Morgan Stanley Sees an End to Travel Agencies' Ad Price War: Thursday's Analyst Actions

Online travel agencies broker peace, boding well for Priceline

Shares of Priceline Group Inc. are up more than 2 percent in the pre-market trade amid an upgrade from analysts at Morgan Stanley.

"The four year ad war is over," proclaimed Analyst Brian Nowak. "After four years of decline, we believe Priceline's ad spend return on investment stabilized in 1Q:16, which we attribute to lower Google cost per click (CPC) competition between Priceline and Expedia, as the two leading online travel agencies show the first signs of acting as rational players in a global duopoly."

Investors should expect higher margins in light of this new behavior, the analyst suggested, and upped his earnings-per-share estimate for the firm by 11 percent for 2017.

"As online travelers increasingly shop across hotels and alternative accommodations, we see PCLN, with its 422,000+ vacation rentals, leading hotel selection, 2X+ user reach advantage, and best in class traffic acquisition and conversion positioned to take material market share in alternative accommodations," said Nowak, referring to Priceline by its ticker name.

He raised the stock to 'overweight' from 'equal-weight' and hiked his price target to $1,525 from $1,330.

Play defense with European Telecoms, says BofAML

Defensive strategies, like low-volatility exchange-traded funds, have served investors well so far in 2016.

Analysts at Bank of America Merrill Lynch advise doubling down on such an approach, writing that European telecom companies are "well positioned for shaky waters" in the aftermath of Brexit.

"The sector's 4.9 percent dividend yield remains a critical support factor in a low yield environment," write analysts led by Frederic Boulan. " Our strategists expect ongoing market pressure and believe defensives could be the place to be while the dust settles."

He upgraded Telenor ASA and Swisscom AG to 'buy' from 'neutral.' Boulan trimmed his price target on Telenor to 141 Norwegian krone from 142, but hiked his price target on Swisscom to 570 CHF from 550.

Separately, the analyst downgraded Bouygues SA and Liberty Global PLC to 'underperform' from 'neutral' and to 'neutral' from 'buy,' respectively.

Buy gold miners, says Credit Suisse

The merits of investing in miners of precious metals have only increased following the Brexit vote, according to analysts at Credit Suisse Group AG.

Analyst Ralph Profiti upgraded a number of names in the space, saying that gold miners would continue to do better than the broader market.

"We see an extended timeframe for a negative real rate environment in the U.S. and abroad and continued gold buying by central banks and consumers to diversify wealth," the analyst wrote.

He upgraded Alamos Gold Inc. and Yamana Gold Inc. to 'outperform' from 'neutral,' hiking his price targets on these stocks to $11 from $7.25 and to $6.50 from $4.50, respectively.

Profiti cited Alamos's "strong project pipeline, favorable foreign exchange exposure, [and] balance sheet and exploration opportunities" as prompting his re-rating. Meanwhile, Yamana is poised to outperform due to its "gold leverage and potential upside through portfolio optimization, balance sheet deleveraging, and exploration opportunities," he said.

The analyst also raised his rating on IAMGold Corp. to 'neutral' from 'underperform' and upped his price target to $5.25 from $3.

Credit Suisse sees gold reaching $1,500 per ounce in the first quarter of 2017.

Profiti also upgraded Silver Wheaton Corp. to 'outperform' from 'neutral' and hiked his price target to $35 (Canadian) from $28.

Imitating peers will help General Mills boost profits, says BofAML

General Mills Inc.'s new strategic adjustments make Bank of America Merrill Lynch analysts more confident that earnings will grow over the next few years.

After announcing its fourth-quarter earnings on Wednesday, the company stressed that it was accelerating the timetable for improving its profitability relative to its previous schedule.

"Going forward GIS will continue to invest behind growing consumption of its 'growth' brands (75 percent of the portfolio)," writes Analyst Bryan Spillane. "Foundation brands will be managed more for improved profitability and move a ways from the value positioning."

This shift in focus is similar to strategies deployed at Kraft Heinz Foods Co. and Campbell Soup Co., and should be well-received by investors, according to Spillane.

These changes suggest General Mills "can deliver earnings growth that is in-line or faster than its peers over the next two years," the analyst wrote.

He upgraded the stock to 'neutral' from 'underperform' and hiked his price target to $70 from $60.

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