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AIRLINES RATED BUY
MARCH NEWSLETTER 5
Amazon.com Inc's Japanese unit has come under antitrust scrutiny for the second time in as many years as retailors become more dependent on the e-commerce giant for customer traffic. Officials from the Fair Trade Commission, Japan's antitrust watchdog, have visited the headquarters of Amazon Japan as they investigate possible violations of the Antimonopoly Act. Amazon which generated nearly 7% of its global sales in Japan last year is fully cooperating with the commission. The commission was interested in ways larger online retailers can reduce incentives for price cutting and can gain an advantage over other online shopping mall operators. In a previous probe Japan had demanded that suppliers offer Amazon customers equal to or less than their prices on other shopping sites run by Rakuten Inc or Yahoo Japan Corp. The commission said the practice cuold give Amazon Japan the broadest lineup of goods at the lowest prices and hinder competion
BOEING BEATS AIRBUS
Stocks surged higher on Monday after it appears that the trade war risks may have been somewhat overblown. Stocks were indicated to open higher on Tuesday as well. The bull market is now over nine years old and the trend that has prevailed so far has been for investors to buy the pullbacks. Investors are still trying to decide how they want their allocations positioned for the rest of 2018 and beyond.
24/7 Wall St. reviews dozens of analyst research reports each day of the week in an effort to find new ideas for investors and traders alike. Some of the daily analyst and research reports cover stocks to buy. Others cover stocks to sell or to avoid.
Additional color and commentary has been added on most of the daily analyst reports. The consensus analyst price targets and other valuation metrics are from the Thomson Reuters sell-side research service.
These were the top analyst upgrades, downgrades and other research calls from Tuesday, March 27, 2018.
Adamas Pharmaceuticals Inc. (NASDAQ: ADMS) was started with a Buy rating and assigned a $39 price objective (versus a $24.40 prior close) at Merrill Lynch.
Albemarle Corp. (NYSE: ALB) was maintained as Buy but the price target was cut to $125 from $148 (versus a $94.36 close) at Argus. The independent research firm said the cut is based on a reduction in its long-term EPS growth forecast.
American Axle & Manufacturing Holdings Inc. (NYSE: AXL) was raised to Buy from Neutral with a $20 price target (versus a $15.34 close) at Citigroup.
AnaptysBio Inc. (NASDAQ: ANAB) was reiterated as Outperform with a $151 price target (versus a $113.83 close) at Wedbush Securities.
Aratana Therapeutics Inc. (NASDAQ: PETX) was raised to Buy from Hold with an $8 price target (versus a $3.87 close) at Stifel.
Arrowhead Pharmaceuticals Inc. (NASDAQ: ARWR) was started with a Buy rating and assigned a $10 price target (versus a $6.94 close) at Jefferies.
BB&T Corp. (NYSE: BBT) was raised to Buy from Neutral with a $59 price target (versus a $52.22 close) at B. Riley. Wells Fargo raised it to Outperform from Market Perform and has a $63 price target.
Brookfield Property Partners L.P. (NYSE: BPY) was raised to Buy from Hold with a $24 price target (versus a $19.39 close) at Canaccord Genuity.
Canadian Solar Inc. (NASDAQ: CSIQ) was downgraded to Underweight from Neutral but the price target was maintained at $17 (versus a $17.51 close) at JPMorgan. Canadian Solar was indicated down 3% at $16.99, and it has a 52-week trading range of $11.31 to $19.09 and a consensus analyst price target of $19.40.
Cheniere Energy Inc. (NYSEAMERICAN: LNG) was raised to Outperform from Market Perform with a $63 price target (versus a $52.51 close) at Bernstein.
Cheniere Energy Partners L.P. (NYSEAMERICAN: CQP) was raised to Outperform from Market Perform with a $35 price target (versus a $28.16 close) at Bernstein.
Chesapeake Energy Corp. (NYSE: CHK) was downgraded to Underperform from Market Perform and the price target was cut to $2.50 from $4.00 at Bernstein. Shares closed up 1.6% at $3.12 on Monday and were down 0.6% at $3.10 on Tuesday, in a 52-week range of $2.53 to $6.59 and with a consensus price target of $4.13.24/7 Wall St.
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China Unicom Ltd. (NYSE: CHU) was raised to Overweight from Underweight at Morgan Stanley.
Cintas Corp. (NASDAQ: CTAS) was started on the prized Conviction Buy List with a $210 price target (versus a $170.98 close) at Goldman Sachs.
Eldorado Gold Corp. (NYSE: EGO) was maintained as Neutral but the price target was cut to $1.25 from $1.60 (versus a $0.87 close) at Credit Suisse, with the firm noting lower production on Eldorado.
