Investing.com – Here’s a quick look at the top takeaways from Wall Street analysts over the past week.
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Advanced microdevices
What’s happened? On Monday, Morgan Stanley downgraded shares of Advanced Micro Devices (NASDAQ:) to Equalweight with a $176 price target.
What’s the whole story? Morgan Stanley recognizes AMD’s strengthening position in its core markets. However, analysts have expressed caution due to high expectations surrounding AMD’s artificial intelligence capabilities, which could cast doubt on the company’s justification for a higher valuation. Despite Morgan Stanley’s previous discussions about these concerns, particularly after the GTC event, the team believes that investor expectations have not fully factored in the potential impact of Nvidia Blackwell’s launch on its competitors.
With AMD shares higher after the quarter and approaching Morgan Stanley’s target, the company decided to take a more subdued stance. The research team turns its attention to Broadcom Inc. (NASDAQ:) as the preferred large-cap artificial intelligence investment alternative, ranking it second behind AMD’s market position and potential in light of upcoming industry developments.
Equal weighting at Morgan Stanley means: “The stock’s total return is expected to be in line with the average risk-adjusted total return of the industry covered by the analyst (or industry team) over the next 12 to 18 months. “
How did the stock react? AMD opened the regular session at $162.75 and closed at $160.34, up 4.49% from the previous day’s regular close.
Cleveland Cliffs
What’s happened? On Tuesday, JPMorgan downgraded Cleveland-Cliffs Inc (NYSE:) to neutral with a $17 price target.
What’s the whole story? JPMorgan has taken a backseat to its growing capex needs, replenishing auto inventories, resulting in less additional demand and a lack of near-term growth projects. The bank values its clean balance sheet and increased focus on shareholder returns.
Regardless, JPMorgan believes most investors would prefer to stockpile cash for potential mergers and acquisitions rather than debt-financed stock buybacks. CLF’s combination of assets consisting of blast furnaces and some EAFs (electric arc furnaces), coupled with its vertical integration into iron ore, scrap and HBI (hot briquetted iron) production, provides a self-sustaining business model that should largely protect the company from shortages scrap ahead relative to peers.
Ultimately, the use of CLF in the automotive sector with annual fixed contract prices can help smooth out profits throughout the cycle.”
“Neutral” for JPMorgan means “over the life of the target price stated in this report, we expect this stock to match the average total stock returns within the research analyst or team of research analysts’ coverage.”
How did the stock react? Cleveland-Cliffs opened the regular session at $15.18 and closed at $15.13, down 3.32% from the previous day’s regular close.
Paramount Global
What’s happened? On Wednesday, Wells Fargo downgraded shares of Paramount Global (NASDAQ:) to underperform with a $9 price target.
What’s the whole story? Wells Fargo analysts said Paramount Global faces challenges in the near term due to possible downward revisions as management reengages with investors, a lack of medium-term free cash flow 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.
Wells analysts believe Paramount’s best opportunity lies in the sale of significant assets such as Black Entertainment Television, as well as a strategic shift from Paramount+ to external licensing of its high-quality content.
By comparison, Warner Bros. Discovery (NASDAQ:) trades at a higher 5x enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) with similar leverage levels, but boasts a more linear business model and richer content. portfolio including HBO and a game studio.
Analysts adjusted their valuation for Paramount to 6.2x EV/EBITDA, which is broken down into 4.5x EV/EBITDA for TV Media + Studios and $1.5 billion for Direct-to-Consumer. Despite criticism that this valuation is inconsistent with studio acquisition offers and is overly punitive for DTC, analysts counter that without any mergers and acquisitions, component sum comparisons are irrelevant.
Wells Fargo set a new target price for Paramount at $9 and 25 times free cash flow. They see $14 upside potential in the Skydance deal and $6 downside risk.
Underweight in Wells Fargo means that the stock’s “overall performance is expected to underperform Overweight and Equal Weight rated stocks within the analyst’s coverage over the next 12 months.” “
How did the stock react? Paramount Global opened the regular session at $10.71 and closed at $11.12, up 0.72% from the previous day’s regular close.
Mereo BioFarma Group
What’s happened? On Thursday, after the normal close on Wednesday, Baird initiated coverage of Mereo BioPharma Group PLC (NASDAQ:) ADR at Outperform with an $8 price target.
What’s the whole story? Baird notes that Mereo has strategically built an impressive rare disease portfolio through a combination of domestic and external licensing operations. The company’s two main assets, setrusumab and alvelestat, are owned by large pharmaceutical companies (Novartis/NVS and AstraZeneca/AZN, respectively). Each of these assets individually represents a compelling case in the rare disease space with a high level of unmet need, according to the brokerage.
Looking ahead, Baird expects growing enthusiasm for setrusumab’s potential, especially with top-line data expected to be available in late 2024 or early 2025. Additionally, the announcement of the alvelestat partnership could serve as an unexpected positive catalyst. Analysts continue to closely monitor these developments and their potential impact on the rare disease market.
“Outperform” in Baird means “The company is expected to outperform the broader U.S. stock market on a risk-adjusted total return basis over the next 12 months.”
How did the stock react? Mereo BioPharma opened the regular session at $3.90 and closed at $3.99, up 4.18% from the previous day’s regular close.
Shopify
What’s happened? On Friday, Evercore updated Shopify Inc. (NYSE:) will outperform with a target price of $75.
What’s the whole story? Evercore upgraded SHOP shares to outperform with a $75 price target. The decision comes after the share price has fallen significantly, down around 30% from its 52-week high, presenting an attractive opportunity to invest in a leading e-commerce platform. The firm maintains a strong long-term outlook for SHOP, bolstered by its large total addressable market (TAM) valued at approximately $850 billion, strong competitive position and growth prospects in the high-end market. These factors are supported by recent channel audits, SHOP’s proven ability to develop innovative products as evidenced by its growing attachment rate, and the forecast for a significant increase in profitability, with free cash flow margin expected to grow from the current 12% to potentially mid-to-high teens by 2026.
The firm also notes that recent downward revisions to operating margin forecasts reflected in the last two earnings per share reports have significantly mitigated the risks associated with SHOP shares. Evercore views the market’s future expectations for operating margin and free cash flow as reasonable. Additionally, as an observer of the dynamics of online advertising, Evercore supports SHOP’s strategic move to intensify its social media marketing efforts, which is expected to accelerate its international expansion and aligns well with current marketing trends.
Evercore’s outperformance means that “total forecast returns are expected to exceed the expected 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, up 4.61% from the previous day’s regular close.