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 February 5-9.
 
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Top 5 Buy Calls:

1. Disney upgraded to Buy at Needham with “magic back”

Needham upgraded Disney (DIS) to Buy from Hold with a $120 price target based on expectations for “strong” 23% 2024 EPS growth, driven by additional cost savings, direct-to-consumer streaming breakeven by Q4 with “double-digit” margins at maturity and 5.5M-6M new subs from Charter (CHTR) in fiscal Q2. The firm also cites the new ESPN Sports joint venture with Fox (FOXA) and Warner (WBD), the $1.5B investment in Epic Games, Parks capex devoted to “incremental capacity,” which equates to added revenue, the exclusive Taylor Swift concert rights on Disney+, a 50% higher dividend and greater than $3B of share repurchases in 2024 in contending that “The Magic’s Back.”

2. UPS upgraded to Buy from Neutral at UBS

UBS upgraded UPS (UPS) to Buy from Neutral with a price target of $175, up from $160. The affirm says the company has a strong cost reduction program to support margin expansion and “attractive” earnings growth.” The firm expects the company’s analyst meeting to provide “greater visibility to cost savings and act as a catalyst for stronger valuation.”

3. Oppenheimer upgrades Enphase Energy on bottoming of estimates

Oppenheimer upgraded Enphase Energy (ENPH) to Outperform from Perform with a $133 price target. With the company guiding well below consensus and shares trading substantially higher, the debate on shares will now focus on lingering channel inventory overhang, underlying demand levels, and the competitive landscape, the firm tells investors in a research note. Oppenheimer reduced estimates post the Q4 report but believes a “beatable baseline: on sales and margin are being established and Enphase is delivering on product enhancements that drive system level performance and cost reductions. The firm expects ongoing volatility in shares but upgraded the name as it believes downside scenarios will now be fully built into expectations.

4. Broadcom reinstated with Overweight, added to Focus List at JPMorgan

JPMorgan initiated coverage of Broadcom (AVGO) with an Overweight rating and $1,550 price target following a period of restriction. The firm also added Broadcom to its U.S. Equity Analyst Focus List a growth idea. The company is a “technology infrastructure powerhouse” with semiconductor leadership positions in artificial intelligence, custom chip ASIC supplier, cloud datacenter/telco networking, wireless, enterprise storage, and broadband connected home, JPMorgan tells investors in a research note. The firm believes the market continues to overlook the diversification story in Broadcom’s semiconductor and mission critical software infrastructure franchises combined with strong free cash flow generation of the business.

5. Cigna upgraded to Outperform on 2024 visibility at RBC Capital

RBC Capital upgraded Cigna (CI) to Outperform from Sector Perform with a price target of $354, up from $327. The firm sees good visibility into the company’s 2024 earnings growth, supported by share buybacks and a more solid operating backdrop this year, which includes pricing actions in the exchange book and “conservative assumptions” around stop-loss. With significant cash flow earmarked for buybacks, the Humana debate should “cool” for the near-term, RBC tells investors in a research note. Against this backdrop, the firm sees a clearer path for multiple recovery to Cigna’s valuation.

Top 5 Sell Calls:

1. ZoomInfo downgraded to Sell at Citi

Citi downgraded ZoomInfo (ZI) to Sell from Neutral with a price target of $13, down from $20. The firm says leading indicators for ZoomInfo, including web traffic and competitive inputs, continue to trend weaker. Citi increasingly has a lack conviction that the company will deliver a meaningful reacceleration in growth in fiscal 2024 with incremental pressure in the sales enablement category and a pick-up in tech sector layoffs again. Meanwhile, the shares still trade at a premium to peers, suggesting potential further downside, contends the firm.

2. Fortinet downgraded to Reduce on sales growth slowdown at HSBC

HSBC downgraded Fortinet (FTNT) to Reduce from Hold with a price target of $57, up from $49, post the Q4 report. The firm thinks a slowdown in the company’s sales growth and operating margin erosion will continue for the foreseeable future. HSBC is less optimistic about Fortinet’s end-market demand reaccelerating in the second half of 2024 and 2025 and takes a cautious stance.

3. Synchrony assumed with an Underweight at Morgan Stanley

Morgan Stanley analyst Jeff Adelson assumed coverage of Synchrony (SYF) with an Underweight rating and unchanged price target of $30. Following Q4 reporting, the firm is incrementally more bullish on prospects of a softer credit landing and identifies Ally and Discover (DFS) as two ways to play that theme. However, the credit cycle is not yet over, as net charge offs are set to rise though 2024, adds Morgan Stanley, which maintains an In-Line rating on the Consumer Finance industry.

4. Aptiv downgraded to Underweight at Morgan Stanley

Morgan Stanley downgraded Aptiv (APTV) to Underweight from Equal Weight with a price target of $74, down from $90. The company’s portfolio is built for rapid EV adoption, but a slowdown in demand for EVs and legacy OEMs’ willingness to build them challenges Aptiv’s growth-over-market assumption that underpins its earnings and valuation, the firm tells investors in a research note. Morgan Stanley further cites the company’s rising capex and 2024 free cash flow outlook that was about $300M less than expected.

5. Arcadium Lithium initiated with an Underweight at Piper Sandler

Piper Sandler initiated coverage of Arcadium Lithium (ALTM) with an Underweight rating and $4.50 price target. The firm believes the lithium industry will remain “highly challenging” through at least 2024 as lithium producers, lithium processors and downstream battery producers struggle to find an equilibrium among competing interests and a foundation to grow from.