Check out today's top analyst calls from around Wall Street, compiled by The Fly.
DEUTSCHE BANK, BUCKINGHAM DOWNGRADE AIRLINE STOCKS: Deutsche Bank analyst Michael Linenberg downgraded American Airlines (AAL), Alaska Air (ALK), Delta Air Lines (DAL), JetBlue (JBLU), Spirit Airlines (SAVE) and United Airlines (UAL), all to Hold from Buy, given his concerns about the increasing risk that the spread of the Covid-19 coronavirus will disrupt travel patterns beyond just China. Despite the worries, Linenberg is maintaining Buy ratings on regional airlines Allegiant Travel (ALGT), Mesa Air (MESA) and SkyWest (SKYW), noting that Mesa and SkyWest are contract carriers and roughly 75% of Allegiant's markets are sole-served.
Meanwhile, Buckingham analyst Daniel McKenzie downgraded seven airline stocks to Neutral from Buy, citing demand impact from COVID-19 that likely proves far greater than investors appreciate based on the data he tracks. The analyst downgraded American Airlines, Allegiant, Alaska Air, JetBlue, Southwest (LUV), Spirit Airlines and United Airlines. While he had expected the stocks to fall another 10%-15%, he is now concluding the pullback is likely going to be stronger for longer. If the collapse in demand to Asia is a sign of things to come in other geographic entities, the stocks are not even close to discounting the potential demand fallout from a broader spread of COVID-19, McKenzie said.
MORGAN STANLEY, CREDIT SUISSE CUT VIRGIN GALACTIC: Morgan Stanley analyst Adam Jonas downgraded Virgin Galactic (SPCE) to Equal Weight from Overweight with an increased price target of $30, up from $22. While "demand appears to be in no shortage" judging from registrations of interest having climbed to about 8,000, at current levels the stock "is nearly fully discounting a highly successful space tourism business at scale, a moderately successful space tourism business with early credit for the hypersonic opportunity, or a combination of both," Jonas said. He lowered his rating as he waits for the fundamentals to "catch up" with the recent rally in the stock, Jonas noted.
Credit Suisse analyst Robert Spingarn downgraded Virgin Galactic to Neutral from Outperform with a price target of $25, up from $15. Virgin Galactic remains a "compelling story" with near-term catalysts toward first revenue flight, its leading market position, strong incremental margin potential, and the scarcity value of the investment opportunity, Spingarn said. However, with the shares up 185% year-to-date, the analyst said he can no longer recommend the name. Further, he sees limited upside potential to estimates owing to the relatively more limited scalability of the business model. The expected build time of a mature SS2 is 24 months and the cost is in the tens of millions, Spingarn pointed out.
CANACCORD BOOSTS SQUARE TO BUY: Canaccord analyst Joseph Vafi upgraded Square (SQ) to Buy from Hold with a price target of $90, up from $64. In a note partially titled "Cash App on a tear," Vafi said that momentum in the consumer side of Square's business is quickly moving it to "center stage," even though the company remains predominantly "seller-centric." He thinks viral growth in the Cash App, along with increased monetization per user, could drive the consumer business to become an equal contributor to the P&L just a few years from now, Vafi told investors.
JPMORGAN RAISES LOGITECH TO OVERWEIGHT: JPMorgan analyst Paul Chung upgraded Logitech (LOGI) to Overweight from Neutral with a $48 price target. The stock has pulled back 18% since posting "solid fiscal Q3 results and its valuation multiples now look attractive, trading at a 10% discount to three year averages, Chung said. Further, the analyst expects video conferencing momentum to continue given Logitech's dominant market share, and possible upside to webcam demand, given the indirect benefit from the coronavirus impacts as travel is restricted, and working from home is encouraged. In addition, the company's upcoming analyst day next week is a potential catalyst with a longer term outlook expected.
BAIRD CUTS VIR BIOTECH TO UNDERPERFORM: Baird analyst Madhu Kumar downgraded Vir Biotechnology (VIR) to Underperform from Neutral with an unchanged price target of $17. The shares have more than doubled in the past five business days despite an absence of significant data for the company's pipeline, Kumar told investors in a research note. As such, Vir is now "deeply over-valued," said the analyst. Kumar is interested in the first half of 2020 Phase 1/2 results for the company's hepatitis B virus candidate VIR-2218, but believes the current the valuation "has gone well beyond even clinical success from these results." Further, Vir is nowhere close to an effective therapeutic for COVID-19, added the analyst.
BARCLAYS STARTS GILEAD AT UNDERWEIGHT: Barclays analyst Carter Gould initiated coverage of Gilead (GILD) with an Underweight rating and $62 price target. Shares have recently moved higher on remdesivir's potential applicability in treating coronavirus, but the greater than $7B in incremental enterprise value that has been added isn't necessarily commensurate with Gilead's ability to commercialize and monetize the drug, Gould told investors. He also sees a lack of visibility on the next growth driver for Gilead. Note that the analyst initiated coverage of the U.S. Biopharmaceuticals industry with a Positive view, citing waning near-term concerns on drug pricing reform, evidence of innovation and attractive valuations.
