Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Intel, Robinhood (NASDAQ:HOOD) and Boston Beer (NYSE:SAM); downgrade for SunPower (NASDAQ:SPWR).
InvestingPro subscribers always get first dibs on market-moving rating changes.
MasterCard What happened? On Monday, Piper Sandler initiated coverage on MasterCard at Overweight with a $531 price target.
What’s the full story? Piper projects that Mastercard (NYSE:MA) is on track to achieve a revenue growth of 11.0% this fiscal year, with an even stronger performance expected in FY25, where a 12.7% growth is anticipated. This growth is primarily fueled by the Payment Network sector, which is predicted to see a 9.5% increase in revenue this year and a 13.5% surge in FY25, accounting for about 62% of Mastercard’s total revenue. Concurrently, the Value-added Services and Solutions are expected to grow by 13.7% in FY24 and 11.5% in FY25, representing approximately 38% of the overall revenue.
The brokerage underscores the significant potential in consumer payments as a pivotal growth catalyst for Mastercard. The company’s current transaction volume stands at a staggering $9 trillion annually, with a Total Addressable Market (TAM) exceeding $250 trillion across various revenue channels, including domestic and cross-border transactions, processing, and value-added services.
Moreover, Piper anticipates that Mastercard will maintain its trajectory of margin expansion, with forecasts of an increase by 20 basis points (bps) in FY24 and a notable 80 bps in FY25, as the company continues to innovate and disrupt traditional cash transactions, expanding into new services and technological offerings.
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? MasterCard opened the regular session at $456.44 and closed at $457.76, a gain of 0.10% from the prior day regular close.
Boston Beer Company What happened? On Tuesday, Jefferies upgraded Boston Beer to Buy with a $360 price target.
What’s the full story? Jefferies reports a positive outlook for Flavored Malt Beverages (FMBs) and Ready-to-Drink (RTD) products, anticipating growth of 4-5%, which is expected to come at the expense of Seltzers and Domestic beers. Hard Teas are emerging as the dominant category within this space, with key brands garnering 43% of honorable mentions. Leading the charge is Twisted Tea, accounting for 19% of these mentions, now surpassing Truly in market size. This shift indicates a significant trend inflection for SAM (Segment-Addressable Market).
The brokerage notes that while the malt-based seltzer industry is on a downward trend, with Truly experiencing continued market share losses, Boston Beer’s cider and beer portfolios are also facing a secular decline. However, the strong performance of Twisted Tea within the flavored malt beverage segment is providing a cushion against these declines. Despite this, the overall volume deleverage across seltzer, beer, and cider categories is contributing to a delayed recovery in Gross Margin (GM) percentage.
Buy at Jefferies means “Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.”
How did the stock react? Boston Beer opened the regular session at $288.32 and closed at $284.78, a gain of 0.34% from the prior day regular close.
What happened? On Wednesday, Wolfe Research downgraded SunPower to Underperform with a $2 price target.
What’s the full story? I deeply agreed with this call as the company was part of the meme stock gamble which was predictably irrational. Shares traded up to the higher-end of a $5 handle on Tuesday. The company has no way to issue an offering at its lofty and unhinged price level. Also, Gordon Johnson of GLJ Research had a great write up which I posted to Investing.com Premium users at the time of its dissemination midday Tuesday, link here. This was a simple and confident call at a great time, like catching the last of a good set when surfing.
Wolfe Research has highlighted SunPower as a standout example of the recent meme stock phenomenon within the Clean Tech sector. Despite a lack of positive fundamental updates, SPWR’s stock has surged approximately 100% week-to-date, driven by a significant short squeeze. This market movement was sparked by the company’s high short interest of around 95%, which caught the attention of retail investors, leading to 65% of the float being traded on Tuesday alone. Adding to the volatility, SPWR has announced a delay in filing its 1Q24 10-Q due to ongoing issues with internal controls and past financial misstatements.
The brokerage remains optimistic about the home solar market, buoyed by incentives such as the Inflation Reduction Act and rising utility bills. Wolfe Research appreciates certain aspects of SPWR’s business strategy, which provides clearer financials and less exposure to interest rate fluctuations compared to its peers. However, the lack of a contracted revenue or cash flow base poses challenges, especially as residential sales have slowed since 2023. Although SPWR has navigated past bankruptcy risks from debt covenant breaches, it may require additional capital in 2024. The ongoing search for a new CEO further contributes to the uncertainty surrounding the company’s strategic direction.
Underperform at Wolfe means “The security is projected to underperform analyst's industry coverage universe over the next 12 months.”
How did the stock react? SunPower opened the regular session at $3.44 and closed at $3.11, a decline of 29.16% from the prior day regular close.
Intel What happened? On Thursday, Wolfe Research upgraded Intel (NASDAQ:INTC) to Peer Perform. The firm does not issues price targets for Peer Perform equities.
What’s the full story? Wolfe Research maintains its cautious stance on Intel, despite the stock’s 38% decline year-to-date (YTD), which has underperformed the Semiconductor Index (SOX) by approximately 60% YTD and 40% since the brokerage’s July initiation. The recent foundry event and earnings reports have reinforced Wolfe Research’s thesis, aligning with the current low market sentiment towards INTC. The brokerage’s primary concern is that the growth in server CPU sales is insufficient to cover the substantial capital expenditures and depreciation associated with INTC’s ambitious 5N4Y manufacturing strategy. This viewpoint was corroborated by INTC’s own forecast, which does not anticipate the manufacturing division to reach breakeven until Calendar Year 27, with profitability hinging on an expanded foundry business towards the decade’s end.
Challenges aside, Wolfe’s team expects some incremental improvement in INTC’s Gross Margin in CY25, as startup costs are projected to decrease and the company starts to internalize more production processes. However, these improvements are expected to be modest. With these factors now priced into investor expectations, Wolfe Research acquired a more neutral stance at Peer Perform.
Peer Perform at Wolfe means “The security is projected to perform approximately in line with analyst's industry coverage universe over the next 12 months.”
How did the stock react? Intel opened the regular session at $31.61 and closed at $32.04, a gain of 2.46% from the prior day regular close.
Robinhood Markets What happened? On Friday, BofA double upgraded Robinhood to Buy with a $24 price target
What’s the full story? BofA Securities views the current entry point as the opposite of 2021 when they initiated at Underperform after its IPO given (1) rising retail engagement & accelerating organic growth; (2) positive operating leverage after large expense reductions; (3) attractive valuation following increases in EBITDA/EPS. Interactive Brokers (NASDAQ:IBKR) remains the research team’s top broker Buy and Virtu Financial (NASDAQ:VIRT) remains their stealth way to play retail engagement via payment for order flow.
The research team is making no changes to their recently revised EPS but are transitioning to a pure EBITDA valuation method (15x vs 7x+excess cash), raising their PO to $24 from $14. Following significant improvements in operating efficiency, organic growth, and product offering, they now apply a 15x EBITDA multiple which is near the low end of the range that IBKR/Charles Schwab (15-20x) trade at. BofA Securities’ 2025 adjusted EBITDA forecast is more than 40% above the consensus.
Regulators may bring action against HOOD’s crypto practices in 2H24. Robinhood has been conservative in its crypto offering, therefore BofA Securities is less concerned with potential outcomes.
Buy at BofA means “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.” How did the stock react? Robinhood opened the regular session at $18.94 and closed at $20.08, a gain of 12.18% from the prior day regular close.
