Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Netflix, Fulcrum Therapeutics, and Grab Holdings, and downgrades for Medical Properties Trust and Dick's Sporting Goods.
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Medical Properties Trust cut to Underweight at JPMorgan
What happened? On Monday, JPMorgan downgraded Medical Properties Trust (NYSE:MPW) to Underweight with a $7 price target.
What’s the full story? There are a couple of factors driving JPMorgan’s Underweight decision.
First, MPW’s significant Prospect and Steward exposures and the complexities surrounding these relationships are being seen as “glass half-full” by the market, and the analysts are not sure there is a near-term catalyst that will change this mindset.
Second, from a fundamental standpoint, the analysts think of MPW’s stock as “working” when it has an external growth engine that can drive funds from operations, a key metric for real estate investment trusts (REITs). Given the state of the transaction markets and its high capital costs, this looks shut down to them today.
Underweight at JPMorgan means: “Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.”
How did the stock react? Shares were volatile and took some hard afternoon losses before rebounding and ending the day up around 1.2% to close at $7.01.
Fulcrum Therapeutics gains Buy rating at Stifel
What happened? On Tuesday, Stifel upgraded Fulcrum Therapeutics (NASDAQ:FULC) to Buy with a $11 price target.
What’s the full story? Stifel upgraded FULC shares to Buy with the clinical hold on FTX-6058 (sickle cell disease treatment) resolved. This was a key value driver for the stock, Stifel says, and its clinical hold was a major setback for investors.
Bulls remained hopeful for an eventual resolution, but the path forward, total addressable market (TAM), and the program execution had added uncertainties given the company’s recent history. While the latter will remain a point of interest, the announcement regarding the hold marks an important win for the new management team, instilling some confidence that they can help right a ship that has undergone a series of mishaps/adversities.
Stifel analysts noted they could be premature or wrong in their upgrade, but with two pipeline assets back in development mode - one of which is in phase 3 testing - there is greater upside potential due to the event catalysts.
A buy at Stifel means the following: “We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.”
How did the stock react? Shares ballooned nearly 40% or $1.51 to close at $5.43.
Dick’s Sporting Goods slashed to Neutral at BofA
What happened? On Wednesday, BofA downgraded Dick’s Sporting Goods Inc (NYSE:DKS) to Neutral with a $125 price target.
What’s the full story? BofA downgraded Dick’s Sporting Goods to Neutral from Buy. After Q2 results, the analysts see increased risks to the company's sales and margin outlook due to:
"(1) normalization of spending on categories that outperformed during COVID-19 (incl. Outdoor apparel & equipment, bicycles, etc.),
"(2) years of high grocery inflation crowding out spending on discretionary purchases,
"(3) the re-opening of alternative discretionary spending opportunities (travel, entertainment) pulling spending away from COVID winners,
"(4) the potential need for further inventory actions in seasonal and other product that could pressure gross margin in F2H, and
"(5) magnified expense deleverage given investments in wages, advertising, technology and store growth (12 House of Sports stores now open and plans for 10 more next year)."
BofA's price target of $125 is based on "10X (was 12-13X) our F25 EPS $12.50 (was $13.90)."
While I have a preference for 12x when scanning for firms, BofA’s 10x multiple is reasonable, as they note it’s the lower bound of 10x-15x historically.
Neutral at BofA means the following: “Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks.”
How did the stock react? Shares thought they had found shelter after the clubbing they took Tuesday, dropping 25% to close $111.53. Just after 6AM in New York, the note hit desks and DKS promptly slid another half-percent. Shares closed Wednesday at $111.53, down some 24%.
Grab Holdings upgraded to Overweight at Barclays
What happened? On Thursday, Barclays upgraded Grab Holdings (NASDAQ:GRAB) to Overweight with a $4.50 price target.
What’s the full story? According to the analysts at Barclays, Grab’s 2Q Deliveries GMV showed positive growth (4% YoY) for the first time since Q3 2022, and the outlook suggests growth ought to reaccelerate in Q3 and Q4.
The firm noted that the company's Delivery segment's margin for earnings before interest, taxes, depreciation and amortization (EBITDA), on an adjusted basis, continues to expand and may soon (in Q3 or Q4) reach the 3% target, which may get raised at some point.
The analysts continued:
"Mobility (ride hailing) business was solid in Q2 with GMV up 28% yoy and the strong growth momentum is likely to continue with driver availability back to 84% of pre-Covid levels and Chinese tourists returning to the region. Among new initiatives, the company is starting to see traction in Advertising, which carries higher margins and has ample room to grow given low penetration among restaurant merchant base. We are also encouraged by Grab’s efforts to embark on other higher-margin initiatives such as selling in-store dining coupons. Fintech is another key potential area for growth."
Overweight at Barclays means: “The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon.”
How did the stock react? After shares' 10% earnings-spurred gain in the prior session, shares retreated 1.1% on Thursday to $3.66.
Netflix upgraded to Buy at Loop Capital
What happened? On Friday, Loop Capital upgraded Netflix (NASDAQ:NFLX) to Buy with a $500 price target.
What’s the full story? Loop Capital analysts wrote to clients that they have been fundamentally strong believers in NFLX and cautious on the valuation, adding, "The competition is simultaneously raising prices and reducing content spend which should further boost NFLX's competitive position."
The analysts also believe Netflix is best positioned for the writer strike "based on its larger pipeline of unreleased content and global production capabilities."
The analysts added:
"NFLX continues to maintain its share of streaming engagement despite the increased streaming competition over the past year. Streaming rationalization is inevitable which should further boost NFLX's market share. We believe the strike will accelerate the decline of the traditional TV business, benefiting streaming, and by definition, benefiting NFLX, the streaming leader. Implementing paid sharing has gone better than expected, and we believe over time NFLX advertising will become a major contributor."
Buy at Loop means: “The stock is expected to trade higher on an absolute basis or outperform relative to the market or its peer stocks over the next 12 months.”
How did the stock react? Shares were knocked around with the broader markets until the Fed's Jackson Hole symposium wrapped up, then steadily rose into the close, up 2.2% to $416.03.
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