Calls of the Day: Wynn, Cummins, Boston Scientific, Applovin and Monster Beverage

Key Concepts

• Las Vegas Sands (LVS) & Wynn Resorts: Gaming stocks with significant Macau and potential Dubai (Wynn) exposure.
• Cummins (CMI): Industrial company, recently downgraded by Wolfe Research due to valuation despite strong earnings growth.
• Boston Scientific (BSX): Medical device company, receiving a tactical outperform rating from Evercore.
• AppLovin (APP): Tech stock, upgraded by Needham, but currently underperforming in the portfolio.
• Monster Beverage (MNST): Consumer staple, reiterated as overweight by Morgan Stanley with a $296 target.
• Return on Equity (ROE) & Debt to Equity: Financial metrics used to assess company quality.
• Moving Averages: Technical analysis tool (specifically the 200-day moving average) used to identify support and resistance levels.
• Cyclical vs. Secular Trends: Distinguishing between temporary fluctuations and long-term shifts in market behavior.

Market Calls & Stock Analysis – December 13th

I. Gaming Sector – Las Vegas & Macau Outlook

Goldman Sachs anticipates another challenging quarter for the Las Vegas gaming market. Despite this, they maintain a “Buy” rating on Las Vegas Sands (LVS) with a price target of $80, and reiterate a “Buy” rating for Wynn Resorts (WYNN), lowering their target to $140 from $148. The core argument for both stocks centers on their exposure to the Macau gaming market and, in Wynn’s case, the upcoming Dubai resort opening (expected within a year). The post-pandemic surge in Las Vegas visitation has subsided, raising questions about whether the current slowdown is cyclical or a more permanent shift.

Jimmy emphasized the importance of Macau and the Dubai resort for Wynn’s future earnings growth, stating, “The reason to own Wynn and also Joe to your Las Vegas Sands is the Macau exposure. And even more than that, the Dubai resort, which is going to open up in less than a year…and that’s where the real boost in earnings is going to come from.”

Joe, however, favors Las Vegas Sands, citing its stronger balance sheet. He noted concerns with Wynn’s financial metrics, specifically “negative return on equity, negative debt to equity,” which impacted its quality assessment. Las Vegas Sands has seen a 2.5% increase since the position was established in late October. Both stocks are currently experiencing a pullback from early December highs.

II. Industrial Sector – Cummins Downgrade

Wolfe Research downgraded Cummins (CMI) from “Outperform” to “Pure Perform,” primarily due to valuation concerns despite acknowledging expected strong earnings per share (EPS) growth over the next two years. The downgrade is described as a “valuation downgrade more than anything else.”

Jimmy disagreed with the downgrade, arguing that Cummins is performing well, particularly in the power generation business. He pointed out that Cummins’ valuation (30x earnings) isn’t extreme compared to other well-performing industrial names like United Rentals, Vertiv, Quanta, Fastenal, and others. He stated, “I see Cummins is doing well in the power gen business. They’ve got strong momentum and they’re delivering on earnings.”

III. Healthcare – Boston Scientific & Medical Device Pressure

Evercore issued a “Tactical Outperform” rating for Boston Scientific (BSX). The panel acknowledged recent underperformance in the medical device sector, including Boston Scientific and Thermo Fisher. Further analysis was deferred due to an upcoming portfolio rebalance on Friday.

IV. Technology – AppLovin’s Struggles

AppLovin (APP), despite receiving an upgrade to $700 from Needham (“Buy the dip”), is currently the worst-performing tech stock in the portfolio. The panel expressed skepticism about the upgrade.

Jimmy highlighted the stock’s persistent failure to regain positive momentum, suggesting increased selling pressure. He noted the stock’s decline from $76 in July 2024 and pointed to the 200-day moving average at $489 as a potential resistance level. He stated, “That’s indicative to me of a situation where more people are looking to exit than they are to actually enter.”

V. Consumer Staples – Monster Beverage & Costco Recovery

Morgan Stanley reiterated an “Overweight” rating on Monster Beverage (MNST) with a target price of $296. The panel also discussed the recovery of Costco from a period of underperformance. These stocks, along with Walmart, are considered strong consumer staple holdings.

Logical Connections:

The discussion flows from broad market calls (gaming) to sector-specific analysis (industrials, healthcare, technology, consumer staples). Each stock is presented with the rationale behind recent analyst ratings and the panel’s own investment perspective. The conversation frequently highlights the interplay between valuation, earnings growth, and market momentum.

Data & Statistics:

• Las Vegas Sands: Up approximately 2.5% since late October.
• Cummins: Trading at 30x earnings.
• AppLovin: Down from $76 in July 2024; 200-day moving average at $489.
• Monster Beverage: Target price of $296 (Morgan Stanley).

Conclusion:

The panel’s discussion reveals a cautious optimism, balancing analyst upgrades with a pragmatic assessment of market conditions and individual stock performance. The emphasis on Macau and Dubai exposure for gaming stocks, strong balance sheets for industrial companies, and the potential for recovery in consumer staples highlights a focus on long-term growth drivers. However, concerns about valuation and momentum, particularly in the technology sector, underscore the importance of careful stock selection and risk management.