Finish Line Inc. (NASDAQ: FINL) was raised to Neutral from Sell and the price target was raised to $14 from $10 at Citigroup now that it is being acquired. Finish Line closed up 31% at $13.83 on Monday’s post-buyout offer reaction. It has a 52-week trading range of $6.90 to $16.38.
H&R Block Inc. (NYSE: HRB) was started as Neutral and assigned a $28 price target (versus a $25.79 close) at Goldman Sachs. The 52-week range is $22.40 to $31.80, and the consensus price target is $28.67.
Iron Mountain Inc. (NYSE: IRM) was started as Buy and assigned a $41 price target (versus a $31.27 close) at Goldman Sachs. It has a 52-week range of $30.78 to $41.53 and as a consensus price target of $37.50.
ALSO READ: Why ImmunoGen Could See Another 60% of Potential Upside
Kinder Morgan Inc. (NYSE: KMI) was raised to Buy from Neutral with a $21 price target (versus a $15.13 close) at Citigroup. The 52-week range is $14.82 to $21.92. The consensus analyst target is $22.00.
MEDNAX Inc. (NYSE: MD) was started as Neutral and assigned a $57 price target (versus a $55.06 close) at Credit Suisse. $57
Prologis Inc. (NYSE: PLD) was raised to Overweight from Neutral with a $68 price target (versus a $61.23 close) at JPMorgan. It has a 52-week range of $49.44 to $67.53 and a consensus price target of $69.11.
Rambus Inc. (NASDAQ: RMBS) was started as Buy and assigned a $17 price target (versus a $13.49 close) at Deutsche Bank. It has a 52-week range of $11.30 to $15.50 and a consensus price target of $16.95.
Red Hat Inc. (NYSE: RHT) was up 3.5% at $153.09 ahead of earnings on Monday and was indicated up 6% at $162.50 on Tuesday. BMP Capital Markets maintained its Market Perform rating but raised its target price to $180 from $172. Other target price hikes have been seen as follows: Credit Suisse to $150 from $120, RBC to $172 from $160, Evercore ISI to $170 from $160, JMP Securities to $175 from $145 and Raymond James to $166 from $164.
Resonant Inc. (NASDAQ: RESN) was started with a Buy rating and assigned a $6 price target (versus a $3.48 close) at Needham.
Roku Inc. (NASDAQ: ROKU) was raised to Neutral from Sell with a $36 price target at Citigroup. Roku closed up 7.9% at $34.59 on Monday and was indicated down 2.7% at $33.65 on Tuesday. Roku has a post-IPO range of $15.75 to $58.80 and a consensus price target of $38.60.
Sierra Wireless Inc. (NASDAQ: SWIR) was raised to Buy from Neutral with a $22 price target (versus a $15.80 close) at Roth Capital.
Verona Pharma PLC (NASDAQ: VRNA) was reiterated as Outperform and the price target was raised to $55 from $48 (versus a $20.97 close) at Wedbush. The target hike is based on the nebulized RPL554 for maintenance therapy of COPD having projected peak worldwide gross sales of $997 million (out in 2027). Verona Pharma has a $287 million market cap, but its shares were up 31% on Monday’s news reaction.
Monday’s top analyst calls included AMD, Broadcom, D.R. Horton, Dollar Tree, Jack in the Box, Zebra Technologies and many more.
If there is any industry that is reasonably dependent on a solid economic climate, it’s the airlines, and with good reason. Plain and simple, if the economy is bad and take home pay is flat, or even in danger, people just don’t travel. That is one of the first things cut out of a budget, whether it’s a family or business budget. With the economy roaring at perhaps the best level in almost 20 years, planes are packed, and the top companies are making big money.
In a new research piece, Deutsche Bank stays very positive on the airlines, noting that metrics from the industry continue to come in outstanding. The report said this:
March quarter revenues trending better-than-expected Over the past day, several US airlines provided updated views in conjunction with presenting at a competitor conference. One key theme that emerged from the presentations is that while overall Mar Q revenue trends are solid, international revenues, particularly in transatlantic markets, are trending better than domestic revenues.
They also cited the big pickup in overseas travel:
What’s driving the strength in international markets? We think US dollar weakness, the return of fuel surcharges, and improved macro backdrops (notably Europe and Latin America) are all contributing to international unit revenue outperformance.
The following stocks are rated Buy and look like solid additions to growth portfolios.
This company has a big west coast exposure and continues to rank high on Wall Street. Alaska Air Group Inc. (NYSE: ALK) is the parent company of Alaska Airlines, and it reported impressive traffic data buoyed by strong demand. The company serves more than 100 cities through an expansive network in Alaska, the Lower 48 states, Hawaii, Canada and Mexico. Despite recent challenges by other carriers for superiority in the Northwest, the company has strong customer loyalty, which has contributed to outstanding earnings and revenue growth.
