Investing.com — Right here is your Professional Recap of the highest takeaways from Wall Road analysts for the previous week: upgrades for Micron, Magnite and GoodRx Holdings; downgrade for Him Hers Well being.
InvestingPro subscribers all the time get first dibs on market-moving score modifications.
Micron
What occurred? On Monday, Morgan Stanley upgraded Micron (NASDAQ:) to Equalweight with a $130 value goal
What’s the total story? Morgan Stanley acknowledges that sustaining a detrimental stance on Micron for an prolonged interval was a misstep. Whereas they aren’t but optimistic, they concede that they need to have anticipated the basic and narrative implications of the energy in AI specialty reminiscence.
Three key errors had been made by the analysis crew in keeping with their analysis report. First, they positioned an excessive amount of emphasis on current losses. After they initially turned pessimistic about MU two years in the past, they predicted vital money burn, monetary losses, and a considerable erosion of e book worth. When losses turned out to be fairly massive – $7.1 billion of GAAP over a five-quarter downturn resulting in a 14% discount in e book worth – they anticipated this to have a higher influence on valuation than it did.
Second, Morgan Stanley underestimated the importance of Excessive Bandwidth (NASDAQ:) Reminiscence (HBM) to the narrative. HBM has emerged as a vital expertise for AI, and whereas Micron is simply now starting to reap the advantages of this, having missed the HBM3 part of the market, they’ve a sturdy 3e product that can firmly place them in second place. This was identified six months in the past, and regardless of some issues that present wafer commitments are too excessive, this nonetheless propelled Micron straight into the winners’ camp throughout a part when proximity to AI drove a lot of the alpha technology within the house.
Third, the financial institution wrote they underestimated the significance of HBM in turning across the base enterprise. Whereas they imagine their Whole Addressable Market (TAM) evaluation of HBM stays affordable, they’re now seeing Trendforce challenge 15% of wafer begins going to HBM by 4Q24, and Utilized Supplies (NASDAQ:) suggesting they’re already at 20%. That is too excessive, at the very least relative to the consumption steered by even the NVIDIA (NASDAQ:) bull case, however the influence on non-HBM is having extra of a detrimental influence on business provide than they’d anticipated.
With these elements driving near-term fundamentals – they might see a constructive preannouncement in upcoming conferences – and a constructive view on AI semis, Morgan Stanley is shifting to Equalweight on MU
Equalweight at Morgan Stanley means “The inventory’s whole return is anticipated to be in step with the typical whole return of the analyst’s business (or business crew’s) protection universe, on a risk-adjusted foundation, over the subsequent 12-18 months. “
How did the inventory react? Micron opened the common session at $127.30 and closed at $129.00, a achieve of two.96% from the prior day common shut.
Penn Leisure
What occurred? On Tuesday (really Monday after-hours), Raymond James began new protection on PENN Leisure (NASDAQ:) at Outperform with a $20 value goal.
What’s the total story? The primary quarter of this 12 months offered a difficult setting for PENN, characterised by a number of elements. These embody weak point within the land-based enterprise, primarily influenced by climate circumstances, higher-than-expected losses within the digital sector, and a big selloff on account of management-related points.
Regardless of these setbacks, the core land-based gaming enterprise stays comparatively sturdy. In 2023, PENN achieved file income and EBITDAR (Earnings Earlier than Curiosity, Taxes, Depreciation, Amortization, and Hire) ranges. Moreover, there’s an anticipated enchancment in EBITDAR all through 2024. Nevertheless, it’s necessary to notice that the inventory’s efficiency continues to be impacted by the corporate’s interactive enterprise, which has gathered vital EBITDA losses.
Raymond James’ constructive stance on PENN’s inventory isn’t solely based mostly on the assumption that ESPN BET (the interactive enterprise) will seize a big market share or generate constructive EBITDA within the close to time period. As an alternative, the brokerage acknowledges that PENN inventory can nonetheless carry out effectively to a sure extent. Particularly, Raymond James believes that the market is undervaluing the digital enterprise, attributing detrimental fairness worth to it. Moreover, the honest worth for the land-based enterprise is estimated to be north of $20 per share.
It’s value noting that PENN shares haven’t traded at this value degree since Might 2020, a interval when all casinos in america had been closed because of the world COVID-19 pandemic. Regardless of the challenges posed by PENN’s interactive technique and an over-leveraged stability sheet, Raymond James identifies worth within the land-based operations. The brokerage contends that present market circumstances could not totally mirror this underlying worth.
