Street calls of the week

Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.

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Palantir Technologies

What happened? On Monday, Raymond James downgraded Palantir Technologies (NYSE:) to Market Perform and removed the price target.

*TLDR: Raymond downgrades mostly on valuation following a strong run-up in 2024.

What’s the full story? Raymond James remains enthusiastic about Palantir’s long-term positioning in AI but has downgraded its rating to Market Perform from Outperform. The firm believes that Palantir’s shares need to consolidate their stellar gains over the last couple of years and grow into their rich valuation. Palantir’s shares have appreciated over 120% year-to-date and nearly sixfold over two years, compared to 20% and 50% for the S&P 500. The valuation has expanded approximately fivefold, making it the richest software name among its peers at 26.1x FY25 sales.

The firm notes that the inclusion of Palantir in the S&P 500, announced on September 9, catalyzed a 23% move over the last 14 days. Raymond James sees significant positive estimate revisions as the lone catalyst from here, suggesting that the stock may need time to consolidate its recent gains.

Market Perform at Raymond James means “The security is expected to perform generally in line with the S&P/TSX composite Index over the next 12 months and could potentially be used as a source of funds for more highly rated securities.”

Starbucks

What happened? On Tuesday, Jefferies downgraded Starbucks (NASDAQ:) to Underperform with a $76 price target.

*TLDR: Jefferies downgrades Starbucks to Underperform, citing strategic execution challenges and low EPS growth.

What’s the full story? Jefferies cut Starbucks’ rating to Underperform citing challenges in executing necessary strategic changes despite the new CEO’s efforts. The brokerage believes that issues related to operations, culture, value perception, and technology will take time to resolve. They expect the F25 guidance to reset to low single-digit (LSD) EPS growth, disappointing compared to the consensus of 11-12%, and foresee ongoing negative same-store sales (SSS) in the US and internationally.

Jefferies anticipates the current 25x price-to-earnings (PE) ratio to move towards 23x peers and below the 21x implied two-year forward PE. The brokerage has set a new price target of $76, based on a 19x F26E PE, indicating a potential 20% downside.

Underperform at Jefferies means “Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month period.”

DoorDash

What happened? On Wednesday, Keybanc upgraded DoorDash Inc (NASDAQ:) to Overweight with a $177 price target.

*TLDR: Keybanc sees strong growth in DoorDash, with 39% favoring it over Uber (NYSE:). Projected 2025 EBITDA of $2.6B and $3.5B in 2026, above consensus estimates.

What’s the full story? Keybanc has expressed increased confidence in the consumer market since launching on DoorDash prior to the second quarter earnings. The bank’s latest survey indicates a continued rise in food delivery usage, with 39% of respondents favoring DoorDash, which is 23 points higher than Uber. Additionally, 8% of respondents now use DoorDash for grocery deliveries, a 300 basis point increase since December 2023.

Looking ahead, Keybanc believes that a robust core business and expansion into new verticals will support their revised estimates for gross order value growth of approximately 17% in 2025 and 15% in 2026, compared to the consensus of 15% and 13%, respectively. The bank also projects an EBITDA of $2.6 billion in 2025 and $3.5 billion in 2026, which is 3% and 6% above consensus estimates. By rolling forward the EV/EBITDA multiple, Keybanc arrives at a price target of $177, based on a 20x 2026 estimated EV/EBITDA.

Overweight at Keybanc means “We expect the stock to outperform the analyst’s coverage sector over the coming 6-12 months.”

Starbucks

What happened? On Thursday, Bernstein-SocGen upgraded Starbucks to Outperform with a $115 price target.

*TLDR: Starbucks aims for balanced growth under CEO Brian Niccol, focusing on operational stability. Analysts predict improved margins and sales growth, making the stock attractive for long-term investors.

What’s the full story? Bernstein-SocGen analysts believe that Starbucks’ organization will be realigned to pursue more balanced growth under the leadership of Brian Niccol, who is seen as the perfect CEO to guide the company’s resurgence. Niccol’s experience at Taco Bell and Chipotle (NYSE:), both of which were in similar turnaround modes when he became CEO, is expected to be instrumental. His appointment as CEO and Chairman of the Board should allow management to focus on operational stability rather than chasing growth at all costs. The analysts anticipate further management changes and a reduction in organizational layers, which should act as a catalyst for the stock by lowering G&A expenses and streamlining decision-making.

The analysts expect this operational focus to result in a re-acceleration of traffic-driven comparable sales growth and a return to pre-Covid operating margin levels of approximately 18.5%. Stabilizing store operations, enhancing brand and value perception, and purposeful innovation are expected to drive positive traffic growth, even if drink customization slows down. Despite investments in labor, equipment, and technology, operating margins are projected to improve to historical highs by 2028 due to sales leverage and operational efficiency. The stock’s current valuation, despite recent hikes, is seen as an attractive entry point for long-term investors, with a normalized FY26 EPS of $4.28.

Outperform at Bernstein-SocGen means “Stock will outpace the relevant index by more than 10 pp.”

Wynn Resorts

What happened? On Friday, Morgan Stanley downgraded Wynn Resorts (NASDAQ:) to Overweight with a $104 price target.

*TLDR: Morgan Stanley sees favorable risk-reward for Wynn due to low valuation and UAE growth potential. Wynn’s strong Las Vegas and Boston performance aids cash flow, but China recovery is crucial.

What’s the full story? Morgan Stanley cites a combination of factors contributing to this favorable risk-reward and re-rating potential. These include the current low valuation, an underappreciated growth opportunity in the UAE, and optionality around Macau.

Morgan Stanley highlights that strong performance in Las Vegas and Boston is contributing to healthy free cash flow generation for Wynn Resorts. However, the bank notes that Wynn remains heavily exposed to the macroeconomic conditions in China and the recovery of Macau. Despite higher consolidated leverage, estimated to be around 4x at the end of 2024, Morgan Stanley expects Wynn to de-lever quickly, projecting a leverage ratio of less than 16x by the end of 2022.

Looking ahead to 2025, Morgan Stanley estimates Wynn’s geographic EBITDA exposure to be approximately 50% from Macau, 40% from Las Vegas, and 10% from Boston. Additionally, the bank identifies an upcoming project in the UAE as a potential catalyst for Wynn’s future growth.

Overweight at Morgan Stanley means “The stock’s total return is expected to exceed the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months.”