In this article, we discuss the 5 stocks recently upgraded by analysts. If you want to see more stocks on the list, go directly to Analysts are Upgrading These 10 Stocks.
05. Tapestry, Inc. (NYSE:TPR)
Number of Hedge Fund Holders: 38
Aneesha Sherman, an analyst at Bernstein, on May 15, upgraded Tapestry, Inc. (NYSE:TPR) from Market Perform to Outperform and raised the price target from $50 to $55. Previously, the firm had downgraded Tapestry, Inc. (NYSE:TPR) to a Neutral rating in January 2023 due to anticipated short-term weakness in North America. However, two quarters later, this weakness has materialized as expected and is already factored into the company’s guidance and consensus. Additionally, Bernstein notes that Tapestry, Inc. (NYSE:TPR) has regained control over its inventory, and there is a strong demand for Coach products in China. The firm maintains a positive outlook on Tapestry, Inc. (NYSE:TPR) long-term investment potential and finds the stock’s current valuation attractive.
04. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 46
Albemarle Corporation (NYSE:ALB) specializes in developing, producing, and distributing specialized chemicals for various industries. The company is divided into three main segments – Lithium, Bromine, and Catalysts.
On May 18, UBS upgraded Albemarle Corporation (NYSE:ALB) from Neutral to Buy and raised the price target from $196 to $225. According to the analyst, the recent 2023 guidance reset by the company presents a favorable opportunity to enter into what is considered the “best growth opportunity” in the chemicals industry. The firm specifically highlights the current shift in China’s lithium pricing and the 2023 earnings reset as factors expected to generate increasingly positive sentiment surrounding the stock.
03. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 48
DuPont de Nemours, Inc. (NYSE:DD) is a global leader in the specialty materials industry. The company has a plethora of offerings for the energy industry, ranging from the exploration and production of oil and gas to solar PV technologies, wind technologies, and fuel cell technologies. On May 15, DuPont de Nemours, Inc. (NYSE:DD) was upgraded by Deutsche Bank analyst David Begleiter from Hold to Buy, along with an increased price target of $80, up from $70. This target implies a potential upside of 25%. Begleiter notes that since the shares were downgraded in mid-January, they have declined by 15% compared to a 3% gain in the S&P 500 Index. As a result, DuPont de Nemours, Inc. (NYSE:DD) stock is now trading at a 50% discount compared to its peers. The analyst believes this presents an opportunity for investors and advises a Buy rating on the stock.
Third Point made the following comment about DuPont de Nemours, Inc. (NYSE:DD) in its Q4 2022 investor letter:
“We recently increased our investment in DuPont de Nemours, Inc. (NYSE:DD), a specialty chemical company run by legendary value creator Ed Breen, who is leading a corporate transformation. In November, DuPont divested its most cyclical and lowest margin business segment, Mobility & Materials, to Celanese for $11 billion, or 14x 2023e EV/EBITDA. Following the divestiture, the improved DuPont trades at 11x 2023e EV/EBITDA, which represents a ~30% discount to its peer group.
We believe the company is laser-focused on closing this gap. First, $5 billion of the proceeds are being deployed to repurchase nearly 15% of its outstanding shares. The next significant catalyst for the stock is a potential settlement of PFAS-related multidistrict litigation in South Carolina, which remains an overhang on the stock even though DuPont’s PFAS liability was largely ring-fenced by the 2021 settlement with Chemours and Corteva. DuPont’s strong management team is eager to demonstrate the business quality of the new portfolio during the current period of economic volatility. We expect the combined catalysts of increased share repurchases, the pending resolution of legal claims, and the new business structure to drive meaningful value for shareholders.”
02. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 74
On May 15, Raymond James analyst Patrick O’Shaughnessy upgraded The Charles Schwab Corporation (NYSE:SCHW) from Market Perform to Outperform and set a price target of $63. The analyst points out that recent data suggest a tapering of client cash outflows at The Charles Schwab Corporation (NYSE:SCHW), which is expected to stabilize the company’s balance sheet and net interest margin. The firm believes that The Charles Schwab Corporation (NYSE:SCHW) deposit balances will begin to stabilize in the third quarter. While a stricter regulatory environment may continue to impact the company’s shares for some time, the firm believes that any incremental risk to Schwab’s earnings power will likely be limited. Additionally, the firm highlights that The Charles Schwab Corporation (NYSE:SCHW) has minimal credit risk and possesses an attractive core growth story that remains unaffected by recent macroeconomic events.
