Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Petrobras
What happened? On Monday, Morgan Stanley upgraded Petrobras (NYSE:PBR) to Overweight with a $20 price target.
*TLDR: Morgan Stanley upgraded Petrobras ADRs to Overweight, optimistic about returns from recent management and strategic continuity. Analysts predict a 60% total return, including 37% appreciation, 16% regular dividends, and 7% extraordinary distributions.
What’s the full story? Morgan Stanley boosted Petrobras to Overweight from Equal-weight, maintaining a positive outlook on the potential for compelling total returns. Despite the stock being down 17% from its peak earlier in 2024 and experiencing high volatility over the past five months, the analysts suggest that recent management changes will lead to a reduction in market noise and, consequently, some stabilization in stock volatility. Insights from recent conference calls and meetings with the new CEO and CFO have reinforced the belief in strategic continuity, emphasizing a balanced approach to increasing investments and dividend distributions, provided surplus cash is available.
The analysts’ base case supports this narrative, anticipating substantial total return potential estimated at 60%. This projection includes a 37% appreciation in share price, 16% from regular dividends, and 7% from extraordinary distributions. The reintroduction of extraordinary dividends appears to be a significant factor in this optimistic outlook, reflecting Morgan Stanley's confidence in the company's strategic direction and cash flow management under the new leadership.
Overweight at Morgan Stanley means “The stock's total return is expected to exceed the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months.”
Hershey
What happened? On Tuesday, Citi downgraded Hershey (NYSE:HSY) to Sell with a $182 price target.
*TLDR: Citi predicts a tough year for Hershey's 2025 gross margins due to insufficient pricing against cocoa inflation. Volume trends and competitive pricing challenges may impede immediate financial performance, despite potential earnings improvement in 2026.
What’s the full story? Citi forecasts a difficult year ahead for Hershey's gross margins, driven by the company's recent pricing plans for 2025, which may fall short of counteracting cocoa inflation, particularly in the first half of the year. The investment bank notes that Hershey's volume trends have been disappointing, partly due to ongoing distribution declines in retail channels. Moreover, the anticipated price elasticity could pose significant challenges for the company next year, especially if competitors in the chocolate segment do not adopt similar pricing strategies and other snack categories, such as salty snacks, decrease their prices.
The investment bank does acknowledge the potential for improved earnings in 2026; however, it cautions that the baseline from which Hershey's growth will commence might be lower than expected. This projection stems from the existing challenges in offsetting cost inflation and the competitive landscape, which could hinder the company's immediate financial performance.
Sell at Citi means “Buy (1) ETR of 15% or more or 25% or more for High risk stocks; and Sell (3) for negative ETR.”
Moderna
What happened? On Wednesday, HSBC upgraded Moderna (NASDAQ:MRNA) to Neutral with a $62 price target.
*TLDR: HSBC downgraded Moderna's 2024 revenue guidance due to weaker COVID-19 vaccine sales and competitive pressures on mRESVIA. HSBC upgraded Moderna to Hold, citing significant potential in its cancer vaccine program despite current uncertainties.
What’s the full story? HSBC has adjusted its expectations for Moderna, noting that the company's 2024 revenue guidance has been revised downward following weaker-than-anticipated COVID-19 vaccine sales in the second quarter. While Moderna's second mRNA-based vaccine, mRESVIA, received FDA approval earlier this year, the bank points out that it does not appear to compete effectively with products that were launched earlier in the season. Additionally, updates from the June ACIP meeting regarding RSV vaccination recommendations for the elderly have dampened market prospects, affirming HSBC’s earlier cautious stance on the company.
Looking ahead, HSBC observes that Moderna's future prospects are increasingly tied to its cancer vaccine program. Despite ongoing uncertainties surrounding the company's respiratory vaccine franchise, the bank sees significant potential in the cancer vaccine as a new revenue driver. HSBC maintains its price target for Moderna at $82.00, using an Adjusted Present Value analysis with a Weighted Average Cost of Capital of 9.8%, implying a modest 0.4% upside. All this drove the bank to upgrade its rating from Reduce to Hold
Neutral at HSBC means “For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.”
Take-Two Interactive
What happened? On Thursday, Redburn-Atlantic initiated coverage on Take-Two (NASDAQ:TTWO) at Buy with a $194 PT.
*TLDR: Redburn-Atlantic highlights Take-Two as a top publisher, anticipating GTA VI to drastically improve financial outlooks. Predicts GTA VI will boost stock returns by 20%, setting a $194 target, trading at 22x estimated EPS.
What’s the full story? Redburn-Atlantic highlights Take-Two Interactive as one of the world's premier video game publishers, owning some of the industry's most enduring franchises, including Grand Theft Auto, Red Dead Redemption, and NBA 2K. With the anticipated release of GTA VI just a year away, the firm predicts this title will be the best-selling video game of the decade, marking the first new entry in the franchise since 2013. Redburn-Atlantic believes GTA VI will significantly transform Take-Two's financial outlook and suggests that current consensus forecasts have not fully accounted for this impact.
The firm emphasizes the strength of Take-Two’s existing franchises, growing investor enthusiasm ahead of GTA VI's launch, and conservative market expectations as factors that could drive substantial stock returns over the next 12 months. With a target price of $194, which represents a 20% upside potential, Redburn-Atlantic asserts that this valuation would require Take-Two to trade at 22 times its estimated EPS for the calendar year 2026, reflecting an approximate 10% premium over its closest peer, Electronic Arts Inc (NASDAQ:EA).
1-800-Flowers.com Inc.
What happened? On Friday, DA Davidson upgraded 1-800 FLOWERS.COM Inc (NASDAQ:FLWS) to Neutral with a $7 price target.
*TLDR: DA Davidson shifts 1-800-Flowers.com to Neutral due to missed Q4 2024 expectations and lower 2025 EBITDA guidance. Firm cuts price target to $7, citing de-risked estimates and ongoing low consumer sentiment affecting sales recovery.
What’s the full story? DA Davidson reports that 1-800-Flowers.com (FLWS) missed its fiscal fourth-quarter 2024 expectations and provided guidance for fiscal year 2025 EBITDA between $85 million and $95 million, below the consensus of $99.4 million. The respected brokerage notes that with ongoing low consumer sentiment, there is a risk that the anticipated return to positive sales growth may be further delayed. However, FLWS confirmed Bloomberg debit card data indicating that the year-over-year sales decline is likely to be less severe in the first quarter of 2025.
The brokerage believes that current Street estimates have now been adequately de-risked for the near term. Due to the recent double digit declines, DA Davidson moved up to Neutral. Despite this, the firm is lowering its estimates and price target, cutting the target price to $7 from $8, based on a 5x multiple of calendar year 2025 estimated EBITDA of $97 million, which has been reduced from $106 million.
Neutral at DA Davidson means “Expected to produce a total return of -15% to +15% on a risk adjusted basis over the next 12-18 months.”