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 February 13-17.
Find all top-rated stocks by the best-rated analysts on TipRanks.
Top 5 Buy Calls:
Five Below (FIVE) – Roth MKM ups stock to Buy, expects shares to outperform this year
On February 13, Roth MKM upgraded Five Below to Buy from Neutral with a price target of $240, up from $180. Over the last several months, the company’s "abrupt shift to value-oriented merchandise" has taken shape more quickly than anticipated, the firm tells investors in a research note. Roth MKM says Five Below’s comps have improved sequentially and profitability improvements are coming. As such, the firm expects the shares to outperform over the balance of the year.
Zillow (ZG) – Upgraded to Outperform at Evercore on five “key factors”
On February 13, Evercore ISI upgraded Zillow Group to Outperform from In Line with a price target of $61, up from $34, citing five "key factors." On a macro level, the firm anticipates Q1 being the trough quarter for residential real estate in terms of existing homes sales and home prices. Given this view, Evercore would anticipate top-line trends for Zillow starting to positively inflect in Q2. In terms of its other three factors, the firm believes Zillow should fully participate in the real estate market recovery; product initiatives and offerings that Zillow has invested in could potentially set up Zillow for stronger growth and profitability; and the firm still sees "reasonable" valuation upside from current levels with the shares about 78% off their 2021 high.
Ralph Lauren (RL) – BofA upgrades to Buy, raises target to $145
On February 13, BofA upgraded Ralph Lauren to Buy from Neutral with a price target of $145, up from $130. In terms of U.S. wholesale, Ralph Lauren is best positioned among peer apparel vendors and the firm has confidence that its strong revenue trends can continue, the firm tells investors in a research note. BofA also thinks management has "baked in an appropriate level of cautiousness" on the U.S. value channel and European wholesale business in their outlook.
Restaurant Brands (QSR) – KeyBanc upgrades stock on improved growth prospects
On February 15, KeyBanc upgraded Restaurant Brands to Overweight from Sector Weight with a $76 price target. With better franchisee alignment and a fresh strategy to improve same-store-sales, the company’s growth prospects have improved significantly since the first half of 2022, the firm tells investors in a research note. KeyBanc sees a "compelling" risk/reward given the stock’s discount relative to peers. It cites better transparency and evidence of improving franchisee profitability under Executive Chairman Patrick Doyle for the upgrade.
Fastly (FSLY) – Craig-Hallum sees return of “beat/raise mode”
On February 16, Craig-Hallum upgraded Fastly to Buy from Hold with a price target of $17, up from $9, after the company reported a quarterly top- and bottom-line beat and gave full year 2023 guidance that was above the Street forecast at the mid-point. The business feels as though it is "settling into a more predictable/manageable growth path" after several years of disruption, said the firm, which views Fastly as likely to resume a "beat/raise mode," thinks shares have bottomed and believes they will likely rise as the year progresses.
Meanwhile, DA Davidson also upgraded Fastly to Buy from Neutral with a price target of $17, up from $8.50. The company’s Q4 results "beat all around," and importantly, gross margins were ahead of expectations for the second straight quarter, the firm tells investors in a research note. DA Davidson believes new CEO Todd Nightingale has brought a renewed focus on "operational rigor," capital efficiency, and streamlined product packaging. While the shares likely need to "cool off near-term" following an 85% run over the last 1.5 months, they are set up to outperform over the next 12-18 months, contends Davidson.
Top 5 Sell Calls:
Okta (OKTA) – Goldman Sachs says Sell as Microsoft becomes more competitive
On February 14, Goldman Sachs initiated coverage of Okta with a Sell rating and $70 price target. The analyst believes emerging software industry dynamics are favorable for long-term investors. Multi-product platforms have gained momentum, the industry is less cyclical, and unit economics outperform broader software, Goldman tells investors in a research note. However, for Okta, the firm expects the pace of its share gain in identity access management to slow, saying Microsoft (MSFT) is becoming slightly more competitive and the identity cloud upgrade cycle being further along.
BofA also initiated coverage of Okta on February 13 with an Underperform rating and $64 price target. The Street is modeling 18% revenue growth over the next two years, but BofA thinks this is "too optimistic" and model growth of 16%, stating that it sees elevated risks of slow growth and limited margin upside given intense competition with Microsoft. Even after the 60% decline over the last 12 months, the firm expects Okta shares to underperform and it sees "no positive catalysts in sight."
Cloudflare (NET) – Goldman starts coverage with Sell rating, $51 target
On February 14, Goldman Sachs initiated coverage of Cloudflare with a Sell rating and $51 price target. The firm believes emerging software industry dynamics are favorable for long-term investors. Multi-product platforms have gained momentum, the industry is less cyclical, and unit economics outperform broader software, Goldman tells investors in a research note. However, for Cloudflare, the firm thinks the path to executing on $5B in annual recurring revenue will likely not be linear. Over the medium term, the risk/reward is skewed negative for the stock, writes the analyst.
Boston Beer (SAM) – Bernstein downgrades to Underperform, cuts target to $255
On February 16, Bernstein downgraded Boston Beer to Underperform from Market Perform with a price target of $255, down from $320. The company’s much lower than expected fiscal 2023 guidance reduces the potential for meaningful gross margin expansion, Bernstein tells investors in a research note. The firm says Boston Beer’s supply inefficiencies run deeper than initially thought. Until Truly stabilizes, "it’s like trying to hit a moving target," writes Bernstein. The firm adds that Twisted Tea’s "stellar" growth is insufficient to offset the decline of and uncertainty around Truly’s near-term performance.
TechTarget (TTGT) – JPMorgan bearish, starts coverage with Underweight
On February 16, JPMorgan initiated coverage of TechTarget with an Underweight rating and $41 price target. The company’s business is profitable, but its historic and future revenue growth appear to be below dynamics of the addressable market, implying that the company is not gaining share, JPMorgan tells investors in a research note. The firm sees "tough times ahead" for TechTarget.
Check Point (CHKP) – SMBC downgrades to Underperform, trims target
On February 16, SMBC Nikko downgraded Check Point Software Technologies to Underperform from Neutral with a price target of $120, down from $125. The firm says the deterioration of forward-looking metrics implies further growth deceleration for the company. This is on top of contracting margins and a lack of foreseeable catalysts, SMBC tells investors in a research note. The firm believes Check Point’s shares losses in the core firewall market are accelerating while it is struggling to scale its non-firewall segments.
Published first on TheFly
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