In this article, we will discuss the 10 stocks recently upgraded by analysts.
ON Semiconductor Corporation (NASDAQ:ON) and Pinterest, Inc. (NYSE:PINS) were among the notable stocks that posted their fourth-quarter results on Monday. While the two companies beat earnings estimates, they issued a soft outlook for the current quarter.
Nevertheless, ON Semiconductor Corporation received an upgrade after its latest earnings. Summit Insights upgraded the semiconductor supplier from “Hold” to “Buy,” saying the company is less vulnerable to price pressure relative to other analog peers.
Meanwhile, music streaming service Spotify Technology S.A. (NYSE:SPOT) and package delivery firm FedEx Corporation (NYSE:FDX), also came into the spotlight after receiving upgrades from analysts.
Wells Fargo turned bullish on Spotify Technology S.A., citing its commitment to margin expansion. On the other hand, Citi upgraded FedEx Corporation after its recently announced cost-cutting initiatives. Check out the complete article to see some other stocks recently upgraded by analysts.
Photo by Austin Distel on Unsplash
10. H.B. Fuller Company (NYSE:FUL)
Number of Hedge Fund Holders: 13
Citi recently turned bullish on H.B. Fuller Company (NYSE:FUL), citing its improving margins. Analyst Eric Petrie raised his ratings for the adhesives manufacturing company from “Neutral” to “Buy” on Friday, February 3.
The analyst thinks China’s reopening and the company’s improving growth prospects in the second half of the year would potentially lift its margins. Petrie believes the stock currently trades at a discount relative to peers. He lifted his price target for H.B. Fuller Company from $72 per share to $85 per share.
9. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 26
Stanley Black & Decker, Inc. recently received an upgrade following its better-than-expected financial results for Q4. Citi analyst Eric Lau upgraded the industrial tools manufacturer from “Sell” to “Neutral” on Friday, February 3.
For the fourth quarter, Stanley Black & Decker, Inc. reported adjusted earnings of 10 cents per share, narrower than analysts’ average estimate for a loss of 34 cents. Revenue remained nearly unchanged at $3.99 billion, against the consensus of $3.88 billion.
However, the company issued a weak financial outlook for 2023. Stanley Black & Decker, Inc. expects adjusted earnings in the range of breakeven to $2 per share, well below the expectations of $4.07.
8. Nordstrom, Inc. (NYSE:JWN)
Number of Hedge Fund Holders: 31
Gordon Haskett lifted its ratings for Nordstrom, Inc. (NYSE:JWN) from “Reduce” to “Hold” on Friday, February 3. The upgrade came after multiple reports suggested that activist investor Ryan Cohen has acquired a major stake in the luxury department store chain.
Cohen reportedly plans to force Nordstrom, Inc. to make changes to its board, considering its weak performance compared to rivals. The activist investor is doing so to support cost saving initiatives.
Nordstrom, Inc. shares climbed nearly 25 percent on February 3 as investors praised Cohen’s reported plans to change things around at Nordstrom.
7. Boyd Gaming Corporation (NYSE:BYD)
Number of Hedge Fund Holders: 36
CBRE lifted its ratings for Boyd Gaming Corporation (NYSE:BYD) from “Hold” to “Buy” on Friday, February 3. The upgrade came a day after the gaming and hospitality company surpassed financial expectations for the fourth quarter.
Boyd Gaming Corporation earned $1.72 per share on an adjusted basis, significantly higher than $1.35 per share in the comparable period of 2021. In addition, revenue for the quarter increased to $922.9 million, from $879.8 million in the year-ago period. The results beat the consensus of $1.45 per share for earnings and $879 million for revenue.
Among other updates, Boyd Gaming Corporation said it repurchased about $1.07 million worth of its common stock during Q4. BYD stock jumped to a nearly 10-month high on February 3 following the latest earnings.
Like Boyd Gaming Corporation, analysts also improved their ratings for ON Semiconductor Corporation, Pinterest, Inc. and Spotify Technology S.A..
6. Align Technology, Inc. (NASDAQ:ALGN)
Number of Hedge Fund Holders: 38
Goldman Sachs raised its ratings for Align Technology, Inc. (NASDAQ:ALGN) from “Sell” to “Neutral” on Thursday, February 2. Analyst Nathan Rich was primarily moved by the company’s sequential growth in Q4 and stability in the Americas and EMEA regions.
Rich also raised his price target for Align Technology, Inc. from $165 per share to $307 per share. The upgrade follows the better-than-expected quarterly performance of the medical device company.
Align Technology, Inc. recently reported adjusted earnings of $1.73 per share for the fourth quarter, crushing estimates of $1.56 per share. The quarterly sales of $901.5 million also exceeded the consensus of $892.82 million.
Speaking on the results, CEO Joe Hogan said in a statement:
“Overall, I’m pleased to report fourth-quarter results that reflect a more stable environment for doctors and their patients than recent quarters, especially in the Americas and EMEA regions, as well as most APAC markets outside of China.”
