Image Source: PixabayWhat 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 trading week of Sept. 23-27, 2024. First, here are the top 5 buy calls of the week.
1. Truist Upgrades Walmart to Buy on Share Gains, Higher Margins
Truist upgraded Walmart (WMT) to Buy from Hold with a price target of $89, up from $76. Walmart continues to gain share across income levels due to its focus on price, convenience, and assortment, the firm tells investors in a research note.Truist says its work suggests the company is increasingly using its “rapidly growing, higher margin” revenue streams like advertising, membership, and marketplace to expand price gaps, gain share, and structurally push margins higher. The combination of accelerating share gains, the “scarcity value of an offensive and defensive mega-cap,” and a structurally more profitable company “should command a far higher-than-historical valuation,” it adds.
2. Bernstein Upgrades Starbucks with Shares Not Pricing In Turnaround
Bernstein upgraded Starbucks (SBUX) to Outperform from Market Perform with a price target of $115, up from $92. The market has positively reacted to the appointment of Brian Niccol as the new CEO, but the stock’s recent valuation does not fully appreciate the earnings power that Starbucks could unlock, the firm tells investors in a research note.Bernstein says that while the turnaround will take time, it will not need to be completed for the stock to start to work. The firm expects the operational focus to result in re-acceleration of traffic-driven comparable sales growth, and in return to pre-COVID operating margin levels of 18.5%.
3. KeyBanc Upgrades DoorDash to Overweight after Q3 Mobility Survey
KeyBanc upgraded DoorDash (DASH) to Overweight from Sector Weight with a price target of $177. The firm came away more confident from its Q3 mobility and delivery survey that DoorDash is gaining ground in its core and emerging verticals, which should sustain greater than 15% gross order volume growth and drive EBITDA of $3.5 billion by 2026, or 6% above consensus.The latest survey showed ongoing gains in food delivery usage and grocery, KeyBanc tells investors in a research note. The firm believes DoorDash’s strong core business and ramp in new verticals should support its revised estimates.
4. Lowe’s Upgraded to Outperform at Oppenheimer
Oppenheimer upgraded Lowe’s (LOW) to Outperform from Perform with a price target of $400, up from $345, suggesting upside potential of more than 15% from recent levels. The firm is assuming a “somewhat more constructive stance” on the shares of the leading home improvement retail chains.Prospects for demand trends within home improvement retail and at leading operators will “gradually solidify and return to normalized expansion algorithms,” as lower lending rates spur improved housing activity and likely support ongoing home price appreciation and encourage shoppers to undertake larger ticket purchases, Oppenheimer tells investors in a research note.The firm says its more upbeat stance on Lowe’s reflects a still discounted share valuation and “ongoing operational slack” within the company’s business model.
5. Deutsche Starts Pinterest at Buy, Sees “Compelling Case” for Core Holding
Deutsche Bank initiated coverage of Pinterest (PINS) with a Buy rating and a $43 price target. The firm views Pinterest as an “under-monetized,” scaled, increasingly personalized “digital catalog” that attracts an affluent, high purchase-intent user base. The platform’s ability to support those seeking inspiration all the way to the ultimate purchase activity is making Pinterest “increasingly indispensable for full-funnel advertisers,” Deutsche tells investors in a research note.The firm says Pinterest’s value proposition is supported by the fact that 90% of its product searches are unbranded, implying advertisers can reach high-intent consumers before a product or brand has been selected. It expects further expansion to adjacent categories, which should drive user growth and engagement. Deutsche sees a “compelling case to make PINS a core holding for investors.”
Oppenheimer Starts Pinterest with Outperform on Growing Ad Platform
Oppenheimer initiated coverage of Pinterest with an Outperform rating and a $45 price target. Pinterest operates a discovery platform with high-intent users in search of products and inspiration, lending itself well to direct response advertising, the firm tells investors in a research note.Oppenheimer says the company is the fastest-growing digital advertising platform excluding Meta Platforms (META). Third party integrations with Amazon (AMZN) and Google (GOOG) are driving improvements to Pinterest’s auction density and pricing. The firm sees upside to engagement, and it says the stock’s valuation is attractive at recent levels.Next, here are the top 5 sell calls of the week.
1. Starbucks Downgraded to Underperform at Jefferies
Jefferies downgraded Starbucks to Underperform from Hold with a price target of $76, down from $80. While the new CEO “suggests necessary strategic change is now on the table,” the company’s execution will be challenged as issues like operations, culture, value perception, and technology will take time to fix, the firm tells investors in a research note.Jefferies expects Starbucks’ fiscal 2025 guidance to be reset to low-single-digit earnings growth, with the consensus at 11%-12%, to disappoint investors, and it sees ongoing, negative same-store-sales weighing on the stock’s multiple. Jefferies sees 20% potential downside in the shares.
2. Jefferies Downgrades Hershey to Underperform on Structural Risks
Jefferies downgraded Hershey (HSY) to Underperform from Hold with a price target of $163, down from $184, citing structural risks to the chocolate category. Elevated prices and a “stretched” consumer are finally impacting the U.S. snack category, and chocolate stands out as amongst the most concerning, the firm tells investors in a research note.Jefferies says buy rates versus 2019 is trailing other snacks, and chocolate’s wide price gaps versus other snacks is getting wider. The firm sees increased risk of accelerating volume declines amid disadvantaged channel exposure and gummy taking share.
3. Morgan Stanley Downgrades Auto Industry, Cuts General Motors to Underweight
Morgan Stanley downgraded General Motors (GM) to Underweight from Equal Weight with a price target of $42, down from $47. The firm also downgraded its U.S. auto industry view to In-Line from Attractive. The downgrade is driven by a combination of international, domestic, and strategic factors that may not be fully appreciated by investors, the firm tells investors in a research note.Morgan Stanley says U.S. auto inventories are on an upward slope with vehicle affordability still out of reach for many households. In addition, credit losses and delinquencies continue to trend upward for less-than-prime consumers, adds the firm.Further, China’s two-decade-long growth engine has reversed in terms of China profits flipping to losses and China producing nearly 9 million units more than it sells locally, adds Morgan Stanley. The firm cites expectations for greater share loss through the end of the decade, price/mix headwinds, and China risk for the downgrades of both Ford and General Motors.
4. GE HealthCare Downgraded to Sell at UBS
UBS downgraded GE HealthCare (GEHC) to Sell from Neutral with a price target of $74, down from $84. The firm says this is hard to justify the stock’s valuation given GE HealthCare’s lower growth outlook, and it implies that investors have higher expectations than even sell-side consensus. Against this backdrop, UBS believes GE HealthCare’s near- and mid-term growth is likely to disappoint.
5. Dollar General Downgraded to Sell at Citi
Citi downgraded Dollar General (DG) to Sell from Neutral with a price target of $73, down from $91. The company “has had a tough” two years, with comps only slightly positive each year and with fiscal 2024 EBIT margin of 4.7% versus 8.4% in fiscal 2019, despite the sales base being 50% larger this year, the analyst tells investors.Citi thinks industry dynamics have changed in a way that challenges Dollar General’s competitive positioning. Walmart (WMT) is “winning is a theme in retail,” and Dollar General “is on the wrong side,” contends the firm. It believes Walmart’s market share gains will continue to pressure Dollar General, making a recovery “very tough.”More By This Author:Wall Street More Bullish On Meta AI Following Connect Event Here’s What Wall Street Is Saying About Micron Ahead Of EarningsWall Street’s Top 10 Stock Calls This Week – Saturday, Sept. 21
