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 July 3-7.
 
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Top 5 Buy Calls:

1. DBS starts Amazon at Buy with retail segment highlighted as “key driver”

DBS Bank initiated coverage of Amazon.com (AMZN) with a Buy rating and $150 price target. The company’s retail segment is expected to become a “key driver” of growth, DBS tells investors in a research note. The firm says that while Amazon is the leading e-commerce player accounting for 39% of the U.S. e-commerce, there is a “significant portion of untapped market to capture.” It believes the focus will shift towards profitability as the retail segment completes its fulfilment build cycle. DBS expects Amazon’s retail segment operating income to be a key driver of share price from 2023 onwards, “dethroning” Web Services’ operating income.

2. Northland admits to having been wrong, upgrades AMD to Outperform

Northland upgraded AMD (AMD) to Outperform from Market Perform with a price target of $150, up from $81. The “only thing worse than being wrong is not admitting it, and we have been wrong on AMD shares,” says the firm, who sees a risk it is upgrading too late, but thinks AMD shares will “get an AI multiple.” AMD has been second to Nvidia (NVDA) in GPUs for decades and Northland doesn’t think that changes in the AI era, but it thinks AMD’s open-source software approach “likely reduces” Nvidia’s software moat and that AMD has IP for AI beyond GPUs.

3. Keurig Dr Pepper upgraded to Overweight at Morgan Stanley

Morgan Stanley upgraded Keurig Dr Pepper to Overweight (KDP) from Equal Weight with an unchanged price target of $36. After the stock’s “pronounced” underperformance, the firm views the valuation as “too low” and sees an “opportune entry point.” Visibility on continued U.S. cold drink upside provides flexibility to offset coffee weakness, argues Morgan Stanley, who sees “an outsized potential bull case” that could come into sight in the second half if there is a coffee inflection. However, the firm notes that it sees Keurig Dr Pepper’s fundamental inflection as more in the second half and has lowered its EPS view slightly to in-line with consensus for Q2.

4. BMO Capital bullish on BioMarin, upgrades to Outperform

BMO Capital upgraded BioMarin Pharmaceutical (BMRN) to Outperform from Market Perform with an unchanged price target of $102. The firm believes its thesis of slow Roctavian uptake is materializing, as reflected in Roctavian’s slow European launch and FDA label restrictions. However, at the stock’s current valuation, Roctavian “constitutes an upside opportunity” as it is largely not priced in, it tells investors in a research note. Moving forward, BMO expects Biomarin’s base business to provide downside protection while positive updates around Voxzogo growth and Roctavian dosing “will drive upside.” As such, it believes BioMarin’s risk/reward is now skewed to the upside.

5. Pegasystems upgraded to Outperform at Wedbush

Wedbush upgraded Pegasystems (PEGA) to Outperform from Neutral with a price target of $65, up from $50. The firm cites incrementally better field checks and calls Pegasystems “an under the radar AI story that is now starting to form.” Wedbush also believes the legal issues from the Appian (APPN) lawsuit are “overblown,” stating that while the potential outcomes, legal settlement, and litigation costs are still unclear, it ultimately believes that the resolution will not be complete for years and “Pega will have to likely pay a small settlement at the end of the day that is significantly less than the original judgment” of $2.036B.

Top 5 Sell Calls:

1. Lumentum downgraded to Underweight from Equal Weight at Barclays

Barclays downgraded Lumentum (LITE) to Underweight from Equal Weight with a price target of $42, up from $40. The shares are “expensive” with no catalyst on the horizon and a telecom inventory overhang “looming,” Barclays tells investors in a research note. The firm says Lumentum’s valuation “doesn’t make sense” with no catalyst and the telecom inventory correction in the “early Innings.”

2. Affirm downgraded to Underweight at Piper Sandler

Piper Sandler downgraded Affirm (AFRM) to Underweight from Neutral with an unchanged price target of $11. The firm expects persistently higher interest rates to pressure operating margins, saying Affirm needs to hold more loans on its balance sheet. In addition, tighter underwriting standards, increased pricing, and the re-introduction of student debt payments will cause an incremental slowdown in the company’s revenue growth over the next year, Piper tells investors in a research note. As such, the firm believes it will be difficult for Affirm to generate the 24% revenue growth implied by consensus estimates.

3. Eagle Materials downgraded to Underweight at JPMorgan

JPMorgan downgraded Eagle Materials (EXP) to Underweight from Neutral with a price target of $190, up from $150. The firm downgraded the U.S. construction materials sector as it sees limited room for upside after the recent rally. The rally has left valuations “stretched” and the shares are now trading above their five-year averages, JPMorgan tells investors in a research note. While the performance has been entirely justified, it is hard to continue adding at these levels, says the firm.

4. Honda downgraded to Sell from Neutral at UBS

UBS downgraded Honda (HMC) to Sell from Neutral with a price target of 3,90 yen, down from 3,400 yen. Honda’s share price has risen 46% year-to-date and is up 19% excluding positive impacts from yen depreciation, and a near-term profit recovery and expanded share buybacks have been discounted, UBS tells investors in a research note. The firm expects profit momentum to slow from a peak in Q1-Q2 on signs of a slowdown in motorcycles and tougher competition in the U.S. for automobiles.

5. Summit Materials cut to Underweight from Neutral at JPMorgan

JPMorgan downgraded Summit Materials (SUM) to Underweight from Neutral with a price target of $37, up from $32. The firm downgraded the U.S. construction materials sector as it sees limited room for upside after the recent rally. The rally has left valuations “stretched” and the shares are now trading above their five-year averages, it tells investors in a research note. While the performance has been entirely justified, it is hard to continue adding at these levels, says JPMorgan.