The company reported solid operational results in February, though revenue per available seat is expected to be down some for the quarter. Most on Wall Street remain extremely bullish on the shares.
The Deutsche Bank price target for the stock is $75, while the Wall Street consensus target is $79. Shares traded early Wednesday at $65.90.
This company has a major hub in Dallas, where business continues to boom. American Airlines Group Inc. (NASDAQ: AAL) is the holding company for American Airlines.
Together with wholly owned and third-party regional carriers operating as American Eagle and US Airways Express, the airlines operate an average of nearly 6,700 flights per day to 350 destinations in over 50 countries from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.
Deutsche Bank has a $60 price target, and the consensus target is $64.11. Shares were trading at $55.25.
Delta Air Lines
This stock consistently has ranked high with Wall Street. Delta Air Lines Inc. (NYSE: DAL) and the regional Delta Connection carriers offer service to 334 destinations in 64 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft.
Wall Street analysts have long lauded that Delta has the most extensive hedging policy among the airlines and owns and operates a refinery in addition to a sizable hedging book. The stock outperformed last year, and if bookings and the economy continue to spike up in 2018, many believe that the company’s multiple stands to benefit the most among the major carriers.
Investors receive a 2.17% dividend. The $73 Deutsche Bank price objective compares with a $71.82 consensus estimate. The stock traded at $55.95.
This stock has traded sideways for well over a year and may be looking to breakout. JetBlue Airways Corp. (NASDAQ: JBLU) is a point-to-point airline that operates out of its headquarters in New York, as well as Boston, Fort Lauderdale/Hollywood, Los Angeles (Long Beach), Orlando and San Juan. JetBlue carries more than 32 million customers a year to 87 cities in the United States, the Caribbean and Latin America with an average of 850 daily flights.
The company has been walloped by storms this winter, and its big east coast presence has resulted in an unusually large number of canceled flights. Despite the weather issues, the company reported an increase in traffic of 6.8% on a capacity increase of 6.8%.
Deutsche Bank has set its price objective at $26. The consensus target price is $24.33, and shares traded at $22.30.
Why Analysts Are Chasing Nike Even Higher
By Chris Lange March 23, 2018 12:15 pm EDTPrintEmail
After Nike Inc. (NYSE: NKE) reported fiscal third-quarter results late Thursday, analysts cheered on this report, hiking their price targets. At the moment, Nike appears to be one of the few bright spots in the Dow Jones industrial average.
24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about Nike following the report.
The athletic gear maker reported a diluted net loss per share of $0.57 on revenue of $9 billion. In the same period a year ago, the company reported adjusted earnings per share (EPS) of $0.68 on revenue of $8.43 billion. Third-quarter results also compare to consensus estimates for EPS of $0.53 and $8.85 billion in revenue.
Excluding a charge of $1.25 per share related to effects of changes to U.S. tax laws, Nike would have posted earnings of $0.68 per share.
The company did not offer any guidance, but consensus estimates call for fourth-quarter EPS of $0.73 and revenues of $9.32 billion. For the full year, Nike is expected to post per-share earnings of $2.30 and revenues of $35.87.
Wedbush reiterated an Outperform rating and raised its price target to $75 from $74, with the firm noting that key initiatives designed to reignite Nike’s growth in North America and around the globe are gaining traction and were evident in its third-quarter results that beat across all lines.
Merrill Lynch reiterated an Underperform rating but raised price objective to $50 from $42, and it raised its 2018 earnings estimate on lower tax rate guidance. The firm still noted that initial 2019 guidance is below a five-year growth algorithm and still sees pressure in North America while direct to consumer efforts were not growing as fast as hoped.
Credit Suisse reiterated an Outperform rating with a $78 price target. The firm detailed in its report:
Nike is finally poised to reverse 2 years of share losses: 1) New innovation scaling (VaporMax selling “millions” of pairs, Epic React selling out); 2) N. America momentum accelerating exiting third quarter (fourth quarter revenue guidance: flat vs third quarter: -6%); 3) accelerating int’l momentum (revenues +19% in third quarter). We’re lowering fiscal 2019 EPS slightly to reflect our view that Nike plans to accelerate investments, as well as N. America revenues (despite improving) still below Nike’s +MSD algorithm (which should result in EPS below midteens algorithm). But with the key sentiment driver (N. America) starting to accelerate (US wholesale back to “pull-market”), & upside to +50 basis points gross margin guidance.
A few other analysts weighed in on the stock after the report:
B. Riley is Neutral but raised its price target to $68 from $63.
Canaccord Genuity has a Hold rating and raised its target to $62 from $60.
