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 October 23-27.
 
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Top 5 Buy Calls:

1. Seaport starts 10 companies in Internet sector with 7 Buy ratings

Seaport Research initiated coverage of ten companies within the Internet sector, including Online Advertising, eCommerce/Transaction Models, and SMB Services/Web Presence companies. The firm is constructive on the long-term growth of the sector, though revenue growth is “generally mixed,” with some companies still recovering from the pandemic and others facing tougher comps. Many of the ten covered companies have increasingly focused on operating margins over the last 12-18 months and are beginning to see the benefits as growth stabilizes and in some cases reaccelerates, added Seaport, which sees the group being set up for outperformance going into 2024. Among the group, Seaport starts Amazon (AMZN) with a Buy rating and $145 price target; Godaddy (GDDY) with a Buy and $85 target; Meta Platforms (META) with a Buy and $365 target; Pinterest (PINS) with a Buy and $33 target; Squarespace (SQSP) with a Buy and $35 target; Uber (UBER) with a Buy and $51 target; Wix.com (WIX) with a Buy and $103 target; Airbnb (ABNB) with a Neutral rating; Alphabet (GOOGL) with a Neutral and DoorDash (DASH) with a Neutral rating.

2. HSBC upgrades Microsoft to Buy on accelerating AI growth

HSBC upgraded Microsoft (MSFT) to Buy from Hold with a price target of $413, up from $347. The firm sees an improved outlook following the company’s stronger than expected fiscal Q1 results. Microsoft’s artificial intelligence exposure is broad and should be a catalyst across its large product portfolio, driving growth and margin expansion, HSBC tells investors in a research note. The firm sees 5%-7% upside to consensus earnings forecasts and an attractive valuation at current share levels.

3. Adobe upgraded to Outperform at Oppenheimer

Oppenheimer upgraded Adobe (ADBE) to Outperform from Perform with a $660 price target. The firm sees strengthening business momentum, a favorable outlook for fiscal 2024, and “durable growth” for Adobe based on positive fundamental trends and its top position in software for the generative artificial intelligence opportunity gleaned from Oppenheimer’s customer and industry surveys. Adobe investors will be rewarded through yearend and next fiscal year as concerns on penetration, pricing tolerance, and generative AI weakening the competitive moat dissipates, the firm tells investors in a research note.

4. Pinterest upgraded to Buy at Stifel

Stifel upgraded Pinterest to Buy from Hold with a price target of $32, up from $27. Channel checks “skew more positive” and there is “still plenty of room” for growth outside the company’s domestic market, the firm tells investors in a research note. Stifel says its digital advertising checks were largely positive overall, with growth that is pacing inline to ahead of internal plans exiting 2023. The firm believes the changes Pinterest has made to its native technology, paired with the recent launch of its Amazon partnership, “are likely to bear fruit as we enter the holiday spend period.”

5. Palo Alto Networks initiated with a Buy at Needham

Needham initiated coverage of Palo Alto Networks (PANW) with a Buy rating and $305 price target. The firm says Palo Alto has transformed itself into a stalwart in cybersecurity as the leader in network firewalls with greater than 25% and growing market share. The company has also evolved into a “diverse platform offering abundant growth opportunities outside firewall in modern security arenas,” Needham tells investors in a research note. The firm calls the company an “execution machine” that will see durable share gains, revenue growth and free cash flow expansion.

Top 5 Sell Calls:

1. Foot Locker downgraded to Underweight on headwinds at JPMorgan

JPMorgan downgraded Foot Locker (FL) to Underweight from Neutral with a price target of $17, down from $20. The company faces headwinds from “choppy” mall-retail traffic and key brand allocation shifts like Nike, the firm tells investors in a research note. JPMorgan adds that Foot Locker is lapping liquidation and promotional activity, which will create an incremental headwind to topline performance.

2. Bath & Body Works downgraded to Underweight at JPMorgan

JPMorgan downgraded Bath & Body Works (BBWI) to Underweight from Neutral with a price target of $27, down from $41. The analyst says the combination of moderating same-store-sales relative to pre-pandemic comp growth, ongoing separation-related investments, and pressure as the model returns to a normalized cadence of promotions present potential earnings headwinds.

In addition, Jefferies downgraded Bath & Body Works to Hold from Buy with a price target of $30, down from $45. The firm sees limited growth opportunities for the company after its data across social, foot traffic, and market share suggested a slowing of trends. 

3. F5 Networks downgraded to Underperform at BofA

BofA downgraded F5 Networks (FFIV) to Underperform from Neutral with a price target of $160, down from $165. The firm expects revenue growth to remain muted, calling for it to be down 2% and up 4% over the next two years, respectively. Given that, BofA believes the stock may continue to underperform the rest of the analyst’s coverage universe.

4. Extra Space Storage initiated with an Underweight at Wells Fargo

Wells Fargo initiated coverage of Extra Space Storage (EXR) with an Underweight rating and $115 price target. The firm sees elevated near-term risks from the LSI integration, and says recent declines in Street rates puts pressure on estimates for 2023 and 2024.

5. Barclays downgraded to Underperform on near-term risks at BofA

BofA downgraded Barclays (BCS) to Underperform from Neutral with a price target of $7.31, down from $8.77. The firm says a “potential material but unspecified restructuring charge to deliver unspecified benefits over an unspecified time period” adds to uncertainty about Barclays strategy and financial targets. While the charge could improve longer-term profitability, it seems unlikely to address the core issue of 70% of Barclays’ capital tied up in the lower returning Corporate & Investment Bank, which the market perceives as volatile, BofA tells investors in a research note. The firm cites near-term risks to capital distributions and uncertain profitability benefits, both in terms of magnitude and timing, for the downgrade.