Check out today's top analyst calls from around Wall Street, compiled by The Fly.
'EXTRAORDINARY DEMAND': Barclays analyst Adrienne Yih upgraded Wayfair (W) to Equal Weight from Underweight with a price target of $321, up from $153, following the company's second quarter results. COVID-19 has turned the thesis of a sales slowdown and delayed profitability “on its head,” driving “extraordinary demand” that otherwise would likely not have existed, Yih contended. The analyst noted that Wayfair's model includes continued sales acceleration, visibility on a sustained path to profitability, and "materially improved" cash flow resulting from COVID-19-driven trends in home. Yih also recognized the "staying power of post-COVID-19 consumer behavior."
DA Davidson analyst Tom Forte also upgraded Wayfair to Neutral from Underperform with a price target of $260, up from $100. The analyst is turning more positive on the company exploiting opportunities created by COVID-19 after Wayfair reported better-than-expected revenue and earnings in second quarter, with gross margins expanding 681 basis points in the quarter. Forte further cited the benefits through the company's increased volume throughput and efficiencies from Wayfair's logistics efforts.
MORE RESILIENCE THAN EXPECTED: Compass Point analyst Mike Del Grosso upgraded Square (SQ) to Neutral from Sell with a price target of $140, up from $50. The company's second quarter revenue of $1.92B beat his estimate of $1.02B as the Seller business' results were more resilient than he anticipated, noted Del Grosso, who called the performance in such a challenging environment "noteworthy." The analyst, who admits he underestimated the ability of Square to onboard new merchants and potentially overestimated merchant attrition as a result of COVID, believes Cash App trends are encouraging but also believes this is adequately reflected in valuation.
COVID TRENDS: Roth Capital analyst Darren Aftahi upgraded Etsy (ETSY) to Buy from Neutral with a price target of $160, up from $90. The analyst noted that company's second quarter numbers and third quarter guidance "well-exceeded" expectations and COVID trends have continued into the third quarter. With non-mask gross merchandise sales up 93% year-over-year and new buyer retention trending positively, these trends "are too strong to discount," he contended. Aftahi sees "incremental catalysts" for growth for Etsy and recommends being opportunistic buyers of the stock.
MOVING TO THE SIDELINES: Craig-Hallum analyst Christian Schwab downgraded Western Digital (WDC) to Hold from Buy with a price target of $44, down from $88. The analyst noted that the company faces a host of near-term challenges with a theme of extremely limited visibility. Furthermore, Schwab argued that Western Digital's challenges include headwinds from retail channels due to COVID-19 related closures, an expected multi-quarter digestion period among cloud customers, the global economic contraction driving a generally uncertain demand environment as well as the risk of geopolitical trade tensions, and the challenges of being in the midst of multiple new product ramps - namely 18TB hard drives and BiCS5 112-layer flash.
Meanwhile, Summit Insights analyst Kinngai Chan also downgraded Western Digital to Hold from Buy, stating that continued gross margin pressure should be expected through the second half of 2020.
'SOLID' SECOND QUARTER RESULTS: Raymond James analyst Aaron Kessler upgraded GoDaddy (GDDY) to Strong Buy from Outperform with a price target of $96, up from $80 following the company's "solid" second quarter results, citing accelerating customer adds, accelerating traction for Websites and Marketing with 60% year-over-year growth in the second quarter and increasing uptake of its commerce tier. The analyst also noted that GoDaddy could see continued revenue and free cash flow upside given acceleration and continued strength in Domains and Business Apps.
JPMorgan analyst Sterling Auty also upgraded GoDaddy to Overweight from Neutral with a price target of $110, up from $83, following second quarter results. GoDaddy's Website + Marketing program is helping the company gain market share versus traditional HTML-coded websites, which complements the strength it is seeing in the domain business, Auty told investors in a research note. Plus, the analyst believes management is making strategic changes like the acquisition of the Neustar registry business that can help growth and margins moving forward. Auty would not be surprised to see GoDaddy enter into the payments area to "bolster the doubling in uptake" of its e-commerce offering.
