Buy/Sell: Wall Street’s top 10 stock calls this week

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 June 19-23.
 
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Top 5 Buy Calls:

1. Adobe upgraded to Outperform at BMO Capital on positive generative AI view

BMO Capital upgraded Adobe (ADBE) to Outperform from Market Perform with a price target of $570, up from $500. The firm believes that Adobe can capture price/mix, as well as new users, through generative AI, adding that its recent survey feedback on Adobe Express has been positive. BMO further thinks net new ARR can sustain in about a $1.8B range through FY24 and believes that upside remains, particularly when compared with other large cap growth stocks, despite the stock having moved higher over the past few months.

2. Spotify assumed with Outperform at Wolfe Research on top-line acceleration

Wolfe Research upgraded Spotify (SPOT) to Outperform from Peer Perform with a $190 price target after a different analyst assumed coverage of the name. The firm sees a path for top-line acceleration, steady margin expansion, and potential for sustained upside revisions to Street estimates over the next roughly 12 months. Risks to the Outperform rating include Spotify’s lack of valuation support and potential slowdown in subs growth, Wolfe tells investors in a research note.

3. Philip Morris upgraded to Buy, ‘Positive Catalyst Watch’ opened at Citi

Citi upgraded Philip Morris (PM) to Buy from Neutral with a price target of $117, up from $109, and opened a “Positive Catalyst Watch” on the stock, citing the belief that the current stock price is “not fairly valuing the group’s market-leading, high growth NGP footprint.” Given the company’s global leadership in Next Generation Products, or NGPs, and its potential for further mid-term upside from the roll-out of IQOS in the U.S., Citi believes the market is failing to adequately value the group’s future growth and cash-flow opportunity.

4. B. Riley starts Expedia at Buy, positive on improved execution, margin expansion

B. Riley initiated coverage of Expedia (EXPE) with a Buy rating and $160 price target. The firm is positive on the company’s leading position across key markets, improved execution resulting in clawback of U.S. market share, tailwinds in its tech stack changes, momentum in B2B, and margin expansion through cost leverage and marketing efficiencies.

5. Baidu upgraded to Overweight from Equal Weight at Morgan Stanley

Morgan Stanley upgraded Baidu (BIDU) to Overweight from Equal Weight with a price target of $190, up from $160. The firm believes Baidu is the most obvious beneficiary of the $7.4T AI internet opportunity in China, and estimates 31% CAGR in Baidu’s cloud revenue by 2025.

Top 5 Sell Calls:

1. Wolfe Research cuts Peloton to Underperform, sees low demand lasting longer

Wolfe Research downgraded Peloton (PTON) to Underperform from Peer Perform with a $6.00 price target after a different analyst assumed coverage of the name. The firm warns that the company is set to experience lower demand for longer while expressing a lack of confidence in the management’s new growth initiatives. Wolfe further states that the path to sustainable profitability and free cash flow for Peloton is unclear.

2. Piper Sandler cuts DigitalOcean to Underweight citing “too much commotion”

Piper Sandler downgraded DigitalOcean (DOCN) to Underweight from Neutral with a $35 price target. For the updated view, the firm cited high SMB exposure, a likely top-line cut coming given its analysis of customers, web-traffic, job postings and ARR build, friction between Cloudways and other MSPs, waning portfolio competitiveness, questionable capital usage, and stretched valuation.

3. Alcoa downgraded to Underweight at Morgan Stanley amid “sluggish fundamentals”

Morgan Stanley downgraded Alcoa (AA) to Underweight from Equal Weight with a price target of $33, down from $43. The firm sees “material downside” to consensus estimates for Alcoa and believes the stock will face downward pressure and underperform as negative earnings revisions materialize,. The “large negative revisions” in its earnings estimates are mainly due to the high operating leverage Alcoa has to aluminum prices, notes the firm, who points out that its commodity team has lowered its aluminum price forecasts in the near- to mid-term.

4. Dow Inc. downgraded to Underperform at BofA on commodity chemical caution

BofA downgraded Dow Inc. (DOW) to Underperform from Neutral with a price target of $55, down from $64. U.S. commodity chemical companies have very back-half weighted earnings expectations for 2023, whether explicitly guided or not, and this weighting runs counter to normal seasonality considering how much of these businesses are tied to North American and European construction, the firm tells investors. However, economic momentum is not materializing and with a lack of economic momentum, feedstock deflation has set in, notes BofA, which has cut estimates across the commodity sub-sector, lowered targets for a number of commodity chemical stocks, and downgraded Dow to Underperform and cut its ratings on both Celanese (CE) and Chemours (CC) to Neutral.

5. Infosys cut to Negative at Susquehanna on eroding competitive advantages

Susquehanna downgraded Infosys (INFY) to Negative from Neutral with a price target of $13, down from $15. While calling Infosys “among the world’s great tech companies with a powerful brand built on operational excellence,” the firm is concerned that some of the company’s current competitive advantages may be eroding due to architectural changes. Susquehanna, which notes that its research suggests a variety of factors may be tempering demand, is lowering estimates “further below consensus.” The firm is also starting to hear that AI and its implicit open sourcing is beginning to create pricing pressure for vendors and “it’s a prisoners’ dilemma which supplier cuts prices first,” adding that in-sourcing “may be a real alternative again” if customers don’t see shared savings.