QQQs +16bps trying to follow through on yesterday’s rally. Yields are ticking up 1-2bps across the curve. China -65bps. BTC -1%
On the tariff front, FT had an article this morning saying Trump is considering a two-step process, using one justification to impose tariffs immediately while working on a separate one that’s more legally durable for the long-term. The White House is shifting away from tariffs as a negotiating tool to extract concessions from partners and instead aims to utilize them to raise revenue to pay for tax relief, which would mean tariffs are in place permanently (h/t VK)
On the macro front, KB Homes -7% out with some neg commentary on the consumer this morning saying: ‘consumer confidence has declined sequentially each month for the past several months and homebuyers are moving more slowly in making their purchase decisions’; and ‘demand at the start of the spring selling season has been more muted than we have seen over the past few years’ (h/t MS)
Let’s get to it…
CVNA: MS upgrades to Buy with 30% upside to $280 PT and $400 Bull Case
Jonas finally throws in the towel and upgrades. MS notes CVNA has demonstrated impressive execution with four consecutive quarters of double-digit retail growth and ~2x industry average EBITDA margins, outperforming peers struggling with used vehicle sales. The company has addressed previous leverage concerns, with 4Q leverage ratio at 2.8x Net Debt/Adj.EBITDA, now in line with franchise dealer peers. With just 1% market share of US used cars, MS believes Carvana is differentiated by its ability to operate efficiently at gross margin and SG&A levels. MS notes their recent Florida Inspection and Reconditioning Center tour reinforced Carvana's vertical integration advantages, positioning it as a potential "Amazon of auto retail."
NET: BofA double upgrades to buy on differentiated AI offering + security momentum. PT to $160 from $60
BofA cites Cloudflare's differentiated AI offering and security momentum as key catalysts, projecting 30% growth by 2028 - 250bps above Street consensus and 500bps above BofA's previous estimates. BofA views Cloudflare as a true "AI winner" with its AI-as-a-Service (AIaaS) approach, offering customers an alternative to building expensive in-house capacity. Their surveys indicate AI is the leading product Cloudflare customers plan to adopt, with average AI spending expected to increase 8% to $100k per customer (15% of total customer spending). Customers are increasingly choosing Cloudflare over hyperscalers like AWS, Oracle and Azure for its ease of use and scalability benefits. BofA also highlights strong momentum in network security withing their survey data.
TTD: Citi says they are incrementally positive with respect to competitive positioning and Kokai
Keep reading with a 7-day free trial
Subscribe to TMT Breakout to keep reading this post and get 7 days of free access to the full post archives.