This Week, From The Analyst Community

Stock analysts can provide valuable insight into the sentiment around a certain stock or sector and shed some light on what is possible or likely for a stock.  Stirring in the analyst community can sometimes be early signs of stock movement, which is why our team reviews dozens of analyst research reports each and every day to find new investment ideas for our readers. 

Of the hundreds of reports, we reference weekly, some stand out among the others for various reasons.  Our team has sifted through this week’s reports and whittled it down to the most pertinent moves.   

Read on for the details on some of the most impactful actions brokerage firms took over the past week.   

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Monday, November 8th

• Bedding and mattress manufacturer Purple Innovation (PRPL) was double-downgraded at Bank of America from Buy to Underperform.  Analyst Curtis Nagle cited the company’s “weak” online and wholesale trends heading into the fourth quarter as well as the announcement by Tempur Sealy (TPX) that it is launching a direct competitor to Purple’s gel grid-based bed next year.  The downgrade came along with a price target revision to $16, down from $36.   

• Coverage of VMware (VMW) was reinstated at Barclays with an Overweight rating and $163 price target after the spinoff from Dell Technologies (DELL).  The spin-off provides VMware increased freedom to execute its multi-cloud strategy, a simplified capital structure and governance model, and additional operational and financial flexibility.  “VMware has emerged as an independent company with the Dell overhang removed and the ability to enter into deeper cloud and new OEM partnerships,” said Barclay’s analyst Raimo Lenschow, who expects revenue acceleration and free cash flow margin expansion through 2024.

Tuesday, November 9th

• JPMorgan analyst Sterling Auty double upgraded software analytics company,  New Relic Inc. (NEWR) from Underweight to Overweight with a price target of $150, up from $70, after their Q2 earnings call.  This was a “big change for the positive this quarter” as changes in management, a revision of the business model and shifts in operations have now shown two straight quarters of material improvement and has the company pointed on growth acceleration back toward industry levels.  The analyst believes New Relic should see top line improvement and margin leverage that “create a significant re-rating in shares higher.”   While the stock is up over 20% post the results, this is not “capturing all the opportunity,” says Auty.  The analyst believes the risk/reward is skewed toward the upside.

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Wednesday, November 10th

• Booking Holdings (BKNG) was upgraded to Buy from Hold at Argus.  Analyst John Staszak upgraded Booking Holdings to Buy from Hold with a $3,060 price target.  The analyst cites the company’s Europe focus and expects it to benefit from the strength of its brand in that market given the relatively high COVID vaccination rates.  The stock trades at a forward earnings multiple of 24-times, which is below the average of other online booking companies, but warrants a higher multiple given its strong earnings outlook, Staszak tells investors in a research note.

Thursday, November 11th

• Evercore ISI analyst Mark Mahaney upgraded mobile language platform Duolingo (DUOL) to Outperform and raised the price target from $140 to $195 after the company reported what he called “a clean beat & raise” third quarter.  Bookings, revenue, monthly active users and subscribers were all “solidly ahead of the Street” forecast and MAU to subscriber conversion continued to improve quarter-over-quarter, Mahaney said.  He cites continued strength in the company’s fundamentals, new product launches likely next year, the potential for revenue acceleration, and Google (GOOGL) and “inevitably” Apple (AAPL) App Store changes that should provide gross margin tailwinds in FY22 and FY23 for his increased rating.

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• Multispecialty telehealth platform, Hims & Hers (HIMS) was upgraded to Buy at Piper Sandler on their third straight guidance boost.  Analyst Sean Wieland upgraded the stock to Overweight from Neutral raising the price target 20% to $12.  The company increased fiscal 2021 sales guidance for the third consecutive quarter, following a “strong Q3 beat across all key metrics,” Wieland tells investors in a research note.  Hims & Hers does not have the clinical expertise, payor support or technological infrastructure to transform U.S. healthcare at scale, but at current share levels, “that is ok,” says the analyst.  He says Hims & Hers is dominating the cash-pay, low-to-mid acuity direct-to-consumer markets for sexual health, dermatology and hair loss.  In the analyst opinion the company is executing consistently and the stock is undervalued.

Friday, November 12th 

• Wedbush analyst Matt Bryson downgraded Nvidia (NVDA) to Neutral from Outperform with a price target of $300, up from $220.  The analyst cites valuation for the downgrade with the shares trading at 55 times his projected 2024 numbers.  However, Bryson believes the combination of “unprecedented demand” for both data center and client offerings will allow Nvidia to again exceed expectations next week when it reports earnings. He sees no “negative catalyst” for the stock and improving fundamentals for Nvidia but downgrades the shares on valuation.
• Deutsche Bank analyst Carlo Santarelli upgraded Penn National Gaming (PENN) to Hold from Sell, citing valuation for the upgrade.  When downgrading the shares to Sell in June of 2020, Santarelli viewed the company’s valuation as “stretched.”  Since that time, Penn National has “massively underperformed” its regional gaming peers, Santarelli tells investors in a research note.

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