By Davit Kirakosyan
Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Lowe's, First Solar, Toast , Constellation Brands, and Semtech.
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Stifel initiated Lowe's at Buy
Late Wednesday, Stifel started coverage on Lowe’s (NYSE:LOW) with a Buy rating and a $270 price target.
The analysts say they believe "the current discount to retail peers undervalues the medium-term growth prospects," noting that their outlook for a 10% compound annual growth rate (CAGR) on Lowe's EPS comes in just above consensus.
Stifel also noted that Lowe’s is "in the late innings of executing its Total Home Strategy" - an offering of products and services for pros and consumers - "with the successful performance from 2018-2022 validating the effort."
The analysts also see the company's overall footprint as an advantage for the company, particularly in terms of its rural exposure. They added:
"Against our tempered view of the 2024 recovery, we believe Lowe’s ability to fully realize the fruits of its efforts should enable a stronger in-market performance supportive of our 2.2% comparable sales growth outlook, the low end of the implied trajectory to achieve $520 per-square foot."
The new buy rating closely follows Bernstein's Tuesday upgrade of Lowe's to Outperform on expected expansion in the company's operating margins over the coming two years, as well as its "unequivocal" bullishness on the macro-level long-term drivers of home-improvement spending.
Lowe's shares were ticking marginally higher to $229.66 in recent premarket trading.
First Solar upgraded at Morgan Stanley
Morgan Stanley upgraded First Solar (NASDAQ:FSLR) to Equalweight from Underweight and raised its price target to $206.00 from $180.00, as reported in real-time on InvestingPro.
The firm "continues to see long-term risk to FSLR's margin profile," with competition among domestic solar panel manufacturers increasing. However, they acknowledge that "the company's substantial 77.8 GW backlog de-risks its earnings profile through 2026." They believe this warrants a premium multiple compared to its peers.
Furthermore, the firm believes there is a limited risk of backlog contract cancelations due to the company's deposit requirements and the lack of near-term alternatives for solar panels.
Toast raised to Buy at UBS
UBS upgraded Toast (NYSE:TOST) to Buy from Neutral and raised its price target to $30.00 from $25.00.
The firm sees improved potential for quarterly net new location additions and expects margin expansion. Toast is well-positioned to take advantage of the restaurant industry's shift away from legacy technology toward integrated omni-channel software solutions.
Despite intense competition and macroeconomic uncertainties, UBS mentioned that the company has demonstrated its leadership in this space, evident in its recent uptick in net location additions. The firm also noted that they see limited risk from the appointment of Aman Narang as Toast's new CEO, "given his strategic leadership roles at Toast."
Two more upgrades
TD Cowen upgraded Constellation Brands (NYSE:STZ) to Outperform from Market Perform and raised its price target to $300.00 from $240.00.
TD Cowen declared that the company is "set to sizzle" and that the firm is constructive on several factors for STZ.
We are constructive on: 1) accelerating beer growth in Nielsen-tracked channels, which de-risks margins, 2) the success of Modelo Oro in particular, 3) re-accelerating earnings growth on better beer growth and deleverage, and 4) the potential for larger shareholder returns with a wine/spirits sale.
Needham & Company upgraded Semtech (NASDAQ:SMTC) to Buy from Hold with a price target of $35.00, ahead of the company’s Q2/24 earnings announcement today after the market close.
The firm's decision to upgrade is not solely based on short-term factors. They acknowledge the potential for near-term results to be affected by weak demand in end markets and inventory adjustments in the IoT and telecom markets.
However, we believe Thursday’s earnings call presents an opportunity for incoming CEO, Paul Pickle, to present a new long-term operating model with earnings power well above Street estimates and highlight potential divestiture opportunities to raise cash and pay down debt.
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