Check out today's top analyst calls from around Wall Street, compiled by The Fly.
SELL, BUT DON'T SHORT, APPLE: Rosenblatt analyst Jun Zhang downgraded Apple (AAPL) to Sell from Neutral, citing his view that its fundamentals will deteriorate over the next 6-12 months. Zhang believes new iPhone sales will be disappointing, iPad sales growth will slow in the second half of 2019, and that service revenue growth will also decelerate. He expects major iPhone upgrades to be pushed out to the second half of 2020 given what are seen as limited upgrades for the new iPhone models in the fall and expectations of a 5G iPhone in 2020. While Zhang cut his rating to Sell, he does not see Apple as a stock to short, noting that the company has "plenty of cash and a meaningful stock buy back program," the analyst added. Zhang keeps a $150 price target on Apple shares.
MORGAN STANLEY LOWERS LARGE CAP BANK VIEW TO IN-LINE: Morgan Stanley analyst Betsy Graseck double downgraded State Street (STT) and BNY Mellon (BK), each to Underweight from Overweight, and downgraded her industry view for large cap banks to In-Line from Attractive. The group is up 23% year-to-date, but the next 6-18 months look tougher as global GDP is slowing, inflation expectations are dimming and the Fed is expected to cut rates in 2019 and 2020, which will make it "much harder for bank stocks to deliver positive surprises in operating leverage," Graseck tells investors. While she is not double downgrading the group to Cautious, because credit remains strong, Graseck sees trust banks as most exposed to the yield curve ahead of what she foresees as "18 months of rate cuts," the analyst added. She lowered her price targets on a number of large cap banks and cut her target on State Street to $55 from $69 while dropping her target for BNY to $41 from $50.
CITI CUTS VERIZON TO NEUTRAL: Citi analyst Michael Rollins downgraded Verizon Communications (VZ) to Neutral from Buy with an unchanged price target of $62. Rising long-term industry risks and the stock's current valuation premium are likely to limit returns over the next 12-months, Rollins tells investors. He believes long-term risks are rising for industry pricing and margins given the "widening array of possible outcomes" for the proposed merger of T-Mobile (TMUS) and Sprint (S).
CREDIT SUISSE SHAKES UP AIRLINE RATINGS: Credit Suisse analyst Jose Caiado downgraded American Airlines (AAL) to Underperform from Neutral on labor and Boeing (BA) 737 Max risk. While these issues may be transient, they add to an already-challenged 2019 cost outlook and "unfortunately mask" some of the progress that American Airlines is making on the commercial front this year, he contends. The analyst lowered his price target on American's shares to $30 from $32. Meanwhile, Caiado upgraded JetBlue (JBLU) to Neutral from Underperform on summer leisure strength and manageable 2020 expectations. The analyst also notes that the company continues to execute on its cost program and is on track to roll out new revenue initiatives by year end. Caiado raised his price target on JetBlue shares to $19 from $16.
JPMORGAN'S TUSA DOWNGRADES LENNOX, UPGRADES JOHNSON CONTROLS: JPMorgan analyst Stephen Tusa downgraded Lennox International (LII) to Underweight from Neutral with an unchanged price target of $231. Lennox's standing premium to implied HVAC multiples "at soon to be pure play peers seems overdone," Tusa tells investors. The analyst believes the emergence of two new pure plays, "seemingly currently trading at ~30% discounts," dilutes Lennox's scarcity value. Tusa's price target implies 20% downside versus his Overweight-rated HVAC related names, Ingersoll-Rand (IR) and United Technologies (UTX). Also this morning, Tusa upgraded Johnson Controls (JCI) to Neutral from Underweight and raised his price target for the shares to $35 from $31. The stock has "de-rated" and the company's fundamentals look more stable now relative to peers, Tusa said. Management's execution of the Battery divestiture "in the least dilutive way possible" brings confidence that Johnson Controls will not overpay for premium valued assets, adds the analyst.
