Investing.com – Here’s a quick look at the key takeaways from Wall Street analysts over the past week: Updates for Micron, Insulet, Cheesecake Factory and Bumble ; downgrading ZoomInfo version.
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micron
What’s happened? On Monday, Baird upgraded shares of Micron (NASDAQ:) to Outperform with a $150 price target.
What’s the whole story? While Baird is a bit late for the train, he sees significant upside for Micron shares, especially in light of the stock’s recent decline. This view contrasts with the progressively positive trends emerging in DRAM, according to recent channel checks. These developments are leading to an unprecedented forecast for the state of memory over the next 12-18 months.
DRAM prices have proven to be more resilient than previously thought, with more premium DDR5 available. This trend is a positive indicator of Micron’s financial performance and market position. The brokerage’s analysis suggests that the move to higher-priced memory options is a strategic move that could pay off in the long run.
Finally, the potential of HBM3E (the fastest memory with maximum capacity and high bandwidth to advance AI innovation) cannot be overlooked. Baird predicts that HBM3E could generate gross margins in excess of 60% for Micron next year. This potential gain indicates strong financial performance and further strengthens Micron’s position in the market. Considering these factors, Baird rates Micron as an “outperformer.” This rating reflects the brokerage house’s confidence in Micron’s future performance amid changing market dynamics.
“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.”
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How did the stock react? Micron opened the regular session at $119.04 and closed at $120.13, up 4.73% from the previous day’s regular close.
insulator
What’s happened? On Tuesday, Wolfe upgraded Insulet (NASDAQ:) to Outperform with a $200 price target.
What’s the whole story? Over the years, Baird has realized that in order to truly understand the value of some of these ambitious, fast-growing, visionary stories, it is necessary to extend the duration of the simulation beyond the comfortable just one, three or even five years. . As a result, Baird has a 20-year PODD DCF to 2040+.
Baird independently models four major segments with different assumptions regarding market penetration and PODD share: US Type 1, US Type 2, Intensive (bolus + basal), US Basal Type, and OUS Type 1. Over the long term, their market penetration rates are the fastest high for US type. 1 and the lowest level for basal rate in the US. In Type 1, Baird describes a PODD that will eventually earn 40% market share in the US and OUS. For Type 2, given its current leadership and single-in-class basal product, Baird expects PODD to earn over 50% of the Type 2 pump market over the long term. Terminal margin and their DCF growth are 30% and 3% respectively, and cash flows are discounted at 9%.
To put it simply, returning to “short-term” metrics, Baird views current levels as undemanding relative to sector growth performance and history. Based on 2025 earnings, PODD trades at approximately 6x, which is the bottom quartile of the note’s history. There are companies with growth of 15-25% that are trading at 7-13 times earnings in 2025. Real EBITDA (including stock returns) here is around 30x in 2025. Names like DXCM, ISRG and SWAV (using a deduction) are clustering at around 40x in 2025.
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“Outperform in Wolfe” means: “The stock is forecast to outperform industry analysts over the next 12 months.”
How did the stock react? Insulet opened the regular session at $183.01 and closed at $184.28, down 4.47% from the previous day’s regular close.
ZoomInfo Technologies
What’s happened? On Wednesday, Goldman downgraded ZoomInfo (NASDAQ:) to Sell with a $12 price target.
What’s the whole story? Goldman is moving to a sell position due to growing uncertainty about the reversal of the above trends. The company’s 1Q24 results highlight continued macro and execution challenges, with NER down to 85% from 87% in 4Q and net new revenue continuing to decline ($12 million in FY24 vs. $142 million in FY23 fiscal year and $350 million in FY22). Additionally, there has been a decline in cRPO (Current Remaining Performance Obligations) growth, which remained at -2% YoY.
Amid a challenging cost environment, weaker macro signals and after delivering two major quarters of updates in Q4/Q1, the banking house sees a dearth of upcoming catalysts that could support a re-acceleration of earnings. This leads Goldman to expect a more gradual revenue recovery. Given the Street’s expectations of a 600 bps acceleration in growth. (preview) in CY25 (vs. GSe ~100 bps), Goldman views downward estimate revisions as an overweight for the stock.
