Investing.com — Here’s your expert recap of the top views from Wall Street analysts over the past week.
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arm Holdings – Monday
What happened? On Monday, HSBC downgraded Arm Holdings (NASDAQ: ) to “reduce” with a price target of $105.
Summary: HSBC is cautious about the AI PC narrative. Weakness in smartphones could weigh on profits. A 10% free float level may provide downside protection for the stock price.
What’s the full story? HSBC lowered its FY25/FY26 earnings per share forecast by 3% and 2% respectively due to the lack of smartphone replenishment momentum and the weak narrative of artificial intelligence PC CPUs. The research team found it difficult to justify further re-ratings beyond the new $105 price target.
They have pushed back valuations to fiscal 2026 expectations, lowering their expected fiscal 2026 earnings per share of $2.06 to 51 times (lower than 63 times) target price-to-earnings ratio. This target price implies a 29.5% downside, causing the stock’s rating to be downgraded from “hold” to “underweight.” However, the research team also acknowledged that there is potential downside protection for the stock price due to limited liquidity, with free float of only 10%.
Finally, the bank noted that despite higher royalties, the narrative for AI PCs was not as positive as previously expected, and uncertainty around smartphones posed potential short-term risks to earnings.
HSBC’s “underweight” means “when the target price is more than 20% higher than the current share price, the stock will be classified as a buy; when the price is 5% to 20% higher than the current share price, the stock may be classified as a buy. Classified as a buy or hold; When the stock price is between 5% and 5% below the current stock price, the stock will be classified as a hold; When the stock price is between 5% and 20% below the current stock price, the stock will be classified as a hold. The stock may be classified as Hold or Underweight; when the stock price falls by more than 20% from the current stock price, the stock will be classified as Underweight.
How have stocks reacted? Arm Holdings’ regular trading opened at $146.58 and closed at $141.48, down 4.84% from the previous trading day’s regular closing price.
Confirm holding – Tuesday
What happened? On Tuesday, Bank of America upgraded Affirm Holdings Inc (NASDAQ: ) to a buy rating with a $36 price target.
Summary: Managing financial goals is achievable. Partnership expansion and credit risk management are progressing well.
What’s the full story? Bernstein SocGen upgraded Affirm on the grounds that GAAP profitability may be closer than consensus expectations. The research team maintained their estimates and price targets, pointing to fourth-quarter print and guidance as positive catalysts. They also believe the fiscal 2025 forecast is achievable. Additionally, the lower interest rate regime is expected to support revenue less transaction costs (RLTC), which is considered the most important profit and loss metric.
Analysts are optimistic about new and expanded partnerships, especially with Apple (NASDAQ: ), and stress that credit risk remains well-controlled. This optimistic outlook is based on the belief that these factors combine to make Affirm Holdings’ financial trajectory promising.
Buy at BofA means “Buy stocks that are expected to have a total return of at least 10% and are the most attractive stocks within coverage.”
How have stocks reacted? Affirm’s regular trading day opened at $28.38 and closed at $27.45, an increase of 2.31% from the previous day’s regular closing price.
PayPal – Wednesday
What happened? On Wednesday, Bernstein SocGen raised PayPal (NASDAQ: ) to outperform with a $64 price target.
Summary: Bernstein upgraded PayPal for the first time in three years. Valuations are attractive and management has been executing.
What’s the full story? Bernstein SocGen’s research team is upgrading PayPal to “outperform” status, its first upgrade in nearly three years. Their decision was based on several positive factors.
First, PayPal’s transaction gross profit performance improved, driven by the growth of its brand services, Braintree pricing initiatives, and the successful monetization of Venmo.
Second, even amid competitive pressures, the company’s product momentum and overall execution are expected to maintain modest single-digit gross profit growth under a new management team.
In addition, PayPal’s strategic choices in e-commerce and digital commerce, as well as its attractive valuation (2025 P/E of 14 times), make it an attractive investment opportunity.
Bernstein SocGen’s outperformance means “the stock would lag the underlying index by more than 10 percentage points.”
How have stocks reacted? PayPal’s regular trading day opened at $64.96 and closed at $65.87, an increase of 3% from the previous trading day’s regular closing price.
Etsy – Thursday
What happened? On Thursday, Oppenheimer downgraded Essie Corporation (NASDAQ: ) has no price target at time of execution.
Summary: Recent strength/outperformance has limited upside to valuations. Investments in cost-saving programs may dampen short-term financial conditions.
What’s the full story? The downgrade follows recent strength. While Etsy reported second-quarter results ahead of schedule due to higher adoption, weak third-quarter guidance and the removal of its full-year gross merchandise sales (GMS) outlook point to a lack of near-term visibility. Additionally, initiatives around gifts, seller assortments and focus on mobile apps are not expected to impact fiscal 2024 results.
In the long term, Oppenheimer believes Etsy has the potential to leverage large language models to enhance search and discovery, although this would require significant time and investment and could conflict with profit priorities. While Etsy may ultimately benefit from a cyclical recovery in its key categories, this is beyond management’s control.
The brokerage sees Etsy’s full valuation at 10 times estimated fiscal 2025 EBITDA, compared with 11 times for peers, noting that Etsy’s growth is 76% slower.
Perform at Oppenheimer means “the stock is expected to perform in line with the S&P 500 over the next 12-18 months.”
How have stocks reacted? Etsy’s regular trading day opened at $63.03 and closed at $60.13, down 7.86% from the previous day’s regular closing price.
Lululemon – Friday
What happened? On Friday, Goldman Sachs downgraded lululemon sport Inc (NASDAQ: ) to Neutral with a price target of $286.
Summary: Goldman Sachs takes a negative view of weak execution and innovation capabilities. The LULU brand sees further competitive pressure.
What’s the full story? Goldman Sachs previously maintained a positive outlook on Lululemon (LULU) despite slowing U.S. sales growth and apparent execution missteps in the spring. Analysts believe the company can drive sequential acceleration in the second half of the year by improving its assortment of colors, accessories and sizes and strengthening its innovation pipeline, including the launch of new fabrics for women’s leggings. Although some weaknesses were identified in a quarterly review earlier this month, analysts initially viewed trends as stable enough to maintain a constructive view on the stock.
However, Goldman Sachs is now less confident in the brand’s near-term growth prospects in the U.S. market due to weaker execution and innovation capabilities. Analysts observed limited signs of material innovation this summer and were disappointed with the rapid removal of New Breeze through the franchise, pointing to shaky near-term execution.
Additionally, LULU’s increased promotions have raised concerns that the brand is training customers to expect regular discounts. Other signs of execution lapses were evident in store inspections and more cautious brand metrics seen in proprietary HundredX survey data.
Goldman Sachs no longer expects a turning point in sales growth in the second half and believes the brand is more vulnerable to competitive pressures and macroeconomic factors.
Goldman Sachs’ neutral means “Goldman Sachs assigns stocks as buys and sells on its investment list in each region; stocks that are not so assigned are considered neutral.”
How have stocks reacted? Lululemon’s regular trading opened at $239.57 and closed at $236.00, down 5.24% from the previous trading day’s regular closing price.