5. Church & Dwight Co., Inc. (NYSE:CHD)
Number of Hedge Fund Holders: 40
Atlantic Equities raised its ratings for Church & Dwight Co., Inc. from “Underweight” to “Neutral” on Monday, February 6. Analyst Edward Lewis acknowledged that the consumer goods company has come through a tough time, with dropping sales and shrinking margins in recent years.
However, Lewis believes the company’s gross margin and sales growth will improve in the coming quarters. In addition, he sees a more balanced risk/reward after the stock’s recent underperformance. Church & Dwight Co., Inc. shares have lost nearly 17 of their value over the past 12 months.
4. ON Semiconductor Corporation (NASDAQ:ON)
Number of Hedge Fund Holders: 45
Summit Insights upgraded ON Semiconductor Corporation from “Hold” to “Buy” on Monday, February 6. Analyst KinNgai Chan believes the company is less vulnerable to price pressure relative to other analog peers.
Chan added that ON Semiconductor could outperform, considering its unique position in the automotive space. The upgrade came the same day ON Semiconductor Corporation released its financial results for the fourth quarter.
The semiconductor supplier reported adjusted earnings of $1.32 per share, beating estimates of $1.26 per share. The quarterly revenue of $2.1 billion also exceeded analysts’ average estimate of $2.08 billion.
On the downside, ON Semiconductor Corporation issued a weak financial outlook for the current quarter. It projected adjusted earnings in the range of 1.02 – $1.14 per share and revenue between $1.87 – $1.97 billion. The midpoint of the guidance missed the consensus of $1.14 per share for earnings and $2 billion for revenue.
3. Cardinal Health, Inc. (NYSE:CAH)
Number of Hedge Fund Holders: 45
Baird turned bullish on Cardinal Health, Inc. (NYSE:CAH) after its latest earnings. Analyst Eric Coldwell upgraded the healthcare services company from “Neutral” to “Outperform” on Friday, February 3.
Coldwell believes the company’s Pharmaceutical segment is catching up with rivals in terms of profit growth. The analyst also increased its price target for Cardinal Health, Inc. from $87 per share to $94 per share.
Cardinal Health, Inc. last week reported adjusted earnings of $1.32 per share for Q4, up 4 percent on a year-over-year basis. Revenue for the quarter also jumped 13 percent to $51.5 billion. Analysts were looking for earnings of $1.14 per share on revenue of $50.74 billion.
In addition, Cardinal Health, Inc. increased its fiscal 2023 earnings outlook to a range of $5.20 – $5.50 per share, from $5.05 – $5.40 per share.
2. FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Holders: 57
Citi improved its ratings for FedEx Corporation from “Neutral” to “Buy” on Thursday, February 2. Analyst Christian Wetherbee seemed impressed with the recently announced cost-cutting initiative by the company.
FedEx Corporation last week disclosed plans to trim about 10 percent of its senior staff, including directors and officers. The latest announcement is a part of its broader efforts to save costs amid fading demand.
Package delivery companies, including FedEx Corporation, enjoyed massive growth during the peak of the pandemic. However, those companies now face weak demand amid increasing inflation and life returning to normal post-Covid.
1. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 57
Shares of Spotify Technology S.A. rose nearly two percent on Monday, February 6, after receiving an upgrade from Wells Fargo. Analyst Steven Cahall improved his ratings for the entertainment services provider from “Equal-Weight” to “Overweight,” citing Spotify’s commitment to margin expansion.
Cahall expects the company to beat gross profit margin estimates in the coming years. The analyst also raised his price target for Spotify Technology S.A. from $121 per share to $180 per share. The upgrade came a week after Spotify Technology S.A. announced better-than-expected user growth for the fourth quarter.
Separately, investment management firm Rowan Street Capital also talked about Spotify Technology S.A. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“We have written a few times (Q2 ’20 Letter, Q2 ’21 Letter, Q2 ’22 Letter) about Spotify Technology S.A. (NYSE:SPOT) and it still remains our favorite idea that is currently extremely mispriced by the market, in our view.
Spotify is estimated to end 2022 with 479 million monthly subscribers. Management thinks that their subscribers can get 1 billion over the next 4-5 years. The paid subscribers are estimated to end 2022 at 202 million. Therefore, based on today’s price, we are paying only $74 per paid subscriber. Now, let’s assume that Spotify can get to only 5 euros in ARPU (they are at 4.63 euros currently), then they would be collecting 60 euros per paid subscriber over a 12 months period, which makes our current payback period of only 1.2 years. This may not be an ideal comparison, but just for some context, Netflix is currently selling for $590 per user and traded as high as $1,400 per user in 2021. According to the “Netflixed: the epic battle for America’s eyeballs” book by Gina Keating, the founder/CEO of Netflix Reed Hastings offered $200 per subscriber to Blockbuster back in 2007. Blockbuster’s management was insulted by such a low-ball figure and rejected his acquisition offer — the rest was history…” (Click here to read the full text
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