Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Micron, Pinterest, and Roku, and downgrades for Lazard and Deere.
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Micron upped to Buy at Deutsche
What happened? On Monday, Deutsche Bank upgraded Micron (NASDAQ:MU) to Buy with a $85 price target.
What’s the full story? Deutsche upgraded Micron on an inflection in DRAM, a type of random-access memory. They think that MU is benefiting from the recent demand strength for AI servers, which is driving the growth of high-bandwidth memory (HBM) and DDR5, another type of random-access memory, according to their comments.
Deutsch’s analysts also note that DRAM prices have started to improve at least one quarter ahead of their expectations, and that they expect the price increases to be sustainable and to accelerate in the next two quarters, given the limited supply growth.
The analysts expect MU to guide fiscal first-quarter (ending November) revenue and earnings per share (EPS) above current Street estimates, and to indicate further improvement in the next few quarters. The analysts also see Street estimates moving up significantly for the remainder of calendar years 2023 and 2024 after MU’s earnings report.
Deutsche acknowledged that MU’s shares have performed better than they had expected during the downcycle, and they expect further appreciation (will MU exceed Deutsche's expectations again?) as estimates increase and valuation multiple (based on price-to-book) expands.
A Buy at Deutsche Bank means: “Based on a current 12-month view of TSR, we recommend that investors buy the stock. “
How did the stock react? Shares jumped $1.84 at the 4am premarket opening match to trade $71.78. Shares slowly came back over the premarket and opened about 1% higher at $70.65. Micron finished Monday at $70.50, up $0.62, or 0.9%.
Lazard cut to Sell at Goldman
What happened? On Tuesday, Goldman Sachs downgraded Lazard (NYSE:LAZ) to Sell with a $32 price target.
What’s the full story? Goldman analysts are bearish on LAZ, an investment bank and asset management firm. They believe LAZ’s top-line growth will lag behind its peers, citing a combination of factors, such as (per their note):
1. "Slower senior banker hiring (as evidenced by 18% Managing Director (MD) growth since 1Q21, 9 percentage points less than at peers, with MD productivity growth underperforming peers by 20 percentage points since 2017),"
2. "the overhang from structurally lower growth in asset management (AM) that comprises ~40% of LAZ’s revenue, and"
3. "less exposure to areas of M&A that are expected to outperform (small & mid caps, US, strategics, energy, healthcare & tech)."
Goldman also questioned LAZ management’s recently disclosed target of doubling revenue through 2030E, which Goldman wrote “would require substantially enhanced AM revenue growth, advisory MD growth and MD productivity” compared with the 2013-2203E period, and “would likely weigh on margins, given substantial guarantees for MD hires.”
Over the short term revenue growth could be pressured by weaker M&A backlog, Goldman says, as well as by less skew to non-M&A investment banking (i.e., ECM [Equity Capital market], DCM [Debt Capital Markets] and restructuring), which have already begun to accelerate, unlike M&A and AM.
Sell at Goldman means the following: “Being assigned a Buy or Sell on an Investment List is determined by a stock’s total return potential relative to its coverage universe.”
How did the stock react? Shares dropped from $39.39 on the premarket open at 4am to $32.88, a decline of about 1.6%. Lazard ended the regular session on Tuesday at $32.96, down $0.44 or 1.3%.
Pinterest upgraded to Buy at Citi
What happened? On Wednesday, Citi upgraded Pinterest (NYSE:PINS) to Buy with a $36 price target. Of note, DA Davidson upgraded PINS about 38 minutes later.
What’s the full story? Pinterest received its first upgrade of the day from Citi analysts after its recent presentation. The analysts upgraded Pinterest’s shares to Buy/High Risk, citing increased user engagement, improved ads innovation, and higher profit margins.
Citi said that Pinterest has made significant product investments that have enhanced the user experience and the relevance and personalization of content. They also praised Pinterest’s full-funnel approach to advertising, which has boosted conversion rates and monetization trends.
The analysts noted that Pinterest is still in the early stages of its turnaround, but they expressed confidence in its long-term growth potential. They projected that Pinterest’s revenue would grow at a compound annual rate of mid-high-teens over the next three to five years, and that its adjusted EBITDA margins would exceed 30% over the same period. Based on these optimistic forecasts, Citi raised their target price for Pinterest’s shares to $36 from $31 previously
Buy at Citi means: expected total return of "15% or more or 25% or more for High risk stocks.”
How did the stock react? Shares trickled higher from $26.36 to $27.36 over the course of eight minutes at 6am in New York. Around 6:40am shares pushed to their premarket high of $27.39 as DA Davidson upgraded PINS, and from there the traders and scalpers who focus on the premarket were cashing out and shares dipped back to $27. PINS ended that day at $27.02, up $0.81 or 3.1%.
Roku raised to Hold at CFRA
What happened? On Thursday, CFRA Research upgraded Roku (NASDAQ:ROKU) to Hold with a $75 price target.
What’s the full story? CFRA analysts are bullish on ROKU’s streaming operating system as TV viewing shifts from linear networks to streaming. The analysts value ROKU at a forward price-to-sales ratio of 2.7x their 2024 revenue estimate, which assumes 15% year-over-year growth.
CFRA suspects lower net operating losses in 2024 are the cornerstone of whether investors will believe the online streaming company has a winning business model to capture video streaming market penetration. The analysts report that ROKU added about 1.9 million net subscriptions in Q2 2023, reaching 73.5M total subscribers, and that the company saw a 7.2% year-over-year decline in average revenue per user.
CFRA wrote to clients that ROKU is pushing for upfront advertising, away from “the more volatile scatter ad market," and added that “advertising verticals depend on health care and consumer product goods to spend more in 2H 2023, while automotive is a wild card with the UAW labor strikes."
How did the stock react? As of the open of US premarket trading at 4am, shares were up from $71.69 to $72.62. The rating hit midday Thursday and took the stock on a tear for about an hour, surging about $2 before fading into the close. Roku ended Thursday's session up fractionally to $71.63 - and then closed Friday’s session down 3.3%, or $2.36, to $69.27.
Deere slashed to Hold at Canaccord
What happened? On Friday, Canaccord downgraded Deere (NYSE:DE) to Hold with a $400 price target.
What’s the full story? Canaccord is downgrading Deere, citing medium-term challenges. The analysts say industry data shows slowing growth and rising inventories for agricultural equipment, which could limit upside potential for the company.
Canaccord’s analysts also note that any cyclical correction is likely to be mild given high farm income, strong demand for technology upgrades, and balanced inventories. This was a rather straightforward run-of-the-mill downgrade on a large operator in a slowing ag sector that also sees inventories at dealerships beginning to normalize.
Hold at Canaccord means: “The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.”
How did the stock react? The downgrade circulated after the 4am premarket open. Around 5am the equity began to slide about $3 over the course of a two-hour period to a morning low of $384.07. Deere ended Friday at $380.87, down $6.77 or 1.75%.
