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 30-February 3.
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Top 5 Buy calls:
Meta Platforms (META) – Rosenblatt, BofA, and Piper upgrade to Buy following results
On February 2, Rosenblatt upgraded Meta Platforms to Buy from Neutral with a price target of $220, up from $104. When the firm had launched coverage of Meta last April, a combination of high spending, weakening macro and ad clouds kept it on the sidelines, but the company’s earnings report shows that "each of these headwinds has pivoted to a tailwind," the firm tells investors. Meta "stoked excitement with cost controls," while there's also solidifying story for accelerating growth and the valuation is "enticing," Rosenblatt adds.
BofA also upgraded Meta Platforms to Buy from Neutral with a price target of $220, up from $160, following Q4 results. The company's U.S. advertising revenue accelerated in Q4 and there are drivers that could lead to ongoing multiple expansion for the shares, the firm tells investors in a research note. Meta shares are now positioned for leverage and earnings upside as the ad environment improves, and its competitive environment is improving with Reels usage growing and TikTok active users decelerating, BofA says. The firm adds that getting back to a market multiple yields a $220 stock price for Meta.
Meanwhile, Piper Sandler upgraded Meta Platforms to Overweight from Neutral with a price target of $215, up from $136. The company's fiscal 2023 spending guidance was lowered meaningfully, yielding a "sharp reset higher" to free cash flow expectations, the firm tells investors in a research note. Piper believes the magnitude of change coming out of the quarter warrants a more constructive rating, despite a difficult advertising market and no capitulation on the company's metaverse investment.
Tesla (TSLA) – Berenberg upgrades to Buy, raises price target to $200
On January 30, Berenberg upgraded Tesla to Buy from Hold with a price target of $200, down from $255. The company's price cuts represent an investment in growth, which reflects its cost leadership strategy, the firm tells investors in a research note. Berenberg believes Tesla's new plants offer multi-year opportunity in capital and labor efficiency and thinks that ramping its battery cell production offers further economies of scale. It expects Tesla to retain its gross and EBIT-margin lead over legacy car makers. The firm believes pricing concerns are "misguided."
Shopify (SHOP) – Roth Capital upgrades to Buy, ups target to $56
On January 30, Roth Capital upgraded Shopify to Buy from Neutral with a price target of $56, up from $38. The firm says tough COVID compares are now behind the company and that Shopify could see sales growth as high as 20% in 2023. The company is implementing new pricing tiers and raising monthly subscription costs by around 33% while maintaining annual costs, which improves revenue visibility, Roth tells investors in a research note. It believes the shares should trade with a premium multiple relative to its growth peers.
Uber (UBER) and DoorDash (DASH) – MoffettNathanson starts both names at Outperform
On January 30, MoffettNathanson initiated coverage of Uber and DoorDash with Outperform ratings and price targets of $47 and $79, respectively. After a decade of growth at all costs, the "bumpiest parts of the ride are in the rearview mirror," the firm tells investors in a research note. MoffettNathanson says gig economy market winners are becoming entrenched, marketing intensity is declining, and the U.S. market has started to rationalize through consolidation. It expects DoorDash and Uber to beat consensus estimates.
For Uber, the firm expects light bookings and adjusted EBITDA beats. Meanwhile, the firm’s thesis on DoorDash is long-term in nature and supported by the firm's outlook on unit economics in the core restaurant business.
Foot Locker (FL) – Credit Suisse upgrades to Outperform, raises target
On February 1, Credit Suisse upgraded Foot Locker to Outperform from Neutral with a price target of $62, up from $38. The firm thinks sentiment on the stock remains "overly bearish" and focused on the negative thesis of Nike (NKE) pulling back from Foot Locker. Credit Suisse, however, sees consistent evidence that the Nike relationship is improving, and is increasingly convinced that the planned pullback from Foot Locker will be far less damaging than initially expected. Since new CEO Mary Dillon started, the company has seen "consistent signals that the relationship has entered a more collaborative phase," the firm says.
Top 5 Sell calls:
Kroger (KR) – R5 Capital double-downgrades to Sell on deteriorating supermarket fundamentals
On January 30, R5 Capital double-downgraded Kroger to Sell from Buy with a $37 price target as the firm's research indicates that supermarket industry fundamentals have "deteriorated rapidly" and it fears the "industry could face a very unwelcome climate of rising unemployment, slowing inflation, volume pressures and increased promotional activities" in the next couple of quarters. R5 views Kroger as "particularly vulnerable" given that it competes more than any supermarket against Walmart (WMT) and other discounters, prompting the firm's recommendation that investors with a shorter time horizon of six to nine months sell the stock. However, the firm still believes that the longer-term story around the acquisition of Albertsons (ACI) remains intact, which it says "suggests an equity value over $50 is possible post the close."
Paramount (PARA)– Macquarie downgrades to Underperform on worries about ad market
On January 31, Macquarie downgraded Paramount to Underperform from Neutral with an unchanged price target of $15 as its ad exposure is highest in the peer group at 35% of sales. Ad revenues will likely be "firmly negative" in Q4 and 2023, said the firm, which cut its Q4 EPS estimate ahead of the company's upcoming report. The firm adds it is "not so bearish" on 2024, but calls its rating change "something of a tactical downgrade" given how the stock has rallied this year.
Edward Lifesciences (EW) – Bernstein double-downgrades to Underperform, cuts target to $66
On January 31, Bernstein double-downgraded Edwards Lifesciences (EW) to Underperform from Outperform with a price target of $66, down from $95. The firm acknowledges that Edwards is a high-quality company and a leading medtech innovator, and investors have come to expect mid-teens revenue growth. However, organic growth slowed to 5.5% over the past two quarters, and the stock still trades at 30-31-times, Bernstein adds. The firm believes U.S. TAVR market growth could remain sluggish for a while, and worse, it thinks Medtronic (MDT) will take share from Edwards. Altogether, Bernstein forecasts less than 7% organic growth for Edwards in 2023, and sees no big TAVR or TMTT catalysts that can save the stock in the near-term. Guidance for 2023 seems optimistic, and the CEO transition adds a bit of uncertainty, the firm adds.
Fortune Brands (FBIN) – BofA downgrades stock to Underperform, trims target to $60
On January 31, BofA downgraded Fortune Brands Innovations to Underperform from Neutral with a price target of $60, down from $61. Following the stock's outperformance since the spinoff the company's cabinet business, shares appear fully valued, the firm tells investors. BofA also sees risk to earnings estimates, especially in the first half, and notes that it forecasts 2023 EPS 5% below consensus.
Ford (F) – Goldman downgrades to Sell, slashes target to $8.50
On February 3, Deutsche Bank downgraded Ford to Sell from Hold with a price target of $11, down from $13. The "large" miss and "new aggressive" 2023 guidance showcase Ford's "considerable operational shortfalls and suggest meaningful downside risk to earnings trajectory," the analyst told investors following the company's quarterly report. Management blamed supply chain conditions but also recognized its suboptimal material economics and poor operational execution, the firm contends. It is concerned about the limited visibility into Ford's supply base.