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 22-26.
 
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Top 5 Buy Calls:

1. Netflix upgraded to Outperform at Macquarie

Macquarie upgraded Netflix (NFLX) to Outperform from Neutral with a price target of $595, up from $410. Netflix reported “excellent” Q4 results and outlook as its efforts to boost subscribers, revenue and earnings are bearing fruit, the firm tells investors in a research note. Macquarie says the company’s profit upside is now coming into view from the positive changes it has implemented in the past year, which merits higher estimates and stock multiple. Netflix is also expanding into the live events business “in a big way” with the signing of WWE (WWE) Raw, which can grow its audience and advertising, contends the firm. Macquarie had been waiting for confirmation that Netflix’s moves were paying off. “We have that now, and upgrade to Outperform,” it writes.

2. Nvidia initiated with an Overweight at Cantor Fitzgerald

Cantor Fitzgerald initiated coverage of Nvidia (NVDA) with an Overweight rating and $775 price target. Nvidia remains the artificial intelligence compute company where the opportunity is not a percentage of data center revenues, but rather a percentage of worldwide IT spending, the firm tells investors in a research note. Cantor Fitzgerald expects the shares to “climb the current wall of worry throughout 2024 as investors gain confidence of sustained growth into 2025 and beyond.”

3. New Street upgrades AMD on AI chip spending growth

New Street upgraded AMD (AMD) to Buy from Neutral with a $215 price target after analyzing the possibility of $400B being spent on artificial intelligence chips in 2027. AMD is the best way to play a fast adoption scenario of AI chips, with the most valuation and expectation upside, the firm tells investors in a research note. New Street believes AMD’s multiple will normalize towards 30-times as its growth slows, implying a $215 share price in 12 months, or 26% upside.

AMD initiated with an Overweight at Cantor Fitzgerald

Cantor Fitzgerald initiated coverage of AMD with an Overweight rating and $190 price target as the firm started coverage on 18 names in the Semiconductor & Semiconductor Equipment industries. The firm views AMD as a key beneficiary of the market’s search for alternatives to Nvidia in accelerated computing. Further, Cantor sees buyside continuing to push to an estimated $6 in EPS as a stretch goal.

4. Micron initiated with an Overweight at Cantor Fitzgerald

Cantor Fitzgerald initiated coverage of Micron (MU) with an Overweight rating and $100 price target. The firm, which recommends investors remain Overweight semiconductor stocks as a group, contends that the combination of improving pricing, supply discipline, improving end markets, and the incremental DRAM demand from Generative AI sets up Micron to see “a meaningful recovery” in revenues, margins, and free cash flows in 2024-2025.

5. Broadcom initiated with an Overweight at Cantor Fitzgerald

Cantor Fitzgerald initiated coverage of Broadcom (AVGO) with an Overweight rating and $1,300 price target. Rationalization of VMware Opex, first half of the year vs. second half $1B restructuring expenses embedded in guidance, and deleveraging should enable $9-plus in EPS in the April quarter followed by $14-plus entering, the firm tells investors in a research note. Cantor sees a long runway for EPS, free cash flow and dividend growth for Broadcom with vision to annualized earnings power of $65 exiting 2025.

Top 5 Sell Calls:

1. Tesla initiated with a Sell at Redburn Atlantic

Redburn Atlantic initiated coverage of Tesla (TSLA) with a Sell rating and $170 price target as the firm launched coverage of nine automotive original equipment manufacturers, with a “cautious bias” driven by falling incremental returns. Margins face fading support, which had been provided by a resilient consumer and vehicle undersupply, Redburn tells investors in a research note. The firm expects the winners to iterate best-in-class electric vehicle platforms and scale desirable models to support high utilization at lower unit costs. Its preferred names are BMW (BMWYY) and Stellantis (STLA). Tesla has largely retained its technical leadership in electrical architectures, offering scale advantages and lower unit costs, says Redburn. However, its valuation “appears indifferent to margin pressure from pricing and rising capital needs,” adds the firm. Redburn rates it Sell, alongside Volkswagen (VWAGY) and Ford (F), where it also detects electric vehicle challenges.

2. Coinbase downgraded to Underweight at JPMorgan

JPMorgan downgraded Coinbase (COIN) to Underweight from Neutral with an unchanged price target of $80. The firm continues to see Coinbase as the dominant U.S. exchange in the crypto ecosystem and a leader in cryptocurrency trading and investing globally. However, JPMorgan thinks the catalyst in bitcoin exchange traded funds that has pushed the ecosystem out of its winter will disappoint market participants. Cryptocurrency prices are already under pressure, with bitcoin falling below $40,000, and there is greater potential for cryptocurrency ETF enthusiasm to “further deflate,” driving with it lower token prices, lower trading volume, and lower ancillary revenue opportunities for firms like Coinbase, the firm tells investors in a research note. JPMorgan sees the potential for 2024 to be a more challenging year for Coinbase shares.

3. Williams downgrades VF Corp. to Sell on lack of Vans turnaround

Williams Trading downgraded VF Corp. (VFC) to Sell from Hold with a price target of $13, down from $17. Based on channel checks and commentary from some retailers at the recent ICR conference, there are no indications that Vans will turn around in the foreseeable future, the firm tells investors in a research note. Williams Trading says the Timberland business remains challenged, “to say the least, and has proved to be huge disappointment since it was acquired in 2011.” VF is in a “tenuous situation,” according to the firm.

4. Philip Morris downgraded to Sell at UBS

UBS downgraded Philip Morris (PM) to Sell from Buy with a price target of $86.50, down from $105, as a new analyst at the firm assumed coverage of the stock. The firm’s analysis suggests growth of next generation products, which make up 20% of tobacco industry revenue, is likely to slow over the next five years, largely due to heated tobacco. UBS expects companies will fall short of their medium-term next generation product targets, which is a key driver of valuations. In this environment, the firm prefers tobacco stocks that will not disappoint on key operating metrics and can return significant cash to shareholders. For Philip Morris, it expects IQOS normalization.

5. Polestar Automotive initiated with an Underperform at Bernstein

Bernstein initiated coverage of Polestar Automotive (PSNY) with an Underperform rating and $1.15 price target. The firm says it loves the innovative asset-light strategy and the cars, but doesn’t think the company should be a stand-alone equity. Bernstein further believes Polestar will miss its 2025 targets, burn 25% more cash than guided, and will need more funding. It would make more sense for Polestar to eventually fold back into the Volvo Cars-Geely ecosystem, making equity returns for investors uncertain, the firm argues.