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 November 6-10.
 
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Top 5 Buy Calls:

1. Capital One upgrades trio of data management names after Datadog earnings

Capital One upgraded MongoDB (MDB), Snowflake (SNOW) and Confluent (CFLT) to Overweight from Equalweight with price targets of $427, $195 and $27, respectively, in conjunction with earnings from sector peer Datadog (DDOG). The firm notes that the trio of stocks have run on Datadog’s commentary, but thinks it is “best to be positioned for at least a better-than-feared 2024 and potentially for a more bullish better-than-expected year in 2024 and into 2025.” There is likely be a multi-quarter recovery ahead, adds Capital One, which sees easier comps for each of the three and more reason to underwrite the potential for reacceleration of revenue growth in 2024 and 2025.

2. Several firms initiate Birkenstock with Buy-equivalent ratings

BMO Capital initiated coverage of Birkenstock (BIRK) with an Outperform rating and $50 price target. The firm believes Birkenstock represents a brand with “significant top-line whitespace ahead” via core growth, product extension and Geographic expansion. The firm sees “plenty of runway” in the core business. Goldman Sachs, Stifel, Piper Sandler, Williams Trading, Baird, Citi, Jefferies, JPMorgan, William Blair, Telsey Advisory, and Evercore ISI also started coverage of the stock with Buy-equivalent ratings.

3. Booking Holdings upgraded to Buy at DA Davidson on valuation

DA Davidson upgraded Booking Holdings (BKNG) to Buy from Neutral with an unchanged $3,400 price target. The firm is looking to take advantage of the recent pullback in the stock – down 7% since the end of September – while reporting “solid” Q3 results and giving “encouraging” commentary for 2024, the firm tells investors in a research note. The stock’s current valuation also represents an 11% discount to its five-year average price-to-earnings multiple, the firm added.

4. Bilibili initiated with a Buy at Mizuho

Mizuho initiated coverage of Bilibili (BILI) with a Buy rating and $18 price target. Bilibili is a leading video entertainment platform in China with over 300M monthly active users, the firm tells investors in a research note. Mizuho expects the company to successfully transition its products to more than double the total addressable market, accelerate sales growth to double digits, and reach profitability in fiscal 2024. It views the stock’s current valuation as compelling.

5. HP Inc. upgraded to Buy from Hold at Edward Jones

Edward Jones upgraded HP Inc. (HPQ) to Buy from Hold. The firm thinks HP Inc.’s shares are attractively valued and that the personal computer market will return to growth in 2024 as PCs purchased during the pandemic are replaced.

Top 5 Sell Calls:

1. Tesla initiated with a Reduce at HSBC

HSBC initiated coverage of Tesla (TSLA) with a Reduce rating and $146 price target. Tesla cars may well be the main driver of revenue and profits currently, but if the group is to be taken at its word, the future for Tesla is about robots, autonomous vehicles, energy storage and super-computers, HSBC tells investors in a research note. The firm adds, however, that the expected cost of capital for these businesses should be well above the group average given the regulatory and technological challenges they face.

2. BofA double downgrades Paramount to Underperform on lack of asset sales

BofA double downgraded Paramount (PARA) to Underperform from Buy with a price target of $9, down from $32. The firm’s prior bullish thesis and valuation methodology was predicated on Paramount’s inherent asset value in a potential sale, but it does not appear any significant asset sales are on the horizon despite the company receiving credible bids for several different assets, such as Showtime and BET. Given the secular challenges in the traditional media ecosystem, BofA was surprised to see Paramount walk away from these potential buyers for various assets. While the firm recognizes management should try to extract maximum value, shares have been down over 40% since May 1 and its concern is the longer it takes to execute potential asset sales, the less value they could ultimately garner. This, coupled with the challenging macro backdrop, persistent secular headwinds, negative free cash flow continuing into 2024 and the company’s elevated leverage “create an unfavorable medium-term outlook,” adds BofA, which notes the firm’s multiple for Paramount represents a “modest premium” to the current trading levels of both Warner Bros. Discovery (WBD) and Fox Corp. (FOX) and a discount to Disney (DIS).

3. Baidu downgraded to Negative from Mixed view at OTR Global

Global downgraded its view on Baidu (BIDU) to Negative from Mixed. The firm notes that its checks found brand advertisers shifted budgets away from Baidu search during Q3 as they sought better search formats and performance in social media, short video and e-commerce.

4. WK Kellogg initiated with an Underweight at Barclays

Barclays initiated coverage of WK Kellogg (KLG) with an Underweight rating and $11 price target. The firm sees the next couple of years as a “likely challenging transition” period for WK Kellogg, in light of a flat sales outlook in a declining ready-to-eat cereal category. The company also faces front-end-loaded capital needs following years of underinvestment and a back-end-loaded margin expansion/cash flow generation profile, Barclays tells investors in a research note.

5. NextEra pair downgraded to Sell at Seaport Research

Seaport Research downgraded NextEra Energy Partners (NEP) to Sell from Neutral with a $15.50 price target. The recent sale of Texas pipelines, short-term interest rate hedges and wind project repowering “won’t be enough” to continue NextEra Energy Partners’ 6% annual growth in distributions per unit beyond 2024, Seaport Research contends. The firm expects a “sharp” 50% cut in Partners’ distributions by late 2024, the analyst added. Seaport also downgraded NextEra Energy (NEE) to Sell from Neutral with a $44 price target.