Check out today's top analyst calls from around Wall Street, compiled by The Fly.
BUY IBM: Argus analyst Jim Kelleher upgraded IBM (IBM) to Buy from Hold with a $155 price target. IBM's hybrid cloud business, benefiting from last year's Redhat acquisition, is accelerating, Kelleher told investors in a research note, adding that the overhang of low-return services contracts has largely run off, and the deferred revenue drag from acquiring Redhat is lessening. While legacy parts of the business could remain pressured as certain industry verticals struggle, the analyst believes IBM has turned an important corner.
'COMPELLING' VALUATION: Morgan Stanley analyst Dara Mohsenian upgraded Coca-Cola (KO) to Overweight from Equal Weight with a price target of $54, up from $52. The analyst noted that the stock's recent underperformance and "outsized valuation discount" compared to peers has become too pronounced, leaving shares with a "compelling valuation." While previously of the view that the market was materially underestimating COVID-19 risk given Coke's large eating/dining-out exposure, Mohsenian now believes the market appears to have more than accounted for short and longer-term COVID risk factors and sees the second quarter as the bottom.
COVID-19 HEADWIND: Raymond James analyst Justin Patterson resumed coverage of Uber (UBER) and Lyft (LYFT) with Market Perform ratings. While Patterson is positive on both companies’ longer-term fundamentals, the analyst expects COVID-19 to remain a material headwind for ridesharing, particularly in the U.S., for much of 2020 and likely into 2021.
SELL MACY'S, KOHL'S: UBS analyst Jay Sole downgraded Macy's (M) to Sell from Neutral with a price target of $3, down from $6, and Kohl's (KSS) to Sell from Neutral with a price target of $14, down from $17.50. The analyst argued that COVID-19 is accelerating the shift to online shopping and the UBS Evidence Lab data suggests the effect will persist after the pandemic ends, indicating success for brands will stem from being premium. Sole also thinks the market does not fully appreciate how much COVID-19 will permanently disrupt the retail landscape.
OHIO RISK IMPOSSIBLE TO PREDICT: KeyBanc analyst Sophie Karp last night downgraded FirstEnergy (FE) to Sector Weight from Overweight. The downgrade follows the arrest and charges of the Ohio House Speaker in connection with his activities related to HB-6, the bill that created subsidies for two Ohio nuclear plants currently owned by Energy Harbor (ENGH). The analyst is concerned about the potential implications for FirstEnergy, which Karp finds "impossible to predict with any degree of certainty at this juncture." The primary risk to FirstEnergy at this point appears to be reputational and political and, as such, hard to quantify, the analyst told investors in a research note.
Meanwhile, Guggenheim analyst Shahriar Pourreza also downgraded FirstEnergy to Neutral from Buy with a price target of $36, down from $51. While Pourreza's initial take on the emerging HB6 scandal was that FirstEnergy was not involved and that this was exclusively an Energy Harbor issue, the details of the full affidavit, the FBI's press conference, and the late afternoon disclosure of subpoenas "represented a series of progressively troublesome developments." Pourreza sees the stock being "a value trap" as investors steer clear of the uncertainty, which will take some time to clear.
