Investing.com — A professional roundup of the top findings from Wall Street analysts over the last week.
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Sasanqua .
what happened? Mizuho on Monday downgraded Southern Company (NYSE:) to “neutral” and set a $90 price target.
*summary: Mizuho sees limited catalysts for further outperformance despite the 21% P/E premium. Strong payload growth and a robust capital plan should support SO's EPS growth of 5-7% and maintain a strong balance sheet through 2026.
What are the details? Mizuho downgraded Southern Company to neutral after upgrading it in April 2023. At the time, the stock was trading at a 4% P/E premium to the group. The firm initially argued that the stock could be re-rated to a double-digit premium as Vogtle 4 nears completion. However, the stock now trades at a 21% P/E premium to the power utility group, and Mizuho sees little catalyst for further outperformance.
While keeping SO on the sidelines, Mizuho believes strong load growth in SO's service territory driven by data center demand and manufacturing reshoring should make the company's 5-7% EPS growth rate more sustainable. The firm also believes management can maintain a solid capital plan, a strong balance sheet with 17% FFO/debt, and minimum capital needs of $350 million per year through 2026.
Neutral at Mizuho means that “the stock's total returns over the next 12 months are expected to be in line with the unweighted estimated total returns of the analyst's industry coverage universe.”
Shopify
what happened? Redburn Atlantic on Tuesday raised its price target on Shopify (NYSE:) to $99 and upgraded the stock to a buy recommendation.
*summary: Redburn-Atlantic highlights Shopify's innovation, social media integration, and Shop Pay as key growth drivers. The company forecasts revenue CAGR of 29% and EBIT margins of 40% through 2026.
What are the details? Redburn-Atlantic highlights Shopify's industry-leading innovation, social media integration, user-friendly platform and unique Shop Pay button functionality as key elements to capitalize on structural growth. The company's extensive ecosystem and platform capabilities have solidified Shopify's position as the e-commerce provider of choice for merchants of all sizes, and it is expected to attract large enterprise merchants by 2025.
Redburn Atlantic upgraded Shopify to a Buy recommendation, citing the company's multi-faceted defenses, featuring scale, high switching costs, and an impenetrable three-sided network. The company projects 29% compound annual growth in net revenue from 2023-2026 and 40% EBIT margins by 2026, beating the 2026 EBIT consensus by 24%. The price target is set at $99, based on above-consensus revenues and fair multiples in line with internet, fintech, and software peers.
Buying with Redburn-Atlantic: “Redburn Atlantic asserts that the stock price will rise at least 15% in one year. For high-beta stocks, the hurdle rate may be correspondingly higher.”
ResMed
what happened? On Wednesday, Wolf Research downgraded it. ResMed Inc. (NYSE:) is expected to underperform with a price target of $180.
*summary: Wolf rates RMD an Underperform and has a $180 price target, citing the risk of disruption from Lilly's GLP-1 drug. Analysts are forecasting mid-single-digit growth, with 10% upside and 30% to 40% downside risk.
What are the details? Wolf analysts rate RMD shares an Underperform and have a price target of $180, applying a P/E multiple of 20x to NTM's EPS of approximately $9. This lower multiple reflects the projected disruption risk to RMD's business in 2025-2026 as Lilly potentially launches an obstructive sleep apnea indication for its GLP-1 drug tirzepatide. Wolf's total addressable market analysis suggests a long-term impact of 15-25% on the CPAP opportunity, with sustainable growth rates more likely to be in the mid-single digits rather than high single digits.
The analysts present two comparison sets: HSD Med Tech Growth (P/E 25-27.5x) and MSD Med Tech Growth (P/E 15-20x). The analysts believe RMD's growth expectations are near the high end of the MSD range. A physician survey projects a 6% negative impact on CPAP prescription volumes, suggesting a potential shift from HSD to MSD growth. Wolf sees 10% upside potential and 30-40% downside risk over the next 12-24 months.
Underperform at Wolfe means that “the security is predicted to underperform the analyst's industry coverage universe over the next 12 months.”
DoorDash
what happened? On Thursday, BTIG raised shares of DoorDash Inc (NASDAQ:) to a buy recommendation with a $155 target price.
*summary: BTIG raised its forecast for DASH due to near-term strength and long-term growth drivers, with positive EBIT and net income expected in the second half of the year and the rideshare delivery division signaling long-term growth.
What are the details? BTIG has been closely monitoring DoorDash due to a positive category bias, strong execution, and upward pressure on forecasts. The analyst cites three main reasons for raising forecasts: continued near-term strength and undervalued long-term drivers, key milestones expected to produce positive EBIT and net income in the second half, and the rideshare delivery sector being a rare area of long-term growth in consumer internet.
Analysts highlight their desire to increase exposure to DASH compared to more mature categories such as eTravel, online dating, real estate services, etc. BTIG sees great potential in DASH's continued growth and milestones and positions it as a compelling investment opportunity.
At BTIG, a “Buy” means “a security that is expected to generate a positive total return of 15% or more over the 12-month period following recommendation.” If price movements cause the target return to fall outside of 15%, the “Buy” rating may be maintained for as long as it is deemed appropriate.
So what happened? On Friday, B. Riley initiated coverage on Reddit (NYSE:) with a Buy recommendation and a price target of $75.
*summary: B. Riley believes Reddit's unique platform and early monetization phase will drive growth. Attractive risk/reward profile at 31x 2025 EBITDA with significant leverage potential.
What are the details? B. Riley highlighted the unique value proposition Reddit offers to users, advertisers and content licensees through a platform that supports tens of millions of users across more than 100,000 communities, creating a vast and growing repository of curated content. The broker believes Reddit is in the early stages of monetizing its platform through advertising and data licenses, which could lead to healthy revenue growth and margin accretion over the next few years.
B. Riley sees an attractive risk/reward profile given the outlook for above-industry growth and significant leverage over the next few years, trading at approximately 31x 2025 EBITDA estimates. The broker sees Reddit's continued expansion and potential profitability as an attractive investment opportunity.
B. Reilly's “Buy” rating means, “We generally expect stocks rated “Buy” to deliver above-average risk-adjusted total returns over the next 12 months. Investors are encouraged to purchase the securities at their current valuations.”
