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

New York Times upgrade, DraftKings downgrade and Coupang initiation among today’s top calls on Wall Street

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Check out today’s top analyst calls from around Wall Street:  

Top 5 Upgrades: 

• Barclays upgraded New York Times (NYT) to Equal Weight from Underweight with a price target of $36, up from $25, following the Q4 results. The company’s growth model is "shifting quickly" towards profitability instead of growth, the analyst tells investors in a research note. The firm believes that if managed properly, New York Times could drive potential upside to long term margins.

• Jefferies upgraded Hims & Hers (HIMS) to Buy from Hold with a price target of $11, up from $7. After having analyzed app downloads, web traffic and market share for Hims & Hers, the firm said the data continue to suggest momentum in the underlying business remains strong and it is becoming "increasingly confident" that F23-24 consensus estimates may prove conservative, prompting an upgrade of the shares ahead of the company’s upcoming presentation of its FY23 guidance.

• Lake Street upgraded Emcore (EMKR) to Buy from Hold with a price target of $2.50, down from $3.50. While the firm does not expect a material revenue snapback in the near term, its upgrade is based on a belief that the CATV business appears to have troughed, so focus can fully shift to the potential in the A&D segment, and that gross margins, while still depressed, should continue to trend higher. Management noted they are in discussions with several interested parties for the CATV business and think a resolution could occur within the next three months, noted the firm, which thinks any announcement regarding a sale of the business could serve as a catalyst. Meanwhile, Northland also upgraded Emcore to Outperform with a price target of $2.50, up from $2, following the company’s "mixed" fiscal Q1 report. Emcore noted it has been in talks with several interested parties for its cable optics unit and Northland believes proceeds from a cable optics sale, expected within the next quarter, along with funding from working capital and outstanding credit lines, is likely sufficient to take the company to breakeven EBITDA. In the longer term, it sees the potential for value creation on the A&D side.

• Craig-Hallum upgraded Cerence (CRNC) to Buy from Hold with a price target of $40, up from $24. The print on the quarter appears well ahead, but normalized for "unusuals" the firm sees it as in-line, with the outlook reiterated. Craig-Hallum also notes that extensive modeling and deconstruction of the model leaves it concluding that the area of most concern in its opinion – connected revenue – is largely derisked in the forward outlook from the company. While the next few quarters will be "ugly" on the top line, 2024 is going to steadily come into clearer focus and what investors will see is an EBITDA number approaching $100M and top line growth of 35%, the firm argues.

• Maxim upgraded Kiora Pharmaceuticals (KPRX) to Buy from Hold with a $12 price target after the company disclosed that it received approval to start its Phase 2 study for KIO-101 in the treatment of ocular presentations of autoimmune diseases. Kiora has also continued to address its capital needs to strengthen the balance sheet, most recently putting a $10M equity line in place, the analyst tells investors in a research note. The firm contends that the company should be positioned to unlock value from several events in 2023, including initial data from the Phase 1b for KIO-301 in retinitis pigmentosa and Phase 2 data for KIO-201 in the first half of the year.

Top 5 Downgrades: 

• Roth MKM downgraded DraftKings (DKNG) to Sell from Neutral with a $15 price target as the firm expects first half of 2023 EBITDA losses greater than consensus to reduce investor conviction in the company’s profitability narrative. Along with Q4 results, Roth MKM expects management to signal disappointing Q1 2023 EBITDA as new state launches require more up-front investment than Street forecasts imply. The firm further expects Fanatics to launch online sports betting by Q1 and "reinvigorate concerns over an intensifying promotional environment," Roth tells investors.

