Evercore ISI hikes Amazon (AMZN)
“To put it simply, we believe investors underestimate the magnitude and significance of Amazon’s dramatic fulfilment capacity expansion—AMZN has grown its distribution capacity by more in 2020 and 2021 (287MM sq. ft. combined) than in the previous ten years combined,” the note said.
According to Evercore, the new distribution facilities should allow Amazon to significantly increase the number of Prime members who can get same-day delivery, resulting in more purchases and increased customer loyalty.
“Amazon’s capacity expansion has enabled the company to improve delivery times and fulfillment reliability.” We estimate that Amazon’s Prime SD delivery currently serves 50% of the US population. And, over the next several years, we expect Amazon to expand the availability of Prime SD delivery to a large portion of the U.S. population,” the note said.
Amazon shares have underperformed the broader market this year, rising 6% in 2021. Despite his upbeat outlook, Mahaney cautioned that Amazon’s operating margins may disappoint in the coming quarters.
Best global stocks according to Goldman Sachs
“We feature Buy rated stocks where our analysts expect double-digit topline growth… and are above consensus,”
As part of the research, the bank created several stock screens. Analysts’ picks for stocks under the heading “High Growth and Where to Find It” include the following:
Beazley, a U.K. insurance company that analyst Alan Devlin likes for its cybersecurity focus. “The group has rapidly grown its cyber book over the last few years, with +23 percent yoy [year-over-year] growth in 2020,” according to the research note.
Zalando, a German e-commerce firm, for its collaborations with fashion brands that sell on the site, as well as its “steady growth” in its discounted clothing business.
According to analyst Daniela Costa, Atlas Copco was chosen for its “high-quality” business, exposure to the semiconductor industry, and “strong financial profile.”
Goldman’s “Quality at a Reasonable Price” stock list includes the following stocks, which the bank claims are trading at a discount to their five-year median valuation:
Richemont, a luxury Swiss conglomerate, for its jewelry brands, Chinese distribution, and digital sales.
Akzo Nobel, a Dutch chemicals company that analyst Georgina Iwamoto praises for its “consistent earnings growth” and the fact that it trades at a discount to US peers.
Novartis, a Swiss pharmaceutical company, for its “strong” second-quarter results and drug pipeline.
Goldman’s list of stocks that appear “inexpensive” in comparison to history and where its analysts’ earnings expectations are higher than the consensus includes:
Banco Santander of Spain, which Goldman says has a 40 percent to 50 percent payout ratio in terms of the proportion of earnings returned to investors as dividends, as well as a “attractive” valuation.
Covestro, a German plastics company, is “trading at a deep discount to history and peers,” according to analyst Georgina Iwamoto.
According to analyst Ajay Patel, French power company EDF, for its “strong”.
Goldman also looked for names that were likely to provide high dividend yields, and the following stocks were found:
Volvo, a Swedish automaker, is expected to pay “structurally higher” dividends to investors in the future, according to analyst Daniela Costa.
According to analyst Alan Devlin, pension firm Legal & General was chosen for its “attractive” dividend yield and “competitive advantage from its focus on the global retirement market.”
Analyst Jean-Francois Neuez recommends Italian bank Intesa Sanpaolo for its likely “excess capital returns.”
Morgan Stanley’s ‘cheap’ Europe stocks
The European equity rally has “more upside,” according to the bank’s analysts led by Graham Secker in a note published on September 7. Since the start of the pandemic in March 2020, the pan-European Stoxx 600 index has risen by more than 65 percent.
“The macro backdrop for European equities over the next 12 months is less supportive than it was last year, but this does not rule out further upside.” “Our new MSCI Europe 12m index target offers a 9 percent implied upside from here,” the analysts wrote. “A stronger-than-normal equity rally may be justified given the stronger-than-normal rebound in corporate earnings.”
Picks for stocks
The bank chose a slew of “cheap” European stocks that it considers overweight. These stocks’ valuations are in the bottom half of the bank’s 10-year range versus the market, with an estimated 20% upside to its base case 12-month price targets.
Banks are its “most overexposed” sector. “After a period of modest underperformance, we expect Banks to lead the European equity market higher from here,” the analysts wrote. Financial stocks on its “cheap” list include BNP Paribas and Societe Generale of France, Banco Santander of Spain, and ING of the Netherlands.
Materials firms with more than a 20% upside to the bank’s price target include Acerinox in Spain, Outokumpu in Finland, SSAB in the Nordics, Holcim in Switzerland, and ArcelorMittal in steel. “Building Materials companies are well positioned to benefit from increased investment in making buildings more energy efficient – the Green Deal calls for a doubling of renovation rates, and our analyst Cedar Ekblom believes governments could provide financial support to individuals to speed up renovation,” Morgan Stanley stated in its note.
Shell and ENI were chosen for energy, while Auto Trader Group and ITV were chosen for media and entertainment.
