What has Wall Street been buzzing about this week?
Here are the top 5 Buy calls and the top 5 Sell calls made by Wall Street’s best analysts during the week of October 17-21, 2022.
Top 5 Buy calls:
Qualcomm (QCOM) – HSBC initiates stock with a Buy rating, $180 target
On October 24, HSBC analyst Frank Lee initiated coverage of Qualcomm with a Buy rating and $180 price target. Qualcomm has "the most complete technology offering of any chip maker," especially in modems and radio frequency front end connectivity chips, Lee told investors. This will enable it to expand its product portfolio beyond the slowing smartphone segment into autos and internet-connected devices, said the analyst, who sees Qualcomm as "well positioned for growth beyond smartphones" and having limited risks to earnings, even as smartphone demand slows.
AT&T (T) – Raymond James upgrades stock to Strong Buy from Outperform
On October 24, Raymond James analyst Frank Louthan upgraded AT&T to Strong Buy from Outperform with an unchanged price target of $24. Louthan believes AT&T will outpace Verizon (VZ) over the next few months based on the current operating performance of the two businesses. While telecom stocks may not be the most defensive, the businesses definitely are, and Louthan does not expect weakness in the fundamentals.
ServiceNow (NOW) – MoffettNathanson and Guggenheim upgrade stock to Buy-equivalent ratings
On October 27, MoffettNathanson analyst Sterling Auty upgraded ServiceNow to Outperform from Market Perform with a $549 price target following a report he called "a welcome change" after the disappointing results from Microsoft (MSFT). Management has done a very good job adjusting the company's go-to-market execution and the tone was "very positive" for the remainder of the year and into 2023, Auty told investors in a post-earnings research note. The disappointing results from Microsoft (MSFT), combined with positive results and tone from ServiceNow, will position the latter to come into favor and benefit from rotation, Auty added.
Earlier this week, Guggenheim analyst John DiFucci also upgraded ServiceNow to Buy from Neutral with an unchanged price target of $510. While the commercial market remains soft for ServiceNow, he believes the U.S. Federal business was likely strong enough to more than offset this and this should carry over to fourth quarter revenue, DiFucci told investors. ServiceNow has proven it is "not immune" to the challenging macro environment, and there remains risk in the company meeting its long-term subscription revenue guidance, he noted. However, DiFucci contended that ServiceNow has "proven itself as a unique asset and premier company." He believes the stock offers attractive near-term risk/reward with shares having declined 28% since August 11, versus 11% for S&P 500.
Biogen (BIIB) – Goldman Sachs upgrades stock to Buy, raises price target to $370
On October 26, Goldman Sachs analyst Salveen Richter upgraded Biogen to Buy from Neutral with a price target of $370, up from $220, after updating his 2022 sales estimates for quarterly trends and revised guidance and increasing his lecanemab sales forecasts based on the recent positive Phase 3 topline data. The company is now poised to address the early Alzheimer's disease market in 2023 and beyond, and although investors are generally cautious into the full presentation of data at the CTAD meeting, his discussions with leading neurologists and management lead Richter to believe that the "results are clinically meaningful," the analyst told investors. He now models lecanemab peak global sales of $14B and estimates that at about $270 per share only about $7B in sales are priced in.
Roblox (RBLX) – DA Davidson starts stock at Buy on uniqueness of platform, metaverse potential
On October 26, DA Davidson analyst Franco Granda initiated coverage of Roblox with a Buy rating and $55 price target. The analyst is positive on the company's "user-first platform approach", its ability to outperform Mobile Gaming peers with a fraction of cost, the emerging opportunities to improve economics at a platform-wide level, and a growing number of use cases beyond gaming. Granda added that the current premium on Roblox shares is warranted given the uniqueness of the platform and the "call option" on the company's metaverse-driven investments.
Top 5 Sell calls:
Silicon Labs (SLAB) – Barclays downgrades stock to Underweight, lowers target to $95
On October 24, Barclays analyst Blayne Curtis downgraded Silicon Labs to Underweight from Equal Weight with a price target of $95, down from $140. Curtis is "actively looking for a bottom to get more positive" on the analog chip sector, but believes it is "too early to pull the trigger across the board." The analyst expects "material cuts through earnings" in radio frequency, memory and PC and "would look for these cuts to get more positive." Higher pricing tailwinds should turn to headwinds for Silicon Labs as selling prices accounted for nearly all of the company's 48% year-over-year growth in the first quarter and pricing remained "up substantially" in the second quarter, Curtis told investors in a research note.
Upstart (UPST) – Mizuho initiates coverage of stock with Underperform, $17 price target
On October 25, Mizuho analyst Dan Dolev initiated coverage of Upstart with an Underperform rating and $17 price target. The stock is down 95% from peak, hurt by a shortfall in funding, Dolev told investors in a research note. The analyst expects "more pain in coming quarters." His 35-year macroeconomic analysis shows that high interest rates and high inflation are associated with rising delinquencies, which can limit funding. If funding remains challenged, Upstart may need to use its own-balance sheet lending to breakeven, which may not be well-received by investors, Dolev added.
Southern Company (SO) – BofA downgrades “expensive” Southern Company to Underperform
On October 24, BofA analyst Julien Dumoulin-Smith downgraded Southern Company to Underperform from Neutral with a price target of $59, down from $63. After the stock's 6% year-to-date relative outperformance, shares are now "expensive" and trading at a premium to peers on 2025 estimates, Dumoulin-Smith told investors. Shares could see a short-term "pop" after the delayed Vogtle 3 nuclear plant goes in-service, but after Vogtle 3 he expects attention to pivot back to the fundamentals, where he sees Southern offering a below average growth rate, the analyst said.
Whirlpool (WHR) – BofA downgrades stock amid “severe drop” in appliance demand
On October 26, BofA analyst Elizabeth Suzuki downgraded Whirlpool to Underperform from Neutral with a price target of $119, down from $155. Industry and company data suggest a severe drop in appliance demand and softening of pricing, Suzuki told investors. Replacement demand, new housing-related demand and discretionary demand are all likely to be headwinds in 2023, while costs remain elevated and are pressuring margins, Suzuki added.
Regeneron (REGN) – Raymond James downgrades stock to Underperform on oncology portfolio struggles
On October 26, Raymond James analyst Dane Leone downgraded Regeneron Pharmaceuticals to Underperform from Market Perform without a price target. In a research note to investors, Leone said that the life cycle extension benefit of 8mg aflibercept is likely over-estimated and that the oncology portfolio is likely to continue to struggle during 2023. Additionally, Leone believes upside to current expectations for Dupixent are likely limited given the outlook for COPD. While 8mg AFL provides some defense against market erosion of EYLEA sales, it does not turn the tide for the structural decline of the franchise even under a generous modeling scenario, the analyst contended.