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 Bu-y calls and the top 5 Sell calls made by Wall Street’s best analysts during the week of March 18-22.
 
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Top 5 Buy Calls:

1. Microsoft initiated with an Overweight at KeyBanc

KeyBanc initiated coverage of Microsoft (MSFT) with an Overweight rating and $490 price target. Microsoft “sits in the catbird seat in two of the three main ways software vendors can monetize the AI wave,” with Azure and the suite of copilots being rolled out across Office and elsewhere in the product portfolio, the firm tells investors. KeyBanc views AI’s rise in the revenue stream as a positive symptom of the company’s strength in the public cloud space and is “unfazed by the recent debate” around Azure’s growth mix between AI and non-AI.

2. TD upgrades Broadcom on “sustainability and diversity” of growth

TD Cowen upgraded Broadcom (AVGO) to Outperform from Market Perform with a price target of $1,500, up from $1,400, following the company’s artificial intelligence infrastructure event. The firm sees potential upside from both Broadcom’s custom silicon and back-end AI networking, as well as from synergies as VMWare is integrated. Consensus estimates already acknowledge cyclicality in Broadcom’s non-AI semis verticals, TD tells investors in a research note. Despite the recent run in shares, the firm is confident in the company’s “sustainability and diversity” of growth and potential upside to consensus estimates, driven by AI compute/networking and software growth.

Broadcom reinstated with an Overweight at Barclays 

Barclays reinstated coverage of Broadcom (AVGO) with an Overweight rating and $1,405 price target. Broadcom operates a diverse portfolio of leading semiconductor businesses, is well positioned in artificial intelligence with franchise custom silicon and switching businesses, and features a software business that provides diversification and supports industry-leading profitability, the firm tells investors in a research note.

3. Argus upgrades Micron to Buy after “solid” Q2 earnings beat

Argus upgraded Micron (MU) to Buy from Hold with a $140 price target. The company posted a “solid” Q2 profit against expectations of losses, while its revenue was “well above” the high end of prior guidance range, the firm tells investors in a research note. The long negative trend in NAND and DRAM memory prices appears to be over, reflecting the lagged effects of prior production cuts, right-sizing of distributor and OEM inventories, and the AI-driven demand surge in data center, Argus states, adding that it also sees value in Micron shares in the early stage of broad-based memory demand growth.

4. PepsiCo upgraded to Overweight at Morgan Stanley

Morgan Stanley upgraded PepsiCo (PEP) to Overweight from Equal Weight with a $190 price target. The firm named PepsiCo the firm’s top pick, both in beverages and overall, replacing Constellation Brands (STZ) in beverages as its top pick and Colgate (CL) as its overall top pick. Morgan Stanley had been concerned that PepsiCo’s valuation was priced to perfection and consensus estimates were too high with an unrealistic volume rebound as pricing dissipated. Both of these issues have now played out, and the firm “would be aggressive buyers here ahead of a powerful inflection” in second half of 2024 after PepsiCo “bottoms fundamentally” in Q1, and returns to above consensus and peer growth. Morgan Stanley believes the stock’s valuation compression is overdone.

5. Best Buy upgraded to Outperform at Telsey Advisory

Telsey Advisory upgraded Best Buy (BBY) to Outperform from Market Perform with a price target of $95, up from $85. The firm says its meetings with Best Buy increased its confidence in the business showing signs of stabilization and improvement after nine consecutive quarters of negative comps. The replacement cycle is kicking in, especially for products purchased in 2019 and 2020, and innovation is starting to gain traction, the firm tells investors in a research note. Telsey believes Best Buy is getting closer to a positive inflection on comps and profits.

Top 5 Sell Calls:

1. Redburn downgrades Snowflake to Sell on lack of AI advantage

Redburn Atlantic downgraded Snowflake (SNOW) to Sell from Neutral with a price target of $125, down from $180. Snowflake lacks a clear generative artificial intelligence advantage, posing a budget reallocation risk that the stock’s current valuation does not reflect, the firm tells investors in a research note. Redburn Atlantic says the company’s architectural limitations “make it vulnerable to future trends.” The recent profit warning signals ongoing headwinds as optimization shifts from storage to the platform’s processing core, contends the firm. It also believes market expectations beyond the current year “remain overly optimistic.” Redburn Atlantic downgraded also MongoDB (MDB) to Sell from Neutral with a price target of $295, down from $410.

2. Adobe initiated with an Underweight at KeyBanc

KeyBanc initiated coverage of Adobe (ADBE) with an Underweight rating and $445 price target. Creative Cloud’s stranglehold on the digital media content creation space has been a source of strength, but it has also been “a source of worry,” the firm tells investors. KeyBanc expects competitive pressure to rise in the coming years and to slow Creative Cloud growth to the high single digits due to both generative AI and the emergence of strong low-end tools.

3. Williams downgraded Nike to Sell ahead of earnings

Williams Trading downgraded Nike (NKE) to Sell from Hold with a price target of $85, down from $92. “Nike’s strength continues to diminish,” the firm tells investors in a research note. Williams Trading believes “consultants, rather than Nike experts are leading strategy decisions, senior leaders are too dogmatic, and do not welcome all opinions.” The firm thinks Nike will report a slight miss in fiscal Q3 and its fiscal 2024 guidance will be cut once again. Williams believes the company does not deserve its historic multiple “as many of the franchises, whose successes contributed to that multiple, are losing their luster.”

4. UBS starts JetBlue with Sell on “unique headwinds”

UBS initiated coverage of JetBlue Airways (JBLU) with a Sell rating and $5 price target. The firm sees the company’ pre-tax losses, negative free cash flow and high leverage persisting into 2025. While JetBlue should benefit from an improving domestic revenue per available seat mile and moderation in cost pressures in 2025, it also has “unique headwinds,” such as material exposure to GTF engines and a pilot contract which becomes amendable again in the first half of 2025, UBS tells investors in a research note. The firm does not believe these risks are accounted for in the stock’s valuation. As current levels, UBS sees a “1:2 downside skew.”

5. Wells downgrades Nuscale Power to Underweight on misguided enthusiasm

Wells Fargo downgraded Nuscale Power (SMR) to Underweight from Equal Weight with a price target of $4.50, down from $7.50. The firm believes the stock’s 207% rally year-to-date is connected to positive developments for nuclear owners Constellation Energy (CEG) and Talen Energy (TLNE). However, Wells thinks investor enthusiasm for Nuscale Power is misguided. The company has not secured customers for its Voygr product and a poor financial condition with cash on hand only providing one year of runway, the firm tells investors in a research note. Wells believes Nuscale’s financial position poses challenges in securing new customers and that its Voygr technology is currently not cost competitive with other sources of generation.