MercadoLibre upgraded, PagerDuty downgraded: Wall Street's top analyst calls
The most talked about and market moving research calls around Wall Street are now in one place. Here are today's research calls that investors need to know, as compiled by The Fly.
Top 5 Upgrades:
New Street upgraded MercadoLibre (MELI) to Buy from Neutral with a price target of $1,650, up from $1,400. The analyst says the company remains a "uniquely well positioned asset" across e-commerce. MercadoLibre's market share gains in Brazil, its core market, have been material in the last 12 months and there is more to come with domestic players struggling to compete, the analyst tells investors in a research note. The firm says talk of Chinese vendor competition is likely overdone.
DA Davidson upgraded AppFolio (APPF) to Buy from Neutral with a price target of $230, up from $155. The firm transitioned coverage to a new analyst with the upgrade. AppFolio holds a competitive advantage in the user-friendliness of its software and has multiple growth drivers from both expansion among existing clients and market penetration, the analyst tells investors in a research note.
Citi upgraded Aramark (ARMK) to Buy from Neutral with a price target of $47, up from $45. With the stock down 6% in the last month, Aramark's valuation is attractive and the upcoming Uniforms spinoff event is a potentially positive catalyst, the analyst tells investors in a research note. Although execution risk remains in the context of the Uniforms separation and the "impressive rate" of new contract growth acting as a near-term margin drag, offsetting this is that the inflationary environment seems on the cusp of inflecting into favorable territory for Aramark, contends Citi.
Guggenheim upgraded Eos Energy (EOSE) to Buy from Neutral with a $10 price target following yesterday's news that the Department of Energy has provided a $400M conditional loan commitment to the company. The "long-awaited" announcement marks the end of a lengthy technical and due diligence process and the loan guarantee should underpin an expansion to 8GWh in annual production capacity by mid-2026, the analyst tells investors. The firm's price target reflects its updated revenue and EBITDA outlook for 2025, arguing that the conditional commitment is significant as it signals that Eos has passed the LPO's due diligence process.
Wedbush upgraded Papa John's (PZZA) to Outperform from Neutral with a price target of $95, up from $80. The firm's checks point to North America same-store sales growth trending above consensus in Q3 and beyond the quarter the firm views Papa's forward domestic same-store sales growth expectations as "realistic," the analyst tells investors. The margin trajectory could deliver operating margins ahead of current expectations and the firm is "not overly concerned" about Papa's medium- to longer-term unit growth trajectory, the analyst added.
Top 5 Downgrades:
Telsey Advisory downgraded Dollar General (DG) to Market Perform from Outperform with a price target of $145, down from $185. The analyst is "disappointed" by the Q2 results, which the firm says reflected soft sales, poor execution, and ongoing investments. Telsey cites Dollar General's softer comp and profit outlook for the second half of 2023, which it believes is likely to continue into 2024, for the downgrade. Meanwhile, Loop Capital also downgraded Dollar General to Hold from Buy with a price target of $140, down from $200. The company "continued a troubling recent trend" in Q2 with the company's second "miss and lower" print of fiscal 2023, the analyst tells investors in a research note. In addition, Evercore ISI downgraded Dollar General to In Line from Outperform with a price target of $150, down from $185, and Raymond James downgraded Dollar General to Outperform from Strong Buy with a price target of $160, down from $200, following the Q2 report.
Argus downgraded British American Tobacco (BTI) to Hold from Buy with no price target. While the management expects global tobacco volume to be down 2% in 2024, the stock has outperformed relative to the broader index and the Consumer Staples ETF (IYK) over the past three months, the analyst tells investors in a research note. The firm adds that it would consider returning British American Tobacco to the Buy list on signs of stronger sustained earnings growth from new categories.
Baird downgraded PagerDuty (PD) to Neutral from Outperform with a price target of $25, down from $32. The company reported mixed Q2 results, with a revenue and earnings beat while billings were below guidance, the analyst tells investors in a research note. The revenue beat was not passed though and Q3 billings were guided weaker, says the firm. Baird cites the company's slower implied second half of fiscal 2024 growth and tougher first half of fiscal 2025 compares likely limiting upside for the downgrade.
B. Riley downgraded Hersha Hospitality Trust (HT) to Neutral from Buy with a price target of $10, up from $9, after the company agreed to be acquired and taken private by KSL Partners for $10 per share in cash.
Northland downgraded Allot Ltd. (ALLT) to Market Perform from Outperform with a price target of $3, down from $8. Despite an in-line topline report for Q2, Allot is lowering the midpoint calendar 2023 revenue guidance and the second half guidance indicates that DPI's "cash cow status has become questionable," the analyst tells investors. Verizon (VZ) SMB uptake as a catalyst to SECaaS ARR acceleration "remains possible," but looks "highly uncertain," the analyst added.
Top 5 Initiations:
Canaccord initiated coverage of Confluent (CFLT) with a Buy rating and $40 price target. In a rapidly growing, highly fragmented data streaming landscape, Confluent "stands out" with its Apache Kafka, a "ubiquitous open-source event streaming technology," the analyst tells investors. The vast majority of data streams in Confluent Cloud are linked downstream to some form of application code processing or reacting to that stream of data and the opportunity in stream processing with Flink "could be as large" as the core market, the analyst added.
Needham initiated coverage of Veeco (VECO) with a Buy rating and $35 price target. The company's turnaround efforts are succeeding and the long-term growth driven by the adoption of Veeco's unique technologies such as laser anneal, ion beam deposition and advanced packaging lithography is transforming the company, the analyst tells investors in a research note. Investors should take a "fresh look" at Veeco shares as the company will look very different as its strategic turnaround progresses, the firm added.
Raymond James initiated coverage of Ferguson (FERG) with an Outperform rating and $175 price target. Ferguson is a well positioned industrial distributor, with leading market positioning and scale advantages across "fragmented, complementary, and growing industries," the analyst tells investors in a research note. The firm believes the company's out-year growth will be supported by secular tailwinds and consistent demonstrated market outgrowth.
Loop Capital initiated coverage of Builders FirstSource (BLDR) with a Buy rating and $180 price target. The company has a number of catalysts that support a "sustainable valuation re-rating moving forward," the analyst tells investors in a research note. Builders FirstSource' recent improvement in single-family housing starts will be a meaningful demand tailwind into 2024 and more than offset any moderation in multi-family construction next year, says the firm.
BTIG initiated coverage of P3 Health Partners (PIII) with a Buy rating and $5 price target. P3 is a value-based-care organization that focuses exclusively on the Medicare Advantage space, the analyst tells investors in a research note. The firm believes the company is better positioned than some others because expectations for EBITDA are low and the P3 was already EBITDA-positive in Q2. In addition, since the company focuses exclusively on Medicare, and not Medicaid, its margin potential is much higher than some peers, contends BTIG.
