Nike comments 'reignite' buy thesis: 6 big analyst picks
Investing.com -- Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: Outperform initiations at Nike and Lululemon Athletica, and upgrades at HP, monday.com, Hess, and DigitalOcean.
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Nike started with an Outperform rating at Evercore ISI
Evercore ISI initiated coverage on Nike (NYSE:NKE) with an Outperform rating and a price target of $124.00.
The analysts suggest that despite strong ongoing demand for Nike products, the bigger near-term opportunity to boost earnings per share lies in the ongoing recapture of ~350bp of post-COVID transitory costs.
Over the long term, the analysts are quite optimistic based on the remarks made in Q1, indicating that Nike is actively implementing strategies to substantially improve its supply chain, warehousing, and fulfillment costs. The analysts believe these initiatives bolster the thesis that Nike is on a trajectory to increase its EBIT margins to the high teens in the forthcoming years.
The analysts further believe that this outlook holds even in the scenario where direct-to-consumer sales do not meet the 60% revenue threshold, an input that was previously considered essential for achieving such elevated EBIT margin levels.
Shares were recently down marginally to $106.95 in the premarket.
HP upgraded to Buy
Edward Jones upgraded HP (NYSE:HPQ) to Buy from Hold, as reported in real time on InvestingPro.
The analysts find HP shares to be priced attractively at the moment and anticipate that the PC market will return to growth in 2024 as PCs bought during the pandemic begin to be replaced. Additionally, they believe, with the Microsoft (NASDAQ:MSFT) Windows 10 operating system set to lose support after October 2025, both consumers and businesses may also look to upgrade their PCs.
The company is set to report its Q4/23 earnings on Nov 21. Street estimates stand at $0.90 for EPS and $13.8 billion for revenues.
Shares were up 0.9% to $27.57 premarket.
DA Davidson upgrades monday.com to Buy
DA Davidson upgraded monday.com (NASDAQ:MNDY) to Buy from Neutral a price target of $170.00.
The analysts said that, because the company is headquartered in Israel, they believe most of the stock's recent weakness has been "attributable to the recent tragic events in the region and the increased perception of geopolitical risk," even though "very little of the company's revenue is from the area, that it has been increasingly building out its North American presence across a few dimensions."
The analysts added that they believe "the business has been little affected; we also believe that company has set itself up for continued success over the coming years (both in strong growth and cash generation)."
Shares were up 3.9% to $129.92 in premarket trading.
DigitalOcean pops on Goldman upgrade
DigitalOcean (NYSE:DOCN) shares surged nearly 7% pre-market today after Goldman Sachs upgraded the company to Buy from Sell with a price target of $33.00.
The upgrade follows a significant stock underperformance, even with nearly a 17% jump on Friday driven by Q3 earnings.
According to the bank, the stock underperformance has likely been driven by a cyclical normalization in cloud optimization spending, as well as an overhang from the ongoing management transition. “We believe the business is now approaching a cyclical trough, based on 1) indicators in the SMB ecosystem and management commentary on the 3Q23 earnings call; 2) contributions from newer initiatives such as the recent acquisition of Paperspace and continued ramping of Cloudways,” commented Goldman Sachs.
Shares were changing hands at $25.49 in the premarket.
Argus Upgrades Hess to Buy
Argus upgraded Hess (NYSE:HES) to Buy from Hold with a price target of $171.00.
The analysts believe the stock is a buy even though Chevron 's (NYSE:CVX) share slump has dented the value of its deal to buy out Hess, eliminating the acquisition premium.
Despite this - as well as the pressure that Hess has been under from weak oil prices and recession concerns - "we believe that Hess remains a logical acquisition for Chevron and expect HES shares to rise, in tandem with CVX shares, ahead of the merger," the analysts said.
They added that their $171 price target is "in line with the initial buyout offer and implying a potential gain of 18% including the dividend."
Still, shares of Hess were down fractionally to $145.40 in the premarket.
Lululemon started at Buy
Evercore ISI initiated coverage on Lululemon Athletica (NASDAQ:LULU) with an Outperform rating and a price target of $475.00.
The athleisure maker is set to release earnings next month, with EPS expected to rise about 16% to $2.28 per share, and sales targeted at about a 21% climb to $2.9B.
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