Investing.com – Here's a professional summary of the most important pieces of information Wall Street analysts said over the past week.
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Advanced micro devices
What happened? On Monday, Morgan Stanley downgraded Advanced Micro Devices (NASDAQ:) to equal weight with a price target of $176.
What's the full story? Morgan Stanley acknowledges AMD's strong position in its core markets. However, analysts are expressing caution due to the high expectations surrounding AMD's AI capabilities, which may challenge the company's justification for a premium valuation. Despite Morgan Stanley's previous discussions of these concerns – particularly since the GTC event – the team believes that investor expectations have not fully taken into account the potential impacts of Nvidia's Blackwell launch on its competitors.
As AMD shares saw a rally post-quarter and approached Morgan Stanley's price target, the company decided to adopt a more conservative stance. The research team turns its focus towards Broadcom Inc. (NASDAQ:) as a preferred high-volume investment alternative in the AI space, ranking second in preference, following a re-evaluation of AMD's market position and potential in light of upcoming industry developments.
Equal weighting at Morgan Stanley means that “the stock's total return is expected to be in line with the average total return of the analyst's (or industry team's) industry coverage universe, on a risk-adjusted basis, 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, an increase of 4.49% from the previous day's regular close.
cleveland cliffs
What happened? On Tuesday, JP Morgan downgraded Cleveland-Cliffs Corporation (NYSE:) to Neutral with a price target of $17.
What's the full story? JPMorgan moved to the sideline due to higher capex needs, replenishment of vehicle inventories, resulting in lower incremental demand, and a lack of near-term growth projects. The bank appreciates the now cleaned up balance sheet and greater focus on shareholder returns.
Whatever the case, JP Morgan feels that most investors would prefer to accumulate cash for potential mergers and acquisitions rather than debt-financed buybacks. CLF's mix of blast furnaces and some electric arc furnaces (EAFs), combined with its vertical integration into iron ore, scrap and HBI (hot briquetted iron), drives a self-sustaining business model which should largely protect it from tight scrap ahead relative to peers. .
Ultimately, CLF’s leverage on cars with annual fixed contract prices could help smooth profits over the course of the cycle.”
Neutrality at JPMorgan means “Over the duration of the target price indicated in this report, we expect this stock to perform in line with the average total stock return in the coverage universe of the research analyst or team of research analysts.”
How did the stock react? The Cleveland Cliffs opened the regular session at $15.18 and closed at $15.13, a decline of 3.32% from the previous day's regular close.
Paramount Global
What happened? On Wednesday, Wells Fargo downgraded Paramount Global (NASDAQ:) to underweight with a price target of $9.
What's the full story? Wells Fargo analysts reported that Paramount Global faces near-term challenges due to potential downward revisions as management reengages with investors, a lack of free cash flow in the medium term, and a weak digital advertising market. Longer-term prospects include the elimination of smaller players in sports distribution in the future and intense competition for market share in subscriptions and streaming revenue.
Wells analysts believe Paramount's best opportunities lie in large asset sales, such as Black Entertainment Television, and Paramount+'s strategic shift toward licensing its high-quality content externally.
Relatively speaking, Warner Bros. Discovery (NASDAQ:) has a high enterprise value of 5x earnings before interest, tax, depreciation, and amortization (EV/EBITDA) with similar leverage levels, but boasts a more linear business model and a richer content portfolio, including HBO and a game studio.
Analysts revised their valuation for Paramount to 6.2x EV/EBITDA, which breaks down to 4.5x EV/EBITDA for TV Media + Studios and $1.5 billion for direct-to-consumer. Despite criticism that this valuation falls short of studio buyout offers and is overly punitive on DTC, analysts counter that without any M&A, sum-of-the-parts comparisons are irrelevant.
Wells Fargo set a new price target for Paramount at $9 and a 25x FCF price. They see a potential upside of $14 in the event of a Skydance deal and a downside risk of $6.
Underweighting Wells Fargo means that “the stock's total return is expected to lag overweight and equal-weight stocks within the analyst's coverage range over the next 12 months.”
How did the stock react? Paramount Global opened the regular session at $10.71 and closed at $11.12, an increase of 0.72% from the previous day's regular close.
Mirio Biopharma Group
What happened? On Thursday, Wednesday after the regular close, Baird initiated coverage of Mereo BioPharma Group PLC ADR (NASDAQ:) at Outperform with a target price of $8.
What's the full story? Bird notes that Mereo has strategically built an impressive rare disease portfolio through a combination of on- and off-licensing transactions. The company's two core assets, cetrozumab and alvelistat, originate from large pharmaceutical companies (Novartis/NVS and AstraZeneca/ANS, respectively). From a brokerage perspective, each of these assets individually represents a compelling case in a rare disease area with a high level of unmet need.
Looking ahead, Bird expects excitement around cetrozumab's potential to grow, especially with pivotal data expected in late 2024 or early 2025. Additionally, the announcement of a partnership with alvelistat could serve as an unexpected positive catalyst. Analysts remain alert to these developments and their potential impact on the rare diseases market.
Baird's outperformance means “it is expected to outperform on a risk-adjusted total return basis the broader U.S. equity market over the next 12 months.”
How did the stock react? Mereo BioPharma opened the regular session at $3.90 and closed at $3.99, an increase of 4.18% from the previous day's regular close.
Shopify
What happened? On Friday, Evercore was upgraded Shopify company (NYSE:) to beat its $75 price target
What's the full story? Evercore upgraded SHOP's stock rating to Outperform, setting a price target of $75. This decision comes after a significant decline in the stock's value, by approximately 30% from its 52-week high, representing a compelling investment opportunity in a leading e-commerce platform. The company maintains a strong long-term outlook for SHOP, supported by its expanded total addressable market (TAM) estimated at approximately $850 billion, a formidable competitive position, and growth prospects in the high-end market. These factors are supported by recent channel scans, SHOP's proven ability to develop innovative products – as evidenced by its growing attachment ratio – and expectations for a significant increase in profitability, with free cash flow margins expected to rise from the current 12% to potentially in the mid-to-high teens by Year 2026.
The company also notes that recent downward revisions in operating margin forecasts, as demonstrated in the previous two EPS reports, have significantly mitigated the risks associated with SHOP shares. Future market expectations for operating margins and free cash flow margins are considered reasonable by Evercore. Additionally, as observers of online advertising dynamics, Evercore supports SHOP's strategic move to intensify its social media marketing efforts, which is expected to accelerate its international expansion and align well with current marketing trends.
Evercore's outperformance means that “the total expected return is expected to be greater than the total expected return of the analyst's coverage sector.”
How did the stock react? Shopify opened the regular session at $65.83 and closed at $67.67, an increase of 4.61% from the previous day's regular close.
