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 January 23-27.
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Top 5 Buy calls:
AMD (AMD) – Barclays upgrades to Overweight, raises target to $85
On January 23, Barclays upgraded AMD to Overweight from Equal Weight with a price target of $85, up from $70. The firm rolled out 2024 estimates and became more positive on the semiconductor group but incrementally more negative on semiconductor capital equipment. Barclays prefers stocks in 2023 that offer exposure to data center, PC and handset. While the handset market has been correcting since the second half of 2021, softer forecasts for Q1 of 2023 could potentially be "the last major cut," the firm says. Barclays believes headwinds in China can shift to tailwinds in the second half of 2023.
Walmart (WMT) – Tigress Financial upgrades stock, ups target
On January 26, Tigress Financial upgraded Walmart to Buy from Neutral with a price target of $176, up from $170. The retailer "continues to expand in all directions to meet the ever-changing retail environment," which, when combined with its higher-margin flywheel growth businesses, will drive further shareholder value creation, the firm says. Tigress Financial believes further upside exists from current shares levels. Walmart continues to enhance shareholder returns through ongoing dividend increases and share repurchases, the firm contends.
Target (TGT) – Oppenheimer starts coverage at Outperform with $190 target
On January 23, Oppenheimer initiated coverage of Target with an Outperform rating and $190 price target. The firm states that the stock underperformed in 2022, falling 36% vs. a 19% decline in the S&P 500, but there is potential for a strong multi-year profit recovery driven by gross margin expansion, management cost actions, and share gains. While some bumps along the way against seemingly aggressive Street forecasts for 2023 could be expected, Target is well positioned to continue capturing share, the firm tells investors in a research note.
Starbucks (SBUX) – Wells Fargo starts coverage of stock with Overweight rating
On January 23, Wells Fargo initiated coverage of Starbucks with an Overweight rating and $120 price target. The company "leads a high-growth global category with big aspirations," said the firm, which sees multi-year upside given "robust" coffee fundamentals, a global economic recovery and re-opening, share gains, unit growth, and innovation. Wells views Starbucks' 2023225 algorithm for high-single digit percentage comp growth and 15-20% EPS growth as "achievable with wiggle room.”
Wayfair (W) – BofA and Wedbush upgrade stock to Buy-equivalent ratings
On January 23, BofA double upgraded Wayfair to Buy from Underperform with a price target of $65, up from $30. The firm is more confident that Wayfair will achieve breakeven or better EBTIDA this year on a "significant improvement" in revenue trends and over $1B of expense reductions. Last week, the company announced it was implementing $1.4B in cost cuts and that revenue trends improved each month in Q4, the firm tells investors in a research note. Despite last week’s rally, BofA sees room for continued multiple expansion if Wayfair turns EBITDA positive this year. The company is outperforming the industry for the first time since COVID, the firm says.
Wedbush also upgraded Wayfair to Outperform from Neutral with a price target of $60, up from $38. The company's "very aggressive" cost-cutting actions announced Friday, combined with improving sales trends and customer unit economics, set the stage for profitable growth in 2023 and beyond, the firm tells investors in a research note. Wedbush believes Wayfair's latest round of savings "will go a long way" in better aligning its cost base with current and forecasted demand levels and higher levels of advertising as it seeks to drive demand during a period of lower direct traffic levels. The firm says the retailer's long-term growth potential is well above the market given the "highly fragmented industry."
Top 5 Sell calls:
Lululemon (LULU) – Bernstein downgrades to Underperform, cuts target to $290
On January 24, Bernstein downgraded Lululemon Athletica to Underperform from Market Perform with a price target of $290, down from $340. After delivering 25% sales growth and 30% earnings growth for five straight years, Lululemon "has a reset coming," the firm tells investors in a research note. Bernstein says that with no more pent-up demand, a more cautious consumer outlook, and negative margin mix shifts, the company's earnings growth will decelerate "materially." It expects the stock's multiple to follow.
Cheesecake Factory (CAKE)– UBS cuts stock to Sell with $30 price target
On January 25, UBS downgraded Cheesecake Factory to Sell from Neutral with an unchanged price target of $30, citing the 16% rise in shares year-to-date and the firm's expectation for a more challenged macro environment in 2023 for the downgrade. Bernstein sees risk to Cheesecake's 2023 margin guidance and believes the company's same-store-sales could decelerate from relatively solid levels through most of 2022. Potential pressured industry demand, ongoing cost headwinds and limited macro visibility highlight risk to the recent move higher in shares and expectations, UBS contends.
Qualys (QLYS) & Varonis (VRNS) – JPMorgan starts both stocks with Underweight ratings
On January 24, JPMorgan initiated coverage of Qualys with an Underweight rating and $109 price target. The company's spending remains elevated, its growth is decelerating, and with a valuation at a premium to peers, the stock's setup is challenging, the firm tells investors in a research note. Healthy cash flow support and share repurchases enabled the stock to perform well over the past year, but these drivers are not sustainable for a deteriorating business, JPMorgan contends.
The firm also started coverage of Varonis with an Underweight rating and $25 price target. While the company's software-as-a-service transition should yield product enhancements and uplift over time, the full transition will take several years and compress margins, JPMorgan tells investors in a research note. Near-term, Varonis faces additional headwinds including high foreign exposure, limited sales channel breadth and competition, the firm contends.
Fisker (FSR) – Morgan Stanley downgrades to Underweight amid EV "shake-out"
On January 25, Morgan Stanley downgraded Fisker to Underweight from Equal Weight with a price target of $4, down from $8. Electric vehicles, or EVs, are passing from acute under-supply to potential over-supply and Tesla's (TSLA) recent price cuts "are just the latest sign the EV market may be entering the 'shake-out' phase," the firm tells investors. Morgan Stanley argues that shorter delivery times, price cuts, and falling used values "mark a new 'reset' chapter for EVs," which prompts them to recommend reducing exposure across the EV portfolio.
Zions Bancorp (ZION) – JPMorgan downgrades stock to Underweight, lowers target
On January 25, JPMorgan downgraded Zions Bancorp to Underweight from Neutral with a price target of $46, down from $49. The firm believes regional banks are at risk of seeing negative earnings revisions in coming quarters. With the guidance that Zions provided on the Q4 earnings call, the company is at the higher end of the risk spectrum in terms of potentially missing 2023 and 2024 consensus estimates, JPMorgan tells investors in a research note. The firm sees Zions' net interest income guidance for Q4 as a "stretch." With a high expectations bar being set for earnings, combined with the shares trading at a "steep premium" to peers, the stock offers an unfavorable risk/reward, JPMorgan contends.