Here are the biggest calls on Wall Street on Tuesday:
“While we do believe in YUM‘s long-term earnings algorithm of mid- to high-single-digit system-wide sales growth driven by ~4% unit growth and 2-3% worldwide comps, the 9% YTD run in the share price—and the corresponding multiple increase to 23.3x C20E P/E—leaves little upside to our estimates…”:
“We believe DPZ‘s algorithm to achieve 8-12% system-wide sales growth remains intact… We are focused on its lowest-cost delivery platform and believe recent multiple compression to slower growing peers presents an opportunity…Our DPZ price target remains $270, or 25x C20E EPS, while our YUM price target is $94 or 21.7x C20E EPS with DPZ implying a 3.6% FCF yield at this multiple and YUM a 4.5% yield… We agree with company guidance that DPZ is an 8-12% system-wide sales growth company driven by 6-8% unit growth, 3-6% US comps, and 3-6% international comps… Dunkin‘, McDonalds, and Wendy’s growth metrics are much lower, but DPZ offers the best comparison to YUM in our coverage today…”
“With 4Q earnings season over, we have re-evaluated our outlook on the OTA sector and for BKNG in particular… We are lowering our PT to $1,800 and downgrading the stock to MP due to: (1) a weaker European economic outlook; and (2) growing threats from Airbnb and Google, which are now encroaching on BKNG’s core hotel offering… While BKNG’s valuation is not overly stretched (considering its B/S, low capital spending, and exposure to independents), we believe these incremental challenges warrant a move to the sidelines…”
“We have been long-time bulls on the BA shares, raising our rating to BUY in May 2012, when the share price was $69… Since our upgrade, the shares have appreciated almost 540%, not including dividends… However, the shares have fallen almost 17% from their highs in the wake of the second fatal crash of a Boeing airplane…. We think the long-term outlook for Boeing is bright and are maintaining our five-year BUY rating… If the cause of the crashes turns out to be a mechanical or an engineering issue, Boeing can correct the problem and the industry, which is heavily dependent on the plane, the 737 Max jet, can move on….”
