Street Calls of the Week: Upgrade for Western Digital; downgrade for Clorox By Investing.com
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Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrade for Western Digital ; downgrades for Clorox, Pepsi and Block.
InvestingPro subscribers always get first dibs on market-moving rating changes.
Bloom Energy
What happened? On Monday, Evercore started Bloom Energy (NYSE:) at Outperform with a $21 price target
What’s the full story? Bloom Energy is on an ambitious journey to facilitate global decarbonization and scale hydrogen solutions, capitalizing on the dynamic energy landscape. The company’s highly efficient, low-emission solid oxide fuel cells are gaining market traction and acceptance in rapidly growing sectors such as marine, aviation, data centers, BEV charging, green ammonia, steel, e-fuel, CCUS, and methanol. Evercore sees Bloom’s stationary, off-grid hydrogen solutions as a burgeoning opportunity as interconnection challenges persist.
While solid oxide fuel cell sales are set to rise this decade, Bloom’s electrolyzer sales are projected to significantly contribute to growth from 2025 onwards. Evercore believes the expansion in electrolyzer capacity is widespread and is expected to reach 242GW by 2030. Bloom’s energy servers are fuel-agnostic, with components easily interchangeable between the company’s fuel cells and electrolyzers, simplifying scaling.
In conjunction with wind, solar, nuclear, and other renewable resources, Bloom is poised for long-term growth in green hydrogen, a key fuel for a low-carbon future. Given the legislative support for decarbonization and electrification, Evercore is initiating coverage with an Outperform rating and a $21 price target.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst’s coverage sector.”
How did the stock react? Bloom Energy stock traded higher on the premarket headlines from $11.24 to $11.64, a gain of around 3.50%. Bloom Energy opened the regular session at $11.75 and closed at $11.73, a gain of 4.36%.
Clorox
What happened? On Tuesday, Citi downgraded Clorox (NYSE:) to Neutral with a $165 price target.
What’s the full story? Citi analysts have observed a significant rise in CLX stock, which has soared approximately 30% in the past five months, surpassing its staples peers by a notable 1,940 basis points. Following this robust performance, Citi suggests a cautious approach, recommending a shift to a neutral stance and a slight reduction in the target price (TP) to $165.
The analysts at Citi also express concerns about the future catalysts for CLX stock. They anticipate that the upcoming scanner data may continue to show negative trends, expect a subdued top-line in the fiscal third quarter (FQ3), and predict a conservative initial guidance for fiscal year 2025 (FY25) to be set forth in conjunction with the fiscal fourth quarter (FQ4) earnings report.
Neutral at Citi means “The Investment rating definitions are: Buy (1) ETR of 15% or more or 25% or more for High risk stocks; and Sell (3) for negative ETR. Any covered stock not assigned a Buy or a Sell is a Neutral (2).”
How did the stock react? Clorox stock traded lower on the premarket headlines from $151.61 to $150.66, a decline of around 0.65 percent. Clorox opened the regular session at $150.18 and closed at $148.71, a decline of 1.95 percent.
Pepsi
What happened? On Wednesday, Argus downgraded PepsiCo (NASDAQ:) to Hold.
What’s the full story? Argus downgraded Pepsi citing concerns that increased product prices may decelerate revenue growth. This is attributed to a consumer shift towards dining out rather than eating at home, which is expected to persist as a challenge for PepsiCo, given its customer base’s preference for home consumption according to Argus.
Additionally, the rising popularity of weight-loss medications such as Wegovy and Zepbound may lead to reduced food expenditure, while a growing inclination towards healthier options is likely to diminish demand for PepsiCo’s salty snacks and sugary drinks.
Despite these short-term headwinds, the analysts maintain a positive long-term outlook for PepsiCo. They highlight the company’s robust digital infrastructure, efficient distribution network, strong brand portfolio, and enhanced supply chain as key factors that will continue to drive PepsiCo’s success in the future.
Hold at Argus means “A HOLD-rated stock is expected to perform in line with the S&P 500.”
How did the stock react? Pepsi stock traded lower on the premarket headlines from $171.62 to $170.62, a decline of around 0.50%. Pepsi opened the regular session at $169.96 and closed at $169.68, a decline of 1.03%.
Block Inc.