‘A bigger comeback’
According to Morgan Stanley, European GDP, as well as earnings-per-share (EPS), an important measure for investors to gauge the value of a stock, have the potential to recover.
“Europe has the potential to enjoy a larger EPS bounceback over the next 12-18 months than many of its peers, particularly the US, given the possibility of a corporate tax hike in 2022,” the analysts wrote. They also expressed support for the EU’s Recovery Fund, which they believe will stimulate growth in the region beginning in 2022.
“Our Buy rating on Lucid Group is based on our belief that the company is one of the most legitimate among the universe of start-up electric vehicle (EV) automakers, as well as a relative competitive threat to the universe of incumbent automakers,”
In addition to designing consumer vehicles, Lucid provides critical components for Formula E, the world’s highest level fully electric motorsports league. That is reminiscent of Ferrari, which is a Formula 1 supplier, according to Bank of America.
Lucid, like Tesla, is beginning with high-end luxury vehicles as its first products.
“Customer reservation trends (latest estimate of >10k as of June and Dream Edition fully reserved) and progress on start and ramp of production will be a better measure of LCID’s success than near-term financials while the company/industry is still in very early stages (target for SOP as of June had been 2H:21). Positive developments on both fronts will be required for the stock to function, which we generally expect,” the note stated.
Lucid went public in July through a SPAC merger, becoming one of many early-stage electric vehicle companies to go public in the last two years. Some of these companies, such as Lordstown Motors and Nikola, have seen executive changes and stock prices fall as their production plans have proven difficult to match.
Goldman Sachs best stocks
This week, the firm shared a few of its buy-rated stocks with investors, despite the fact that the majority of Wall Street has rated them neutral or sell.
Goldman Sachs’ earnings estimates for each stock in 2021 are at least 2% higher than the consensus. Goldman has a price target of at least 20% upside for the majority of these companies.
Expedia, a travel booking site, and PVH, an apparel company, are newcomers to the list and have the most buy ratings, with 47 percent of analysts covering the stock for each firm giving it a thumbs up.
Goldman recently named Expedia one of its favorite internet stocks, saying it is optimistic about the travel site’s operating margins’ medium- to long-term trajectory after management addressed its less-efficient cost structure and spending levels prior to the pandemic. The stock is up about 13% so far this year.
PVH, which owns Calvin Klein and Tommy Hilfiger, has a 26 percent upside, according to the firm. This year, its stock has risen by more than 16 percent.
By market capitalization, Tesla is the most valuable stock on the list. 17 of the 40 analysts who cover the stock, or 43 percent, have a buy rating on it. Goldman sees a 19% increase in the price target.
Competition in the electric vehicle market has been brisk this year as traditional automakers transition to electric vehicles, but Tesla maintains a commanding lead in the space for the time being. In 2021, its stock is expected to rise by more than 6%.
The hotel chain’s stock is up about 1% year to date, as Covid-19 continues to be a setback for the travel industry as a whole. It has a buy rating from 6% of analysts across all firms.
According to him, Apple may be a victim of its own success in some ways.
The success of last year’s iPhone 12, thanks in part to pent-up demand from the pandemic, will weigh on Apple’s ability to sell new handsets next year, the analyst said.
After hours, Apple shares were trading at $148.96, up 0.61 percent.
“If iPhone shipments fall 15% below expectations… [it] will cause a very, very significant selloff, very similar to what happened in early 2019,” Ferragu said. “In just a few weeks, the stock lost 30% of its value.”
“I anticipate a very similar phenomenon — a very brief pullback in the stock, but today’s markets are what they are. “You get that kind of revision when you have a very, very negative earnings revision,” he explained.
After cutting revenue guidance, Apple suffered its largest single-day loss in six years in January 2019.
“The reason I’m not very optimistic about Apple’s next cycle is because this phone is like, let’s say, a small innovation cycle,” Ferragu explained. “Most importantly, the success of the [iPhone 12] will weigh on Apple’s ability to sell phones next year,” Ferragu added.
Conviction has grown stronger
New Street downgraded Apple in May, and Tuesday’s iPhone event reinforced its belief that the stock price will fall.
“The strong iPhone 12 cycle is consuming pent-up demand, rejuvenating the first-hand installed base, which will impede demand for the next iPhone,” Ferragu and his team wrote in a client note on Tuesday.
“It is reasonable to expect consumer spending to shift away from electronics as the economy reopens, and we expect limited innovation in the next iPhone line up,” they said, adding that the iPhone 13 line-up will receive a “lukewarm to cold consumer reception.”
According to the global research firm, Apple will ship between 180 million and 200 million iPhones in fiscal year 2022, which is 15% to 20% less than consensus.
In July, the US tech behemoth reported fiscal third-quarter earnings, stating that iPhone sales increased nearly 50% year on year to $39.57 billion.