Wells Fargo upgrades ViacomCBS
“VIAC’s streaming efforts are bearing fruit and impressing us, so we are shifting from historical bears to constructive bulls. The upcoming slate for Paramount+ should keep the momentum going, and we believe the company is one of the better bets for industry consolidation,” according to the note.
At the end of the second quarter, the company had more than 42 million streaming subscribers. Customers for Paramount+, Pluto TV, and Showtime are included in this figure. According to Wells Fargo, that figure should reach 70 million by the end of 2022.
The merger of Warner Media and Discovery, as well as Amazon’s acquisition of MGM, have both resulted in significant deals in the media industry recently. ViacomCBS is positioning itself to be a major player in the next wave of deals as a result of its streaming success.
“We consider content capabilities such as VIAC’s studios to be among the rarest gems. “We believe that crystallization of further streaming value in the stock may be the controlling shareholder’s final act before attempting to transact, and the timing is favorable,” the note stated.
This year, the media company’s stock has lagged, rising less than 5%.
Wells Fargo raised its price target on ViacomCBS from $45 to $60 per share. The new target represents a nearly 54 percent increase in value.
Bank of America upgrades Walmart
According to FactSet, Bank of America analyst Robert Ohmes raised his price target on the stock to $190 from $185 on Wednesday, setting a new Wall Street high among major analysts.
“We believe WMT’s grocery share gains will accelerate as the environment normalizes and consumers shift away from the closer-to-home/smaller-box shopping that favored supermarkets via COVID….” Greater price sensitivity as a result of the reopening… could also divert traffic to value names like WMT,” according to the note.
According to Bank of America, the retailer’s online shopping push should continue to pay off for the company even after the pandemic.
“We believe WMT’s investments in omni-channel execution have supported potentially sticky share gains via COVID, with US [e-commerce] still +triple-digits percent on a 2-year basis despite slowing on a difficult y/y comparison in F2Q,” the note stated.
Walmart stock has struggled this year, gaining only 4.5 percent.
Oppenheimer upgrades Wendy
Analyst Brian Bittner raised the stock from perform to outperform in a note to clients on Wednesday, claiming that Wendy’s strategy to increase the number of locations will result in large returns for investors.
“The company has discovered powerful tools to unlock unit growth beginning in 2022, which appears underappreciated by consensus and underappreciated by the stock’s 18% valuation discount to peers,” according to the note.
Wendy’s stock has gained about 7.5 percent this year, trailing peers such as McDonald’s and Yum Brands.
The expansion plans may not be a significant revenue generator for a few years, but there are already signs of success, according to Oppenheimer.
“Visibility appears to be remarkably high, with 70 percent of the 8,500-9,000 targeted units by 2025 having signed development agreements,” according to the note.
Oppenheimer isn’t the only brokerage firm that believes in Wendy’s new strategy. Evercore ISI upgraded the stock to outperform last week.
UBS upgrades Seagate Technology
Analyst Timothy Arcuri raised the stock from neutral to buy, citing the growth of the hard disk drive segment of the chip industry as a benefit to Seagate.
“We anticipate that structural changes in the HDD segment will benefit STX. According to the note, “the ramp of high-capacity nearline applications is mixing demand to cloud, and these customers are increasingly spending on different cadences depending on their technology initiatives.”
According to UBS, Seagate should be able to return capital to shareholders in the foreseeable future due to an improving sales outlook and a strong balance sheet.
“Seagate’s debt maturity profile is very broad,” the note said, “with the most debt coming due in a single year being $565MM (FY23) and ample capacity on the balance sheet to add more debt as needed.”
Semiconductor stocks have lagged in recent weeks, with the VanEck Vectors Semiconductor ETF (SMH) down slightly since July’s end. Concerns about memory chip demand have harmed the sector.
Seagate, on the other hand, is up 2.7 percent year to date, outperforming many of its peers.
According to a regulatory filing, D1 increased its stakes in travel booking companies Expedia and Booking Holdings last quarter, making them the hedge fund’s top holdings. It also increased its RH holding. The home furnishing retailer is widely regarded as a bet on the reopening.
Simultaneously, the fund increased its bet on some of the hot pandemic plays significantly.
According to the filing, the hedge fund increased its Carvana stake to more than $800 million as of the end of June. Carvana had a tremendous run as the pandemic increased interest in used cars. After gaining 160 percent last year, the stock is expected to rise another 46 percent in 2021.
D1 also increased its stake in Peloton to nearly $500 million at the end of the second quarter. After a 400 percent run in 2020, the stay-at-home winner has pulled back 25 percent this year.
The spread of the Covid-19 delta variant eroded investor confidence in the smooth reopening of the economy. Stay-at-home plays could outperform again if consumer behavior changes as a result of the pandemic.
The fund also has significant holdings in some of the Big Tech stocks, such as Facebook, Microsoft, and Amazon.
D1 had approximately $20 billion in assets at the start of 2021. Sundheim worked at Viking Global Investors for 15 years before starting D1, the last seven as chief investment officer.
EV stocks on the rise
Investing in infrastructure networks that support electric vehicles, according to Tim Campbell, co-founder and chief investment officer of Longlead Capital Partners, could be one way to capitalize on the EV boom.
“Consumers want to be able to buy a car and know that they will be able to charge it quickly. “Our view is that full charging networks will command a premium,” Campbell said last week.
“If you buy an EV today, range anxiety is at the top of the list for consumers,” he said, referring to how EV drivers frequently worry about becoming stranded because their car batteries may run out of charge and there are no charging stations nearby.
Longlead identified two stocks that are poised to benefit.
“We have a long history with Travel Centers America (TA US), but we have spent a lot of time studying Couche-Tard and their motivations in the space,” Campbell later explained in an email.
America’s Travel Centers
TravelCenters of America, which is listed on the Nasdaq, is a truck-stop operator with a nationwide network of over 270 locations in the United States.
In April of this year, the company announced plans to establish a new business unit to provide alternative energy to drivers. It also collaborated with Nikola, an electric truck manufacturer, to install hydrogen fueling stations for heavy-duty trucks. As a first step, they would do so at two California locations.
Campbell said that TravelCenters of America “has an enviable network across America, particularly along key highway routes.” “With Non Fuel (food / drinks) accounting for 75% of gross profit, we believe the strategic appeal of rebranding their sites with EV charging is extremely undervalued.”
He added that the company’s new management team has done an excellent job of increasing revenue while controlling costs.
Campbell believes the business will be profitable for at least the next two years. His fund has a long position in the stock, which means it owns it and expects prices to rise. TravelCenters of America stock has risen by more than 12% year to date.
Alimentation is a Toronto-listed company. Couche-Tard is another stock mentioned by Campbell. The Canadian multinational convenience store operator has operations in North America, Europe, and Asia. In Canada, the company owns Couche-Tard, Circle K in the United States, and Ingo in Sweden and Denmark.
Circle K operates an electric vehicle lab in Norway, where the local team has spent years learning about EV charging and consumer behavior. Its management stated earlier this year that it is prepared to bring the know-how to the United States and other markets.
Norway has the world’s highest EV penetration rate, expected to be nearly 75% by 2020.
President Joe Biden announced earlier this month a national goal for electric vehicles to account for 50% of all new vehicles sold by 2030.
According to International Energy Agency data, that rate was only 2% last year.
“Couche-Tarde, the market leader with a strong balance sheet, could be a potential acquirer of TravelCenters of America’s unique network,” Campbell added.
So far this year, Couche-Tard shares have increased by about 19%.