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 September 18-22.
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Top 5 Buy Calls:
1. Micron upgraded to Buy from Hold at Deutsche Bank
Deutsche Bank upgraded Micron Technology (MU) to Buy from Hold with a price target of $85, up from $65. The firm says DRAM prices started to improve at least one quarter ahead of its expectation on the recent demand strength for artificial intelligence servers, fueling the growth of HBM and DDR5. Recent checks with the supply chain suggest that the price increases are sustainable and should accelerate in the next two quarters given the limited supply growth, Deutsche tells investors in a research note. As a result, the firm expects Micron to guide fiscal Q1 revenue and earnings above current Street estimates with commentary suggesting further improvement in the next few quarters. It sees Street estimates for the remainder of 2023 and 2024 "moving up meaningfully post-earnings."
2. Disney initiated with an Outperform at Raymond James
Raymond James initiated coverage of Disney (DIS) with an Outperform rating and $97 price target. Media companies are grappling with the transition from the profitable but declining Linear TV to the mostly unprofitable but growing streaming business, and Disney's assets position it well to navigate this transition, the firm tells investors in a research note. With two scaled U.S. Streaming services in Disney+ and Hulu , as well as ESPN+, Disney is bundling its services, driving higher average revenue per account, lower churn, and strong pricing power, says Raymond James.
3. DoorDash upgraded to Buy at Mizuho
Mizuho upgraded DoorDash (DASH) to Buy from Neutral with a price target of $105, up from $90. The firm is confident that the company's' gross-order-value growth rate should outperform guidance and Street expectations in the second half of 2023. Key drivers include continued market share gains from DoorDash's "category-leading" position in the U.S. and rational competition in Europe, Mizuho tells investors in a research note. In conjunction, moderated food inflation and resilient consumer spending provide "incremental support," says the firm. It thinks DoorDash's valuation does not reflect the potential for high-teens growth exiting fiscal 2024 and into 2024.
4. Pinterest upgraded to Buy at DA Davidson
DA Davidson upgraded Pinterest (PINS) to Buy from Neutral with a price target of $35, up from $25. After attending the company's first analyst day since its 2019 IPO, the firm raised its long-term adjusted EBITDA margin forecast to 34.0% from 25.0%, stating that the $10 increase in its price target "is a reflection of raising our near- and long-term sales and profit forecasts."
5. Dell Technologies upgraded to Outperform at Daiwa
Daiwa upgraded Dell Technologies (DELL) to Outperform from Neutral with a price target of $80, up from $50. The firm states that the demand slowdown seen since the second half of 202 seems to be abating and a new up cycle is beginning. Improving macro tech demand and AI sales ramp are also "two new big positives" that should aid Dell's long-term growth potential, Daiwa tells investors in a research note.
Top 5 Sell Calls:
1. Bernstein starts Arm at Underperform on premium valuation
Bernstein initiated coverage of Arm Holdings (ARM) with an Underperform rating and $46 price target. The stock has been given a premium valuation on hopes the company will be a beneficiary of rising artificial intelligence adoption, but it is too soon to declare the company an AI winner, the firm tells investors in a research note. Bernstein believes Arm may not be able to meet management's mobile royalty rate growth guidance. Management expectations for 11% revenue growth in fiscal 2024 could be too optimistic given cyclical headwinds and a maturing mobile end market, contends the firm.
2. Dollar General downgraded to Underweight at JPMorgan
JPMorgan downgraded Dollar General (DG) to Underweight from Neutral with a price target of $116, down from $132. The company's core low-end consumer is "already at a stress point acting recessionary today," the firm tells investors in a research note. Compounding matters, Dollar General management sees excess savings for the middle-income cohort on pace to be depleted by the end of fall 2023 and potential for sequential worsening tied to student loan repayments, says JPMorgan.
3. Global Payments downgraded to Sell at Redburn on payment processing competition
Redburn downgraded Global Payments (GPN) to Sell from Neutral with a $105 price target. Global Payments is "particularly exposed to payment processing competition," with limited product differentiation, but the stock is currently commanding top decile margins in the S&P 500, the firm tells investors. Redburn notes its calendar 2025 adjusted EPS forecast is 6% below consensus, without assuming macro pressures, since "the Street looks too optimistic on the margin trajectory" and it assumes the stock's valuation premium to Worldline moderates.
4. Zebra downgraded to Underweight at Morgan Stanley
Morgan Stanley downgraded Zebra Technologies (ZBRA) to Underweight from Equal Weight with a price target of $220, down from $260. The firm says growth headwinds challenge the company's growth rebound for next 12-24 months. Weaker consumer data points, inventory digestion, and more secular headwinds around capacity absorption post COVID e-commerce overbuild meaningfully lowers Morgan Stanley's expectations of Zebra's run-rate earnings power over at least the next 12-24 months. This will cause challenges for the stock to maintain the current valuation, the firm tells investors in a research note.
5. Morgan Stanley cuts nCino to Underweight, sees FY25 consensus estimates as too high
Morgan Stanley downgraded nCino (NCNO) to Underweight from Equal Weight with an unchanged price target of $24. The company's fiscal 2025 consensus estimates look too high when accounting for recent bookings performance and potential revenue headwinds from recent bank closures, the firm tells investors in a research note. Morgan Stanley says the stock is trading at a premium to the vertical software universe on numbers that are too high. It believes nCino's investor day is unlikely to adequately dispel investor concerns.