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 January 15-19.
 
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Top 5 Buy Calls:

1. BofA upgrades Apple to Buy on end of negative revisions

BofA upgraded Apple (AAPL) to Buy from Neutral with a price target of $225, up from $208. The firm sees a stronger multi-year iPhone upgrade cycle driven by the need for the latest hardware to enable generative artificial intelligence features to be introduced in 2024 and 2025. BofA also expects higher growth in Apple’s Services as the company monetizes its installed base better. Apple’s capital returns are strong, and the stock remains under-weighted versus the S&P 500 Index, adds the firm, which believes AI features could induce institutional investors to increase positions. BofA calls the end of Apple’s negative earnings revisions.

2. Target upgraded to Overweight from Equal Weight at Morgan Stanley

Morgan Stanley upgraded Target (TGT) to Overweight from Equal Weight with a price target of $165, up from $140. The firm made rating changes in the hardline, broadline and food retail sector as part of its 2024 outlook. Morgan Stanley tells investors to focus on stocks with reasonable 2024 estimates and stronger 2025 earnings growth. Lower interest rates, bottoming durables and a late 2024 housing inflection make for an improving setup, the firm tells investors in a research note.

3. Argus upgrades Pinterest to Buy, sees higher engagement and ad loads

Argus upgraded Pinterest (PINS) to Buy from Hold with a $45 price target. More than half of the company’s users have intention to purchase prior to visiting the Pinterest platform, and the firm sees more of these users, higher engagement, increased ad prices and higher ad loads to drive growth. In order to increase shopping, Pinterest is adding products, using AI to make better recommendations, and partnering with Amazon (AMZN) to increase ad loads and add new advertisers, Argus added.

4. Palo Alto Networks initiated with an Outperform at Bernstein

Bernstein initiated coverage of Palo Alto Networks (PANW) with an Outperform rating and $402 price target. Palo Alto’s platform play appears well-positioned, and may help grow top line 3-4-times by 2030, and put 2026 growth +15% above consensus, the firm tells investors in a research note. The company has a good-enough product and has a clear competitive swim lane in a large market, Bernstein argues.

5. Home Depot upgraded to Overweight at Piper Sandler

Piper Sandler upgraded Home Depot (HD) to Overweight from Neutral with a price target of $400, up from $311. The firm is taking a more bullish stance on home improvement – and more specifically, large remodel projects – saying home equity extraction activity is trending toward improvement in 2024. Piper now thinks Home Depot is set to outperform both the market and Lowe’s (LOW). Home Depot’s greater Pro exposure and newly built complex Pro capabilities should drive healthy comp growth as large remodel activity returns, the firm tells investors in a research note. Piper says Home Depot also has a much more favorable margin setup in 2024 vis-a-vis Lowe’s.

Top 5 Sell Calls:

1. Spirit Airlines downgraded to Sell at Citi

Citi downgraded Spirit Airlines (SAVE) to Sell from Neutral with a price target of $4, down from $13. Although JetBlue (JBLU) and Spirit can still appeal Tuesday’s court ruling, which blocked the carriers’ proposed merger, it is unclear why JetBlue wouldn’t cut its losses here and recognize that it avoided a risky bid on a highly levered carrier with steep losses, the firm tells investors in a research note. Citi assumes that each carrier goes their separate way and thinks a new bid seems unlikely for Spirit without the carrier first restructuring its debt. Spirit’s net debt jumped from $3.3B to $5.5B over the past two years, EBITDA shouldn’t turn positive until 2025 and the carrier’s bond yield has soared above 40%, the firm points out.

Spirit Airlines downgraded to Negative at Susquehanna after judge blocks merger

Susquehanna downgraded Spirit Airlines to Negative from Neutral with a price target of $5, down from $15. The firm sees “little likelihood” of JetBlue reworking the companies’ deal after a U.S. district court judge ruled to block the proposed merger. Given that view, Susquehanna sees Spirit’s fundamental challenges come into sharper focus in a challenging operating landscape for U.S. carriers into 2024. Any other potential bidder will have to contemplate “what was a lengthy and arduous regulatory review,” the firm added.

2. Barclays cuts SolarEdge to sell, says Enphase better positioned

Barclays downgraded SolarEdge Technologies (SEDG) to Underweight from Equal Weight with a price target of $50, down from $74. Consensus estimates will need to come down for both SolarEdge and Enphase Energy (ENPH), but the magnitude is larger for SolarEdge, the firm tells investors in a research note. Barclays calculates that SolarEdge is trading at a three-turn premium to Enphase based on 2025 earnings estimates. Due to the better recovery expect for Enphase and the higher gross margins, Barclays thinks these valuations should be flipped with Enphase trading at a premium. As a result, the firm downgraded SolarEdge Underweight and raised its price target for Equal Weight-rated Enphase Energy to $106.

3. Playtika downgraded to Underperform at BofA

BofA downgraded Playtika (PLTK) to Underperform from Neutral with a price target of $8, down from $11. The firm cites a “tepid” growth outlook and lack of catalysts for the downgrade. Playtika’s “aging” portfolio is in slow decline and its acquisition strategy needs to be clarified. BofA sees the PC and console industry as a much better 2024 play than mobile gaming.

4. Brinker downgraded to Underweight at Morgan Stanley on modest pricing power

Morgan Stanley downgraded Brinker (EAT) to Underweight from Equal Weight with an unchanged price target of $36. The firm doesn’t find the risk-reward skew as attractive right now with patience still required for the turnaround story to play out, the analyst tells investors. Like with Cheesecake Factory (CAKE), Morgan Stanley thinks the “discretionary occasion” restaurant likely still struggles in 2024 compared to the overall industry and more modest same-store sales growth and pricing power could mean that Brinker has a harder time offsetting cost inflation and expanding margins.

5. Canada Goose downgraded to Sell at Williams Trading with brand “losing luster”

Williams Trading downgraded Canada Goose (GOOS) to Sell from Hold with a price target of C$11, down from C$13. Management continues to believe that the Canada Goose brand is a luxury brand rather than a premium outdoor brand, says the firm, which sees the brand “losing luster” and thinks ongoing sales in the U.S. will “remain challenged for some time as Canada Goose prices itself out of the market.” Williams, which expects that the problems starting to occur in the U.S. will develop over time in Europe and Asia, and “to a lesser extent, leak into Canada,” forecasts that Q3 and 2024 results will come in at the low end of guidance.