Investing.com — Here’s your professional summary of the key takeaways from Wall Street analysts from the past week.
InvestingPro subscribers always get the first chance at market-moving rating changes.
Advanced micro devices
What happened? On Monday, Morgan Stanley downgraded Advanced Micro Devices (NASDAQ:) to Equalweight with a $176 price target.
What’s the full story? Morgan Stanley recognizes AMD’s strengthening position within its core markets. However, analysts are cautious due to high expectations surrounding AMD’s AI capabilities, which could call into question the company’s justification for a premium valuation. Despite previous discussions by Morgan Stanley about these concerns – especially since the GTC event – the team believes that investor expectations have not fully taken into account the potential effects of Nvidia’s Blackwell launch on its competitors.
As AMD’s shares have rallied after the quarter and are approaching Morgan Stanley’s price target, the company has decided to take a more reserved stance. The research team shifts its focus to Broadcom Inc. (NASDAQ:) as a preferred alternative for large-cap AI investments, ranking it second, after a reassessment of AMD’s market position and potential in light of upcoming industry developments.
Equalweight at Morgan Stanley means: “The stock’s total return is expected to be in line with the average total return of the analysts’ (or sector team’s) sector coverage universe, on a risk-adjusted basis, over the next twelve to eighteen months. “
How did the stock react? AMD opened the regular session at $162.75 and closed at $160.34, a gain of 4.49% from the previous day’s regular close.
Cleveland Cliffs
What happened? On Tuesday, JPMorgan downgraded Cleveland-Cliffs Inc (NYSE:) to Neutral with a $17 price target
What’s the full story? JPMorgan moved to the sidelines due to rising investment needs, replenishing car inventories, resulting in less increasing demand and no growth projects in the short term. The bank appreciates the now cleaned-up balance sheet and the greater attention to shareholder returns.
Be that as it may, JPMorgan believes that most investors prefer cash accumulation for potential mergers and acquisitions over debt-financed buybacks. CLF’s asset mix of blast furnaces and some EAFs (electric arc furnaces), combined with its vertical integration into iron ore, scrap and HBI (hot briquette iron), creates a self-sustaining business model that should largely protect the company from a scrap shortage advantage over peers.
Ultimately, CLF’s impact on the automotive sector with annual fixed contract prices can help smooth revenues over the cycle.”
Neutral at JPMorgan means we expect this stock to perform in line with the average total return of the stocks in the Research Analyst or Research Analyst team’s coverage universe over the life of the price target indicated in this report.
How did the stock react? Cleveland-Cliffs opened the regular session at $15.18 and closed at $15.13, a decline of 3.32% from the previous day’s regular close.
Big global
What happened? On Wednesday, Wells Fargo downgraded Paramount Global (NASDAQ:) to Underweight with a $9 price target.
What’s the full story? Wells Fargo analysts say Paramount Global faces near-term challenges due to possible downward revisions as management reengages with investors, a lack of free cash flow in the medium term and a weakening digital advertising market. Long-term prospects include the elimination of smaller players in future sports distribution and intense competition for market share in streaming subscriptions and profits.
The Wells analysts believe the best opportunities for Paramount lie in significant asset sales, such as Black Entertainment Television, and a strategic shift from Paramount+ to licensing its premium content externally.
By comparison, Warner Bros. Discovery (NASDAQ:) trades at an enterprise value of over 5x to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) with similar leverage levels, but has a more linear business model and richer content. portfolio, including HBO and a gaming studio.
The analysts adjusted their valuation of Paramount to 6.2x EV/EBITDA, which breaks down into 4.5x EV/EBITDA for TV Media + Studios and $1.5 billion for Direct-to-Consumer. Despite criticism that this valuation lags behind studio purchase offers and is overly punitive on DTC, the analysts counter that without any M&A, sum-of-the-parts comparisons are irrelevant.
Wells Fargo has set a new target price for Paramount at $9 and 25x price versus FCF. They see a potential upside of $14 in the case of a Skydance deal and a downside risk of $6.
Underweight at Wells Fargo means: “Total equity returns are expected to lag Overweight and Equal Weight stocks within the analysts’ coverage universe over the next twelve months. “
How did the stock react? Paramount Global opened the regular session at $10.71 and closed at $11.12, a gain of 0.72% from the previous day’s regular close.
Mereo BioPharma Group
What happened? On Thursday, well Wednesday after the regular close, Baird initiated coverage on Mereo BioPharma Group PLC ADR (NASDAQ:) at Outperform with a price target of $8
What’s the full story? Baird notes that Mereo has strategically built an impressive rare disease portfolio through a combination of in- and out-licensing transactions. The company’s two main assets, setrusumab and alvelestat, come from major pharmaceutical companies (Novartis/NVS and AstraZeneca/AZN, respectively). According to the brokerage, each of these assets individually makes a compelling case in a rare disease area with high levels of unmet need.
Looking ahead, Baird expects growing excitement about setrusumab’s potential, especially as pivotal data is expected to emerge in late 2024 or early 2025. Furthermore, the announcement of a partnership for alvelestat could serve as an unexpected positive catalyst. The analysts remain alert to these developments and their potential impact on the rare disease market.
Outperforming at Baird means: “The broader U.S. equity markets are expected to outperform the broader U.S. equity market on a total return and risk-adjusted basis over the next twelve months.”
How did the stock react? Mereo BioPharma opened the regular session at $3.90 and closed at $3.99, a gain of 4.18% from the previous day’s regular close.
Shopify
What happened? Evercore performed an upgrade on Friday Shopify Inc (NYSE 🙂 to outperform with a $75 price target
What’s the full story? Evercore upgraded SHOP stock to Outperform, setting a $75 price target. This decision comes after a significant decline in the share value, approximately 30% from its 52-week high, providing an attractive opportunity to invest in a leading e-commerce platform. The company maintains a robust long-term outlook for SHOP, supported by its extensive Total Addressable Market (TAM), valued at approximately $850 billion, a formidable competitive position and prospects for growth in the luxury market. These factors are supported by recent channel controls, SHOP’s proven capacity for innovative product development – as indicated by its increasing Attach Rate – and the forecast for a substantial increase in profitability, with free cash flow margins expected to increase from the current 12% to potentially mid to high teens by 2026.
The company also notes that recent downward revisions to operating margin projections, as reflected in the past two earnings per share reports, have significantly reduced risks associated with SHOP stock. Future market expectations for operating margins and FCF margins are considered reasonable by Evercore. Furthermore, as observers of the dynamics of Internet advertising, Evercore endorses SHOP’s strategic move to intensify its marketing efforts on social media, which is expected to accelerate international expansion and align well with current marketing trends.
Outperformance at Evercore means that “total forecast returns are expected to be greater than the forecast total returns of the analyst’s coverage sector.”
How did the stock react? Shopify opened the regular session at $65.83 and closed at $67.67, a 4.61% gain from the previous day’s regular close.
