stock, Analyst Says. AI Will Add Billions to Its Revenue.

/ / Technology /

By Tae Kim Salesforce will generate more revenue from its clients thanks to new artificial-intelligence features in its software for managing relations with customers, according to Wedbush Securities. On Thursday, analyst Daniel Ives reiterated his Outperform rating on the software company and raised his target for the stock price to $325 from $315. “We believe CRM will be a clear 2nd derivative beneficiary of the AI revolution,” he wrote. Salesforce shares rose 0.2% to $276.39 in afternoon trading Friday. The analyst said by adding new capabilities such as AI agents that can handle routine sales and service interactions, he estimates Salesforce could add more than $4 billion of revenue a year starting in 2025. Conversations with clients at the recent Salesforce Dreamforce conference indicate the company’s AI strategy is resonating with customers, he said. “We are incrementally more bullish on Salesforce given positive customer feedback,” he wrote. Salesforce shares are

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Visa to Acquire Featurespace

/ / Industrials /

Visa (NYSE: V) today announced it has signed a definitive agreement to acquire Featurespace, a developer of real-time artificial intelligence (AI) payments protection technology that prevents and mitigates payments fraud and financial crime risks. The acquisition of Featurespace will complement and strengthen Visa’s portfolio of fraud detection and risk-scoring solutions used by clients around the world to grow and protect their businesses. Since its inception out of Cambridge University’s engineering department, Featurespace has developed innovative algorithmic-based solutions to analyze transaction data and detect even the most elusive fraud cases. Antony Cahill, Global Head of Value-added Services at Visa, said: “Providing our clients with solutions that can adapt to and anticipate the changing threat landscape is of the utmost importance. Featurespace’s strong foundation in AI will enhance our existing product portfolio and enable us to address our clients’ most complex and pressing challenges. We look forward to welcoming the Featurespace team

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Google Grapples With Search Concerns, Possible Loss of Apple Exclusivity, Oppenheimer Says

/ / Technology /

Alphabet’s (GOOG) Google faces uncertainty around its search business, with investors now factoring in a possible loss of exclusivity with Apple (AAPL), Oppenheimer said in a note emailed Wednesday. “Google generates 31% of gross search revenue ($61B) via Apple devices and pays 36% to Apple for exclusivity, resulting in 19% of net ad exposure,” Oppenheimer said. However, Google would need to retain only 65% of Apple search activity if there were no traffic acquisition cost payment, or 75% if the TAC decreases to 15%, it added. This could cap price-to-equity ration at 20, the brokerage said in the note. However, a survey showed that 75% users would go for Google if they had to pick a default search, and if Apple removed Google from default search, 78% would download Chrome, Oppenheimer said. The US Department of Justice’s case against Google’s Adtech unit is also a headwind which could translate to

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Costco Made These Subtle Changes, Adding Enough ‘Friction’ to Prompt a Downgrade

/ / Consumer Discretionary /

While business remains strong, the fact that Costco’s stock is trading near a record high leaves very little room for error . Shares of Costco Wholesale Corp. pulled back Tuesday, after Truist analyst Scot Ciccarelli recommended investors stop buying due to concerns that historically rich valuations increase the risk of a selloff. Ciccarelli noted that the membership-based warehouse retailer’s business remains strong, it is gaining market share versus virtually all retail classes and likely has the highest barriers to entry in all of retail. But with the stock’s (COST) recent outperformance, it is trading at a multiple of forward earnings estimates at “a multi-decade high,” he cut his rating to hold from buy until he sees a more attractive re-entry price. Ciccarelli kept his stock price target at $873, which, prior to the downgrade, was the lowest of the 23 analysts surveyed by FactSet who were bullish. The stock fell

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Tesla’s Q3 Deliveries Expected to Rise 8% Year-Over-Year, UBS Says

/ / Consumer Discretionary /

Tesla’s (TSLA) Q3 deliveries are expected to increase by 8% year-over-year, UBS said in a note emailed Tuesday. The company is expected to report Q3 deliveries on Oct. 2, UBS said, adding that it has not yet received the company’s consensus, but based on investor discussions, it estimates the buyside expectation to be around 465,000 to 480,000, placing itself towards the lower end of the range. While the focus is typically on vehicle deliveries, Tesla now also reports energy storage deployments in gigawatt-hours. The Visible Alpha consensus for Q3 is 9 GWh, slightly below the 9.4 GWh recorded in Q2 of 2024, UBS said. “We believe consensus expectations look elevated as we remind investors energy storage deployments are lumpy and 2Q24 was by far a record quarter,” UBS said, adding that it can’t accurately verify storage deployments, especially due to accounting methods, but its estimates are just below 8 GWh.

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