Check out today's top analyst calls from around Wall Street, compiled by The Fly.
WELLS FARGO CUTS CIGNA TO UNDERPERFORM: Wells Fargo analyst Peter Costa downgraded Cigna (CI) to Underperform from Market Perform with an unchanged price target of $181. The analyst believes Cigna's "large" debt load could impede its growth and upside earnings surprises. Further, its benefits business is poorly positioned relative to the growth areas of Medicare and Medicaid, and has risk from commercial market cycles/competition and currency, Costa said. The analyst also thinks the company's pharmacy benefits management business has risk from potential drug price legislation and increased competition. In addition, Wells Fargo's new rating parameters focus on relative performance compared to the group, while previously it focused on comparison to the market as a whole. This resulted in him downgrading five names in the Pharmacy/Ancillary Benefits space.
Meanwhile, Mizuho analyst Ann Hynes noted that shares of Cigna and CVS Health (CVS) were down yesterday on headline risks from the potential for "surprise billing" legislation and, to a lesser extent, Amazon's (AMZN) PillPack becoming an in-network pharmacy provider with Express Scripts client, BCBS of Massachusetts. However, for Cigna, on the positive side, the Wall Street Journal reported that the company is in talks to sell its non-health insurance business for $6B, said the analyst. She views the selloff in both stocks are overdone. Based on her Washington checks, the analyst believes Majority Leader of the Senate, Senator Mitch McConnell is not supportive of the legislation. As such, Hynes believes the risk of the elimination of spread pricing is low. And while she continues to expect PillPack to pick up pharmacy market share, she expects its market share gains to be slow until Amazon buys a payer.
PIPER SEES Q4 SUBSCRIBER UPSIDE FOR NETFLIX: Piper Jaffray analyst Michael Olson said the combination of his preliminary "Netflix Navigator" search index and YouTube trailer analysis point to Netflix (NFLX) having Q4 subscriber addition upside for both domestic and international. Specifically, the preliminary search index analysis suggests Q4 domestic subscriber growth of 6.0% year-over-year, above the consensus estimate of 4.8%, and international growth of 30.9%, above the consensus of 29.9%. Further, through the first two months of the quarter, the number of U.S. YouTube trailer views for "major" Netflix originals is up 3% year-over-year compared to Q4 of last year, which signals a more engaging content slate, contended Olson. The analyst expects Netflix will continue to capture a "significant portion" of traditional content dollars as they migrate to streaming "despite an onslaught of new streaming services." Olson kept an Overweight rating on Netflix with a $400 price target.
EVERCORE RAISES APPLE PRICE TARGET TO $305: Evercore ISI analyst Amit Daryanani raised his price target for Apple (AAPL) to $305 from $275 and maintained an Outperform rating, saying he expects Apple to return to growth in FY20. For FY20, the analyst said he sees revenue growth coming in around 6% as strength in Wearables and Services should offset flat to declining revenue in other product lines. He added that he sees signs of strong demand for new products which should enable Apple to report December quarter results at the high-end or above its conservative guidance.
CITI BOOSTS PG&E PRICE TARGET TO $10.50: Citi analyst Praful Mehta raised his price target for PG&E (PCG) to $10.50 from $5, saying the company's settlement with the Official Committee of Tort Claimants likely dealt a "fatal blow" to the bondholder plan and the zero stock price scenario. The bondholder plan's primary leverage was their deal with the Committee of Tort Claimants, Mehta told investors in a research note. Without that leverage, he sees a "very low likelihood" of Judge Montali rejecting the settlement and keeping the two competing plans alive. The analyst, whose new $10.50 price target is based on the latest settlement, kept a Sell rating on PG&E.
BMO CUTS UPS TO MARKET PERFORM: BMO Capital analyst Fadi Chamoun downgraded UPS (UPS) to Market Perform from Outperform with a price target of $123, down from $125. The analyst believes the company's path to improving its profitability and free cash flow is challenging. Strong volumes and efficiency gains could drive positive operating leverage, excluding the impact of pension, in the near-term for UPS, Chamoun said. The analyst, however, has growing concerns that the "fast-growing shift" of business-to-consumer will limit its opportunity to improve operating margins in the U.S. Domestic operations over the medium term. Further, capital intensity and free cash flow, other key elements to the valuation of UPS, offer limited opportunity for improvement, added the analyst.