What happened? On Thursday, Morgan Stanley downgraded Block Inc (NYSE:) to Underweight with a $60 price target
What’s the full story? Morgan Stanley’s valuation approach assigns a 12x Seller EV/Ebitda multiple to the subject, marginally lower than its peers when adjusted for growth. This conservative estimate reflects the analysts’ view that the current high Ebitda growth rates are not sustainable and may lead to modest revenue increases in the medium term. In contrast, the Cash App is valued at a 2.5x EV/Gross Profit multiple, aligning it with consumer finance counterparts like AFRM and SYF, and offering a slight discount compared to COF. This valuation is justified by comparing Cash App’s gross profit surge to the revenue trajectories of established consumer finance entities.
Further bolstering the valuation, Morgan Stanley’s analysts draw parallels between Cash App and banking giant Capital One, speculating on Cash App’s future as a banking alternative for the Gen Z and millennial demographics. They anticipate that Cash App could mirror Capital One’s Average Revenue Per User (ARPU) and market share within its target audience.
The analysts conclude that the optimal outcome, where Cash App evolves into a ‘Capital One’ for the younger generations, is substantially factored into their current valuation projections for Cash App.
Underweight at Morgan Stanley means “The stock’s total return is expected to be below the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months .”
How did the stock react? Block stock traded significantly lower on the premarket headlines from $79.98 to $76.52, a decline of around 3.80%. Block opened the regular session at $78.27 and closed at $74.73, a decline of 6.18%.
Western Digital
What happened? On Friday, Rosenblatt upgraded Western Digital (NASDAQ:) to Buy with a $115 price target
What’s the full story? Rosenblatt upgraded WDC due to strengthening NAND Flash prices. Industry data indicates that 2Q24 NAND Flash average contract prices will rise by 15%+ sequentially, driven by increasing demand, low inventories, and disciplined capacity controls. Rosenblatt adjusted their NAND Flash ASP assumption for the next four quarters and maintains a view of NAND Flash demand as price elastic.
Additionally, the brokerage anticipates limited new capacity expansions until industry gross margins reach the mid-30%. The 12-month price target for WDC is now $115 (up from $65), based on 13x their NTM Non-GAAP EPS
Buy at Rosenblatt means “Buy [We believe this stock will outperform relative to other companies in its industry over the following 12 months.]”
How did the stock react? Western Digital stock traded higher on the premarket headlines from $70.74 to $72.71, a gain of around 2.50%. It opened the regular session at $73.22 and closed at $73.10, a gain of 3.63%.
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Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrade for Western Digital ; downgrades for Clorox, Pepsi and Block.
InvestingPro subscribers always get first dibs on market-moving rating changes.
Bloom Energy
What happened? On Monday, Evercore started Bloom Energy (NYSE:) at Outperform with a $21 price target
What’s the full story? Bloom Energy is on an ambitious journey to facilitate global decarbonization and scale hydrogen solutions, capitalizing on the dynamic energy landscape. The company’s highly efficient, low-emission solid oxide fuel cells are gaining market traction and acceptance in rapidly growing sectors such as marine, aviation, data centers, BEV charging, green ammonia, steel, e-fuel, CCUS, and methanol. Evercore sees Bloom’s stationary, off-grid hydrogen solutions as a burgeoning opportunity as interconnection challenges persist.
While solid oxide fuel cell sales are set to rise this decade, Bloom’s electrolyzer sales are projected to significantly contribute to growth from 2025 onwards. Evercore believes the expansion in electrolyzer capacity is widespread and is expected to reach 242GW by 2030. Bloom’s energy servers are fuel-agnostic, with components easily interchangeable between the company’s fuel cells and electrolyzers, simplifying scaling.
In conjunction with wind, solar, nuclear, and other renewable resources, Bloom is poised for long-term growth in green hydrogen, a key fuel for a low-carbon future. Given the legislative support for decarbonization and electrification, Evercore is initiating coverage with an Outperform rating and a $21 price target.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst’s coverage sector.”
How did the stock react? Bloom Energy stock traded higher on the premarket headlines from $11.24 to $11.64, a gain of around 3.50%. Bloom Energy opened the regular session at $11.75 and closed at $11.73, a gain of 4.36%.
Clorox
What happened? On Tuesday, Citi downgraded Clorox (NYSE:) to Neutral with a $165 price target.
What’s the full story? Citi analysts have observed a significant rise in CLX stock, which has soared approximately 30% in the past five months, surpassing its staples peers by a notable 1,940 basis points. Following this robust performance, Citi suggests a cautious approach, recommending a shift to a neutral stance and a slight reduction in the target price (TP) to $165.
