Investing.com – Here’s a quick look at the key takeaways from Wall Street analysts over the past week: Updates for Best buy , Lululemon and Collegium Pharma; rating downgrade for Maxeon Solar and Medifast.
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Best buy
What’s happened? On Monday, Citi twice upgraded shares of Best Buy (NYSE:) to Buy with a $100 price target.
What’s the whole story? Citi upgrades shares BBY twice from sell to buy. The research team believes the catalyst path looks positive with upside potential for both earnings and valuation. This is based on ongoing technology replacement cycles, new AI innovations supporting growing demand, and continued profitability.
Last week’s Q1 2020 earnings report proved that GM’s performance remains best-in-class, and the company’s specific drivers are able to offset external pressures such as increased promotional activity. Simply put, this changed the thesis from Citi’s previous negative thesis. The research team recognizes the risk of 2H SSS in the face of consumer uncertainty (election distractions and shortened holiday calendars).
However, Citi believes it is prudent to look several years ahead as the business returns to growth and develops a compelling earnings growth story. The research team raises its price target to $100 (from $67) based on higher earnings per share estimates (driven by sales and margins) and an elevated target multiple of 14x FY26 EPS.
Buying at Citi means “Buy (1) 15% or more ETR or 25% or more for high risk stocks.”
How did the stock react? Best Buy opened the regular session at $85.96 and closed at $86.94, up 2.50% from the previous day’s regular close.
Maxeon Solar Technologies
What’s happened? On Tuesday, Goldman Sachs downgraded Maxeon Solar Technologies Ltd (NASDAQ:) twice to Sell with a $1 price target.
What’s the whole story? Goldman Sachs revised its position on MAXN following the company’s 4Q23 and 1Q24 earnings reports released on May 30. The report showed that both gross margin and EBITDA fell short of GSe/Factset consensus expectations, leading to weaker-than-expected guidance. for the 2nd quarter of 24 and the whole of 2024. In addition, MAXN has not yet received a DOE loan and has unexpectedly announced an equity investment from TZE. This investment, combined with the debt restructuring plan, is expected to significantly change MAXN’s capital structure. The proposed issuance of new shares will likely result in value dilution for current shareholders, as the transaction will take TZE’s ownership to more than 50.1% and nearly 350 million convertible shares will become active.
Goldman Sachs’ research team noted that while equity investments and debt restructuring should mitigate liquidity concerns in challenging market conditions, heightened uncertainty remains about future financing, including Department of Energy loan guarantees. Given a combination of market weakness, dovish management, risks associated with future capacity expansion and timing, as well as uncertainty and the potential risk of capital structure dilution as MAXN resolves its liquidity issues, Goldman Sachs downgraded MAXN from buy to sell. The firm also adjusted its 12-month price target for MAXN to $1, which represents a 46% downside potential, down from its previous forecast of about 22% upside.
Selling in Goldman means: “The designation of buying or selling on an investment list is determined by the total return potential of a stock relative to its coverage.”
How did the stock react? Maxeon Solar Technologies opened the regular session at $1.76 and closed at $1.75, down 5.41% from the previous day’s regular close.
Medifast
What’s happened? On Wednesday, DA Davidson downgraded Medifast (NYSE:) to Underperform with a $17.50 price target.
What’s the whole story? The downgrade followed a meeting with Medifast that prompted a change in earnings forecasts, with sequential declines now expected in the first quarter of 2025 rather than the fourth quarter of 2024. Consequently, projected sales for 2025 were down 5% year-over-year. per year, and forecast earnings per share (EPS) were cut by 29%.
Medifast’s advertising campaign for the GLP-1 proposal, originally scheduled for June, has been postponed to July. The ad’s impact on customer acquisition will not be revealed until November. With shares down 64% year to date, D.A. Davidson suggests further declines are possible. Medifast’s current marketing spend (5-6% of sales) is noticeably lower than its weight loss and telehealth competitors (25-50% of sales), raising concerns about its competitive position.
DA Davidson’s underperformance means “The company’s value is expected to fall by more than 15% on a risk-adjusted basis over the next 12 to 18 months.”
How did the stock react? Medifast opened the regular session at $20.43 and closed at $22.02, down 8.30% from the previous day’s regular close.
Lululemon
What’s happened? HSBC upgraded its rating on Thursday Lululemon Athletics Inc (NASDAQ:) Buy with a target price of $425.
What’s the whole story? HSBC analysts say Lululemon shares have seen strong gains but have faced challenges since hitting an all-time high in January 2024. “hit and lift.” Consequently, the stock is down 40% year to date, contrasting with the more resilient sporting goods sector.
While comparable sales in the Americas were flat in the first quarter, some of the pain was self-inflicted due to inventory shortages in a variety of colors and sizes, especially in women’s products. However, global like-for-like sales rose 7%, driven by strong performance in mainland China and other international markets. While America still accounts for 73% of the group’s sales, rising international sales suggest a potential scenario in which international revenues reach half of the group’s business.
Despite the limited earnings revision, the recent multiple squeeze has left the stock in what analysts see as an overly punishing performance.
How did the stock react? Lululemon opened the regular session at $337.23 and closed at $323.03, up 4.91% from the previous day’s regular close.
Collegium Pharma
What’s happened? On Friday, Jeffries updated College of Pharmaceuticals Inc (NASDAQ:) Buy with a target price of $44.
What’s the whole story? Jefferies expressed a more bullish view on COLL, which currently trades at just 4 times EBITDA following the departure of its CEO. The firm believes that the risk/reward ratio is trending upward. This optimistic view is due to several factors. First, Jeffries notes that second-quarter trends appear strong and consensus EBITDA estimates are likely too low. Secondly, the company believes that the LOE (base case) growth potential is underestimated.
Additionally, Jeffries highlights significant cash generation expected through 2028 and forecasts net cash to exceed market capitalization in F28. As a result of these factors, the company upgraded COLL to Buy with a $44 price target. This target is based on equal weighting of 5xC25 adjusted EBITDA and DCF analysis. Despite the recent management changes, Jeffries sees potential for growth and profitability in COLL’s future.
“Buy at Jeffreys” means “Describes a security that we expect to provide a total return (price growth plus yield) of 15% or more over a 12-month period.”
How did the stock react? Collegium Pharma opened the regular session at $32.62 and closed at $33.19, up 5.84% from the previous day’s regular close.