Lyft is a ‘buy’ despite the slide in its share price after earnings and a regulatory overhang, 2 analysts say

john zimmer lyft
Lyft’s John Zimmer in New Orleans in 2018.

  • Lyft got some analyst support on Wednesday after earnings with two top Wall Street analysts reiterating their bullish stances.
  • CFRA’s Angelo Zino reiterated his “buy” rating and $75 price target citing improved pricing.
  • Wedbush’s Dan Ives reiterated his “overweight” rating and $85 price target citing a demand rebound.
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Lyft stock is a “buy” despite the slide in share prices after earnings, according to two top Wall Street analysts.

In a note to investors after Lyft reported earnings, Dan Ives of Wedbush Securities reiterated his “overweight” rating and $85 price target on shares of Lyft.

Similarly, CFRA Research’s Angelo Zino reiterated his “buy” rating and $75 price target.

Both analysts believe the market may be overreacting to regulatory overhang brought about by new pressure on the gig economy.

Lyft stock has been under fire since US labor secretary Marty Walsh said “we are looking at it, but in a lot of cases gig workers should be classified as employees,” in an interview with Reuters last Thursday.

Rideshare services like Lyft and Uber, among a slew of other companies, rely on gig workers’ independent contractor status to reduce labor costs.

On Wednesday things got even worse for Lyft after the Biden administration announced it would end the Trump administration’s “Independent Contractor” rule, which limited the ability of workers to argue that they were misclassified as contractors instead of employees.

The withdrawal of the “Independent Contractor” rule will be published in the Federal Register today, and become effective on Thursday, the Washington Post reported.

Despite the news, some analysts remain bullish on Lyft’s prospects amid the reopening of the American economy.

CFRA’s Angelo Zino said that Lyft is benefitting from improved pricing, rising sales, and a more favorable cost structure after the sale of its Level 5 autonomous vehicle business to Toyota.

Zino did note that there is a “regulatory overhang,” but overall said he was “optimistic” about Lyft’s prospects moving forward.

Dan Ives of Wedbush Securities added similar comments in his note to clients on Wednesday. The analyst said Lyft’s March results gave him “increased confidence” that the company is seeing a “clear demand rebound” heading into the June quarter.

Ives believes Lyft’s guidance for EBITDA profitability by September is reasonable as well.

“Lyft (as well as its stalwart brethren Uber) is set to see a ‘roaring 20’s-like’ rebound into 2H with the red ink soon in the rearview mirror,” Ives wrote.

Wedbush’s managing director of equity research added that he expects there will be a solution to the gig worker dilemma similar to what happened in California back in March.

California voters approved a ballot measure that exempts companies that utilize the “gig economy” from having to treat workers as employees in the first quarter, freeing Uber and Lyft from a 2019 state law that entitled workers to overtime pay, sick leave, and unemployment benefits.

“Management continues to be proactive in labor policy, and we continue to expect a California-like resolution to play out across the rest of the country as well,” Ives wrote.

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Zscaler and Varonis Systems are among the top 7 cybersecurity stocks this earnings season, Wedbush says

cyber security
  • Wedbush analysts expect cybersecurity spending to jump more than 20% in 2021 alone.
  • Cybersecurity stocks will be buoyed by federal spending and a push towards hosting workloads on the cloud.
  • Varonis Systems, Zscaler, Telos Corp., Sailpoint Technologies, Tenable Holdings, Palo Alto Networks, and Fortinet are the firm’s top cybersecurity picks.
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Zscaler and Varonis Systems are among Wedbush Securities’ top 7 cybersecurity stocks heading into what the investment firm believes will be a “strong” earnings season for the sector.

In a note to clients on Sunday, analyst Dan Ives and his team said they’re expecting a robust March earnings season for the cybersecurity space due to a growing threat landscape for tech companies and a continued shift to the cloud.

“Cybersecurity sector/stocks have been treading water so far this year, we view a ‘beat and raise’ 1Q as a positive catalyst to move the sector higher for the rest of 2021,” Ives wrote.

The analysts said recent checks on the cybersecurity industry have revealed strong deal flow making them bullish on the sector.

“In particular we are seeing strong deal flow around identity threat detection, privileged access management (PAM), endpoint/ vulnerability security, and a discernible shift to zero trust architecture all gaining steam in the field,” Ives wrote.

Ives and his team also said they believe 44% of workloads will move to the cloud by the end of 2021 and that figure will hit 55% by 2022.

This digital transformation to the cloud is set to buoy cybersecurity names moving forward, according to Wedbush. The firm forecasts cybersecurity spending to increase over 20% in 2021.

Data from Gartner backs up the Wedbush’s stance. Gartner is forecasting the worldwide information security market to reach over $170 billion in net value by 2022 amid a continued push towards cloud hosting.

