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 November 7-November 11, 2022.
Top 5 Buy calls:
Meta Platforms (META) – Itau upgrades stock, says “right price has finally come”
On November 7, Itau BBA analyst Thiago Kapulskis upgraded Meta Platforms to Outperform from Market Perform with a $102 price target. Meta’s current share price "reflects an extremely bear case, where it would be crazily spending forever while being disrupted by Apple and/or TikTok," Kapulskis tells investors in a research note. "Although potential outcomes are very wide, our value-investing toolkit inclines us to try our luck," writes the analyst. He believes the "right price has finally come" to buy shares of Meta Platforms.
Block (SQ) – Macquarie upgrades stock to Outperform with $100 price target
On November 7, Macquarie analyst Paul Golding upgraded Block to Outperform from Neutral with a $100 price target. The shares have fallen 20% since the analyst’s downgrade to Neutral in late July, a time he saw market risk and risk to consensus EBITDA as potential pitfalls in the coming periods. With the shares "now de-rated and operating leverage flowing through," Block has improved upside/ downside positioning across shares and fundamentals, Golding tells investors in a research note. He says the company’s cost cuts and "on-ramps" came through in Q3.
DoorDash (DASH) – Oppenheimer upgrades stock to Outperform on improving margins
On November 7, Oppenheimer analyst Jason Helfstein upgraded DoorDash to Outperform from Perform with a 12-18 month price target price target of $70. The company’s increased disclosure shows improving U.S. restaurant margins, Helfstein tells investors in a research note. The analyst forecasts DoorDash’s U.S. restaurant contribution margins improving from 5.7% in 2022 to 6.1% in 2025, with international and U.S. non-restaurant contribution margins improving from negative 13.4% to negative 2.4%. In addition, competition is easing on the challenging fundraising environment, and DoorDash can leverage its position to invest profitably and gain share as competitors pull back, Helfstein contends.
Kroger (KR) – Evercore ISI upgrades stock to Outperform, raises price target to $56
On November 9, Evercore ISI analyst Michael Montani upgraded Kroger to Outperform from In Line with a price target of $56, up from $49. The analyst sees a favorable risk/reward for Kroger given his view that food inflation will be "higher for longer with trade-down into food at home categories." In a bull case, the Kroger-Albertsons (ACI) merger closes with minimal divestitures, resulting in 35% accretion and bringing a $70-plus stock "into focus," Montani tells investors in a research note. The analyst says mid-$30s downside for Kroger shares is the risk if "grocery degrades into a food fight." However, he sees above trend industry demand as likely with inflation likely above the 1%-2% norm.
Splunk (SPLK) – Wolfe Research starts coverage of the stock with an Outperform, $90 price target
On November 7, Wolfe Research analyst Joshua Tilton initiated coverage of Splunk with an Outperform rating and $90 price target. The company’s "cult like customer base is stickier than people realize" and competition fears are somewhat overdone, Tilton tells investors in a research note. The analyst thinks cybersecurity spending will remain resilient and that Splunk’s observability opportunity "has legs."
Top 5 Sell calls:
Tyson Foods (TSN) – BofA downgrades stock to Underperform, lowers price target to $61
On November 9, BofA analyst Peter Galbo downgraded Tyson Foods (TSN) to Underperform from Neutral with a price target of $61, down from $73, ahead of the fiscal fourth quarter report next week. Macro factors within the protein complex has worsened, with beef fundamentals continuing to deteriorate and chicken prices declining meaningfully, Galbo tells investors in a research note. The analyst believes beef margins are likely to get worse through 2024.
Boston Beer (SAM) – Morgan Stanley starts coverage of the stock with an Underperform, $300 price target
On November 7, Morgan Stanley analyst Eric Serotta initiated coverage of Boston Beer with an Underweight rating and $300 price target. While Serotta acknowledges Boston Beer’s "significant momentum" behind Twisted Tea and "impressive innovation track record," he sees downside to consensus expectations for 2023/24, the company’s long-term growth guidance and the market-implied growth outlook given increasing competition in the "beyond beer" space.
Westlake (WLK) – Scotiabank downgrades stock to Underperform on macro headwinds
On November 7, Scotiabank analyst Ben Isaacson downgraded Westlake to Underperform from Sector Perform with a price target of $100, down from $122. Westlake has higher North American exposure than most of its chemical peers at a time when the U.S. is likely to enter a recession on a lagged basis, Issacson tells investors. Meanwhile, new residential home starts continue to weaken, integrated PVC margin compression is ongoing and weak domestic demand for PE/PVC have led to increased exports for Westlake but export PVC prices are much lower than domestic contract prices, Isaacson adds.
Redfin (RDFN) – Oppenheimer downgrades stock to Underperform, sees "fundamentally flawed" model
On November 9, Oppenheimer analyst Jason Helfstein downgraded Redfin to Underperform from Perform with a $1.30 price target. The analyst says the company’s business model is "fundamentally flawed." Redfin’s fixed-cost model for agents compared to 100% commission for the wider industry prevents the company from optimizing its margins when the housing market declines and from making share gains when it rebounds, Helfstein tells investors in a research note. He estimates it will take two years for U.S. housing demand to return to meaningful growth and says Redfin’s convertible note refinancing in late-2023 or early-2024 also "creates risk."
Gray Television (GTN) – Wells Fargo double downgrades to Underweight, slashes target to $7
On November 9, Wells Fargo analyst Steven Cahall double downgraded Gray Television to Underweight from Overweight with a price target of $7, down from $25. The company is carrying more leverage than its broadcast peers due to station acquisitions from late 2021, Cahall tells investors in a research note. While these offer strategic benefits, "the timing is terrible, as industry trends have soured," including a 2022 "political miss," weaker core ads from recession and worsening cord cutting, says the analyst. He notes that Gray also has common and preferred dividends, so its cash for debt reduction is modest in 2023. Cahall expects the company’s net leverage will be going up, which he says "compresses the equity."
Published first on TheFly
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