Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: downgrades for Tesla and Pfizer, upgrades for Nvidia and Pinterest, and an outperform initiation for Frontier Comms.
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Tesla
What happened? On Sunday night, Tesla (NASDAQ:TSLA) was downgraded to Neutral at Goldman Sachs with a $248 price target.
What’s the full story? Tesla is becoming repetitive and honestly rather boring. Musk is letting his ego get ahead of himself, but I digress.
Early Monday, scalpers jumped on the Sunday night downgrade to spread the intel at 4AM then again at 6AM. Goldman didn’t blow anyone's socks off when they stated the driver of the downgrade as:
…we believe the stock now better reflects our positive long-term view of the company's growth potential and competitive positioning.
Goldman believes that their valuation - at 187x enterprise value to free cash flow (EV/FCF) for the next 12 months (NTM) - continues to be somehow reasonable.
Neutral at Goldman is described as follows:
Any stock not assigned as a Buy or a Sell on an Investment List with an active rating (i.e., a stock that is not Rating Suspended, Not Rated, Coverage Suspended or Not Covered), is deemed Neutral.
How did the equity react? Tesla shares, predictably volatile on days ending in “Y,” traded lower on the first premarket execution, at a $253 handle, down to a $249 handle. And then, you guessed it, they rebounded higher into 6AM and subsequently 7AM - as a way to trap retail traders.
Shares sold through the day to close at the $241 handle. Hilariously, it was the week's low before they rocketed upwards through the end of the week to end in a $261 handle.
Frontier Communications
What happened? On Tuesday, Wolfe initiated Outperform on Frontier Comms (NASDAQ:FYBR) with a $27 price target.
What’s the full story? Wolfe is trying to beat the rush in the door to pick up Frontier Comms equity. The firm wrote:
Valuation - the ground-floor of a multi-story build: If Frontier never laid down another fiber cable, the value of today's fiber arguably equals the EV ($1.2B TTM EBITDA x 11 = $13B) before attributing value to future customer/pricing gains & copper's optionality as upgrade feedstock. FYBR's 36% / $2.3B YTD equity value decline vastly overstates build cost pressure: +$100/home x 5M homes to upgrade destroys $500M of value. Despite our concern that costs may have yet to peak, onetime build cost increases are far less meaningful to ROIC than penetration & pricing.
As Wolfe also noted, this rather extreme bullish outlook hinges upon FYBR advantage in service for continually increase consumer data demands.
Outperform for Wolfe is described as:
The security is projected to outperform analyst's industry coverage universe over the next 12 months.
How did the equity react? FYBR saw the usual headline volatility push the equity up $1.80 to a high $17 handle. Shares ended the day up around 8% to $17.53.
What happened? Overnight on Tuesday, Wells Fargo upgraded Pinterest (NYSE:PINS) to Overweight with a $34 price target.
What’s the full story? Aside from Wells Fargo believing a 25x multiple on 2024 EBITDA is legit, the driver of the move was the following commentary. (Also keep in mind that Wells is a favored outlet for the pro scalpers to trickle out ratings to newswires.)
We believe Pinterest is making the optimal strategic move to outsource monetization to third-parties to overcome its attribution and scale challenges. This includes an announced partnership with Amazon, now expected to be live in time for the 2023 holiday season, and future expected partnerships with other scaled retail media networks. This should allow Pinterest to focus its resources on growing engagement and improving overall user experience. Outsourced monetization coupled with early signs of progress on improved engagement and ad load should drive a materially stronger revenue and margin outlook for the company.
An Overweight at Wells is described as:
Total return on stock expected to be 10%+ over the next 12 months.
How did the equity react? The note was published just before midnight on Tuesday and circulated on desks and chatrooms at the crucial 4AM opening hour. Shares of PINS jumped about $1 by 5AM and were trading mid-$27 handle for premarket. PINS ended the day up 6.6%, closing at $28.14.
Pfizer
What happened? On Thursday, Credit Suisse downgraded Pfizer (NYSE:PFE) to Neutral with a $40 price target.
What’s the full story? Credit Suisse commented negatively, as the ever-sought-for “catalyst” with these names appears to have dissipated. They wrote:
Valuation attractive but entering period of uncertainty with limited meaningful catalysts. These changes decrease our 2023 EPS to $3.30 from $3.32, and 2030 EPS to $3.09 from $3.25. Valuation remains undemanding (10.6x vs. 16.3x peers), and the stock has the most attractive dividend yield in our space (4.2% vs. peers 3.0%). However, the rerating from pipeline catalysts and BD has not emerged this year as we had thought. We see it tough to turn sentiment around given the uncertainty as we enter commercial COVID pricing, less BD, and a lack of meaningful catalysts on the horizon. We need to see execution in order to be comfortable with management’s ambitious expectations (pipeline peak sales/COVID/Flu).
Neutral at Credit Suisse is described as:
The stock’s total return is expected to be in line with the relevant benchmark over the next 12 months.
How did the equity react? Shares were jagged in the premarket for the scalp trader, and by the end of the day the equity was nearly unchanged. Ignoring the large block trade which hit the SIP at 4AM as part of the dark pool updates, the shares largely remained within a $0.60 range before ending the day down fractionally to the low $36 handle.
Nvidia
What happened? On Friday, Daiwa upgraded Nvidia (NASDAQ:NVDA) to Outperform with a $475 price target.
What’s the full story? “More AI” seems to be the chant these days. Daiwa jumped in on the NVDA long trade, commenting:
We obviously missed the huge jump in the shares, but this is the beginning of what we believe to be a new technology era. Every company will want to not only use something like ChatGPT, based on public data, but also do the same with their own internal data. GPUs are essential for training, which can be considered a ‘new’ market.
How did the equity react? Shares rocketed nearly 4% from a $408 handle to $423.02 by the end of the day. Premarket buying on the headline was manic once 4AM NYC time rolled around and all the institutional traders went long.
