Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Alaska Airlines
What happened? On Monday, Melius upgraded Alaska Air (NYSE:ALK) to Buy with a $56 price target.
*TLDR: Melius sees disciplined capacity setup as an opportunity for positive revisions in 2025. Alaska Airlines benefits from Hawaiian synergies; strong management and market share in key regions.
What’s the full story? The analysts at Melius highlight the volatile nature of airline stocks, noting that while the industry is challenging, there are periods when stocks significantly outperform. They believe that the current disciplined capacity setup, driven by the need to fix margins, presents a real opportunity for positive revisions in 2025. For instance, United Airlines could see earnings power of $20 by 2027 compared to $10.21 in 2024.
Earlier in the year, Melius downgraded Alaska Airlines due to concerns about the Hawaiian acquisition being a distraction. However, unexpected capacity rationalization from JetBlue and Southwest has favored Alaska’s West Coast markets. Despite Hawaiian Airlines expected to dilute earnings by 22% in 2025, Melius believes Alaska’s management can quickly address and improve Hawaiian’s fundamentals. They anticipate more details at the investor day on December 10th, where there could be upside to initial synergy expectations.
Alaska not only benefits from Hawaiian synergies but also boasts one of the strongest management teams with top market share in the Pacific Northwest, California, and now Hawaii.
Buy at Melius means “Melius uses a three-point rating methodology at the stock level of Buy, Hold, Sell. The rating is versus the S&P 500. We maintain the view that our work uncovers mispricings that become more pronounced over a longer time horizon, therefore our investment horizon is typically 2 years, though we often will state or include shorter term views as we see catalysts and events that merit the distinction.“
Tapestry
What happened? On Tuesday, TD Cowen downgraded Tapestry (NYSE:TPR) to Hold with $52 price target.
*TLDR: TD Cowen downgrades stock to Hold; cautious due to muted trends in China and U.S. Stock near $52 target; strong margins but wary of multi-year comparison and CPRI deal risks.
What’s the full story? TD Cowen notes that the stock is within 3% of its $52 price target, driven by a solid price growth of +40% year-to-date and +85% over the last 12 months, resulting in a P/E ratio of 11x compared to a 9.5x five-year average. However, the brokerage house remains cautious due to muted consumer trends in China and the U.S., potential risks associated with the pending CPRI deal, and the overall portfolio platform strategy.
In the U.S., sales have moderated to flat or slightly negative, but margins have remained strong due to full-price selling. TD Cowen is wary of the challenging multi-year comparison against impressive sales growth and margins at Coach . Additionally, worsening trends in China, high youth unemployment, and a struggling property market contribute to their cautious outlook. Consequently, TD Cowen has downgraded the stock from Buy to Hold, maintaining their price target of $52 based on an 11x FY26 EPS estimate.
Hold at TD Cowen means “The stock is expected to achieve a total return that falls between -10% to +15% over the next 12 months.”
Qorvo
What happened? On Wednesday, Raymond James downgraded Qorvo (NASDAQ:QRVO) to Market Perform without a price target.
*TLDR: Qorvo reports a disappointing December 2024 outlook due to unfavorable phone mix and competition. Company scaling back in mainstream Android; non-smartphone businesses performing well.
What’s the full story? Raymond James reports that the company’s December 2024 quarter outlook fell short of both their and consensus estimates. Management attributes this to an unfavorable mix in premium phones, impacting the company’s RF content, and a shift from mid-tier to entry-tier in Android, where the company has limited presence. Additionally, price pressures and domestic competition in China are suspected to be affecting mainstream models as the 5G cycle matures. Consequently, the company plans to scale back from the mainstream Android market, which Raymond James estimates accounts for over 10% of the RF total addressable market.
On a positive note, the company is taking steps to reduce operating and manufacturing expenses, and its non-smartphone businesses (HPA and CSG) are performing well. While Raymond James remains optimistic about the company’s long-term content opportunities in premium phones, they expect mix headwinds to persist for the next few quarters.
Despite a reasonable valuation of approximately 13x FY26 estimated P/E after-market, Raymond James does not foresee many immediate catalysts for the stock.
Market Perform at Raymond James means “The security is expected to perform generally in line with the S&P 500 over the next 12 months and could potentially be used as a source of funds for more highly rated securities.”
Wingstop
What happened? On Thursday, BTIG upgraded Wingstop (NASDAQ:WING) to Buy with a $370 price target.
*TLDR: BTIG sees sub-$300 as a long-term buy, citing strong brand and resources. Upgrade driven by unit development, economics, and potential royalty rate increase.
What’s the full story? BTIG analysts believe the decline below $300 represents an attractive opportunity for long-term investors willing to look past the hyper-analyzing of 4Q guidance implications. They highlight the company’s strong brand and impressive resources, which include increased advertising, menu innovations like chicken sandwiches or tenders, and promotions such as the boneless bundle, to reaccelerate same-store sales.
The acceleration in unit development, best-in-class unit economics, and long-term potential underpin BTIG’s upgrade. Analysts also suggest that management could eventually increase the royalty rate on new units to capture further earnings potential.
Buy at BTIG means “A security which is expected to produce a positive total return of 15% or greater over the 12 months following the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.”
Atlassian Corp.
What happened? On Friday, Keybanc upgraded Atlassian Corp (NASDAQ:TEAM) to Overweight with a $260 price target.
*TLDR: Keybanc sees Atlassian’s guidance set for consistent beat-and-raise cadence. Growth catalysts: AI initiatives, cloud pricing, and data center migrations.
What’s the full story? Keybanc, following Atlassian’s strong first-quarter financial results, believes that the company’s guidance is now appropriately set to facilitate a more consistent beat-and-raise cadence moving forward.
The bank highlights stable paid seat expansion over the past two quarters and a risk-adjusted guidance framework that accounts for a deteriorating macroeconomic environment. Additionally, recent surveys conducted by Keybanc indicate some optimism in IT budgets for 2025, creating a positive setup for Atlassian.
Keybanc identifies several catalysts for accelerating growth beyond fiscal year 2025. These include more focused sales execution on upselling and cross-selling, particularly with AI initiatives like Rovo and Atlassian Intelligence.
Keybanc analysts further note higher-than-typical cloud pricing increases and data center migrations to the cloud, which, despite potential lumpiness, present significant opportunities with Atlassian’s largest and most strategic customers.
Overweight at Keybanc means “We expect the stock to outperform the analyst's coverage sector over the coming 6-12 months.”