RiverPark Large Growth Fund made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2023 investor letter:
“The Charles Schwab Corporation (NYSE:SCHW): SCHW shares were our top detractor for the quarter as bank stocks sold off aggressively following the failures of Silicon Valley Bank and Signature Bank. Despite the bulk of Schwab’s $7 trillion of assets being in the brokerage business, the company does have a large deposit base on which it earns net interest income. While Schwab has seen asset growth increase as depositors look for safety, the company has seen persistent cash sorting (depositors moving cash from deposits to money market funds to generate higher yields). This sorting has two negative consequences: first, it reduces the firm’s profitability because Schwab earns more in net interest income on assets on deposit than it does on management fees from money market funds, and second, it forces Schwab to sell assets held by its bank subsidiary to fund the cash transfers into money market funds. Because of the recent rapid rise in interest rates, these asset sales could cause Schwab to realize trading losses. We think this latter scenario is unlikely for two reasons: first, following historical patterns from past cycles, we believe the cash sorting trend will slow in the coming months, and second, Schwab has enough available liquidity from other sources to fund nearly 100% of its deposit base without selling marked-down securities.
Schwab and TD Ameritrade (which Schwab acquired in October 2020) have been the leading share gainers in the discount brokerage industry over the last decade, with both generating substantial organic asset growth while also growing operating margins and remaining amongst the price leaders on all products. With these two businesses now combined, revenue and expense synergies should accelerate in 2023, and we believe the company will be in an even stronger position to gather assets and drive long-term margins and free cash flow in the years to come.”
01. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Meta Platforms, Inc. (NASDAQ:META) is the biggest social media company in the world. Its Facebook and Instagram services are among the largest in the world. Additionally, Facebook also owns the messaging service WhatsApp. The firm was set up in 2004 and is based in Menlo Park, California.
Loop Capital on May 15 upgraded Meta Platforms, Inc. (NASDAQ:META) from Hold to Buy and raised the price target from $220 to $320. The analysts at Loop Capital initially viewed the company’s expense rationalization as a one-time driver but have grown increasingly optimistic about Meta Platforms, Inc. (NASDAQ:META) revenue outlook. They note that three significant headwinds to revenue – Apple’s ad tracking changes, foreign exchange fluctuations, and the transition to Reels – are all in the process of cycling through and are expected to become tailwinds for the company. According to the firm, these factors have been responsible for a headwind of around mid-teens percent to revenue growth. In addition to normalizing comparisons, Meta Platforms, Inc. (NASDAQ:META) is anticipated to benefit from product-driven enhancements through Advantage+ and monetization momentum on Reels. Loop Capital believes that earnings estimates for Meta should be favorable, barring a severe global recession.
Baron Opportunity Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q1 2023 investor letter:
“We continued rebuilding our position of Meta Platforms, Inc. (NASDAQ:META), the world’s largest social network, this quarter. We believe Meta is competitively well positioned to utilize its leadership in mobile advertising and expand further with the generative AI shift, especially given its massive user base, substantial technological scale, and innovative culture. Core engagement has been strong at Meta, especially with the success of Instagram Reels, which is regaining share from TikTok. Across its platforms, Meta has 3.7 billion monthly active users. A U.S. TikTok ban would further materially benefit Meta. In terms of improving monetization, Meta has developed more effective ad targeting in the last few months with its Advantage+ product. Longer term, Meta has invested in generative AI for years and has among the world’s best and largest datasets and distribution. We believe generative AI can materially help Meta improve existing products (e.g., instantly generate personalized creative ads) and expand into new areas (e.g., through WhatsApp and Messenger chats). On the profitability front, Meta’s management is serious about cost discipline (laying off approximately 21,000 workers) and prioritizing a more efficient environment, led in earnest by CEO Mark Zuckerberg. Valuation remains relatively attractive, especially as we expect double-digit earnings per share growth, and additional growth options remain.”
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