Outperform at Raymond James means “The safety is anticipated to understand or outperform the S&P 500 over the subsequent 12-18 months.”
How did the inventory react? Penn Leisure opened the common session at $16.39 and closed at $16.41 a achieve of 0.86% from the prior day common shut.
Him Hers Well being
What occurred? On Wednesday, Citi downgraded Hims Hers Well being Inc (NYSE:) to Impartial with a $20 value goal.
What’s the total story? Citi has expressed encouragement by HIMS’ considerate strategy to their new program, which was initially a trigger for concern on account of potential regulatory and authorized dangers. The financial institution is satisfied that HIMS is working above-board, partnering with a big 340B producer that’s straight producing Semaglutide, utilizing API, processes, and expedients similar to Novo. In response to administration, the manufacturing of Semaglutide is comparatively easy, and HIMS’ manufacturing associate ought to be capable of produce sufficient product to fulfill what is anticipated to be vital demand, as there appears to be no scarcity of API.
Nevertheless, with the replenish 20% for the reason that announcement, HIMS has successfully added roughly $760M of enterprise worth on restricted new info, leaving little room for upside, in Citi’s view. Because of this, the financial institution is downgrading HIMS from Purchase/Excessive Danger to Impartial/Excessive Danger as they await additional element on GLP-1 economics and sturdiness. Regardless of the downgrade, Citi stays attentive to HIMS’ future strikes and potential out there.
Impartial at Citi means “For shares rated Impartial (2), if an analyst believes that there are inadequate valuation drivers and/or funding catalysts to derive a constructive or detrimental funding view, they could elect with the approval of Citi Analysis administration to not assign a goal value and, thus, not derive an ETR.”
How did the inventory react? Hims & Hims Well being opened the common session at $16.90 and closed at $16.17, a misplaced of seven.84% from the prior day common shut.
GoodRx Holdings
What occurred? On Thursday, RBC Capital upgraded Goodrx Holdings Inc (NASDAQ:) to Outperform with a $10 value goal.
What’s the total story? GDRX’s current ISP and DC initiatives, together with the continued scaling of its MfgSolns enterprise, present it with a number of new and significant progress alternatives. These initiatives additionally improve the sturdiness of its core Rx transaction enterprise. A lot of the required upfront promoting/contracting is now full—GDRX has signed 5 PBMs and 7 top-10 pharmacies. The ramping of those gives GDRX with a great line-of-sight on a 3-year mid-teens+ EBITDA CAGR.
RBC Capital believes that execution right here will assist re-rate GDRX’s present 10x ’25 EBITDA valuation to one thing extra in step with its progress price and 14x peer common. The analysts have raised the worth goal to $10, up from $8.
Outperform at RBC Capital means “Anticipated to materially outperform sector common over 12 months.”
How did the inventory react? GoodRx Holdings opened the common session at $7.74 and closed at $7.24, a achieve of 0.56% from the prior day common shut.
Magnite Inc.
What occurred? On Friday, BofA Securities upgraded Magnite (NASDAQ:) to Purchase with a $15 value goal.
What’s the total story? RBC’s improve of MGNI is bolstered by the agency’s heightened assurance in MGNI’s trajectory to ascend because the premier supply-side expertise answer in CTV promoting—a sector anticipated to develop at a mid-teens price over the medium time period. This optimism is rooted within the business’s shift towards extra automated, or programmatic, advert execution—a distinct segment the place MGNI excels. The corporate is more and more acknowledged as the popular advert tech collaborator for each buy-side entities, corresponding to businesses and DSPs, and sell-side members like publishers. That is largely on account of its modern programmatic expertise, which has been underscored by its current unique partnerships with business giants Netflix (NASDAQ:) and MediaOcean.
The analysts spotlight MGNI’s distinctive product combine that marries an advert server with an SSP, establishing it as a pivotal hub for publishers’ programmatic frameworks whatever the buying pathway. This integration renders MGNI considerably much less prone to disintermediation in comparison with standalone SSPs. Moreover, insights from Disney and Paramount point out that the transfer towards programmatic strategies is progressing swiftly, with projections of reaching roughly 50% by the top of 2024 inside premium streaming companies. This development underpins a story of sustained market share progress for MGNI, as considered by the analysts at RBC Capital.
Purchase at BofA means “Purchase shares are anticipated to have a complete return of at the very least 10% and are probably the most engaging shares within the protection cluster.”
How did the inventory react? Magnite opened the common session at $12.03 and closed at $12.57, a achieve of 13.55% from the prior day common shut.
