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Street Calls of the Week: Block upgraded on growth opportunities

Published 02/04/2024, 08:41 AM
Updated 09/02/2020, 02:05 AM

Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Block, Plug Power, Cigna; downgrades for Bloom Energy and Tractor Supply.

InvestingPro subscribers always get first dibs on market-moving rating changes.

Bloom Energy downgraded

What happened? On Monday, BofA downgraded Bloom Energy Corp (NYSE:BE) to Underperform with a $10.00 price target.

What’s the full story? BofA expects 2023-2025 revenues will be approximately flat, a change from previous acceleration. Bloom has historically had low visibility into orders and growth, a concern that led to BofA’s downgrade to Neutral in December. Despite partner SK upsizing and extending its order, there has been little else tangible to support an acceleration.

The analysts have not seen evidence of the anticipated commercial successes during the pivotal period of the years. They believe a reset of expectations is not priced-in. Consequently, they are moving the price objective lower from $16 to $10 based on flat order assumptions in 2024 and 2025, and still declining average selling prices (ASPs).

Underperform at BofA means “Underperform stocks are the least attractive stocks in a coverage cluster.”

How did the stock react? Bloom Energy equity traded lower on the premarket headlines from $12.48 to $11.81, a decline of 5.37 percent. Bloom Energy opened the regular session at $11.58 and closed at $11.90, a decline of 4.61 percent.

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Block Inc. upgraded

What happened? On Tuesday, BTIG upgraded Block Inc (NYSE:SQ) to Buy with a $85 price target.

What’s the full story? BTIG analysts wrote that they see Block’s growth opportunities paired with management’s focus on the bottom-line as presenting an attractive investment opportunity with the stock trading at ~17x fiscal year 2024 estimated enterprise value to adjusted earnings before interest, taxes, depreciation, and amortization (EV/adjusted EBITDA).

The analysts wrote that their core investment thesis is focused on Block’s attractive position between the consumer and merchant with its Cash App and Square ecosystems and potential for each segment to become stronger as integrations are built between them. The analysts also penned that they are attracted to Block’s increased focus on costs and expected the company to reach its goal of mid-20s adjusted operating margin (including stock-based compensation) by 2026, which they believe would align with investors who were increasingly focused on generally accepted accounting principles (GAAP) profitability.”

Buy at BTIG means “A security which is expected to produce a positive total return of 15% or greater over the 12 months following the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return. “

How did the stock react? Block equity traded higher on the premarket headlines from $68.97 to $70.35, a gain of 1.84%. Block opened the regular session at $70.58 and closed at $68.22, a decline of 1.12 percent since Monday’s close.

Plug Power upgraded

What happened? On Wednesday, Roth/MKM upgraded Plug Power Inc (NASDAQ:PLUG) to Buy with a $9 price target.

What’s the full story? Roth visited Plug’s Georgia green hydrogen plant and gained confidence in the company’s operations. Roth’s analysts wrote that the facility was ramping smoothly and that all major technical issues were handled, addressing their prior concerns about backlog and margin visibility.

The analysts wrote January 31 was the third day of liquefaction, and that they expect the first liquid hydrogen delivery from the facility to take place imminently. The analysts also wrote that full rate 15 tons per day (TPD) production should be confirmed in the next few weeks.

Roth believes the Georgia green hydrogen plant is a key asset for the green hydrogen industry, as it uses renewable energy to produce low-carbon hydrogen.

Buy at Roth/MKM means “A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months.”

How did the stock react? Plug Power equity traded higher on the premarket headlines from $3.70 to $4.00, a gain of 4.83%. PLUG opened the regular session at $4.09 and closed at $4.54, a gain of around 17 percent since Tuesday’s close.

Cigna upgraded

What happened? On Thursday, Deutsche Bank upgraded Cigna Corp (NYSE:CI) to Buy with a $370 price target.

What’s the full story? Deutsche analysts shared that they increased their target multiple to 13x from 12.5x their fiscal year 2024 estimated earnings per share (EPS) of $28.42, reflecting their increased confidence in Cigna’s ability to hit their fiscal year 2025 EPS estimates without the drag of the underperforming Medicare Advantage (MA) segment.

Deutsche Bank stated they recognized EPS estimates now have a positive revision bias (up to ~9%) based on the influx of capital and a continuing focus on accretive tack-on mergers and acquisitions and share repurchases. The analysts wrote that their investment thesis around Cigna’s shares had focused on valuation, with their expectation being that investors would eventually pay more for exposure to the more profitable but slower growing commercial market versus the government-pay space.

The analysts further shared that while they believed the company had navigated the challenges in the core commercial business with good client retention levels and new business wins, it still faces margin pressure in the near term due to the Centene (NYSE:CNC) pharmacy benefit manager (PBM) implementation expenses and elevated growth investment.

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? Cigna equity opened the regular session at $301.44 and closed at $307.32, a gain of 2.12 percent since Wednesday's close.

Tractor Supply Company downgraded

What happened? On Friday, Raymond James downgraded Tractor Supply Company (NASDAQ:TSCO) to Outperform with a $250 price target.

What’s the full story? Raymond James analysts downgraded Tractor Supply Company (TSCO) from a Strong Buy to an Outperform rating following the company’s 4Q23 results, conference call, and subsequent follow-up discussions.

While the brokerage maintains a positive outlook on TSCO’s long-term growth prospects, the stock has already surpassed their previous price target of $230. Additionally, 2024 is expected to be a more subdued earnings year, leading to a reduction in near-term upside at 23x NTM EPS. Consequently, the analysts are taking a cautious approach by adjusting their rating.

Despite challenges posed by adverse weather, rising interest rates, and inflation, TSCO has demonstrated resilience by gaining market share and experiencing strong demand for everyday “C.U.E.” (consumable, usable, and edible) products, surpassing chain averages. This customer loyalty reinforces their confidence in Tractor Supply’s business model and its potential for sustained sales and earnings growth in the years ahead according to Raymond James' research note.

Outperform at Raymond James means “The security is expected to appreciate or outperform the S&P 500 over the next 12-18 months. “

How did the stock react? Tractor Supply equity opened the regular session at $235.18 and closed at $232.94, a decline of 0.83 percent since Thursday’s close.

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