• Piper Sandler downgraded Rapid7 (RPD) to Neutral from Overweight with a price target of $52, up from $45. The company’s Q4 results were mostly inline to slightly better than expectations, though forward guidance implies increased macro deterioration and annual recurring revenue growth decelerating to 15% in 2023, the analyst tells investors in a research note. The firm sees longer sales cycles and greater uncertainty overall. Following the 47% year-to-date rally on acquisition reports, it finds Rapid7 fairly valued relative to fundamentals. In addition, Canaccord downgraded Rapid7 to Hold from Buy with a price target of $52, down from $55, following the company’s quarterly report. While Q4 results were "solid" in light of sustained macro challenges, the "soft" 2023 outlook was below expectations as the company anticipates macro pressures to persist throughout the year, the analyst tells investors. The firm believes Rapid7 has strong expansion opportunities within its customer base and "a long runway to drive net customer adds," but is moving to the sidelines following the softer-than-anticipated guidance.

• Jefferies downgraded Accolade (ACCD) to Hold from Buy with a price target of $14, up from $12. The firm’s survey of 35 benefits consultants came back with "lukewarm" results when it came to navigation, suggesting spending on the benefit could be impacted in the current environment, Jefferies tells investors. Given the survey results, along with the fact that Accolade shares are now up more 60% year-to-date and more than 135% since bottoming in April of last year, the firm believes the risk/reward is now more balanced.

• Keefe Bruyette downgraded Bank of America (BAC) to Underperform from Market Perform with a price target of $33, down from $35. KBW’s estimates are 12% below consensus for 2024 and the shares are trading above its historical price-to-earnings multiple, the analyst tells investors. The firm views Bank of America shares as "vulnerable" following the 7% post-earnings rally and sees limited catalysts with the bank hitting "peak" revenues and net interest income. Bank of America’s current premium valuation to JPMorgan (JPM) is expensive for an environment that may face more revenue risk than a severe credit downturn, according to the firm.

• RBC Capital downgraded Affirm (AFRM) to Sector Perform from Outperform with a price target of $17, down from $23, after the company’s Q2 earnings miss. The combination of higher funding costs, latency effects of pricing actions, and expected deceleration in gross merchandise volume in the second half of this year suggest a more challenging environment up ahead, the analyst tells investors. While Affirm management reiterated its commitment to achieving operating income by year-end, the firm is now "less convinced that it will be successful."

Top 5 Initiations: 

• Barclays initiated coverage of Coupang (CPNG) with an Overweight rating and $20 price target. The company can be described as Korea’s Amazon, Door Dash, and FreshDirect – all under one roof, the analyst tells investors in a research note. The firm believes Coupang’s success will depend on whether it can continue thriving without COVID tailwinds.

• Canaccord initiated coverage of SentinelOne (S) with a Buy rating and $20 price target. The analyst views SentinelOne as a "long-term secular winner" due to its positioning as a data-driven security platform. The firm anticipates "long-tailed adoption" driving sustained revenue growth and believes the company has a clear path to achieving "strong long-term profitability."

• Janney Montgomery Scott initiated coverage of SunPower (SPWR) with a Neutral rating and $16 fair value estimate. When arriving at its valuation, the firm said the "most consequential" factor is the outlook for gross margin improvement throughout 2023, but it also cites SunPower’s relatively high exposure to California, the new homes market and cash sales and loans.

• EF Hutton initiated coverage of Direct Digital (DRCT) with a Buy rating and $7 price target. Direct Digital is an "under-the-radar, high-quality business with high insider ownership and very low institutional ownership," the analyst tells investors in a research note. The analyst says Direct is benefiting from the secular tailwinds of increased adoption of digital advertising.

• Raymond James initiated coverage of Vertex (VERX) with an Outperform rating and $19 price target. Shares offer a compelling combination of a leading indirect tax solution, a healthy growth/profitability profile, a defensive model, and a reasonable valuation, the analyst tells investors in a research note. Raymond James believes Vertex should continue to benefit from a complex indirect tax market that is likely to only get more challenging with changing government regulations and business model shifts.

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Keywords: analyst, analyst calls, upgrades, downgrades, initiations, research, Wall Street