The shift to cloud for both enterprises and governments is also being accelerated by big tech companies like Microsoft, Amazon, and Google, due to their recent push to enhance cloud offerings.

Ives and his team said they believe the cybersecurity sector could see an additional 300 bps+ lift from President Biden’s federal spending surge in light of recent nation-state attacks from Russia and China as well.

The analysts added that they expect a surge of M&A to take place within cybersecurity from both strategic and financial players in the coming months.

To that point, ThomaBravo announced it acquired the cybersecurity firm Proofpoint for $12.3 billion in cash on Monday.

Ives concluded by laying out his top seven picks for the cybersecurity industry, which included the following: Varonis Systems, Zscaler, Telos Corp., Sailpoint Technologies, Tenable Holdings, Palo Alto Networks, and Fortinet.

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The recent tech sell-off creates a ‘massive buying opportunity’ with another 30% jump for the sector possible in 2021, Wedbush says

happy trader
  • The recent decline in tech stocks has created a “massive buying opportunity” in the sector, according to Wedbush analyst Dan Ives.
  • Ives said he believes another 30% jump in tech names is possible in 2021.
  • The analyst argued that 30% to 40% of employees could eventually be permanently remote, adding fuel to the digital transformation.
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The recent decline in tech stocks has created a “massive buying opportunity” as another 30% jump in the sector is possible over the next 12 to 18 months, according to analysts at Wedbush Securities.

In a note to clients late Thursday, Wedbush analyst Dan Ives said he believes the current tech stock sell-off has run too far.

“The momentum names in tech are down anywhere from 15% to 25%+ this week and in our opinion, this sell-off is way overdone given the $2 trillion of digital transformation spending on the horizon coupled by a massive M&A spree set for the next few years in the tech space,” Ives said.

This past week’s tech-stock weakness pushed a popular exchange-traded fund that tracks the Nasdaq 100 index below key support levels on Thursday. Popular tech names like Tesla and Microsoft led sector losses throughout the week, falling roughly 10% and 4% respectively.

Much of the decline was caused by a sell-off in government bonds that intensified over the week.

The yield on the 10-year US Treasury note, which acts as a benchmark for global borrowing rates, climbed to 1.54% on Thursday following Federal Reserve Chair Jerome Powell’s comments. This led to further rotation out of the highly valued tech sector into more cyclical stocks in the energy and financial sectors.

Wedbush’s Ives said he sees the tech sell-off as a “golden opportunity” and argues the “digital transformation across the enterprise and consumer world is just in its first few innings.”

While some analysts and investors have said tech stocks market leadership is fading, Ives believes the post-pandemic reopening won’t hurt tech companies to the extent that some might argue.

The analyst said his team spoke to CEOs around the world who told them that “30%-40% of employees could be remote in a semi-permanent structure.” Ives said this will “put further pressure on CIOs to rip the band-aid off and go aggressive on a cloud/digital transformation roadmap the next few years.”

Ives and company highlighted several tech names that they believe offer considerable upside in his note including Microsoft, Docusign, Salesforce, Zscaler, and Apple.

Despite recent tech weakness, Wedbush “believes tech stocks have another 30% upward move in the cards” in 2021 led by “FAANG, cloud, and cybersecurity names.”

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Nikola downgraded to ‘sell’ by CFRA amid supplier issues and potential ‘legal risks’

Nikola garbage Truck
  • CFRA analyst Garrett Nelson downgraded shares of Nikola to “sell” and lowered his price target to $12 on Thursday.
  • The analyst cited “supplier issues” with the Tre semi-truck and potential ‘legal risks’ from false statements in his reasoning.
  • The company’s 10-K confirmed several allegations made by Hindenburg Research in Sept. of last year.
  • Visit the Business section of Insider for more stories.

CFRA downgraded shares of Nikola to a “sell” on Thursday and lowered the price target to $12 per share after the electric-vehicle maker reported earnings.

Senior analyst Garrett Nelson cited “supplier issues” and potential “legal risks” as the main reasons for the downgrade.

Nikola was able to beat consensus earnings estimates in Q4 posting quarterly EPS of -$0.17 versus an expected -$0.24, but the pre-revenue company revealed its 2021 deliveries for the Tre semi-truck would total only 100 units due to supplier issues, down from 600.

As for legal risks to the company, Nikola disclosed in its 10-K that an internal review conducted by Kirkland & Ellis found at least nine statements made by the company and former CEO Trevor Milton were “inaccurate in whole or in part.”

This confirmed several allegations made by short seller Hindenburg Research back in September of last year. However, the 10-K also said that other statements made by Hindenburg were incorrect.

Nikola’s founder Trevor Milton stepped down on September 21, 2020, after fraud allegations were made public. Recent reports out of CNBC indicate Nikola has been forced to pay $8.1 million for its founder’s legal fees even after his departure.

