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 May 8-12.
Find all top-rated stocks by the best-rated analysts on TipRanks.
Top 5 Buy Calls:
1. Roblox upgraded to Buy at Benchmark and Roth on reemerging growth
Benchmark upgraded Roblox (RBLX) to Buy from Hold and introduced a $45 price target following the company’s Q1 report. While Roblox reported "mixed" results, including missing the consensus view on profitability in the quarter, it delivered "strong" net bookings growth that continues to accelerate and a "solid return" to positive operating cash flow and free cash flow, the firm tells investors. Roblox "appears to have worked through the pandemic influence" and is now showing "encouraging KPIs, reemerging growth, and operational discipline," Benchmark added.
Roth MKM also upgraded Roblox to Buy from Neutral with a price target of $48, up from $37. The firm is taking a more constructive view towards Roblox following comments from management that increases in headcount and compensation will soon be slowing. This action should create an inflection point in 2024 with the company’s adjusted EBITDA returning to growth, adjusted EBITDA margin expanding, and free cash flow returning to positive territory, Roth tells investors in a research note. Roblox reported mixed Q1results but more importantly, management stated it is entering a new phase of its business in which it has achieved sufficient economies of scale where it can begin to slow its increases in headcount and compensation expenses, the firm says.
2. Coinbase upgraded to Buy from Hold at Daiwa
Daiwa upgraded Coinbase (COIN) to Buy from Hold with a price target of $65, up from $58, after research coverage was transferred at the firm. The company’s Q1 adjusted EBITDA margin of 39% came in as a strong beat and it is accelerating global expansion and crypto-native innovations, the analyst tells investors in a research note. Daiwa believes the current share price has largely priced in the U.S. regulation uncertainty but underestimates Coinbase’s recovering profitability, accelerating global expansion and crypto-native innovations.
3, Stifel upgrades Snowflake to Buy as optimization headwinds stabilize
Stifel upgraded Snowflake (SNOW) to Buy from Hold with a price target of $185, up from $145. Recent commentary from Microsoft (MSFT) as well as other third party consumption models suggest optimization headwinds the group has felt over the last nine months are stabilizing, the firm tells investors in a research note. With easing compares in the second half of 2023, Snowflake’s revenue growth should stabilize in the high 30% range. Beyond sales, management’s discipline should continue to drive margins and free cash flow meaningfully higher, Stifel adds. Further, it believes Snowflake stands as a net beneficiary from the growth of the emerging generative artificial intelligence market.
4. American Airlines upgraded to Overweight from Neutral at JPMorgan
JPMorgan upgraded American Airlines (AAL( to Overweight from Neutral with a price target of $29, up from $26. The long term relationship between the airlines discounters and the Big 3 has inverted, as it is now the larger airlines that control the "high ground," the firm tells investors in a research note. JPMorgan believes this newfound relationship between operating models can persist. JPMorgan harmonized its discounter target multiples with those of the larger airlines, which results in rating downgrades to Neutral for Frontier (ULCC) and Southwest (LUV). American is now 60% of its way to reducing its total debt by $15B by the end of 2025, which is ahead of expectations, yet the stock currently resides 35% below when its debt peaked in Q2 of 2021, says the firm.
5. Fortinet upgraded to Buy at BofA on "strong" fundamentals and execution
BofA upgraded Fortinet (FTNT) to Buy from Neutral with a price target of $75, up from $66. A premium to cyber peers’ multiple is warranted given the company’s "strong" fundamentals, says the firm, which also highlights "continued strong execution" despite a challenged environment. While backlog drawdowns remain a reality, the business momentum "dwarfs these concerns" as underlying demand remains strong, attesting to "the high value Fortinet delivers to its customers," BofA tells investors.
Top 5 Sell Calls:
1. Block double downgraded to Underperform at CLSA
CLSA analyst John Marrin downgraded Block to Underperform from Buy with a price target of $63, down from $93. The firm says concerns around the macro environment now eclipse its ongoing enthusiasm around the company’s prospects for long-term growth. CLSA believes odds are on the rise for a "hard landing" in the U.S. in the second half of 2023, as a retreat by regional banks applies additional pressure directly on consumers and small businesses, who are already under duress from higher interest rates. Block shares have lagged the market coming out of a "decent" earnings print last week, as investors are already likely coming to terms with a lower earnings trajectory in 2024, the firm tells investors in a research note.
2. Barclays bearish on DLocal, starts at Underweight
Barclays initiated coverage of DLocal (DLO) with an Underweight rating and $10 price target. While the company has a valuable product offering, it competes directly with several companies with a similar payments focus as well as significantly larger, mainline payment processors that have similar overlaps in functionality, Barclays tells investors in a research note. The firm believes consensus estimates for DLocal total payment volume revenues and earnings are too high given its expectation of TPV growth decelerating to 54% and 40% in fiscal 2023 and 2024, respectively.
3. Southern Copper downgraded to Sell from Neutral at Goldman Sachs
Goldman Sachs downgraded Southern Copper (SCCO) to Sell from Neutral with a price target of $66, up from $65. The stock has run ahead of fundamentals and looks "fully valued", having reached the firm’s prior price target, the firm tells investors in a research note. Goldman Sachs adds however that it continues to prefer copper exposure on a long term basis and view Southern Copper as offering investors exposure to high quality copper assets.
4. Radian Group double downgraded to Underperform at BofA
BofA double downgraded Radian Group (RDN) to Underperform from Buy following the Q1 results. Following the recent outperformance, Radian shares are trading at a premium to MGIC Investment (MTG) and Enact Holdings (ACT), the firm tells investors in a research note. While capital return has been positive at Radian, Homegenius segment performance has been "lackluster" and there is meaningful execution risk as the company attempts to grow the segment, BofA says. The firm believes Radian has the weakest risk/reward profile in the mortgage insurance group.
5. Wolfe Research downgrades Qualys to Underperform with $100 target
Wolfe Research downgraded Qualys (QLYS) to Underperform from Peer Perform with a $100 price target. The company reported Q1 revenue in line with guidance, but billings that missed Street expectations its reaffirmed guidance looks aggressive, Wolfe Research tells investors in a research note. The firm cites Qualys’ slowing growth and pressured margins for the downgrade.
Published first on TheFly
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