Deutsche Bank raised its price target from $75 to $76.
Instinet has a Buy rating and raised its target to $74 from $65.
Jefferies raised its price objective to $68 from $59.
Raymond James raised its target price to $75 from $67.
Susquehanna has a Neutral rating and raised its target from $60 to $62.
Shares of Nike were last seen up about 3% at $66.49 on Friday, with a consensus analyst price target of $68.68 and a 52-week range of $50.35 to $70.25.
ANALYST RECOMMEND BUY
Before American Airlines Group Inc. (NASDAQ: AAL) merged with U.S. Airways, the latter company had ordered 22 dual-aisle Airbus A350 passenger jets. After the merger, American, long a top Boeing Co. (NYSE: BA) customer, decided to review the order for the legacy Airbus jets and consider the newer Airbus A330neo and the Boeing 787 Dreamliner.
According to a report from Bloomberg late Friday, American has selected the 787 to replace the inherited order for 22 A350s. The airline has delayed delivery of the A350s twice, once in 2016 and again last year, a reasonably sure sign that the order would be canceled. For the record, American denies that it has made a final decision between the A330 and the 787.
Bloomberg reported that Airbus officials said Friday that negotiations with American have ended because the company could not match Boeing’s price. The 787-9 has a list price of $264.6 million, compared to a list price of $284.6 million for the Airbus A350-900, although American’s price for either plane likely would have been discounted by about 50%.
American will have received 40 of its 42 ordered Dreamliners this year, and the airline has an option on another 52. The airline’s fleet currently includes 24 smaller A330s and it did not believe that adding 22 of the larger A330-900s would be profitable. American has apparently decided that the 787 is a cost-effective replacement for its older Boeing 767s and 777s.
The A330neo has struggled with stubborn problems with its geared turbo-fan engines. The single order Airbus had for the A330-800 was canceled by Hawaiian Airlines earlier this year in favor of Boeing’s 787.
FACING PROBE IN JAPAN
Fees for baggage, preferred seating and a seemingly endless list of other items generated $7 billion in airline revenues last year. Many of those fees are disclosed to potential passengers before they buy their tickets, but a significant number are not disclosed, if at all, until the passenger is either at the airport or on the plane.
The U.S. Department of Transportation in July 2011 proposed a rule that would have required airlines to disclose detailed information about the ancillary fees they charge customers. The proposal would have required large airlines to report quarterly on 19 separate fee categories. In December of last year, the department withdrew the proposed rule.
Comments on the proposed rules fell into two camps: consumer advocates that supported the rule and airline industry participants that did not. No surprise there.
The proposal generated about 280 comments, with consumer groups, an association representing governmental bodies that own and operate commercial U.S. airports, and one airline — Southwest — supporting the rule because it would make fees more transparent and improve reporting on the portion of the fees that supports a federal trust fund for airport operators.
On the other side, most airlines and airline industry groups commented that the rule would not benefit the public because the Transportation Department had not demonstrated that the public needed this information. We’re not making that up. See the summary of the comments received on this proposed rule.
According to a report Friday morning from Bloomberg, the airlines are trying to kill efforts by third-party ticket booking companies to provide customers with accurate data on fees and other items of concern to airline passengers. The airlines may be poised to win again:
[T]he airline companies are fighting to take these tools away from you, banking on the Trump administration’s antiregulation fervor to get their way. In December the airlines sent a lengthy series of requests to the U.S. Department of Transportation that’s being evaluated. Among the priorities: repealing rules that mandate “full-fare advertising” and eliminating the requirement to display on-time flight and cancellation data during the fare-purchase process. In other words, they’re hoping to conceal the data that power third-party distribution channels—and all their shiny new features.
Consumer site Travel Pulse cites a study showing that travelers pay an average of $30 more per ticket when they are unable easily to compare prices for plane tickets and fees. The lack of transparency adds nearly another $7 billion annually to airlines revenue streams. Any questions?
Facebook Inc's loose approach to policing how app creators and others deployed its user data persisted for years, including after a 2015 effort by the social network to restrict access, according to court documents and people familiar with Facebook The social media giant is now dealing with the fallout. The Federal Trade commission is investigating whether Facebook violated terms of a 2011 settlement when data of up to 50 million users was transferred to an analytics firm firm tied to President Donald Trump's campaign. If the FCC finds that Facebook violated the settlement terms, the company could face millions fo dollars in fines. Meanwhile, Canada's privacy commissioner said Tuesday it had formally opened its own investigation into alleged unauthorized access and use of Facebook user profiles, focussing on the company's privacy laws
LAX DATA POLICIES