Street calls of the week
Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Roku Inc.
What happened? On Monday, Baird upgraded Roku (NASDAQ:ROKU) to Outperform with a $90 price target.
*TLDR: ROKU drops 25% YTD; Baird sees undervaluation. Optimism from industry trends and positive developments.
What’s the full story? ROKU has dropped by 25% year-to-date in stark contrast to the SPUZ’s 23% gain. Baird, historically cautious about ROKU’s performance within the rapidly changing streaming environment, now believes the stock is underappreciating significant business changes and long-term prospects.
The firm notes its optimism stems from increasingly favorable industry trends, positive strategic developments, and encouraging early indicators in recent results. With investor expectations seemingly better aligned following the third quarter, Baird sees potential for upside in estimates and valuation moving forward
Outperform at Baird means “Expected to outperform on a total return, risk-adjusted basis the broader U.S. equity market over the next 12 months. “
Sabre
What happened? On Tuesday, Bernstein SocGen downgraded Sabre (NASDAQ:SABR) to Underperform with a $3 price target.
*TLDR: Sabre struggles with GDS reliance; competitors gain clients. Potential hospitality sale might improve finances.
What’s the full story? Sabre appears to be in a challenging position, heavily reliant on a weakening Global Distribution Systems market and threatened by technological advances. A larger competitor in IT Solutions continues to attract Sabre’s existing customers, exacerbating the situation further. Constrained by a stretched balance sheet, Sabre cannot invest at the same level as its competitors like Amadeus (BME:AMA), which has recently secured major clients from Sabre, including Etihad and Vietnam Airlines.
The analysts at Bernstein SocGen note that Amadeus’s ability to widen the product gap poses a significant threat to Sabre’s market position. The imperative for airlines to move towards order management systems may prompt further customer migrations away from Sabre. As Sabre slowly works towards deleveraging, it is likely facing a precarious balance sheet, especially vulnerable during the next downturn in the airline industry’s cyclical nature.
A potential opportunity for Sabre could materialize as a company break-up. Media speculation, though unconfirmed by Sabre, suggests a possible sale of its hospitality business as a strategy to strengthen its financial standing. Such a move could provide the necessary capital to address its balance sheet challenges and adapt to the evolving industry landscape.
Underperform at Bernstein SocGen means “Stock will trail the performance of the market index by more than 15 pp.”
Chewy
What happened? On Wednesday, BofA double upgraded Chewy Inc (NYSE:CHWY) to Buy with a $40 price target.
*TLDR: BofA predicts Chewy’s earnings are underestimated. Strong growth from cost management and sales shift.
What’s the full story? BofA analysts predict that improving industry data will boost Chewy’s topline trends and earnings, which they believe are being underestimated by the market. Following cost cuts in late 2023, Chewy has shown strong expense discipline in SG&A and optimized fulfillment costs. With a transition to higher gross margin sales, (IE advertising and health) the analysts see significant potential for earnings growth.
For 2025 and 2026, BofA projects Chewy’s EBITDA at $719 million and $917 million, respectively, both surpassing market expectations of $675 million and $848 million. The analysts also anticipate a strong EBITDA performance in the upcoming third quarter, forecasting a 7.7% increase above market estimates.
The positive outlook is buoyed by Chewy’s successful cost management and strategic sales shift, positioning the company for continued financial strength. BofA’s projections suggest robust growth potential as Chewy capitalizes on evolving market trends and internal efficiency improvements.
Buy at BofA means “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.”
Palo Alto Network
What happened? On Thursday, Rosenblatt upgraded Palo Alto (NASDAQ:PANW) to Buy with a $430 price target.
*TLDR: Palo Alto upgraded for strong growth and leadership. Strategic acquisitions boost cybersecurity performance effectively.
What’s the full story? This upgrade is driven by the company’s robust first-quarter performance, which highlights the success of its platformization strategy leading to larger deals and impressive Next-Generation Security Annual Recurring Revenue (NGS ARR) growth. The analysts further attribute this upgrade to the strong momentum of SASE and rapid adoption of Cortex/XSIAM, especially following the strategic QRadar acquisition, positioning Palo Alto Networks for sustained market leadership.
ROKU’s most recent earnings report underscores this positive outlook, marked by a more than 50% year-over-year increase in its platform strategy and a 40% rise in NGS ARR. Palo Alto Networks’ seamless integration of the QRadar acquisition and operational improvements are also reflected in the significant operating margin of 28.8%, surpassing Rosenblatt’s estimate of 27.4%.
Rosenblatt’s confidence in Palo Alto Networks stems from its continued execution and strategic acquisitions, which solidify its position in the market. The analysts believe that these factors will propel ongoing growth and reinforce the company’s leadership in the cybersecurity sector.
Buy at Rosenblatt means “We believe this stock will outperform relative to other companies in its industry over the following 12 months.”
Grab Holdings
What happened? On Friday, BofA Securities double downgraded Grab Holdings Ltd (NASDAQ:GRAB) to Underperform with a $4.90 price target.
*TLDR: Grab stock surges 70%, analysts caution downside risk.
What’s the full story? Since September 1, Grab’s stock price has surged by 70%, significantly outperforming both the Nasdaq, up 5%, and Sea, up 45% according to BofA. This strength has been attributed to strong Q3 numbers, growing confidence regarding Grab’s improved free cash flow profile, and recent Federal Reserve rate cuts. However, BofA analysts suggest that the current risk-reward balance is now skewed towards the downside.
The analysts note that Grab’s stock is presently trading at a fiscal year 2026 estimated enterprise value to adjusted EBITDA of 30 times and a price-to-earnings ratio of 57 times. They express concerns about increasing competition in the mobility sector, particularly pointing to rivals like GoTo, which has ramped up investments in on-demand services, intensifying competition in the Indonesian market.
The competitive landscape is also shifting in other key markets such as Singapore, Vietnam, and Thailand, where smaller players are becoming more aggressive. In Vietnam, for example, following GoJek’s exit, local competitors like Be and GreenSM are offering increased discounts to capture market share. The analysts caution that these dynamics present risks to Grab’s market position.
Underperform at BofA means “Underperform stocks are the least attractive stocks in a coverage cluster.”