Investing.com – Here's a professional summary of the most important information Wall Street analysts said over the past week: Upgrades to Best buy Lululemon and Collegium Pharma; Downgrade for Maxeon Solar and Medifast.
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Best buy
What happened? On Monday, Citi upgraded Best Buy (NYSE:) to buy with a $100 price target.
What's the full story? Citi double-upgrades BBY stock from sell to buy. The research team believes the catalytic path looks positive from here with upside potential for both earnings and valuation. This is based on ongoing technology replacement cycles, new innovation in AI providing increased demand, and margin execution remaining strong.
Last week's Q125 earnings print proved that GM's execution remains best-in-class with company-specific drivers able to offset external pressures such as high promotional activity. Simply put, it was a change in the thesis compared to City's previous negative thesis. The research team acknowledges the risks of 2H SSS in the face of consumer uncertainty (electoral distraction and shortening of the holiday calendar).
However, Citi believes it is prudent to look at the multi-year opportunity ahead as the business returns to growth and an attractive margin expansion story develops. The research team raises TP to $100 (from $67) based on higher EPS estimates (leading sales and margin) and a high target multiple of 14x EPS in FY2026.
Buying into Citi means “buying (1) ETR of 15% or more or 25% or more for high-risk stocks.”
How did the stock react? Best Buy opened the regular session at $85.96 and closed at $86.94, an increase of 2.50% from the previous day's regular close.
Maxion Solar Technologies
What happened? On Tuesday, Goldman Sachs downgraded Maxeon Solar Technologies Ltd (NASDAQ:) to sell with a price target of $1.
What's the full story? Goldman Sachs revised its stance on MAXN following the company's 4Q23 and 1Q24 earnings report, which was released on May 30. The report showed that both gross margins and EBITDA were below GSe/Factset consensus expectations, resulting in weaker-than-expected guidance for the second quarter of 2024 and the full year of 2024. Additionally, MAXN has not yet secured a loan The Department of Energy, in a surprise move, announced an equity investment from TZE. This investment, combined with the debt restructuring plan, is expected to significantly change MAXN's capital structure. The proposed issuance of new shares is likely to result in value dilution for existing shareholders, as TZE's ownership is set to exceed 50.1% following the transaction, and approximately 350 million convertible shares become active.
The Goldman Sachs research team notes that while equity investing and debt restructuring should alleviate liquidity concerns amid challenging market conditions, there remains heightened uncertainty about future financing, including the DOE loan guarantee. Due to the combination of market weakness, soft guidance, risks associated with future capacity additions and timing, as well as uncertainty and potential capital structure dilution risks as MAXN addresses its liquidity issues, Goldman Sachs downgraded MAXN from Buy to Sell. The company also revised its 12-month price target for MAXN to $1, which represents a 46% downside, in contrast to the ~22% upside previously expected across its coverage.
Selling at Goldman means that “a purchase or sale in an investment portfolio is determined by the total potential return of a stock compared to its coverage universe.”
How did the stock react? Maxeon Solar Technologies opened the regular session at $1.76 and closed at $1.75, a decline of 5.41% from the previous day's regular close.
Medifast
What happened? On Wednesday, DA Davidson downgraded Medifast (NYSE:) to Underperform with a price target of $17.50.
What's the full story? The downgrade comes after a meeting with Medifast, which led to a shift in revenue forecasts – and we now expect sequential stability in Q1 2025 rather than Q4 2024. As a result, estimated sales for 2025 are down 5% compared to last year. Last year, expected earnings per share (EPS) were reduced by 29%.
Medifast's advertising campaign to showcase GLP-1, which was scheduled to take place in June, has been postponed to July. The impact of these ads on customer acquisition will not be revealed until November. With the stock down 64% year to date, DA Davidson points to the potential for further decline. Medifast's current marketing spend (5%-6% of sales) is significantly lower than that of weight loss and telehealth competitors (25%-50% of sales), raising concerns about its competitive position
Underperformance at DA Davidson means it is “expected to lose value of more than 15% on a risk-adjusted basis over the next 12 to 18 months.”
How did the stock react? Medifast opened the regular session at $20.43 and closed at $22.02, a decline of 8.30% from the previous day's regular close.
Lululemon
What happened? On Thursday, HSBC upgraded Lululemon Athletica Inc (NASDAQ:) to buy with a target price of $425.
What's the full story? HSBC analysts reported that Lululemon saw its shares rise significantly but faced challenges after reaching an all-time high in January 2024. Doubts about the resilience of growth in North America led to concerns, and the company's March guidance missed consensus expectations. – This is a major departure from its established policy. “Hit and raise” pattern. As a result, the stock is down 40% year-to-date, in contrast to the more stable sporting goods sector.
While first-quarter sales in the Americas remained flat, some of the pain was caused by inventory shortages in various colors and sizes, particularly in women's products. However, global comparable sales rose 7%, driven by strong performance in mainland China and other international markets. Although the Americas still represent 73% of group sales, the rise in international sales indicates a possible scenario where international revenues reach half of the group's business.
Despite limited earnings revisions, the recent multiple squeeze has led to what analysts consider an overly penalized stock
How did the stock react? Lululemon opened the regular session at $337.23 and closed at $323.03, an increase of 4.91% from the previous day's regular close.
faculty of Pharmacy
What happened? On Friday, Jeffries was promoted faculty of Pharmacy Inc (NASDAQ:) to buy with a target price of $44.
What's the full story? Jefferies expressed a more optimistic view on COLL, which currently trades at 4x EBITDA following the CEO's departure. The company believes that the risk/reward ratio is tilted to the upside. This optimistic outlook is driven by several factors. First, Jefferies notes that Q2 trends look strong and that consensus EBITDA is likely too low. Second, the company believes that the upside around LOEs (base case) is underappreciated.
Furthermore, Jefferies highlights the significant cash generation expected through 2028, expecting net cash to exceed market cap at F28. As a result of these factors, the company upgraded COLL to Buy with a price target of $44. This target is based on an equal weight of 5xC25 adjusted EBITDA and discounted cash flow analysis. Despite the recent leadership changes, Jeffries sees potential for growth and profitability in COLL's future.
Buy at Jefferies means “describes securities that we expect will provide a total return (price appreciation plus yield) of 15% or more over a 12-month period.”
How did the stock react? Collegium Pharma opened the regular session at $32.62 and closed at $33.19, an increase of 5.84% from the previous day's regular close.