Analyst Dan Ives of Wedbush wasn’t as concerned about potential legal risks as his peers, however. In a note to clients on Friday Ives said, “we would characterize last night as a positive step in the right direction after navigating a Category 5 storm post the short report/Trevor departure.”

Ives called Nikola a “prove me” story and cited investments into hydrogen-powered battery technology, a friendly clean energy environment from the Biden administration, and partnership momentum as his reasoning.

Ives holds a “neutral” rating and a $25 price target on Nikola.

On the other hand, CFRA’s Garret Nelson said, “even absent its legal issues, we think NKLA stacks up less favorably versus other EV names.”

Nikola holds three “buy” ratings, eight “neutral” ratings, and now one “sell” rating from analysts.

Shares of the EV maker were down 4.99% as of 11:36 a.m ET on Friday.

NKLA chart
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Nikola could fall 30% as ‘ambitious’ profit forecasts and Tesla’s first-mover advantage weigh on valuation, CFRA analysts say

nikola tre render 1
Nikola truck prototype.

  • CFRA analyst Garrett Nelson initiated coverage on EV maker Nikola with a “sell” rating and a $15 price target.
  • The price target implies a nearly 30% drop from Monday’s closing price.
  • Nelson said Nikola has “ambitious” profit forecasts and faces stiff competition from Tesla and others.
  • Watch Nikola trade live here.

CFRA analysts initiated coverage on electric vehicle maker Nikola with a “sell” rating and a $15 price target late on Monday.

Analyst Garret Nelson said in his note that Nikola could fall nearly 30% from Monday’s closing price due to “ambitious” profit forecasts, “significant execution risk”, and Tesla’s first-mover advantage.

Nelson noted Tesla’s dominance in electric vehicles will most likely translate to the commercial trucking segment that Nikola hopes to enter.

The analyst said following the launch of Tesla’s semi-truck later this year, that “it will become a preferred supplier to the Class 8 commercial truck market that NKLA intends to target.”

In an email to Insider, Nelson said Tesla will be able to “scale production more quickly given its size and cost of capital advantage over competitors” and “commercial customers will be much more comfortable buying these big-ticket vehicles from a proven EV manufacturer.”

Also, despite Nikola’s estimates for a 20%-25% profit range, CFRA sees the company remaining unprofitable for years to come. Nelson gave EPS loss estimates of -$0.70 for 2020, -$1.45 for 2021, -$1.40 for 2022, -$1.15 for 2023, and -$0.90 for 2024.

The analyst cited “the high fixed cost nature of vehicle manufacturing, particularly for smaller, niche OEMs” as his reasoning.

Nikola saw its share price rise over 600% amid a wave of EV bullishness in 2020, hitting highs of nearly $80 per share on June 9, 2020. The stock has reversed course though and has seen a steep fall, trading in the $15-$30 per share range over the past five months.

The EV stock can’t seem to mount a break-out amid increasing competition.

Nikola is scheduled to release earnings on February 25th after the closing bell. However, investors shouldn’t expect much because Nikola still has yet to produce revenues from its EV operations.

CFRA’s Nelson called the company “more of a business plan than a revenue-generating business” in his note to clients on Monday.

Still, some analysts are more bullish on the name. Wedbush’s Dan Ives upgraded shares of Nikola to “neutral” and raised his price target to $25 per share from $15 on February 1st citing the Biden administration’s green initiatives and a lack of “negative catalysts.”

“While some clear hurdles remain for Nikola to achieve its hydrogen and semi-truck vision over the next year, we believe most of the negative catalysts we were fearing have now played out in the market with a more balanced risk/reward on the name looking ahead,” Ives said in a note to investors.

Nikola traded down roughly 7% as of 1:33PM ET on Tuesday.

Nikola chart
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Microsoft stock will climb to $300 as the company gains cloud market share, Wedbush says

Microsoft employees

  • Microsoft stock will climb to $300 per share, according to analysts at Wedbush.
  • Analyst Daniel Ives said “recent field checks” have made Wedbush believe Azure is gaining market share in the cloud business.
  • Microsoft saw total revenue growth of 17% year-over-year and cloud revenue growth of 50% year-over-year in its most recent earnings release.
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Microsoft stock will climb to $300 as the company continues to gain cloud market share Wedbush analysts said in a note to clients on Monday.

Wedbush analyst Daniel Ives lifted the firm’s price target for Microsoft to $300 from $285 after “recent field checks” in the industry have led him to believe Microsoft’s Azure cloud business is gaining market share from the competition.

Ives had already raised his price target for the tech giant to $285 from $275 after Microsoft outperformed in its latest earnings report, but recent updates have the analyst seeing even more upside ahead.

