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 December 11-15.
 
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Top 5 Buy Calls:

1. Microsoft initiated with bullish view at Truist

Truist initiated coverage of Microsoft (MSFT) with a Buy rating and three-year price target of $600. The firm believes Microsoft can grow revenue and free cash flow in the mid-teens, driven by upside to consensus numbers in artificial intelligence, Azure, and Copilot, “which could propel shares to compounding strong gains.” In a year when shares of the software behemoth have risen by over 50%, many investors will be wondering where the upside potential is from here, Truist tells investors in a research note. The firm says Microsoft’s AI opportunity will likely serve as a catalyst to accelerate both its top and bottom-line growth. It believes the ultimate opportunity could be in the tens of billions of dollars for the company.

2. Snap upgraded to Overweight at Wells Fargo

Wells Fargo upgraded Snap (SNAP) to Overweight from Equal Weight with a price target of $22, up from $8. The firm sees advertising positively inflecting at Snap for first time since Apple’s privacy initiatives in April 2021. The company’s reinvestment in advertising tech stack, new ads management and renewed focus leads to increased estimates materially above the Street, Wells t tells investors in a research note. The firm believes changes made over the past several months have meaningfully narrowed Snap’s ad product gap relative to other audience platforms. It views Snap’s recent product and ads leadership makeover as key to faster product innovation and revenue reacceleration.

3. Citi upgrades Nike to Buy on margin recovery in 2024

Citi upgraded Nike (NKE) to Buy from Neutral with a price target of $135, up from $100. While the company’s sales challenges remain, Citi is more optimistic about Nike’s ability to “protect” earnings in fiscal 2024 and 2025 despite a “choppy” macro environment, Citi tells investors in a research note. The firm sees a gross margin recovery starting in Q2 of 2024 through 2025 from leaner inventory, lower promotions and direct-to-consumer benefits. Nike also has a new innovation calendar in 2024 ahead of the Paris Olympics and a solid position in China, says Citi. It sees a favorable risk/reward at current share levels.

4. Foot Locker upgraded to Overweight at Piper Sandler

Piper Sandler upgraded Foot Locker (FL) to Overweight from Neutral with a price target of $33, up from $24. The firm is incrementally more positive on Foot Locker’s margin expansion opportunity in 2024. While a lack of clarity remains on the return to growth of Nike (NKE) product, Foot Locker is best positioned among the athletic and footwear group in the next 6-12 months, Piper tells investors in a research note. The firm expects expect newness to be better in 2024 which should lead to a favorable mix of full price sales.

5. Wells Fargo starts Roblox with Overweight ahead of ads benefit

Wells Fargo initiated coverage of Roblox (RBLX) with an Overweight rating and $49 price target. The firm views Roblox as a growing audience platform with “deep” engagement, rather than a gaming platform. Wells expects material contribution from the company’s advertising business in 2025, enabling margin expansion exceeding the investor day targets. The firm sees “meaningful upside” to Street bookings estimates in the out years, saying they are not properly capturing the ads contribution.

Top 5 Sell Calls:

1. Airbnb downgraded to Underweight at Barclays

Barclays downgraded Airbnb (ABNB) to Underweight from Equal Weight with a price target of $100, down from $135. The firm thinks online travel growth slows from here as eventually the “pent-up” travel demand will get exhausted – particularly as consumers’ wallets are increasingly under pressure. Meanwhile, alternative accommodations are showing signs of maturation, and the firm’s industry framework is mixed on travel overall, Barclays tells investors in a research note. The firm says that while artificial intelligence is an opportunity, recession is a risk. The firm is more cautious on travel into 2024.

2. Macy’s downgraded to Sell at Citi

Citi downgraded Macy’s (M) to Sell from Neutral with a $14 price target. The stock was up 20% on a Wall Street Journal report of a $21 per share bid made for the company, seemingly with a real estate angle, the firm tells investors in a research note. Citi says that “others have gone down this path before” and that is unsure how advanced the talks are. In this interest rate environment and with the secular challenges Macy’s faces, it may be difficult to finance, Citi adds. It believes Macy’s has more real estate value than the other department stores, but thinks monetizing “is easier said than done.” The firm finds it is hard to see enough real estate value to justify the current valuation of the shares.

3. Loop cuts Paramount to Sell, sees no upside from National Amusements interest

Loop Capital downgraded Paramount (PARA) to Sell from Hold with an unchanged $12 price target. According to media reports, David Ellison’s Skydance Media, in partnership with RedBird Capital, is “kicking the tires” on National Amusements, which is the controlling shareholder of Paramount, but the firm does not see the upside for the public shareholders of Paramount from the deal, the firm tells investors in a research note. The value of the company’s legacy media assets has continued to decline, Loop Capital notes, adding that Paramount+ is the “fourth or fifth ranked streaming service at best” and does not deserve a multiple close to Netflix (NFLX) or Hulu.

4. Cardinal Health initiated with bearish view at Wells Fargo

Wells Fargo initiated coverage of Cardinal Health (CAH) with an Underweight rating and $96 price target. While the company’s business quality and execution appear to be improving, Cardinal remains a structurally lower-growth company versus peers, the firm tells investors in a research note. Wells says the emerging disintermediation threat from Optum puts the stock’s multiple expansion at risk. The company’s contract with Optum is up for renewal in June 2024 and Optum appears to be preparing to handle at least some specialty distribution itself, the firm tells investors in a research note.

5. Roku cut back to Sell at MoffettNathanson

MoffettNathanson downgraded Roku (ROKU) to Sell from Neutral. The firm had taken its prior Sell call off the stock heading into Roku’s Q3 earnings on a belief that the company was getting more focused on efficiency and margin expansion, but “at over $100 per share now, Roku’s share price has nearly doubled since then” and the firm now thinks that the valuation is “stretched relative to the top-line risks we continue to env