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 18-22.
 
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Top 5 Buy Calls:

1. Snap resumed with an Outperform at Raymond James

Raymond James resumed coverage of Snap (SNAP) with an Outperform rating and $20 price target. The firm’s “Ad stack revamp” thesis is based on the company’s attracting incremental GenZ direct response dollars following a broad-based ad stack re-architecture to address IDFA signal loss, recommendations improvements, campaign tools, and bolstering product/go-to-market functions with the infusion of new talent. Raymond James adds that these should collectively set the stage for accelerating strong double-digit direct response growth in 2024 amid a “softish” landing macro backdrop.

2. Salesforce upgraded to Overweight at Morgan Stanley on GenAI potential

Morgan Stanley upgraded Salesforce (CRM) to Overweight from Equal Weight with a price target of $350, up from $290. The firm sees “several vectors” for Salesforce to drive top-line upside versus “muted” investor growth expectations. While generative AI, or GenAI, app demand is likely to ramp in the second half of 2024, Salesforce’s Data Cloud offering will likely see traction earlier as organizations look to prep their data for GenAI and the company’s “unrivaled breadth” of Front Office workflows and depth of customer data well positions Salesforce to benefit from GenAI innovations, Morgan Stanley added.

Salesforce upgraded to Outperform at Wolfe Research

Wolfe Research also upgraded Salesforce to Outperform from Peer Perform with a $315 price target. The firm, whose core thesis is that growth has bottomed and should stay double digits and that the “commitment to margin leverage is real,” thinks 2024 is “the year to own this value growth stock.”

3. Spotify upgraded to Buy at Pivotal Research

Pivotal Research upgraded Spotify (SPOT) to Buy from Hold with a price target of $265, up from $170. The firm forecasts higher medium- to long-term EBITDA and free cash flow given the company’s renewed focus on financial discipline and sees “continued strong results” and what appears to be an ability to take price without significant churn. It “appears that Spotify has won the digital audio streaming content war,” Pivotal added.

4. McDonald’s initiated with a Buy at HSBC

HSBC initiated coverage of McDonald’s (MCD) with a Buy rating and $317 price target. A return to U.S. capacity growth, combined with multi-pronged sales initiatives, provide upside potential for the “global brand icon with diversified, resilient revenue streams,” the firm tells investors.

5. Cheesecake Factory upgraded to Outperform from Neutral at Wedbush

Wedbush upgraded Cheesecake Factory (CAKE) to Outperform from Neutral with a price target of $40, up from $34. The firm views Cheesecake Factory’s 2024 same-store sales growth estimates as realistic and believes Q4’s UL margins will validate the uptick expected in 2024. Wedbush views Cheesecake’s consistent transaction growth outperformance vs. the peer set, North Italia’s and Flower Child’s consistent positive transaction growth, Cheesecake Factory’s margin trajectory, and compelling CoC returns that is leading to accelerated unit growth, as underappreciated. The firm is also hopeful that a declining interest rate environment will alleviate the outsized pressure on its valuation.

Top 5 Sell Calls:

1. Roku downgraded to Sell at Seaport Research

Seaport Research downgraded Roku (ROKU) to Sell from Neutral with a $75 price target. Roku’s advertising growth faces challenges from “streaming behemoths” Disney+ (DIS) and Netflix (NFLX) having launched ad tiers, as well as the broader Media & Entertainment spending pullback and from a softer upfront and scatter market that reacted to last season’s trends, the firm tells investors. Seaport Research, which is cautious on the growth prospects and reliance on revenue multiples to justify the current stock price, adds that industry digital ad growth expectations for Q4 and 2024 that are above its estimates for Roku imply that the company could be losing share.

2. Wells Fargo downgraded both Zoom Video, DocuSign to Underweight

Wells Fargo downgraded Zoom Video (ZM) and DocuSign (DOCU) to Underweight from Equal Weight. The firm says that while it has “exercised patience with some of the pandemic ‘winners,'” it has become clear over the course of the past year that many are still struggling to find stable footing. Given the lack of clear growth/margin strategy going forward, Wells is expecting an uptick in activist/M&A interest in 2024 aiming to address these challenged models, but isn’t expecting substantive fixes in all cases.

3. Cinemark downgraded to Underweight at Wells Fargo

Wells Fargo downgraded Cinemark (CNK) to Underweight from Equal Weight with a price target of $13, down from $16. The firm revised its 2024 domestic box office estimate down by 10% and believes Street estimates for FY24 remain too high, so it expects shares to be pressured over the near-term by further negative revisions.

4. Wells Fargo downgrades Clear Secure to Underweight, keeps $20 price target

Wells Fargo downgraded Clear Secure (YOU) to Underweight from Equal Weight with a $20 price target. The firm notes shares have declined by 20% year-to-date, since recovering about 40% prior two months. While the growth profile since IPO has proven durable, Wells sees an air pocket ahead in 2024.

5. Highwoods Properties downgraded to Underweight at Morgan Stanley

Morgan Stanley downgraded Highwoods Properties (HIW) to Underweight from Equal Weight with a price target of $18, down from $22. Sun Belt fundamentals remain under pressure with class A market vacancy of 21.2% and the firm’s expectations for Highwoods’ occupancy to drop to 87.2% by year end 2024. In addition, Morgan Stanley sees risk to consensus estimates for 2024 given underappreciated occupancy headwinds and says the recent pricing on debt issuance and expected cap rates on potential sales may be underappreciated by the market.