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 25-28.

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Top 5 Buy Calls:

1. Barclays upgraded Disney to Overweight after “narrative reset”

Barclays upgraded Disney (DIS) to Overweight from Equal Weight with a price target of $135, up from $95. The recent “narrative reset” is likely to be followed by positive estimate revisions, which is still early in the cycle and should further support the stock’s valuation, the firm tells investors in a research note. Barclays says the “incessant Disney-related news flow” ahead of the proxy vote has dominated investor considerations since last quarter’s earnings and should continue helping the stock in the near term. This process and announcements, including better than expected free cash flow and earnings guidance for fiscal 2024, has helped investors gain more confidence about Disney’s earnings estimates having bottomed, says the firm. Barclays believes there may still be some sources of “upside narrative surprises” such as ESPN’s streaming partnerships.

2. Foot Locker upgraded to Outperform at Evercore ISI

Evercore ISI upgraded Foot Locker (FL) to Outperform from In Line with a price target of $32, up from $28. The firm cites meetings with Foot Locker’s management team last week, its own channel checks from across the U.S. and Europe athletic specialty channel, and comments from the brands, especially Nike (NKE), that suggest there will be “the most significant investment behind the specialty athletic retail channel that we’ve seen in years.”

3. Spotify initiated with a Buy at HSBC

HSBC initiated coverage of Spotify (SPOT) with a Buy rating and $310 price target. The company is the music streaming leader and has new verticals with large opportunities. Restructuring measures help move Spotify towards profitability, with significant room for future margin expansion, the firm tells investors in a research note. HSBC says the stock screens well against peers given its strong growth outlook.

4. Seagate upgraded to Overweight at Morgan Stanley

Morgan Stanley upgraded Seagate Technology (STX) to Overweight from Equal Weight with a price target of $115, up from $73. The firm says a cyclical recovery, technology leadership, and the potential for generative artificial intelligence-related demand means Seagate is entering a period of structurally stronger gross margins. Morgan Stanley’s new bottom-up analysis shows the company’s earnings power 25%-30% greater than previously estimated. The firm also believes generative AI will be a longer-term “rising tides lifts all boats” tailwind for storage.

5. CyberArk initiated with a Buy at BTIG

BTIG initiated coverage of CyberArk (CYBR) with a Buy rating and $317 price target. Following field checks with customers, partners, and industry analysts, the firm sees multiple factors driving continued growth in the privilege account management market, where it notes CyberArk holds “a strong leadership position” and is gaining share.

Top 5 Sell Calls:

1. Monness downgraded Palantir to Sell on “egregiously rich” valuation

Monness Crespi downgraded Palantir Technologies (PLTR) to Sell from Neutral with a $20 price target. The shares trade at an “egregiously rich valuation” due to the “unprecedented generative AI hype cycle,” the firm tells investors in a research note. Monness says that while Palantir is well positioned to benefit from the long-term artificial intelligence trend and capitalize on volatile geopolitics, its revenue from government-related contracts has “proven lumpy,” its execution is “spotty,” and valuation “excessive.” The “darkest days of this economic downturn are ahead of us,” adds the firm.

2. Molina Healthcare downgraded to Underperform at BofA

BofA downgraded Molina Healthcare (MOH) to Underperform from Neutral with a $439 price target. The firm, which is concerned that Molina and the Medicaid industry more broadly are likely to face rate pressure after a period of elevated margins, sees a less attractive risk/reward for Molina compared to other insurers it covers. Molina is now trading roughly at parity with the firm’s top pick in the space, UnitedHealth (UNH), compared to a 22% discount that had been seen over the last five years, helping to underscore the firm’s view that “sentiment for Medicaid is nearing a top just at a time when Medicare is reaching a bottom.”

3. JetBlue reinstated with an Underweight at Barclays

Barclays reinstated coverage of JetBlue (JBLU) with an Underweight rating and $6 price target. The company’s standalone strategy appears to be returning to its roots in the Northeast, but its significant financial leverage will likely challenge future returns for shareholders, the firm tells investors in a research note. Barclays says that while network changes should help boost JetBlue’s profitability, it sees long-term returns in the shares challenged by the airline’s significant financial leverage.

4. Spirit Airlines reinstated with an Underweight at Barclays

Barclays reinstated coverage of Spirit Airlines (SAVE) with an Underweight rating and $4 price target. Spirit faces significant operating and financial headwinds in the coming year that are likely to limit share upside, the firm tells investors in a research note. Barclays says that with mounting financial leverage and ongoing operating losses compounded by GTF engine-related groundings, it sees limited equity potential in Spirit’s shares.

5. BigCommerce downgraded to Underperform at BofA

BofA downgraded BigCommerce (BIGC) to Underperform from Neutral with a price target of $7.50, down from $11. The firm sees few catalysts to drive shares higher over the medium term. The key growth metric for the e-commerce software category is revenue growth, and BofA forecasts 2024 growth of 5.7% year-over-year, which is below the U.S. industry outlook and BigCommerce’s pure play global peers, BofA tells investors in a research note. The firm says BigCommerce operates in a market with “fierce” competition amid a tough macro environment which presents risks to revenue growth.