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 August 14-18.
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Top 5 Buy Calls:
1. BofA upgrades Adobe to Buy, calls artificial intelligence leader
BofA upgraded Adobe (ADBE) to Buy from Neutral with a price target of $630, up from $575. The firm says the company is emerging as an artificial intelligence leader. Adobe's AI offerings, such as generative AI-powered content creation tool Firefly, are likely to begin driving "meaningful" revenue and free cash flow upside as soon as fiscal 2024, BofA tells investors in a research note. The firm sees three potential AI monetization opportunities for the company: a paid Firefly subscription, credit packs for Firefly consumption, and custom agreements with global brands to blend data with Adobe's. It believes the company's AI revenue will growth from $300M in 2024 to $960M by 2026.
2. Monster Beverage initiated with a Buy at HSBC
HSBC initiated coverage of Monster Beverage (MNST) with a Buy rating and $72 price target. Monster's purchase of Bang "addresses a missing growth driver," which is recruiting women into a category that typically skews male 60%-40%, HSBC tells investors in a research note. The firm likes Monster for its market positioning and growth opportunity. It notes its price target is the high on the Street.
3. Okta upgraded to Buy from Sell at Goldman Sachs
Goldman Sachs analyst Gabriela Borges double upgraded Okta (OKTA) to Buy from Sell with a price target of $91, up from $77. The shares can outperform over the next 12 months, driven by remaining performance obligations and annual recurring revenue acceleration back to 15%-20%, Goldman tells investors in a research note. The firm says Okta is lapping headwinds in its customer identity access management business tied to the merging of its organic and acquired product portfolios. Goldman believes competition from Microsoft will remain an overhang on the overhang on the stock, but says this is reflected in its bull case scenario by continuing to discount Okta's multiple by 30% relative to peers.
4. GE HealthCare initiated with an Overweight at Wells Fargo
Wells Fargo initiated coverage of GE HealthCare (GEHC) with an Overweight rating and $90 price target. The company is well positioned to capitalize on its opportunity in Alzheimer's, Wells tells investors in a research note. The firm expects $500M of incremental sales by 2027 for GE HealthCare, based on its analysis of the number of patients on Alzheimer's drugs in the U.S., Europe and Japan. It believes the shares are attractively valued at current levels.
5. Mizuho upgrades Chevron, others to Buy from Neutral
Mizuho upgraded Chevron (CVX), Matador Resources (MTDR) and Permian Resources (PR)to Buy from Neutral. Although higher commodity prices and an improving macro outlook have driven outperformance of U.S. oil and gas stocks, there are some secular tailwinds for the energy sector that give more confidence in longer-term cash generation, Mizuho tells investors in a research note. The firm stays constructive on the space, particularly U.S. exploration and production stocks. However, while refining margins are likely strong, the risk/reward for the group is skewed to the downside, the analyst tells investors in a research note. Mizuho ialso downgraded Marathon Petroleum (MPC), HF Sinclair (DINO) and Magnolia Oil & Gas (MGY) to Neutral. Mizuho also added Pioneer Natural Resources (PXD) to its Top Picks, alongside Coterra Energy (CTRA) and Diamondback Energy (FANG), replacing Devon Energy (DVN).
Top 5 Sell Calls:
1. BTIG downgrades Marqeta to Sell on lack of profitability
BTIG downgraded Marqeta (MQ) to Sell from Neutral with a $4 price target. The stock has not moved significantly on news of the four-year contract renewal with Square's (SQ) Cash App, which is likely attributable to the details of the agreement and the effect on the net take rate, as well as ongoing woes for Marqeta's non-Block revenue streams, BTIG tells investors in a research note. The firm continues to like Marqeta's "strong product offering," but says near-term headwinds have it concerned for the stock's near- and mid-term performance. It cites downward pressure on take rates for both the Block- and non-Block segments, poor non-Block revenue performance, and a lack of path to profitability for the downgrade to Sell.
2. BofA downgrades Keysight to Underperform on cooling 5G demand
BofA downgraded Keysight Technologies (KEYS) to Underperform from Neutral with a price target of $148, down from $163. The firm expects the company's July quarter orders to decline more than consensus expectations and sees downside risk to fiscal 2024 estimates. The macro backdrop is likely to limit Keysight's earnings growth as 5G demand "cools," BofA tells investors in a research note.
3. Magellan Midstream downgraded to Sell from Hold at Argus
Argus downgraded Magellan Midstream (MMP) to Sell from Hold after a "strong run- up" in the stock. The analyst is citing the planned acquisition of Magellan by ONEOK (OKE) announced on May 14th pending shareholder approval, antitrust clearance, and customary closing conditions. The transaction is expected to be approved, and the post-merger company will be able to offer a wider range of products and have increased export opportunities, the firm tells investors in a research note.
4. Nutrien double downgraded to Underweight from Overweight at Barclays
Barclays double downgraded Nutrien (NTR) to Underweight from Overweight with a price target of $68, down from $70. "Price-supporting events" such as pipeline and gas curtailments should continue into seocnd half of 2023 but so will deferred purchases, higher interest rates, and potash port issues, Barclays tells investors in a research note. The firm views the stock's valuation as full at current levels. After a strong performance from most agriculture chemical companies since the USDA's planting update late June, Barclays is seeing more limited upside potential for the broader group. It cites continued price decline in the potash space and margin impacts for North American producers for the downgrade. Barclays aslo downgraded Mosaic (MOS) to Underweight from Equal Weight with an unchanged price target of $40.
5. JBG Smith downgraded to Underperform from In Line at Evercore ISI
Evercore ISI downgraded JBG Smith (JBGS) to Underperform from In Line with a price target of $15, down from $16. The firm cites the company's "substantial" lease rollover the next 18 months, its higher leverage, and relative valuation for the downgrade. Evercore ISI does not see lots of share downside, but thinks other office stocks offer better value, lower lease rolls and stronger balance sheets.