Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Kyndryl, Godaddy, Home Depot, and Ciena; downgrades for Yum! Brands.
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Kyndryl upgraded
What happened? On Monday, Evercore upgraded Kyndryl Holdings Inc (NYSE:KD) to Outperform with a $26 price target
What’s the full story? Evercore upgraded Kyndryl to Outperform and raised its price target to $26, citing the company’s strong performance on the 3As initiatives (known as alliances, advanced deliveries, and accounts) and its improved revenue outlook for 2025 and 2026. The analysts also increased their adjusted EBITDA estimates for Kyndryl above consensus, reflecting the company’s higher earnings quality and growth potential.
Evercore wrote that the company has achieved higher margins and customer retention through its Accounts, Alliances & Advanced Delivery strategies. Evercore expects Kyndryl to grow its adjusted EBITDA from $2.352B in 2024 to $2.745B in 2026, and raised its valuation multiple from 2.5 to 3.0.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst's coverage sector”
How did the stock react? KD shares rose from $19.60 to $19.97, a gain of $1.94% in the premarket. Kyndryl opened the regular session at $20.23 and closed at $20.80, a gain of 6.18% since Friday day’s close.
GoDaddy upgraded
What happened? On Tuesday, Piper upgraded Godaddy Inc (NYSE:GDDY) to Overweight with a $121 price target.
What’s the full story? Piper downgraded GoDaddy last year due to its slowing growth rate. The analyst noted the company has improved its margins and domains bookings, which could lead to a faster growth in 2024 with over 30% NEBITDA (Normalized-EBITDA) margin. This may end GoDaddy’s long-term multiple compression according to Piper.
GoDaddy outperformed its peers by boosting its profitability while maintaining its growth outlook. The ecommerce sector saw flat or lower revenue estimates for 2023 and 2024, but higher EBITDA estimates excluding SHOP. Piper expects the higher quality names to deliver positive growth revisions in 2024 without sacrificing profitability.
Overweight at Piper means “Anticipated to outperform relative to the median of the group of stocks covered by the analyst.”
How did the stock react? GoDaddy shares spiked on the 6am headlines from $101.96 to $104, a gain of 1.78%. GoDaddy opened the regular session at $103.68 and closed at $103.53, a gain of 1.59% since Monday’s close.
Home Depot upgraded
What happened? On Wednesday, Wedbush upgraded Home Depot Inc (NYSE:HD) to Outperform with a $380 price target.
What’s the full story? Wedbush upgraded Home Depot to Outperform, expecting a recovery in home improvement retail demand in 2024. The analysts argued that the negative factors that hurt the sector in 2023, such as high interest rates, low home sales, and pandemic effects, are reversing or bottoming out.
Wedbush analysts forecast that home improvement spending will grow by at least low single digits year-over-year by the second half of 2024, with HD as a key beneficiary. The analysts also anticipate that HD’s Pro segment will outperform its DIY segment, driven by strong employment, wage growth, and home price appreciation.
Outperform at Wedbush 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.”
How did the stock react? Home Depot shares spiked on the premarket headlines from $346.58 to $350, a gain of 1.08%. Home Depot opened the regular session at $349.77 and closed at $356.80, a gain of 3.06% since Tuesday’s close.
Yum Brands downgraded
What happened? On Thursday, Wells Fargo (NYSE:WFC) downgraded Yum! Brands Inc (NYSE:YUM) to Equal-weight with a $135 price target.
What’s the full story? Wells Fargo turned less bullish on YUM after its strong performance in 2023. The analysts expect a tougher 2024, with slower sales, weaker pricing, and limited catalysts. They also see less room for YUM to beat its 8% profit target, and lower their EPS estimate below consensus, factoring in YUM’s halt of buybacks.
YUM is a popular restaurant company with long-term growth drivers, but Wells Fargo sees more challenges ahead in 2024. The analysts believe that YUM’s traffic, pricing, and profit margins will decelerate, and that YUM’s decision to pay down debt will reduce its EPS growth.
Equal-weight at Wells Fargo means “Total return on stock expected to be -10% to +10% over the next 12 months.”
How did the stock react? YUM shares dropped on the premarket headlines from $129.17 to $128.51, a loss of 0.58%. Yum Brands opened the regular session at $128.84 and regained ground to close at $129..02, a loss of 0.15% since Wednesday's close.
Ciena upgraded
What happened? On Friday, Evercore upgraded Ciena Corp (NYSE:CIEN) to Outperform with a $57 price target
What’s the full story? Evercore upgraded Ciena to Outperform, based on its recent earnings report that reset expectations and paved the way for higher earnings in 2024. The analysts trust that Ciena’s cloud and India segments can compensate for any softness in North America, and that Ciena can achieve 5% revenue growth and 200bps gross margin expansion in 2024.
Evercore estimates that Ciena’s EPS could reach $3.50 or more in 2024, implying a $70 stock price at a 20x multiple. The analysts also noted that Ciena’s downside risk is low, as it trades at a discount to its historical average and has a conservative gross margin guide. The analysts also acknowledged that North America telecom recovery could be uneven or delayed, but that would not hurt Ciena’s margins.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst's coverage sector”
How did the stock react? Ciena shares spiked on the premarket headlines from $48.40 to $48.85, a gain of 0.58%. Ciena opened the regular session at $49.56 and closed at $49.70, a gain of 2.77% since Thursday’s close.
