Street Wrap: Today’s Top 15 Upgrades, Downgrades, Initiations

Seagate upgrade, Morgan Stanley downgrade, and Adobe initiation among today’s top calls on Wall Street

Institutional investors and professional traders rely on The Fly to learn which companies the best analysts on Wall Street are saying to buy and sell.

Research analysts at Wall Street’s largest banks issue recommendations on whether a stock should be bought, held, or sold. The Fly’s team of financial market experts scours hundreds of research notes daily to uncover the best trading ideas. Check out today’s top analyst calls from around Wall Street, compiled by The Fly.

Top 5 Upgrades:

• Stanley analyst Erik Woodring upgraded Seagate (STX) to Overweight from Equal Weight with a price target of $69, up from $54, as he starts to transition away from defensive names, towards more transactional, early cycle beneficiaries.
• Morgan Stanley analyst Alex Straton upgraded Gap (GPS) to Equal Weight from Underweight. The analyst sees a potential inflection in fundamentals in the second half of the year on easier compares, some margin pressure relief, inventory normalization, the 53rd week benefit, and a recovering macro, among other tailwinds.
• Evercore ISI analyst Mark Mahaney upgraded GoDaddy (GDDY) to Outperform from In Line with a price target of $103, up from $86. Mahaney views GoDaddy as a company with a reasonably recession-resistant business model, and has an "intriguing" new product cycle with the rollout of Payable Domains that has the potential to materially boost ARPU.
• Mizuho analyst John Baumgartner upgraded Oatly Group (OTLY) to Buy from Neutral with a price target of $6, up from $2.50. The analyst views the company’s recently announced manufacturing agreement as positive given how it enhances visibility into the pivot outlined in November.
• Citi analyst Steven Enders upgraded Pegasystems (PEGA) to Buy from Neutral with a price target of $45, up from $36, as he adjusted estimates and targets as part of his broader 2023 Back Office Software outlook.

Top 5 Downgrades:

• Citi analyst Keith Horowitz downgraded Morgan Stanley (MS) to Neutral from Buy with an unchanged price target of $100. He expects 2023 to be fundamentally challenging for the banks due to net interest margin compression and potential credit concerns.
• SMBC Nikko analyst Andrew Bauch downgraded PayPal (PYPL) to Underperform from Neutral with a price target of $75, down from $95. At a bare minimum, the rate of PayPal’s branded share of checkout gains has slowed considerably, particularly in 2022, Bauch tells investors in a research note.
• BofA analyst Christopher Nardone downgraded Levi Strauss (LEVI) to Neutral from Buy with a price target of $17, down from $19. The analyst, who cites a more cautious North America outlook for the downgrade, expects elevated promotions will continue given soft denim trends and the inventory positions of retailers.
• Morgan Stanley analyst Erik Woodring downgraded IBM (IBM) to Equal Weight from Overweight with a price target of $148, down from $152, as he starts to transition away from defensive names, towards more transactional, early cycle beneficiaries.
• Morgan Stanley analyst Alex Straton downgraded Skechers (SKX) to Equal Weight from Overweight with a price target of $46, down from $54. The stock is sitting at the upper end of its historical valuation range, and a re-rating may be unlikely while potentially below-expectations FY23 EPS guidance is digested and management re-builds trust via EBIT-flow-through consistency.

Top 5 Initiations:

• DA Davidson analyst Gil Luria initiated coverage of Adobe (ADBE) with a Neutral rating and $350 price target. The company is well positioned for slower software market growth in 2023 and its Figma acquisition represents a good strategic fit, but until visibility increases into enterprise budgets and the Figma dilution, the stock is less likely to outperform its peers in the near- term, the analyst tells investors in a research note.
• Scotiabank analyst Patrick Colville initiated coverage of Crowdstrike (CRWD) with an Outperform rating and $132 price target. CrowdStrike has "a great product," is early in its penetration of a "robust" end-market, and has scale and profitability, making "one of the very few companies in our coverage" where he doesn’t see an overhang risk in 2023, Colville tells investors. BMO Capital analyst Keith Bachman also started coverage of Crowdstrike with an Outperform rating and $120 price target.
• Scotiabank analyst Patrick Colville initiated coverage of Palo Alto Networks (PANW) with an Outperform rating and $155 price target. Palo Alto is "one of the best long-term stories in software," argues Colville, highlighting its sticky core business, vendor consolidation, and adoption of cloud security.
• Scotiabank analyst Patrick Colville initiated coverage of Snowflake (SNOW) with a Sector Perform rating and $125 price target. While Snowflake has emerged as a leader in the SaaS data warehouse market and he views the company’s medium-term runway as "compelling," Colville said the Street forecast of 47% product revenue growth in FY24 is "aggressive" given the backdrop of rapidly softening IT spending.
• Mizuho analyst Matthew Broome initiated coverage of Palantir (PLTR) with a Neutral rating and $7 price target. While he expects ongoing global disruptions can help to further catalyze adoption of Palantir’s "unique" software, growth across both its government and commercial businesses has slowed and an uncertain macro environment makes meaningful near-term reacceleration "much more difficult," Broome tells investors

Keywords: analyst, analyst calls, upgrades, downgrades, initiations, research, wall street