5 Huge Analyst Calls: Meta’s Future Looking Brighter; Gap Sheds a Sell Rating
2023.05.21 05:20
Here is your Pro Recap of the top takeaways from Wall Street analysts for the past five sessions, so you can make sense of another whirlwind week for markets: Upgrades at Meta, Gap, Veris Residential, BioNTech, and Dynatrace
InvestingPro subscribers got word of these market-moving calls in real time. Start your free 7-day trial to make sure you always know first, too.
Meta Platforms a Buy on turnaround
What happened? On Monday, Loop Capital upgraded Meta Platforms Inc (NASDAQ:) to Buy with a Street High price target of $320.
What’s the full story? Meta appears to have executed a turnaround in its business, and the sell side – at least Loop Capital for now – is now able to model a bright revenue picture for the company. Loop wrote:
Three significant headwinds to revenue (Apple ad tracking changes, foreign exchange and transition to Reels) are all cycling through and set to become tailwinds. Combined we estimate these pressures had around mid-teens percent headwind to revenue growth. In addition to acceleration from comp normalization we see strong product-driven enhancements with Advantage+ and monetization momentum on Reels.
Furthermore, Reels is set to perform rather well according to Loop:
Reels monetization started from scratch not long ago and is still low. Efficiency is improving quickly – up 30% QoQ [quarter over quarter] on Instagram and 40% QoQ on Facebook in 1Q – but management does not have a timeline for closing the gap. However, including the incremental time-spent Reels is driving, the company expects the impact will become revenue neutral by year-end or soon after.
Loop benchmarks their Buy as follows:
Buy – 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? After InvestingPro’s real-time alert on the upgrade, shares jumped off the lower $233 handle in the premarket to the mid-$236 handle. The stock ended Monday’s regular session at $238.86 for a gain of just over 2%.
Veris Residential upgraded at Deutsche
What happened? On Tuesday, Deutsche Bank upgraded Veris Residential Inc (NYSE:) to Buy with a $19 price target.
What’s the full story? Deutsche Bank notes rent growth surged “beyond historical levels” as expenses “appear to be moderating.” All metrics point positive for the real estate investment trust (REIT), and Deutsche noted the sustainability of its future growth:
…given the probable recession, growth should normalize, likely returning to historical rates by year-end. We believe that is when the VRE portfolio value proposition stands out given their luxury units at discounted pricing. Given this backdrop, we find Veris to be well positioned to deliver sustainable growth offering luxury apartments at a cost-effective rate.
With VRE holding an attractive portfolio and coming off the heels of an improved spread on Rent vs. Expenses, the ultimate driver will be the supply backdrop, according to Deutsche Bank, to wit:
The underappreciated growth engine is in the supply backdrop, competitive advantage in price and newest assets positioning, in our view.
A Buy from Deutsche Bank is benchmarked as follows:
Buy: Based on a current 12-month view of TSR (Total Shareholder Return), we recommend that investors buy the stock.
How did the stock react? Shares of VRE climbed on the 5am InvestingPro premarket headline Tuesday – from $16.24 (Monday’s close) to $16.34. VRE ended the regular session up fractionally at $16.30.
BioNTech upped to Buy on valuation
What happened? On Wednesday, Redburn upgraded BioNTech (NASDAQ:) to Buy with a $170 price target.
What’s the full story? The upgrade comes as BNTX shares have witnessed material downside pressure lately. The valuation is now more appealing, says Redburn, at these new lower price levels. The firm wrote:
BioNTech has fallen around 30% in 2023. We argue this has pushed valuation to the other extreme and therefore we upgrade our recommendation to Buy from Neutral.
The real meat of the commentary comes down to this:
Considering EV/2024E EBITDA, BioNTech trades on 9.6x, versus the broader US large-cap biotech sector average of 10.2x (7-21x range).
A Buy for Redburn is benchmarked as follows:
Buy: Redburn argues that the stock price will rise by at least 15% over one year. For high beta stocks the hurdle rate may be commensurately higher.
How did the stock react? BNTX shares jumped once premarket trading opened on Wednesday at 4am in New York. The equity ran from $105.60 to $107.23 over the course of two hours. Shares closed Wednesday trading at $105.15, down 0.4% following a dramatic $2 slide that began around 2pm.
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Dynatrace gets Buy rating after better-than-expected quarter
What happened? On Thursday, BTIG upgraded Dynatrace (NYSE:) to Buy with a $57 price target.
What’s the full story? The firm sees future upside on the foundation of a better-than-expected earnings report. BTIG says all key metrics showed improvements, and the outlook was laid out more positively than expected. The firm also commented:
We think DT cleared all buy-side targets in the print. Growth appears to be stabilizing despite macro headwinds and ongoing customer cloud optimization initiatives. And commentary on new products, namely application security and log monitoring, was encouraging. Looking forward, we think guidance for FY24 is conservative and believe that an upside bias to estimates now exists after a period of uncertainty that started back in early 2022.
BTIG values DT at 43x 2023 EV/FCF. The firm benchmarks their Buy as follows:
BUY – A security which is expected to produce a positive total return of 15% or greater over the 12 months following the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.
How did the stock react? Shares surged in the premarket at 5am from the low $47 handle to the low $48 handle after a lightning-fast update went out to InvestingPro subscribers. DT ended the day up 4.5%, or $2.11, to close at $49.18.
Gap upped to Hold from Sell at Citi
What happened? On Friday, Citi upgraded Gap Inc (NYSE:) to Neutral with an $8 price target.
What’s the full story? This upgrade from Sell to Neutral is basically Citi saying they are not as negative as they once were. The bank wrote to clients:
…shares are trading at 3-year lows and an F23E EV/EBITDA multiple of 4.0x, accounting for significant uncertainty, and suggesting a more balanced risk/reward.
Further, the call focused on an overly negative consensus, as Citi penned:
We believe sentiment is overly negative and, with F23 margin recovery is still likely, we are upgrading shares from Sell to Neutral.
Citi uses the following disclosure to explain what a Neutral rating represents:
The Investment rating definitions are: Buy (1) ETR of 15% or more or 25% or more for High risk stocks; and Sell (3) for negative ETR. Any covered stock not assigned a Buy or a Sell is a Neutral (2).
How did the stock react? Shares gained as the headlines hit premarket, rising from $8.11 to $8.35. GPS opened Friday’s regular session at $8.00 and ended the day lower at $7.78, down just over 4%.
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