Investing.com – Here’s a professional summary of what Wall Street analysts said over the past week.
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Robin Hood
What happened? On Monday, Piper Sandler upgraded Robinhood (NASDAQ:) stock to Overweight with a $23 price target.
*Tilder: The recent decline in stock prices provides an entry point. There are favorable business winds on the horizon.
What is the full story? Piper believes the recent pullback provides an attractive entry point into an innovative and fast-growing brokerage platform. In the near term, Piper expects net interest income headwinds from future price cuts to be largely offset by increased trading activity and margin lending growth. Additionally, Piper expects HOOD to benefit from the launch of a new web-based trading platform and the launch of index options and futures trading later this year.
Looking ahead, Piper expects HOOD to benefit from several key factors: continued growth in global retail and derivatives, the transfer of wealth from baby boomers to their children, a strong position in the cryptocurrency market, and international expansion, as HOOD is still in the early stages. These factors are expected to drive long-term growth and strengthen HOOD’s position in the market.
Overweight at Piper means “the analyst is expected to outperform the average of the group of stocks covered by the analyst.”
Hormel Foods
What happened? On Tuesday, Citi upgraded Hormel Foods (NYSE:) stock to Buy with a $37 price target.
*Tilder: Improving retail sales trends and a benign input cost environment are expected to boost earnings per share. The shares are trading at a discount to their historical value.
What is the full story? Citi analysts see slight potential for Hormel Foods’ EPS to rise in Q3 2024 and FY24, with further upside in FY25 and FY26. Despite headwinds from the Planters business shutdown, underlying retail sales trends appear to be improving, and the input cost environment appears benign with lower feed costs. Additionally, lower production in the turkey industry could soon lead to higher prices. Sentiment on the stock appears to be negatively skewed, with Citi’s buy rating the only one among its sell-side peers, and consensus estimates already assume that HRL’s $250 million operating profit target in FY26 will fall short.
The shares are trading at a premium to most food stocks but at a larger discount to their historical P/E and EV/EBITDA multiples than their food peers. Citi analysts believe this represents an opportunity for investors, given the potential for improved earnings and favourable market conditions.
Buying from Citi means “buying (1) ETR of 15% or more or 25% or more of high-risk stocks.”
Chipotle Mexican Restaurant
What happened? On Wednesday, Wedbush upgraded Chipotle Mexican Grill (NYSE:) to Outperform with a $58 price target.
*Tilder: CMG can maintain market share gains amid ongoing macroeconomic challenges, says Wedbush. Valuation is attractive.
What is the full story? Wedbush reports that Chipotle remains in good hands despite the departure of Brian Niccol, chairman and CEO, who will join Starbucks (NASDAQ:) on September 9. Scott Boatwright, Chipotle’s current chief operating officer, will serve as interim CEO, while Jack Hartung, who recently announced his retirement as chief financial officer, will remain in his role indefinitely as head of strategy, finance and supply chain. The company credits both leaders, along with Niccol, for turning Chipotle around and believes the company is well-positioned for the future.
Wedbush highlights the drivers of same-store sales growth in the second half of the year compared to the revised outlook, noting management’s observation of volatile sales trends in July. Q3 menu prices are expected to be in line with Q2 prices, with no further pricing actions planned for 2024. The return of popular menu items such as brisket is expected to boost comparables in Q3. Additionally, margin expectations have been reset following Q2, adjusting for food costs and labor costs. The company maintains its Q3 same-store sales growth estimate of 6.0% and sees potential for margin upside as avocado prices decline and the gradual growth in comparables translates into higher margins.
Outperforming Chipotle means “the stock’s total return is expected to outperform the relative average total return of the analyst’s (or analyst team’s) coverage area over the next six to twelve months.”
Robin Hood
What happened? On Thursday, Deutsche Bank upgraded Robinhood (NASDAQ:) to Buy with a $24 price target.
*Tilder: The earnings per share reviews were positive. Management is operating in a favorable environment to support earnings.
What is the full story? Deutsche Bank’s decision was driven by modestly positive earnings reviews and a recent sell-off in the stock, with HOOD shares down about 25% from their recent peak in July and down 18% in the third quarter so far. Despite being the worst performing stock in Deutsche Bank’s coverage this quarter, Robinhood remains the best performer year-to-date, up 46%.
The bank sees momentum building for Robinhood’s long-term earnings power, supported by an improved diversified business profile, a broad range of promising growth initiatives, strong cost control, and leverage favorable to strong secular retail trends. Deutsche Bank also notes an emerging desire to price new products and initiatives more appropriately, along with ample capacity to return capital through share buybacks or acquisitions. While Robinhood has been viewed as the most speculative stock in Deutsche Bank’s large-cap capital markets coverage, the bank now sees a more durable earnings profile developing and some of the larger risks easing. However, they still believe that Hood’s shares could be among the most volatile in their coverage over the near to medium term.
A Buy from Deutsche Bank means “Based on a current 12-month view of the stock’s total return, we recommend investors buy the stock.”
Nike
What happened? On Friday, Williams Trading upgraded Nike (NYSE:) stock to Buy with a $93 price target.
*Tilder: The reappointment of Tom Peddie as VP of market partners signals a potential shakeup at Nike. The stock is expected to rise as more investors see the improvements in the business.
What is the full story? Williams Trading doesn’t expect any major changes in Nike’s business direction imminent, but believes the recent reappointment of Tom Peddie as vice president of market partners signals that change is coming. Nike’s wholesale partners have expressed satisfaction with Mr. Peddie’s return and are beginning to see increased interest in their accounts. Given Mr. Peddie’s departure in 2020 after 30 years with the company, Williams Trading believes he won’t return without confidence that more changes are underway.
The brokerage notes that Nike’s Q4 2024 results and fiscal 2025 outlook, coupled with the perception that Nike is losing its luster, make the changes necessary. Nike’s footwear, particularly running shoes, have been seen less in high-traffic areas than in previous years, and core customers are less willing to buy full-price merchandise. Williams Trading doesn’t believe the planned Investor Day on Nov. 19, 2024, will be affected by these changes. The brokerage expects it will take 15 to 18 months from the day the change occurs for real progress to occur, possibly by spring 2026. Despite the challenges, Williams Trading believes Nike shares will rise before major brand improvements, signaling the return of the company’s logo.
A buy from Williams Trading means “the stock’s total return (price appreciation plus dividend yield) is expected to exceed 15% over the next 12-month investment horizon.”