News From The Analyst Community For This Week

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 with the goal of finding new investment ideas for our readers. 

Of the hundred 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 taken by brokerage firms over the past week.    

Monday, October 18th

  • UBS analyst Myles Walton downgraded Virgin Galactic (SPCE) to Sell from Neutral with a price target of $15, down from $26.  The analyst cites yet another delay for the company’s next powered flights, which had already been delayed from late September to late October following a supplier part issue, stating that the next launch has now been pushed back to Q3 of next year and commercial service starting in Q4 of 2022.  While the details on the Delta class design and results of September-quarter ticket sales will serve as the focal points on the company’s upcoming earnings call, neither seem “material upside catalysts”, Walton tells investors in a research note.
  • Morgan Stanley analyst Meta Marshall upgraded Five9 (FIVN) to Overweight from Equal Weight with an unchanged price target of $200, telling investors that she sees an attractive entry point at the stock’s current valuation ahead of the company’s analyst day, which can be a catalyst for the stock.  While “cognizant” that Five9’s beat/raise setup is harder given company forecasts in its Zoom (ZM) merger proxy, that the probability of strategic interest in the near-term is reduced by that scrapped deal and that the company is facing more challenging comps in the second half, she thinks Q3 results could help the stock in its recovery.  However, Marshall adds that she thinks it will take the analyst day and recovery in some of communication software valuations “in order to get full [price target] recognition over next few quarters.”
  • Wells Fargo analyst Dori Kesten upgraded Host Hotels & Resorts (HST) to Equal Weight from Underweight.  The analyst also upgraded Hersha Hospitality (HT) to Overweight from Equal Weight.  Kesten believes their exposure to urban hotels will be advantageous in this environment of improving mid-week demand, supported by still elevated leisure demand, the analyst tells investors in a research note.  Kesten feels that the relatively large size of Host’s average hotel will make revenue management more difficult vs. its smaller peers, and during a period of heightened potential M&A discussions, Host is not a name typically cited on the receiving end given its relative size.  She believes Hersha’s  ability to effectively fill its hotels and push margins is another advantage the company has vs. others.

Tuesday, October 19th

  • Clearwater Analytics (CWAN) received much attention from analysts.  JPMorgan analyst Jackson Ader initiated coverage of Clearwater Analytics with an Overweight rating and $31 price target.  William Blair analyst Bhavan Suri  also initiated coverage of Clearwater with an Outperform rating.  Clearwater is the leading provider of automated investment accounting, performance, compliance, and risk reporting solutions, Suri tells investors in a research note.  The analyst says Clearwater is addressing a total market of $10B, implying penetration of 2%. He sees potential for accelerating growth as Clearwater is expanding into adjacent markets, moving into new geographies including Europe and AsiaPacific, and launching new solutions including Clearwater Prism.  RBC Capital analyst Rishi Jaluria also initiated coverage of Clearwater Analytics with an Outperform rating and $29 price target.  The analyst is positive on the company’s position as the leading provider of solutions for financial services with over a thousand enterprise customers across three major verticals – asset management, insurance, and corporations.

Wednesday, October 20th

  • Halliburton (HAL) was the recipient of a string of upgrades and positive price target revisions after reporting better than expected earnings.  Argus analyst Bill Selesky upgraded Halliburton to Buy from Hold with a $32 price target after its better than expected Q3 results. The rating change is driven by improving energy market fundamentals, which he expect to result in higher 2022 capital spending by E&P companies, the analyst tells investors in a research note.  Selesky adds that he has stronger preference for oil service companies with more exposure to international markets, but he also believes that North America, where Halliburton does 60% of its business, will benefit from higher E&P spending.  Among firms raising their price targets for HAL were RBC Capital, Cowen and Co., and Barclays.
  • Deutsche Bank analyst Bryan Kraft downgraded Netflix (NFLX) to Hold from Buy with an unchanged price target of $590.  The analyst cites valuation for the downgrade following last night’s Q3 results.  Kraft says his 2021 and 2022 subscriber, revenue, EBITDA, and EBIT forecasts are essentially unchanged following Netflix’s “slightly better-than-expected” quarter. As such, he maintains the $590 12-month price target, which is below yesterday’s closing price. Kraft also thinks a Q4 subscriber beat is “already more than priced into the stock.”  At some point, he believes Netflix “will begin to trade on profit metrics.”

Thursday, October 21st

  • Vale (VALE) was double-downgraded to Underperform from Outperform at RBC Capital.  Analyst Tyler Broda downgraded Vale to Underperform from Outperform with a price target of $12.50, down from $17. China’s economic rebalancing away from the property sector and fixed- asset investment “hits at the core” of the company’s profitability – its iron ore business – the analyst tells investors in a research note.  While the stock looks inexpensive, Vale’s recent operations update has put his 2022 EBITDA estimate 34% below consensus, Broda adds, also cutting his FY21 EPS view to $3.45 from $3.91 and FY22 view to $1.06 from $1.34.
  • Truist analyst Naved Khan initiated coverage of Squarespace (SQSP) with a Buy rating and $50 price target. The company’s platform allows small business customers to easily and quickly create websites and online stores, while its fully-integrated offering includes website building templates, domains, ecommerce plans and advertising/marketing capabilities.  Khan adds that the rising brand awareness, growing user base, strength in commerce, and tuck-in mergers and acquisitions should allow Squarespace to grow at a 14% CAGR over the next nine years.

Friday, October 22nd

  • Jefferies downgraded a trio of iron ore miners on near-term downside risk.  Analyst Christopher LaFemina downgraded Rio Tinto (RIO) to Hold from Buy with a price target of $71, down from $80, downgraded BHP Group (BBL) to Hold from Buy with a price target of $56, down from $63, and downgraded Vale (VALE) to Hold from Buy with a price target of $15 given his view that the outlook for iron ore continues to deteriorate.  While still a bull on the commodity cycle, he has become more cautious on the iron ore miners, even after the decline in their share prices over the past few months, as he sees near-term downside risk to iron ore and to consensus forecasts, LaFemina tells investors.
  • BTIG analyst James Sullivan assumed coverage and upgraded Invitation Homes (INVH) to Buy from Neutral with a $50 price target and upgraded American Homes 4 Rent (AMH) to Buy from Neutral with a $47 price target as part of a broader research note titled “Single Family Rentals – Robust Earnings Momentum”. The analyst cites “very favorable” macro conditions for single family rentals with increasing prices of for-sale homes, lack of for-sale inventory, and renter demand for more space, as rent growth remains well above historic norms.  Sullivan adds that the single family home supply is being impeded by rising labor and material costs while new homes completions are falling short of demand as permitting starts slowed.

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