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 29 – February 2.
 
Find all top-rated stocks by the best-rated analysts on TipRanks.

Top 5 Buy Calls:

1. AMD upgraded back to Outperform at Northland

Northland upgraded AMD (AMD) to Outperform from Market Perform with a reestablished price target of $195. While the firm says it prefers “not to downgrade and upgrade so rapidly,” the weak demand except for non-AI products and high expectations for AI chips left it “little alternative.” Northland, which expects demand to improve for non-AI products throughout the year, thinks based on AMD’s strong execution that “there is likely still some upside to our AI forecast.” The firm had previously downgraded AMD to Market Perform on January 22.

2. Block upgraded at Wedbush on financial discipline

Wedbush upgraded Block (SQ) to Outperform from Neutral with a price target of $90, up from $70. Wedbush now has increased conviction in Block’s ability to post improving performance in its “weak” merchant segment. In addition to management’s positive decision last quarter to run the company with strict financial discipline and focus on GAAP earnings, accelerating growth in the merchant segment is another important catalyst for share performance, the firm tells investors in a research note.

Block upgraded to Buy from Neutral at BTIG

BTIG also upgraded Block to Buy from Neutral with an $85 price target. The firm sees the company’s growth opportunities paired with management’s focus on the bottom-line as “presenting an attractive investment opportunity” at current share levels. The core investment thesis is focused on Block’s “attractive position” between the consumer and merchant with its Cash App and Square ecosystems and potential for each segment to become stronger as integrations are built between them, BTIG tells investors in a research note. The firm believes the Cash App and Square ecosystems are strong as individual units and have track records of providing value which it expects to continue in 2024.

3. Spotify upgraded to Buy from Neutral at UBS

UBS upgraded Spotify Technology (SPOT) to Buy from Neutral with a price target of $274, up from $170. The firm thinks the company’s efficiency initiatives remain the focus and have increased conviction on sustainable margin expansion and stronger bottom-line trends in the coming years. This, coupled with solid subscriber growth, a steady cadence of price increases and advertising growth, should lead to an improved EBITDA trajectory for Spotify, UBS tells investors in a research note. The firm expects the company “to gain valuation support” with EBITDA “now firmly in positive territory and growth pegged against peers.”

4. Cigna upgraded to Buy from Hold at Deutsche Bank

Deutsche Bank upgraded Cigna (CI) to Buy from Hold with a price target of $370, up from $355. The company announced the agreement to sell its Medicare Advantage, Supplemental Benefits, Part D, and CareAllies Business to HCSC for a total transaction value of $3.7B, in what can be a “value unlocking-transaction,” the firm tells investors in a research note. Deutsche says the announcement “finally brings this story with multi-month deal headlines to an end.” Investors will likely continue to have concerns on whether the sale signals Cigna will make another run at Humana (HUM), the firm notes. Deutsche believes this scenario is extremely unlikely in 2024 and could be a 2025 event at the earliest.

5. American Airlines upgraded to Buy from Neutral at Citi

Citi upgraded American Airlines (AAL) to Buy from Neutral with a price target of $20, up from $14. The company’s diversified revenue streams and solid demand for premium cabin offerings appear to provide it with superior positioning in this post-pandemic environment, the firm tells investors in a research note. Against this supportive backdrop, American’s ongoing deleveraging focus and continued low capex, along with protracted industry capacity constraints, should continue to support shares, says Citi.

Top 5 Sell Calls:

1. SoFi Technologies downgraded to Underweight at Morgan Stanley

Morgan Stanley downgraded SoFi Technologies (SOFI) to Underweight from Equal Weight with a price target of $6.50, down from $7. The company’s “new medium-term targets are now out in the open, but may be optimistic,” the firm tells investors in a research note. Morgan Stanley says SoFi’s revenue growth is still set to slow meaningfully in 2024, as lending pressures grow and keep “a lid” on growth over the medium-term. It cites slowing sales and execution risk on the path to 2026 earnings for the downgrade to Underweight.

2. Vertex Pharmaceuticals downgraded to Underperform at Baird

Baird downgraded Vertex Pharmaceuticals (VRTX) to Underperform from Neutral with an unchanged price target of $325. The firm sees “irrational exuberance” for VX-548. Expectations that VX-548 ushers in a big shift in growth are unsustainable, given the very modest efficacy seen across pain studies, Baird tells investors in a research note. The firm does not have the same confidence in the drug’s commercial opportunity given that VX-548 “looks no more efficacious than generically available pain meds.”

3. Lennox downgraded to Underweight at JPMorgan

JPMorgan downgraded Lennox (LII) to Underweight from Neutral with a price target of $330, down from $370, post the Q4 report. The firm commends the company for strong execution on commercial margins, but downgraded the shares on “reinforced caution” on the residential HVAC end market cycle outlook. JPMorgan also sees potential for declines in short cycle light commercial HVAC markets in the second half of 2024. This could carry weakness in volumes into 2025, the firm tells investors in a research note.

4. McCormick initiated with a Sell at Citi

Citi initiated coverage of McCormick (MCK) with a Sell rating and $60 price target. The firm sees “plenty of nearer-term headwinds” for the company, especially market share losses in key categories. Consensus estimates, which call for 8% average earnings growth over the next three years, seem optimistic considering that level of growth historically was supported by accretive acquisitions, which could be hard to come by in the current interest rate environment, Citi tells investors in a research note.

5. Amplitude downgraded to Underweight at Morgan Stanley

Morgan Stanley downgraded Amplitude (AMPL) to Underweight from Equal Weight with a $12 price target. The stock’s current valuation does reflect that Amplitude’s story is still a work in progress, the firm tells investors in a research note. Amplitude shares have re-rated but macro environment, increased competition from Google (GOOGL) and Adobe (ADBE), and execution concerns remain, says Morgan Stanley. In the current spending environment, the firm sees the budget for Amplitude’s “less mission-critical tools” as challenged, particularly for the company’s core base of technology customer.