The analysts at Citi also express concerns about the future catalysts for CLX stock. They anticipate that the upcoming scanner data may continue to show negative trends, expect a subdued top-line in the fiscal third quarter (FQ3), and predict a conservative initial guidance for fiscal year 2025 (FY25) to be set forth in conjunction with the fiscal fourth quarter (FQ4) earnings report.
Neutral at Citi means “The Investment rating definitions are: Buy (1) ETR of 15% or more or 25% or more for High risk stocks; and Sell (3) for negative ETR. Any covered stock not assigned a Buy or a Sell is a Neutral (2).”
How did the stock react? Clorox stock traded lower on the premarket headlines from $151.61 to $150.66, a decline of around 0.65 percent. Clorox opened the regular session at $150.18 and closed at $148.71, a decline of 1.95 percent.
Pepsi
What happened? On Wednesday, Argus downgraded PepsiCo (NASDAQ:) to Hold.
What’s the full story? Argus downgraded Pepsi citing concerns that increased product prices may decelerate revenue growth. This is attributed to a consumer shift towards dining out rather than eating at home, which is expected to persist as a challenge for PepsiCo, given its customer base’s preference for home consumption according to Argus.
Additionally, the rising popularity of weight-loss medications such as Wegovy and Zepbound may lead to reduced food expenditure, while a growing inclination towards healthier options is likely to diminish demand for PepsiCo’s salty snacks and sugary drinks.
Despite these short-term headwinds, the analysts maintain a positive long-term outlook for PepsiCo. They highlight the company’s robust digital infrastructure, efficient distribution network, strong brand portfolio, and enhanced supply chain as key factors that will continue to drive PepsiCo’s success in the future.
Hold at Argus means “A HOLD-rated stock is expected to perform in line with the S&P 500.”
How did the stock react? Pepsi stock traded lower on the premarket headlines from $171.62 to $170.62, a decline of around 0.50%. Pepsi opened the regular session at $169.96 and closed at $169.68, a decline of 1.03%.
Block Inc.
What happened? On Thursday, Morgan Stanley downgraded Block Inc (NYSE:) to Underweight with a $60 price target
What’s the full story? Morgan Stanley’s valuation approach assigns a 12x Seller EV/Ebitda multiple to the subject, marginally lower than its peers when adjusted for growth. This conservative estimate reflects the analysts’ view that the current high Ebitda growth rates are not sustainable and may lead to modest revenue increases in the medium term. In contrast, the Cash App is valued at a 2.5x EV/Gross Profit multiple, aligning it with consumer finance counterparts like AFRM and SYF, and offering a slight discount compared to COF. This valuation is justified by comparing Cash App’s gross profit surge to the revenue trajectories of established consumer finance entities.
Further bolstering the valuation, Morgan Stanley’s analysts draw parallels between Cash App and banking giant Capital One, speculating on Cash App’s future as a banking alternative for the Gen Z and millennial demographics. They anticipate that Cash App could mirror Capital One’s Average Revenue Per User (ARPU) and market share within its target audience.
The analysts conclude that the optimal outcome, where Cash App evolves into a ‘Capital One’ for the younger generations, is substantially factored into their current valuation projections for Cash App.
Underweight at Morgan Stanley means “The stock’s total return is expected to be below the average total return of the analyst’s industry (or industry team’s) coverage universe, on a risk-adjusted basis, over the next 12-18 months .”
How did the stock react? Block stock traded significantly lower on the premarket headlines from $79.98 to $76.52, a decline of around 3.80%. Block opened the regular session at $78.27 and closed at $74.73, a decline of 6.18%.
Western Digital
What happened? On Friday, Rosenblatt upgraded Western Digital (NASDAQ:) to Buy with a $115 price target
What’s the full story? Rosenblatt upgraded WDC due to strengthening NAND Flash prices. Industry data indicates that 2Q24 NAND Flash average contract prices will rise by 15%+ sequentially, driven by increasing demand, low inventories, and disciplined capacity controls. Rosenblatt adjusted their NAND Flash ASP assumption for the next four quarters and maintains a view of NAND Flash demand as price elastic.
Additionally, the brokerage anticipates limited new capacity expansions until industry gross margins reach the mid-30%. The 12-month price target for WDC is now $115 (up from $65), based on 13x their NTM Non-GAAP EPS
Buy at Rosenblatt means “Buy [We believe this stock will outperform relative to other companies in its industry over the following 12 months.]”
How did the stock react? Western Digital stock traded higher on the premarket headlines from $70.74 to $72.71, a gain of around 2.50%. It opened the regular session at $73.22 and closed at $73.10, a gain of 3.63%.
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