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 November 14-18, 2022.
Top 5 Buy calls:
Netflix (NFLX) – BofA reinstates stock with a Buy rating, $370 price target
On November 15, BofA analyst Jessica Reif Ehrlich reinstated coverage of Netflix with a Buy rating and $370 price target, which represents 24% upside potential, as she notes Netflix is still the streaming leader. Her valuation accounts for the company's leading position within the "still burgeoning" shift towards non-linear video viewing, a "strong runway" for subscriber growth outside the U.S. and upside from advertising video on demand. Reif Ehrlich views Netflix's risk/reward favorably.
Target (TGT) – Piper Sandler upgrades stock to Overweight as valuation “looks compelling”
On November 17, Piper Sandler analyst Edward Yruma upgraded Target to Overweight from Neutral with a price target of $200, up from $190. The company has had a difficult 2022, but "trough" EBIT margins are near and the stock's valuation now "looks compelling," Yruma tells investors in a research note. While the demand environment remains weak, Target's "extraordinary" markdowns will fall as inventory aligns better with sales, the analyst says. He believes the company's revenue trends are likely to get worse, but inventories are getting better aligned. Target shows "strong risk/reward prospects for a patient investor," Yruma adds.
Nvidia (NVDA) – Summit Insights upgrades stock to Buy following quarterly results
On November 16, Summit Insights analyst Kinngai Chan upgraded Nvidia to Buy from Hold. The analyst sees a favorable risk-reward scenario for the stock, as Chan sees tailwinds through 2023 driven by the company's new product cycle, and believes the downside from crypto-mining demand and the export restriction of data center products to Chinese customers are now behind the company.
AMD (AMD) – Evercore ISI upgrades stock to Outperform, raises price target to $56
On November 14, Baird analyst Tristan Gerra upgraded AMD to Outperform from Neutral with a price target of $100, up from $65. His supply chain checks highlight "strong reception" of Genoa at data center makers, which are shifting significant resources in support of AMD. The Genoa chip's "very significant" performance step up should accelerate market share gains for AMD in 2023 and come along with significantly higher pricing and a higher gross margin profile, Gerra argues in his upgrade note to investors.
UBS analyst Timothy Arcuri also upgraded AMD to Buy from Neutral with a price target of $95, up from $75. The PC segment has been early in digesting inventory and been dragging down growth, but overall CPU shipments are annualizing to about 230M units in Q4, which is "far below even the most bearish market forecasts for PCs in 2023," the analyst tells investors in a research note. Arcuri further anticipates "some replenishment" moving through fiscal 2023, adding that computer hardware "typically out-performs off the bottom."
Micron (MU), Qualcomm (QCOM), Qorvo (QRVO) – Credit Suisse started all three stocks with Outperform ratings
On November 15, Credit Suisse analyst Chris Caso initiated coverage of Micron Technology with an Outperform rating and $78 price target, implying 25% upside potential from current levels. The analyst thinks long-term DRAM and NAND industry growth is intact. Also, DRAM consolidation and smaller shrink benefits minimizes risk of persistent overcapacity, Caso tells investors in a research note.
The analyst also started coverage of Qualcomm with an Outperform rating and $150 price target. Qualcomm has more short-term security than others in the group since Android has already corrected and the company is shipping below consumption, Caso said. He also sees a revenue catalyst from Samsung (SSNLF) share gains in 2023, medium-term optionality should they sign a contract with Apple (AAPL) for the iPhone modem beyond iPhone 15, and a longer-term catalyst from auto design win traction.
Additionally, Caso initiated coverage of Qorvo with an Outperform rating and $120 price target. Qorvo has cyclical exposure to handsets along with increasing diversification into non-handset businesses that will provide higher growth, he adds. The analyst believes the market is "close to a cyclical trough in handset," which should allow for mean reversion as customers fully digest inventory.
Top 5 Sell calls:
Norwegian Cruise (NCLH) – Credit Suisse double downgrades Norwegian to Underperform
On November 17, Credit Suisse analyst Benjamin Chaiken double downgraded Norwegian Cruise Line to Underperform from Outperform with a price target of $14, down from $20. The analyst sees downside risk to estimates and now prefers shares of Royal Caribbean (RCL). Norwegian's fiscal 2023 EBITDA guidance is at risk from higher-than-expected costs and the stock's valuation premium compared to peers is likely to prove "unsustainable," Chaiken tells investors in a research note. If the company does hit its guidance, it would be reasonable to assume that the whole industry would be doing well and would imply more equity upside for Royal Caribbean and Carnival (CCL), the analyst adds.
Harley-Davidson (HOG) – Jefferies downgrades the stock to Underperform following “overdone” rally
On November 15, Jefferies analyst Anna Glaessgen initiated coverage of Harley-Davidson with an Underperform rating and $39 price target. The analyst views the recent rally in the shares as overdone. The stock rallied after a strong Q3 yet dealer checks indicate that the retail inflection "lacks legs," Glaessgen tells investors in a research note. The analyst believes Harley-Davidson's hardwire strategic plan will be tested over the coming months amid "outsized execution risk" as it expands beyond its core business into "unfamiliar territory."
Teva Pharmaceuticals (TEVA) – JPMorgan downgrades the stock to Underweight as growth challenges continue
On November 14, JPMorgan analyst Christopher Schott downgraded Teva Pharmaceutical Industries to Underweight from Neutral with a price target of $10, down from $11. The analyst sees "continued growth challenges" for Teva. The company has made significant progress in addressing its debt and cost structure over the past several years, but its Q3 results again showed that it continues to struggle with a lack of growth in the portfolio. Looking into 2023, Schott struggles with Teva's growth outlook, icing ongoing erosion across parts of the portfolio. The company's North America generics business is "consistently underperforming" and there is limited visibility on the biosimilar Humira opportunity, the analyst writes.
Quest Diagnostics (DGX) – Citi downgrades the stock to Sell on risks to long-term guidance
On November 17, Citi analyst Patrick Donnelly downgraded Quest Diagnostics to Sell from Neutral with a price target of $125, down from $145. The downgrade follows the recent multiple expansion as the analyst see risks to Quest 's long-term guidance of 4%-5% growth in the base business as well as additional cost headwinds. While management has continued to reiterate the $8.50 earnings per share number for fiscal 2023, even if giving the company credit for hitting this, the multiple is "inflated and at risk for compression," Donnelly tells investors in a research note. Quest is trading above a three-times price-to-earnings spread versus Labcorp (LH), well above the prior two-year average of 1.3 times, which is no longer warranted, the analyst says.
Rocket Companies (RKT) – Argus downgrades stock to Sell on decline in mortgage originations
On November 16, Argus analyst Kevin Heal downgraded Rocket Companies to Sell from Hold. The analyst cites the company's position as the second largest U.S. mortgage originator with approximately 5% of the overall market, noting that as mortgage rates have recently risen to 7%, origination volumes are expected to drop 50% from 2021 levels, with further declines expected in 2023. While the stock has underperformed the S&P500 year-to-date with a 40% decline, shares remain "fundamentally overvalued at current prices", Heal tells investors in a research note.