UBS downgrades Virgin Galactic
While the business is ready to send its billionaire creator into space, shares of Virgin Galactic may have hit their highest point, according to UBS.
The stock has nearly tripled since mid-May as it gets closer to manned flights, and a trip with Richard Branson on board is planned for July 11.
However, in a note to clients on Monday, UBS analyst Myles Walton downgraded the stock to neutral from buy, stating that the excitement surrounding the space travel business becoming a reality is already reflected in the stock.
“We remain optimistic about the event path ahead, which has been bolstered by the recent FAA operator license update, paving the way for another powered flight, which was recently announced for July 11th. “While we see this catalyst chain as appealing, we do see a lot priced in at the stock’s current levels,” the note said.
According to UBS, the stock could lose steam later in the year as interest in the initial flights fades.
“After the summer of flights, there will likely be less news flow in the fall as the flight program shuts down for maintenance into 1Q22. Furthermore, share lock-ups of the original investor base that are about to expire (30% of the float) could add some pressure,” the note said.
The firm raised its price target from $36 to $45 per share, which is only 6 cents higher than where the stock closed on Friday.
Citi downgrades Domino
With such excellent results reported in the second quarter, it is now time for investors to take some gains from Domino’s, says Citi.
The stock has recently outperformed the broader market, rising more than 24 percent in the last three months.
Analyst Sergio Matsumoto downgraded the stock from buy to neutral in a note to clients on Tuesday, stating that the stock appears fully valued.
“We believe DPZ’s current price fully reflects the recovery in the carryout channel, which accounts for 35% of US sales mix, as well as market share gains in 2020 versus competitors Pizza Hut, other chains, and independent shops,” according to the note.
Despite the downgrade, the firm raised its price target for Domino’s from $435 to $480 per share. The new target is only about 1% higher than the stock’s closing price on Friday.
In addition, rising prices may be a problem for Domino’s. According to the note, Citi believes that “an emerging concern is rising inflation for food and labor, which represent 27 percent and 29 percent of sales at US company-owned stores, respectively,” but that the company will continue to grow its margins.
Credit Suisse downgrades 3M
Analyst John Walsh downgraded the industrial products company from outperform to neutral, citing uncertain costs associated with a pair of legal issues.
“Despite fundamental potential upside from a cyclical upturn in global IP and potential inventory restocking,” the note stated, “we believe it will be difficult for 3M to regain its premium multiple at this point in the cycle with two, still difficult to quantify liabilities.”
According to Credit Suisse, 3M is dealing with two issues: potential costs associated with its use of PFAS chemicals and a lawsuit involving Combat Arms Earplugs.
The stock of the company has performed well this year, rising more than 14 percent, but it fell 3 percent last month and is down 3 percent since June. According to Credit Suisse, the stock may appear cheap in comparison to its peers, but this is justified by the liabilities.
“3M went from trading at a 12 percent premium to other short cycle [industrials] (e.g., ITW, PH, ROK) to a discount, primarily due to liabilities, though there were some organic sales growth challenges as well,” according to the note.
The firm raised its price target by $2 to $212 per share, which is only 6% higher than the stock’s closing price on Friday.