Here are the biggest calls on Wall Street on Friday:
"AMZN is taking a number of operational moves to improve profitability in core retail, which could drive mid-term earnings above the current consensus view. AMZN is pivoting to a company with accelerating profitability... In addition to $5B in incremental retail profitability, growth and margins remain very strong in the combined AWS and advertising businesses (modeling 30% revenue CAGR to $100B by 2022)... We upgrade AMZN to Overweight and establish a $2,100 price target..."
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"We believe the adjustment to the metric expectations has been absorbed into the market, and the outlook for positive earnings growth combined with a strong de-levering story are likely to drive the shares to outperform... AT&T trades at a discount to Verizon of ~3.5x turns of EPS and FCF, with 250 bp higher dividend yield... We believe that the combination of positive earnings growth and delevering over the course of the year will being investors back to AT&T... As such, for longer term oriented investors, locking in the 6.7% yield and waiting for mean reversion in valuation is likely to be rewarded..."
"We are downgrading shares of ZG to Underweight based on the following three reasons: a) Material Erosion In Homes Unit Economics: Contribution margin at ZG's Homes has been admittedly decent so far in the early days... However, our analysis of transaction velocity and inventory build implies CM is likely to erode significantly over the next several quarters as non-profitable (and significantly loss-making) transactions involving aging and mis-priced inventory from older cohorts hit the P&L at an increasing rate; this is likely to make the investment community re-evaluate ZG's margin profile. b) Operational Challenges: The process of buying, fixing up, and selling homes at scale involves various complexities at each stage and currently seems under-appreciated by the street and is not fully evident from the company's guidance... We expect ZG to face several roadblocks along the way while rapidly scaling the frequency of buying/selling several-fold, driving meaningful increases in opex and/or impairing unit economics. c) Core Premier Agent Business Likely To Be Muted Near Term: As challenges mount in the Homes business, we think ZG's efforts to slowly transition its core PA business closer to transaction is likely to keep revenue growth muted near-term... The opportunity from new revenue streams such as seller leads is compelling, but our calculations indicate that incremental contribution could disappoint in the near-medium term..."
"We continue to seek out how the legal path might progress for these types of actions, but in the
short term, we think it's appropriate to move NFLX to Top Pick and Amazon to number two in our Large Cap pecking order... We last addressed regulatory risk in the September edition of Convergence Catch-up and our most notable change in view since then is that we have less confidence in the subject being a wall of worry to climb and instead increasingly clouding the fundamental thesis for Amazon, which we continue to view as a long-term structural Outperform due to the positive revenue mix shift of adding higher-margin businesses like AWS and advertising to lower-margin retail... Netflix, on the other hand, faces little to no regulatory risk, in our view; thus, we are more comfortable with it in the Top Pick slot at the moment, and Amazon moves down slightly to number two..."
"We are modestly lowering our FY20 estimates, and maintaining our target price of $53, which continues to be based on 15x EV/FY20E FCF... We believe that Oracle can sustain ~2% CC revenue growth, but we are dubious that Oracle can improve revenue growth rates... Therefore, we do not think Autonomous database or gradual unfolding of the cloud ERP market will help Oracle's growth in FY20... We are therefore moving to the sidelines... Given the current valuation, we see risk/reward as being more balanced at present..."
"We continue to like Live Nation's business model and long-term growth prospects... But, valuation appears full, M&A may be less likely and macroeconomic forces may conspire against the firm... As such, we are downgrading the stock from Buy to Neutral... Our target price increases from $59 to $63. Fundamentals Remain Robust — 2018 was a robust year for Live Nation... The firm delivered another year of double-digit EBITDA growth... And, Live Nation continues to have key attributes that appeal to investors: consistent growth, exposure to live events and insulation from disruptive FAANG forces (cord cutting, digital ad migration, ratings erosion)..."
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