Read More: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

Microsoft beat analyst revenue and earnings estimates for the quarter that ended in December on Jan 26, turning in record quarterly revenue of over $43 billion, up 17% year-over-year, and EPS of $2.03.

Analysts were most excited by the incredible growth of Microsoft’s Azure cloud business. The segment grew revenues by 50% year-over-year versus just 28% year-over-year growth at the company’s major competitor Amazon Web Services.

Now, analysts at Wedbush believe “the tide is shifting in the cloud arms race” and Microsoft is pulling ahead of Amazon’s AWS and others due to its broad installed base of customers.

“We believe Azure’s cloud momentum is still in its early days of playing out within the company’s massive installed base and the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next few years,” Ives said.

Read More: EXCLUSIVE: An asset manager overseeing nearly $100 billion divested from Exxon on concerns it is failing to move fast enough to address climate change

Wedbush also believes cloud adoption is only going to accelerate in 2021 even after a record year in 2020 due to the pandemic and stay-at-home trends.

“Based on our conversations with CIOs, CISOs, and IT product managers globally over the last month we believe cloud-driven architecture IT growth in 2021 could surpass that of 2020 as more enterprises rip the band-aid off on digital transformations,” Ives said.

The analysts continued, “we believe this disproportionally benefits the cloud stalwart out of Redmond, as Nadella & Co. are so well positioned in its core enterprise backyard to further deploy its Azure/Office 365 as the cloud backbone and artery.”

Growing market share and prime conditions for Azure are probably music to the ears of executives at Microsoft. Especially after former CEO Steve Ballmer said he wished the company had got into cloud services sooner.

“Azure — I wish we probably started a year or so, two years earlier,” Ballmer said in a live stream on Clubhouse. “We started actually with platform as a service instead of infrastructure as a service. Probably we would do that a little bit differently. It cost us a little bit of time in the eventual battle, if you will, with AWS.”

Microsoft traded up slightly in premarket hours on Tuesday at $245.50 per share, implying a potential 22% price increase based on the Wedbush analysts’ predictions.

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Apple will climb 29% from current levels as the iPhone 12 5G kicks off the strongest product cycle in 6 years, says Wedbush

Tim Cook
  • Shares of Apple could gain nearly 29% over the next 12 months as demand soars for the new iPhone 12, according to a team of Wedbush analysts led by Dan Ives. 
  • Wedbush upgraded its Apple 12-month price target to $160 from $150 on Wednesday. The analysts are maintaining their “outperform” rating for the stock. 
  • “For the key China region, demand remains very healthy with strong pent up demand for upgrades heading into holiday season for this latest iPhone 12 5G, which we would characterize as the strongest product cycle for Cook & Co. thus far since iPhone 6 in 2014,” said Wedbush.
  • Visit the Business Insider homepage for more stories.

Shares of Apple could gain nearly 29% over the next 12 months as demand soars for the new iPhone 12.

That’s according to a team of Wedbush Securities analysts led by Dan Ives, who just updated their Apple 12-month price target to $160 from $150, while maintaining their “outperform” rating for the stock. Shares of the tech giant currently trade around $124.

Wedbush analysts say that demand for the iPhone 12 5G in the US and China is stronger than initially expected. 

“With more order activity kicking in over the last few weeks for iPhone 12 our initial reads are very bullish and give us incremental confidence in our supercycle thesis on iPhone 12,” said the analysts.

After initially anticipating 65 million iPhones to fill the supply chain during the initial launch period, Wedbush now forecasts that number to be closer to 80 million. According to their analysis, the only iPhone with a similar growth trajectory was the iPhone 6 in 2014.

“For the key China region, demand remains very healthy with strong pent up demand for upgrades heading into holiday season for this latest iPhone 12 5G, which we would characterize as the strongest product cycle for Cook & Co. thus far since iPhone 6 in 2014,” said Wedbush. 

Read more:We spoke with Wall Street’s 9 best-performing fund managers of 2020 to learn how they crushed the chaotic market – and compile the biggest bets they’re making for 2021

Wedbush also anticipates that 350 million of the 950 million iPhones worldwide are currently in “in the window of an upgrade opportunity,” which will lead to an “unprecedented upgrade cycle for Apple” as the holidays approach. Additionally, Apple could sell more than 240 million iPhones in 2021, said the analysts. The Street forecast is around 215 million units.

Wedbush added that China is a “key ingredient” for Apple. Roughly 20% of the iPhone upgrades will come from that region over the coming year, they said.

“In a nutshell, while services growth remains the key to the Apple re-rating story over the past six months, the hearts and lungs of the Apple growth story are built around iPhone installed base upgrades,” Wedbush said. ” With 5G now in the cards and roughly 40% of its ‘golden jewel’  iPhone installed base not upgrading their phones in the last 3.5 years, Cook & Co. have the stage set for a supercycle 5G product release.” 

 

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