Investing.com — Here’s your professional summary of the key takeaways from Wall Street analysts from the past week.
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Southern Co .
What happened? On Monday, Mizuho downgraded Southern Company (NYSE:) to Neutral with a $90 price target.
*TLDR: Mizuho sees limited catalysts for further outperformance, despite a 21% price-earnings premium. Strong expense growth and a robust capital plan should support SO’s 5-7% EPS growth and maintain a strong balance sheet through 2026.
What’s the full story? Mizuho downgraded Southern Company’s rating to Neutral after previously upgrading it in April 2023, when its shares were trading at a 4% price-earnings premium to the group. The company initially argued that the shares could revalue to a double-digit premium as Vogtle Unit 4 neared completion. However, with the shares now trading at a 21% price-earnings premium to the electricity group, Mizuho sees few catalysts for further outperformance.
Despite being sidelined in SO, Mizuho believes that strong occupancy growth in SO’s service territory, driven by data center demand and manufacturing relocation, will boost the company’s earnings growth by 5- should make 7% more sustainable. The company also believes that management can maintain a robust capital plan through 2026, a strong balance sheet with 17% FFO/debt and a minimum equity requirement of $350 million per year.
Neutral at Mizuho means: “The stock’s total return is expected to perform in line with the unweighted, expected total return of the analyst’s sector coverage universe over the next twelve months. “
Shopify
What happened? On Tuesday, Redburn-Atlantic upgraded Shopify (NYSE:) to Buy with a $99 price target
*TLDR: Redburn-Atlantic highlights Shopify’s innovation, social media integrations and Shop Pay as key growth drivers. The company forecasts a revenue CAGR of 29% and an EBIT margin of 40% by 2026.
What’s the full story? Redburn-Atlantic highlights Shopify’s industry-leading innovation, social media integrations, easy-to-use platform and unique Shop Pay button functionality as key factors positioning it to benefit from structural growth. The company’s extensive ecosystem and platform capabilities have made Shopify the ecommerce provider of choice for merchants of all sizes, with significant gains for enterprise merchants by 2025.
Redburn-Atlantic upgrades its recommendation on Shopify to Buy, citing the company’s multi-faceted moat characterized by scale, high switching costs and an impenetrable three-sided network. The company forecasts a net sales CAGR of 29% from 2023 to 2026 and an EBIT margin of 40% in 2026, resulting in projections 24% above the 2026 EBIT consensus. The price target is set at $99, based on earnings above consensus and a reasonable multiple in line with peers in the internet, fintech and software sectors.
Buying from Redburn-Atlantic means: “Redburn Atlantic claims its stock price will rise at least 15% in a year. For high beta stocks, the threshold percentage may be proportionately higher. “
Reserved
What happened? On Wednesday, Wolfe Research downgraded its rating ResMed Inc (NYSE:) will underperform with a $180 price target.
*TLDR: Wolfe rates RMD Underperform with a target of $180, citing the disruption risks of Lilly’s GLP-1 drug. Analysts see an upside risk of 10% and a downside risk of 30% to 40%, with mid-single digit growth forecast.
What’s the full story? Wolfe analysts rate RMD stock Underperform with a target price of $180, applying a 20x price-to-earnings ratio to NTM EPS of around $9. This lower multiple reflects expected disruption risks to RMD’s business in 2025-2026 due to Lilly’s potential launch of an obstructive sleep apnea indication for its GLP-1 drug tirzepatide. Wolfe’s total addressable market analysis suggests a 15% to 25% long-term impact on the CPAP opportunity, leading to sustainable growth that is more likely to be in the mid-single digits rather than high single digits.
The analysts present two comparison sets: HSD med tech growers with a price/earnings of 25x-27.5x and MSD med tech growers with a price/earnings of 15x-20x. They believe that RMD’s growth expectations are more in line with the high end of the MSD range. A survey of physicians shows a 6% negative impact on CPAP prescription rates, outlining the potential shift from HSD to MSD growth. Wolfe sees an upside potential of 10% with a downside risk of 30% to 40% over the next 12 to 24 months.
Underperforming at Wolfe means: “The security is expected to underperform in the analyst sector coverage universe over the next twelve months.”
DoorDash
What happened? On Thursday, BTIG upgraded DoorDash Inc (NASDAQ:) to Buy with a $155 price target.
*TLDR: BTIG is raising estimates for DASH due to near-term strength and long-term growth factors. Positive EBIT and net profit expected in 2H; The ride-sharing industry is showing secular growth.
What’s the full story? BTIG is keeping a close eye on DoorDash due to positive category bias, strong execution and upward pressure on estimates. The analyst highlights three key reasons for raising estimates: continued near-term strength and long-term undervalued drivers, key milestones with positive EBIT and net profit expected in the second half, and the rideshare delivery sector is a rare area of secular developments. growth of the consumer-oriented Internet.
The analyst emphasizes the desire to increase exposure to DASH over more mature categories such as eTravel, online dating and real estate services. BTIG sees significant potential in DASH’s continued growth and milestones and positions it as an attractive investment opportunity.
Buying from BTIG means “A security that is expected to deliver a positive total return of 15% or more over the twelve months following the recommendation. The BUY rating can be maintained for as long as deemed appropriate, despite price movements that would take the target outside the 15% yield. “
What happened? On Friday, B. Riley initiated coverage on Reddit (NYSE:) at Buy with a $75 price target.
*TLDR: B. Riley sees Reddit’s unique platform and early monetization phase as driving growth. Attractive risk/reward profile at 31x 2025 EBITDA, with potential for significant leverage.
What’s the full story? B. Riley highlights Reddit’s unique value proposition to users, advertisers and content licensees through its platform, which supports tens of millions of users in more than 100,000 communities. This creates a vast and growing repository of curated content. The broker believes that Reddit is in the early stages of monetizing its platform through advertising and data licensing, positioning it for healthy revenue growth and margin gains in the coming years.
With an estimated EBITDA of approximately 31x estimated 2025 EBITDA, B. Riley finds the risk/reward profile attractive given the prospects for above-industry growth and significant debt over the coming years. The broker sees Reddit’s potential for continued expansion and profitability as an attractive investment opportunity
Buying at B. Riley means: “We generally expect “Buy” rated stocks to have above-average risk-adjusted total returns over the next twelve months. We recommend that investors purchase the securities at the current valuation.”
