Yahoo Finance Street calls of the week: Stifel initiates on Tesla; downgrade for Alphabet
Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
InvestingPro subscribers always get first dibs on market-moving rating changes.
Affirm Holdings
What happened? On Monday, Goldman Sachs launched coverage with a new analyst on Affirm Holdings Inc (NASDAQ:AFRM) at Buy with a $42 price target.
What’s the full story? Goldman regards AFRM as a frontrunner in the provision of contemporary credit solutions for consumers, boasting a varied array of products tailored for point-of-sale financing and daily expenditures. The analysts are particularly taken with the sophistication of AFRM’s underwriting processes compared to its fintech counterparts, as well as the company’s consistent delivery of well-managed credit results, even amidst rapid growth that outpaces its peers. This success is attributed to AFRM’s approach to short-duration receivables and transaction-level underwriting, which enables the company to individually assess and underwrite various types of consumer spending. These include everyday purchases (“Pay now” via Debit), cash flow management or short-term financing (such as Pay-in-4), and more extended installment financing options (spanning 6-12 months or more), all facilitated through a single card-based product, the Affirm Debit+ card.
In contrast to traditional card issuers who have historically provided a single revolving credit line to cover these needs, AFRM’s method incurs significantly lower costs for the consumer and reduces credit risk for the lender by avoiding large open-to-buy balances. Goldman believes that AFRM’s precise underwriting grants it a competitive edge, enabling the firm to delve deeper into the credit spectrum and make inroads into the subprime/near-prime market segment—a challenging area for many established players to engage in sustainably. The analysts anticipate that this precision in underwriting will bolster AFRM’s position in the market and facilitate its continued growth and success.
Buy at Goldman means “Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. 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? Affirm Holdings opened the regular session at $31.02 and closed at $33.70, a gain of 12.82% from the prior day’s regular close.
Penn Entertainment
What happened? On Tuesday, Raymond James downgraded PENN Entertainment Inc (NASDAQ:PENN) to Market Perform and removed their $20 price target.
What’s the full story? The recommendation change follows a 21% increase in the company’s share price since May 20, which was influenced by activist pressure and merger and acquisition rumors. Initially, when coverage began, Raymond James posited that the stock’s potential was limited to approximately $20/share. This ceiling was attributed to ongoing discounts related to the interactive segment and the “penalty box” status, which were expected to continue until a clearer route to profitability in the interactive space was established or a significant strategic shift occurred.
However, the path to profitability in the digital realm for PENN remains ambiguous, and no substantial changes in strategy, such as a complete sale of the company, appear imminent. Consequently, Raymond James advises investors to capitalize on the recent gains and seek more favorable risk-adjusted investment opportunities within the sector. The brokerage highlights Caesars (NASDAQ:CZR) as its preferred choice, suggesting that it offers a more attractive investment profile compared to PENN under the current market conditions.
Raymond James’ assessment reflects a cautious stance on PENN’s short-term prospects, emphasizing the need for clarity in its digital strategy and profitability outlook.
Market Perform at Raymond James means “The security is expected to perform generally in line with the S&P 500 over the next 12 months and could potentially be used as a source of funds for more highly rated securities.”
How did the stock react? Penn Entertainment opened the regular session at $18.85 and closed at $18.26, a gain of 5.58% from the prior day’s regular close.
Tesla
What happened? On Wednesday, (well Tuesday after hours) Stifel initiated coverage on Tesla Inc (NASDAQ:TSLA) at Buy with a $265 price target.
What’s the full story? Stifel believes that TSLA is very well positioned to deliver robust multi-year growth in 2025-27+. In the near term, the revamped Model 3 and upcoming Model Y refresh should bolster sales, followed by the commencement of its next-generation vehicle (Model 2) production, which will likely garner very strong demand. The Stifel analysts also believe TSLA’s AI-based Full Self-Driving initiative has the potential to generate significant value through sales of FSD, possible licensing agreements, and as a critical driver of longer-term RoboTaxi initiatives.
Noteworthy near-term risks include delivery levels following lackluster 1Q24 results, as well as near-term EV adoption headwinds and the U.S. election. Stifel is initiating coverage with a Buy and a $265 target price.
Buy at Stifel means “We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.”
How did the stock react? Tesla opened the regular session at $186.69 and closed at $196.37, a gain of 4.81% from the prior day’s regular close.
Qiagen
What happened? On Thursday, Wolfe Research upgraded Qiagen (NYSE:QGEN) to Outperform with a $50 price target.
What’s the full story? Wolfe Research has expressed increased confidence in QGEN’s prospects following the company’s compelling Corporate Management Day (CMD) presentation on June 17th. The brokerage is optimistic about QGEN’s ability to surpass its competitors in the upcoming year, as management has presented a credible strategy to achieve over 7% organic growth and an Operating Margin exceeding 31% between 2024 and 2028.
The current portfolio is particularly appealing due to its high percentage of recurring revenue, approximately 85%, alongside several medium-term growth catalysts and strong market positions. Additionally, Wolfe Research anticipates that QGEN’s latent-TB segment will remain unchallenged by new competitors in the near term, and they trust in the company’s disciplined execution, as demonstrated by initiatives like NeuMoDx.
Despite these positive indicators, QGEN’s stock is currently trading at less than 20x the next twelve months’ P/E ratio, which is more than a 5x discount compared to its peers. This valuation leads Wolfe Research to believe that the shares are undervalued, presenting an attractive investment opportunity with limited downside risk. In light of this assessment, the brokerage has decided to revise its estimates for 2025 and beyond, reflecting a stronger belief in QGEN’s trajectory towards enhanced growth and profitability.
Wolfe Research’s analysis suggests that QGEN is well-positioned for future success, and its current stock price offers a favorable entry point for investors.
Outperform at Wolfe means “The security is projected to outperform analyst's industry coverage universe over the next 12 months.”
How did the stock react? Qiagen opened the regular session at $41.02 and closed at $41.10, a gain of 1.02% from the prior day’s regular close.
Alphabet
What happened? On Friday, Rosenblatt downgraded Alphabet (NASDAQ:GOOG) to Neutral with a $181 price target.
What’s the full story? Rosenblatt downgraded Alphabet's to Neutral citing several areas of transitional risk that warrant cautionary observation. Key concerns include the potential impact of AI on search functionality, particularly the introduction of AI Overviews, which may temporarily disrupt search ad revenues. Additionally, there are indications of emerging competition from Bing, potentially leading to a loss of search market share. Moreover, the shift of search ad revenue towards retail media networks, influenced by Amazon (NASDAQ:AMZN) and others entering this space, is expected to accelerate, posing further uncertainties.
Another significant factor is Amazon's aggressive foray into video advertising, including the integration of ads on Prime Video and a robust upfront sales strategy, which could alter the dynamics of ad sales, particularly affecting Alphabet's YouTube platform. The research team also highlights the possibility of heightened capital expenditure (capex) for AI, driven by competitive pressures within the industry.
In light of these transitional risks, Rosenblatt suggests a cautious stance on Alphabet until clearer outcomes emerge from these developments. Monitoring how Alphabet navigates these challenges will be crucial in reassessing its investment outlook going forward.
Neutral at Rosenblatt means “We believe that this stock’s performance will be in line with the average return of others in its industry over the following 12 months.“
How did the stock react? Alphabet opened the regular session at $184.17 and closed at $182.15, a decline of 1.76% from the prior day’s regular close.
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