Merrill Lynch’s Insights: Fitbit Inc (FIT), Walt Disney Co (DIS), Tesla Motors Inc (TSLA)

Merrill Lynch analysts were out with mixed ratings on wearable fitness device maker Fitbit Inc (NYSE:FIT), entertainment leader Walt Disney Co (NYSE:DIS), and electric car giant Tesla Motors Inc (NASDAQ:TSLA). Let’s take a closer look.

Fitbit Inc

In a research report issued today, Merrill Lynch analyst Nat Schindler reiterated a Buy rating on shares of Fitbit, with a price target of $29, after the company announced that Blaze and Alta each shipped over one million units during the quarter to retailers.

Schindler noted, “Fitbit indicated the Fitbit Blaze exceeded Fitbit ’s internal sales forecast for the quarter, which we believe likely indicates Fitbit had a second channel order for the Blaze during 1Q and could beat its guide for revenue […] Our model is based on Fitbit shipping 5 million units during 1Q, generating $437mn in revenue. Given Fitbit sold 2mn+ Blaze and Alta during 1Q, Fitbit likely exceeded our unit estimate given: 1) high app downloads in 1Q which likely indicate positive sell-through; 2) int ’l is roughly 25% of revenue or roughly 1.25mn units and Blaze and Alta were only sold domestically; 3) Charge HR is Fitbit ’s most popular product and likely continued to see substantial sales in 1Q; and 4) Both Charge and Charge HR saw discounting in Feb and Jan which likely drove unit sales.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Nat Schindler has a yearly average return of -4% and a 43.5% success rate. Schindler has a -29% average return when recommending FIT, and is ranked #3244 out of 3840 analysts.

Out of the 16 analysts polled by TipRanks (in the past 3 months), 9 rate Fitbit stock a Buy, while 7 rate the stock a Hold. With a return potential of 56%, the stock’s consensus target price stands at $23.67.

Walt Disney Co

In addition, Merrill Lynch analyst Jessica Reif Cohen reiterated a Buy rating on shares of Walt Disney, with a price target of $130, ahead of the company’s upcoming earnings results, which are expected to reflect the strong theatrical performance of Zootopia along with continued flow through from Star Wars: The ForceAwakens(SWTFA), partially offset by soft ratings at Media Networks, Shanghai Disney pre-open exp. and a $75 million write down from The Finest Hours.

The analyst wrote, “Key F2QE drivers incl.: (1) mid-single digit affil. fee growth at Cable Networks, (2) favorable cost comps at Cable Networks with programming expenses down high teens due to timing of College Bowl games, (3) strong scatter market, (4) rising retrans., (5) strong theatrical contribution at Film (SWTFAand Zootopiavs. last year ’s Cinderella) + initial digital home ent. benefit of SWTFA, (6) healthy underlying U.S. Theme Parks aided by late February price increases, (7) SWTFAbenefit at CP and (8) strong buyback activity given recent volatility ($2bn est.).”

“Key offsets incl.: (1) soft ratings at Cable Networks due to timing of College Bowl games, (2) unfavorable home ent. comps at Film (The Good Dinosaurvs. last year ’s Big Hero 6), (3) soft ratings at Broadcasting, (4) continued A&E headwinds + Hulu investment, (5) soft Int ’l Parks (Shanghai pre-open exp. and Hong Kong headwinds), (6) a $75mn loss from The Finest Hours, (7) tough FrozenCP comps and (8) FX headwinds,” the analyst added.

According to, analyst Jessica Reif Cohen has a yearly average return of 6.5% and a 57% success rate. Cohen has a 10% average return when recommending DIS, and is ranked #775 out of 3840 analysts.

Tesla Motors Inc

Unlike his colleagues, Merrill Lynch’s John Murphy took the other route, reiterating an Underperform rating on shares of Tesla Motors, with a price target of $144, after the company unveiled prototypes of the Model 3 which will begin production in late 2017.

Murphy commented, “We ultimately believe that the hype surrounding the Model 3 will settle and investors will once again focus on Tesla ’s rate of cash burn, which, despite some creative accounting in 4Q15, remains material. We believe that support for TSLA shares may dissipate if the company fails to turn the corner on cash burn by mid-2016 (including capex and without utilizing the company ’s asset-backed line).”

Furthermore, “We note that Tesla ’s estimates appear to put the Model 3 among the top 3% of global vehicles by sales volume, which is an optimistic forecast. More importantly, we have consistently argued that even in the unlikely scenario that mass market demand ultimately materializes for EVs, achieving luxury vehicle EBIT margins on the Model 3 will be challenging given a lower expected price point, high battery costs (even with the benefit of scale), significant planned R&D investment, and fierce competition from incumbent OEMs with the ability to price aggressively.”

According to, analyst John Murphy has a yearly average return of 8.8% and a 68% success rate. Murphy has an -17.6% average return when recommending TSLA, and is ranked #604 out of 3840 analysts.

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