U.S. markets will get back up to speed today after a long holiday weekend. But the shortened week will still be an interesting week, as earnings season will kick into high gear before it’s all punctuated by President-elect Donald Trump’s inauguration on Friday.
As we head into Tuesday’s trading day, investors and traders should have their eyes on a few stocks, including Chipotle Mexican Grill, Inc. (NYSE:CMG), Noble Energy, Inc. (NYSE:NBL) and Wells Fargo & Co (NYSE:WFC).
Here’s what you should know:
Chipotle Mexican Grill, Inc. (CMG)
CMG shares are sliding this morning on another downgrade — this time from JPMorgan’s John Ivankoe.
The note wasn’t terribly-heavy handed, with the main criticism being that much of Chipotle’s potential improvement is already factored into JPMorgan’s price target of $375. Instead, the analyst chose to downgrade CMG’s rating from “Overweight” to “Neutral.”
Per Ivankoe:
“We value CMG at 26x our F20 EPS of $16.54, discount back 2 years at a 10% cost of equity, and add F19 ending cash per share for our Dec-17 price target of $375. CMG will likely be a beneficiary from corporate tax reform (~23% accretion from using a lower tax rate of 24% vs our modeled F20 rate of 38%) implying a ~22x target P/E multiple on a PF F20 EPS of ~$20+.”
Chipotle has actually been putting in a series of higher lows and higher highs since January. However, today’s news and subsequent 1%-plus dip threatens to pull CMG shares off their current perch of around $410, where they’ve been battling to break above the 200-day moving average.
Wells Fargo & Co (WFC)
Wells Fargo’s issues continue as the mega-bank announced it will shut down more than 400 branches over the next two years.
WFC has been embroiled in scandal after the bank opened more than two million fraudulent accounts in customers’ names — an episode that led to Wells Fargo paying $185 million in fines and that cost CEO John G. Stumpf his job.
New CEO Timothy J. Sloan is now tasked with doing damage control and making the necessary adjustments to regain the trust of its customers. Wells previously was considered one of the cleanest of America’s large banks. Now, however, it’s wracked by a plunge in new account openings.
The restructuring plan should save about $2 billion in costs by the end of 2018. Wells Fargo already shut down 84 stores last year, most of which closed in the second half of 2016.
The company shelled out $185 million in penalties and hearings following last year’s disaster, and many workers lost their job, leading to a shortage of workers at the moment.
WFC shares are off fractionally this morning and sit at roughly breakeven so far in 2017.
Noble Energy, Inc. (NBL)
Noble Energy is in the headlines for making another acquisition, though shares are taking a slight hit.
NBL will shell out $2.7 billion in stock and cash to snap up Clayton Williams Energy, Inc. (NYSE:CWEI). Thanks to the merger, Noble will boast a major presence in the Southern Delaware Basin of Permian shale formation, including a new 120,000 acres that amount to more than 2 billion barrels of oil equivalent.
Noble says it plans to up the output on its new assets by about 50,000 barrels of oil equivalent per day by 2020.
Clayton Williams shareholders will receive 2.7874 shares of NBL stock plus $34.75 for each share of common stock. Noble will assume about $500 million in net debt as part of the agreement.
NBL shares, which are up about 35% in the past 12 months, are off roughly 2% this morning. CWEI surged more than 30% on the deal.
