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 August 5-9.
Top 5 Buy Calls:
1. Nvidia upgraded to Buy at New Street after 26% pullback
New Street upgraded NVIDIA Corp to Buy from Neutral with a $120 price target. Since the peak seen in June, Nvidia's stock has pulled back by 26%, underperforming most other semiconductor stocks exposed to datacenter AI, notes the firm. While New Street finds the correction "healthy overall" and recognizes some limited and tactical headwinds specific to Nvidia, it views the pullback as "an opportunity to gain more exposure."
2. PayPal upgraded at Phillip Securities, Daiwa
Phillip Securities upgraded PayPal to Buy from Accumulate with a price target of $80, up from $75, following the Q2 report. The firm cites valuation for the upgrade following the stock's recent pullback. PayPal is well positioned to benefit from its "two-sided global network" of 429M active users, the secular shift toward digital commerce, and innovations like Fastlane guest checkout, which can help improve conversion rates for merchants, Phillip Securities tells investors in a research note.
Later in the week, Daiwa also upgraded PayPal to Outperform from Neutral with a price target of $72, up from $68. Some of the company's initiatives are "quickly generating visible results," such as improving profitability for Braintree, the analyst tells investors in a research note. The firm anticipates a positive results release again for Q3, including a guidance beat and upward earnings revision. Should new services like Fastlane as well as marketing investments set for second half of 2024 for PayPal, Venmo, and the like prove successful, investor interest should improve further even from a medium- and long-term standpoint, contends Daiwa.
3. Arm upgraded to Outperform at Daiwa
Daiwa upgraded ARM Holdings Ltd to Outperform from Neutral with a $130 price target. Following "a few interesting and volatile quarters," the bad news of a possible recession is out, and tech is settling post the big recent selloff, though AI expectations are "still strong," the firm tells investors. While acknowledging valuation is "still high," Daiwa feels the next 90 days will see Arm shares move back higher, and adds that the firm doesn't expect a recession and notes that the Fed will start to cut rates soon.
4. Costco upgraded to Buy on traffic outperformance at Gordon Haskett
Gordon Haskett upgraded Costco to Buy from Accumulate with an unchanged price target of $925. The July same-store-sales outperformance was once again traffic driven, increasing 6.3% worldwide and up 5.1% in the U.S., both of which marked a notable acceleration on a two-year basis, the firm tells investors in a research note. Gordon Haskett says the consistency of Costco's comp performance each month "continues to grow even more impressive, particularly against a backdrop that has seen many other retailers struggle to gain traction." The firm thinks a Buy rating is now more appropriate as it believes Costco's recent execution will be more the "exception" than the "norm" in retail.
5. Crowdstrike upgraded to Overweight at Piper Sandler
Piper Sandler upgraded CrowdStrike Holdings, Inc. to Overweight from Neutral with a price target of $290, down from $310. While the scale of the Crowdstrike-caused outage is unprecedented, historically, outages and breaches have had modest impacts on cyber business fundamentals, the firm tells investors in a research note. Piper says that even though the near-term news cycle will likely revolve around litigations and settlements, congressional testimony and ensuing numbers cuts ahead of and on Q2 earnings, the ramifications of the event "will likely be more-so short-lived and at negligible cost." With the shares down sharply for the month, the firm believes investors should opportunistically build positions at current levels.
Top 5 Sell Calls:
1. ZoomInfo double downgraded to Underperform at BofA on declining growth
BofA downgraded ZoomInfo Technologies Inc. to Underperform from Buy with a price target of $8, down from $23, after the company reported Q2 results and lowered 2024 revenue guidance to imply growth of down 3.4% year-over-year at the midpoint. Following this second guide down quarter in a row, the firm thinks ZoomInfo will likely underperform many SMID-cap software peers until there is confidence that revenue growth can inflect positively.
2. Bumble double downgraded to Underperform at BofA amid "very limited visibility"
BofA double downgraded Bumble Inc. to Underperform from Buy with a price target of $5.50, down from $12, given the significant cut made by the company to FY24 guidance and "very limited visibility" on when revenue growth returns. Management's decision to "reset" their product and revenue strategies comes at a time when competition from a larger competitor is rising, the firm added.
3. Six Flags Entertainment initiated with an Underweight at JPMorgan
JPMorgan initiated coverage of Six Flags Entertainment Corporation with an Underweight rating and $50 price target. The firm believes Six Flags will be focused on recapturing the lost attendance, which comes with potential pricing pressure on admissions. The company recently eliminated the guest surcharge fee on in-park food and beverage and retail purchase at legacy Six Flags parks, pointing to increasing pressure to in-park per caps, it adds. JPMorgan says that while the combined company is well positioned in the regional theme park industry driven by geographic diversification and opportunity to deliver an enhanced guest value proposition, it sees the potential benefits and upside reflected in the stock's valuation.
4. BofA cuts Extra Space to Underperform on fading hope for improved storage demand
BofA downgraded Extra Space Storage to Underperform from Neutral with a price target of $155, down from $172, citing "fading hope" for improvement in demand for storage, possibly through 2025 peak leasing season, as well as weaker demand in pandemic-boosted markets like Florida. The firm additionally sees a lack of pricing power with new customers and a negative skew for the risk/reward at current levels.
5. Celsius Holdings downgraded to Underperform at BofA
BofA downgraded Celsius Holdings, Inc. to Underperform from Neutral with a price target of $32, down from $60. The energy drink category's growth is eroding and BofA does not expect to see a meaningful recovery until next summer, the firm tells investors in a research note. BofA says the slowdown is driven in part by Celsius' "faster-than-sustainable" growth rate since 2021, exacerbated by weakness in the consumer environment. It believes the category slowdown will have an "outsized impact" on Celsius Holdings.
