Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Robinhood
What happened? On Monday, Piper Sandler upgraded Robinhood (NASDAQ:) to Overweight with a $23 price target.
*TLDR: Recent decline in share price offers entry point. Tailwinds for business on the horizon.
What’s the full story? Piper believes that the recent pullback offers an attractive entry point into an innovative and fast-growing brokerage platform. In the near term, Piper expects net interest income (NII) headwinds from future rate cuts to be largely offset by increased trading activity and margin loan growth. Additionally, Piper anticipates that HOOD will benefit from the launch of a new web-based trading platform and the rollout of index options and futures trading later this year.
Looking further ahead, Piper expects HOOD to benefit from several key factors: continued growth in global retail and derivatives trading, the generational wealth transfer from baby boomers to their children, a strong position in the cryptocurrency market, and international expansion, where HOOD is still in the early stages. These factors are expected to drive long-term growth and solidify HOOD’s position in the market.
Overweight at Piper means “Anticipated to outperform relative to the median of the group of stocks covered by the analyst.”
Hormel Foods
What happened? On Tuesday, Citi upgraded Hormel Foods (NYSE:) to Buy with a $37 price target.
*TLDR: Improving retail sales trends and a benign input cost environment should boost EPS. Shares trade as a discount to history.
What’s the full story? Citi analysts see slight upside potential to Hormel Foods’ 3Q24 and FY24 EPS, with further upside in FY25 and FY26. Despite headwinds from Planters’ downtime, underlying retail sales trends appear to be improving, and the input cost environment seems benign with falling feed costs. Additionally, production declines in the turkey industry could soon drive prices higher. Sentiment toward the shares seems skewed negatively, as Citi’s Buy rating is the only one among sell-side peers, and consensus estimates already assume HRL’s targeted $250 million operating profit improvement in FY26 will be unsuccessful.
The shares trade at a premium to most food stocks but at a wider discount to their historic P/E and EV/EBITDA multiples compared to food peers. Citi analysts believe this presents an opportunity for investors, given the potential for improved earnings and favorable market conditions.
Buy at Citi means “Buy (1) ETR of 15% or more or 25% or more for High risk stocks.”
Chipotle Mexican Grill
What happened? On Wednesday, Wedbush upgraded Chipotle Mexican Grill (NYSE:) to Outperform with a $58 price target.
*TLDR: Wedbush says CMG can sustain market share gains as challenging macro backdrop continues. Valuation is attractive.
What’s the full story? Wedbush reports that Chipotle remains in capable hands despite the upcoming departure of Brian Niccol, Chairman and CEO, who will join Starbucks (NASDAQ:) on September 9th. Scott Boatwright, currently Chipotle’s COO, will serve as interim CEO, while Jack Hartung, who recently announced his retirement as CFO, will stay on indefinitely as President of Strategy, Finance, and Supply Chain. The firm credits both leaders, along with Niccol, for Chipotle’s turnaround and believes the company is well-positioned for the future.
Wedbush highlights drivers of second-half same-store sales (SSS) growth outperformance versus reset expectations, noting management’s observation of choppy sales trends in July. Q3 menu pricing is expected to align with Q2’s, with no further pricing actions planned for 2024. The return of popular menu items like Brisket is anticipated to boost Q3 comps. Additionally, margin expectations have been reset post-Q2, with food costs and labor costs adjusted. The firm maintains its Q3 SSS growth estimate of 6.0% and sees potential for margin upside as avocado prices decline and incremental comp growth translates to higher margins
Outperform at Chipotle means “Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months.”
Robinhood
What happened? On Thursday, Deutsche Bank upgraded Robinhood (NASDAQ:) to Buy with a $24 price target.
*TLDR: EPS revisions have been positive. Management operating in a favorable environment to sustain earnings.
What’s the full story? Deutsche Bank’s decision was driven by modestly positive earnings revisions and the recent sell-off in the stock, with HOOD shares down nearly 25% from a recent peak in July and down 18% in the third quarter to date. Despite being the worst-performing stock in Deutsche Bank’s coverage this quarter, Robinhood remains the best performer year-to-date, with a 46% increase.
The bank sees momentum building for long-term earnings power at Robinhood, supported by an improving business diversification profile, a wide array of promising growth initiatives, solid cost control, and favorable leverage to strong secular retail trends. Deutsche Bank also notes an emerging willingness to price more appropriately for new products and initiatives, along with ample capacity for capital return via share buybacks or acquisitions. While Robinhood has been viewed as the most speculative stock within Deutsche Bank’s large-cap capital markets coverage, the bank now sees a more durable earnings profile developing and some of the substantial risks moderating. However, they still believe HOOD shares can be among the most volatile in their coverage for the near-to-intermediate term.
Buy at Deutsche Bank means “Based on a current 12-month view of TSR, we recommend that investors buy the stock.”
Nike
What happened? On Friday, Williams Trading double upgraded Nike (NYSE:) to Buy with a $93 price target.
*TLDR: Rehiring of Tom Peddie as VP of Marketplace Partners indicates potential changes for Nike. Expects share price appreciation as more investors learn of business improvements.
What’s the full story? Williams Trading does not foresee an imminent major directional change for Nike’s business but believes that the recent rehiring of Tom Peddie as the VP of Marketplace Partners indicates that change is brewing. Nike’s wholesale partners have expressed satisfaction with Mr. Peddie’s return and are beginning to see more focused attention on their accounts. Given Mr. Peddie’s departure in 2020 after 30 years with the company, Williams Trading believes he would not return without confidence that further changes were in process.
The brokerage notes that Nike’s 4Q24 results and FY25 outlook, along with the perception that Nike is losing its luster, make changes necessary. The percentage of Nike shoes, especially running silhouettes, seen in high-traffic areas has declined from previous years, and core customers are less willing to buy goods at full price. Williams Trading does not believe that the Investor Day planned for November 19th, 2024, will be impacted by these changes. The brokerage expects that it will take 15-18 months from the day a change occurs until true evolution is realized, potentially by spring 2026. Despite the challenges, Williams Trading believes that Nike’s stock will appreciate ahead of significant business improvements, signaling a return of the Swoosh.
Buy at Williams Trading means “The stock’s total return (price appreciation plus dividend yield) is expected to exceed more than 15% over the next 12-month investment horizon. “
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