While Goldman notes that ZI is seeing underlying trends improve, stabilizing mid-market retention and improving enterprise health, and is expected to roll out Gen-AI services in the second half of the year, the banking house is waiting for the next trends to take shape before moving on to more constructive approach: 1) signs of a rebound in hiring, 2) improved execution in terms of stabilizing churn, and 3) sustained expansion. These factors will be critical in determining Goldman’s future position on the company.
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“Sell” in Goldman means “Analysts recommend buying or selling a stock for inclusion on various regional investment lists.” The purpose of buying or selling in an investment list is determined by the overall return potential of the stock relative to its coverage.”
How did the stock react? ZoomInfo opened the regular session at $12.12 and closed at $12.14, down about 25% from the previous day’s regular close of $16.02.
Cheesecake Factory
What’s happened? On Thursday, Raymond James upgraded shares of Cheesecake Factory (NASDAQ:) to Outperform with a $42 price target.
What’s the whole story? Raymond James says CAKE’s first quarter results showed promising signs of competitive resilience and significant outperformance amid weakening industry conditions. Of particular note was the cheesecake segment, which exceeded 2019 profitability levels for the second quarter in a row, allaying previous concerns about margin pressure. These results indicate a strong competitive position in a challenging market.
The brokerage notes that while store margins for the company’s growing brands continue to fall short of the division’s economic goals, there is potential for margin improvement by 2024. This optimism is based on the expectation that prices will keep pace with inflation, which could prompt investors to re-evaluate the company’s long-term revenue growth prospects, estimated at 7-8% annually. Such an adjustment could lead to a revaluation of the company’s value, especially given its current low price-to-earnings ratio of approximately 11 times.
Additionally, Raymond James highlights that the company’s shares are undervalued, with a P/E ratio of around 11x, suggesting room for growth. In addition, there is a high percentage of short positions in shares, amounting to about 15% of the total number of shares. The updated guidance provided by the company contains some caution due to the uncertain state of the industry. However, this conservative forecast could provide room for growth in the stock if industry trends remain stable or improve. Raymond James remains positive on the stock, expecting potential gains from current valuation levels.
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Outperforming the Raymond James Index means: “A security is expected to rise in value or outperform the S&P 500 Index over the next 12 to 18 months. For higher-yielding and more conservative stocks, such as REITs and some MLPs, an Outperform rating is used for securities in which Raymond James is comfortable with the relative safety of the dividend and expects the total return to slightly exceed the dividend yield over the next 12 to 18 years . months.”
How did the stock react? The Cheesecake Factory opened the regular session at $36.47 and closed at $36.06, up 6.15% from the previous day’s regular close.
Bumble
What’s happened? On Friday, BofA Securities upgraded Bumble (NASDAQ:) to Buy with a $14 price target.
What’s the whole story? BofA is moving Bumble to Buy as the banking house is now more confident that Bumble can meet or exceed Street expectations, which they believe will fuel multiple expansion. BMBL beat first-quarter street earnings estimates for the first time in two quarters (EBITDA outperformed, above 4 of the last 5 quarters) and consensus FY24 earnings estimates by 80 bps. below the forecast midpoint (range +8-11%). y-y).
The banking house also believes that an expanded share buyback program will help boost valuations. At 2025 EV/EBITDA of 6.4x, Bumble’s valuation currently represents a significant discount to projected growth (9.6/15.8% 3-year revenue/EBTIDA CAGR), peer comparison (8.4x ) and comparability of consumer subscriptions (16.4x).
BofA raises estimates slightly, and their target price remains at $14 for 7x 2025 EV/EBITDA. This increase reflects BofA’s growing confidence in Bumble’s ability to meet or exceed market expectations, as well as their belief in the company’s growth potential.
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Buying at BofA means: “The stock being purchased is expected to have a total return of at least 10% and is the most attractive stock in the coverage cluster.”
How did the stock react? Bumble opened the regular session at $11.65 and closed at $11.45, up 0.26% from the previous day’s regular close.