Street calls of the week: Upgrades for Crocs, Roku, BrightView Holdings
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Apple
What happened? On Monday, MoffettNathanson initiated on Apple (NASDAQ:AAPL) at Neutral with a $211 price target.
*TLDR: MoffettNathanson ponders the question of Apple’s valuation being too high and/or beyond its fair value. The firm further has concern over Apple’s AI potential noting “unclear data on acceptance in Greater China and potential regulatory challenges.”
What’s the full story? MoffettNathanson analysts question whether Apple’s valuation has overshot, noting that the stock price reflects an iPhone upgrade cycle expected to be significantly larger than the 5G cycle of 2021/22. They express skepticism about this assumption and highlight the overlooked regulatory risks associated with Apple’s contract with Google (NASDAQ:GOOGL) for the default search position. While the firm expects Apple to execute its strategy well, they believe the market has already priced in this expectation. The key question remains whether the anticipated upgrade cycle driven by Apple Intelligence will be larger or smaller than expected.
The firm also raises concerns about Apple’s future beyond AI, including the unclear data on Apple’s acceptance in Greater China and potential regulatory challenges that could impact Apple’s competitive ability. Despite a positive bias towards Apple’s AI strategy, MoffettNathanson concludes that the current valuation suggests the market has already accounted for these factors. They recommend waiting for a shake in market confidence before making further investments.
Neutral at MoffettNathanson means “Neutral recommendations are typically within 15% of fair value.”
AMD
What happened? On Tuesday, Edward Jones initiated coverage on Advanced Micro Devices (NASDAQ:AMD) at Buy without a price target. AMD was also added to Edward Jones Stock Focus List
*TLDR: Edward Jones analysts believe AMD will see significant growth due to rising demand for data-center infrastructure and the integration of Xilinx’s programmable chip products, with a potential $10 billion opportunity. The firm also highlights that the rebounding PC market, driven by AI-enabled PCs, could lead to sustained growth, which is not yet fully reflected in AMD’s current share price.
What’s the full story? Edward Jones analysts believe that AMD is poised for significant growth due to several key factors. The increasing demand for data-center infrastructure is expected to boost sales of AMD’s chips, particularly GPUs and CPUs. Additionally, the acquisition of Xilinx (NASDAQ:XLNX) has introduced new programmable chip products and expanded AMD’s market reach. The analysts suggest that AMD is still in the early stages of integrating and cross-selling Xilinx and AMD products, with management estimating this opportunity could be worth up to $10 billion.
Furthermore, the analysts highlight that the PC market, which has begun to rebound, could see sustained growth driven by AI-enabled PCs, potentially leading to a longer upgrade cycle. They assert that this optimism is not yet fully reflected in AMD’s current share price, indicating potential for further appreciation.
Buy at Edward Jones means “We believe the valuation is attractive and total return potential is above average over the next 3-5 years compared with industry peers.”
BrightView Holdings
What happened? On Wednesday, Jefferies upgraded BrightView Holdings (NYSE:BV) to Buy with a $17 price target.
*TLDR: Jefferies upgrades BV to Buy from Hold, expecting low single-digit revenue growth and record margins, driven by a new CEO’s leadership and significant progress over the past 10 months. The brokerage anticipates margins to expand from ~11% in FY23 to over 13%, supported by cost-cutting, profitable growth, and improved client and employee retention.
What’s the full story? Jefferies has upgraded BrightView from Hold to Buy, anticipating a return to low single-digit percentage revenue growth and record-breaking margins. This optimism is driven by the leadership of a new CEO with an exceptional track record, who has made significant progress at BV over the past 10 months. The brokerage expects margins to expand from approximately 11% in FY2023 to over 13%, supported by the company’s focus on cost-cutting, profitable growth, and improved client and employee retention.
The brokerage’s confidence in BV’s future performance is bolstered by the upgraded management team and the strategic initiatives implemented under the new CEO. These efforts are expected to drive both revenue growth and margin expansion, positioning BV for a strong financial performance in the coming years.
Buy at Jefferies means “Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.”
Crocs
What happened? On Thursday, Williams Trading upgraded Crocs (NASDAQ:CROX) to Buy with a $163 price target.
*TLDR: Sidney Sweeney’s role as brand ambassador will attract young consumers and boost HEYDUDE’s visibility, increasing FY24 and FY25 revenue estimates to $873 million despite guidance of an 8%-10% decrease. The analysts stress a “clean marketplace” and “data-drive allocation choices” for Crocs/HEYDUDE in order to pressure competitors such as VANS.
What’s the full story? The research team believes that Sidney Sweeney’s addition as brand ambassador/global spokesperson will attract young consumers and bring much-needed attention to the HEYDUDE brand. Williams Trading expects the agreement with Sweeney to last through at least 2025. Consequently, the research team has increased their FY24 and FY25 revenue estimates for HEYDUDE from $859.5 million to $873 million, despite guidance indicating a revenue decrease of 8% to 10% for FY24. They are confident that Crocs’ history of long-term brand marketing driving short-term positive results will begin to manifest at HEYDUDE.
The analysts emphasize the importance of maintaining a clean marketplace and implementing a pull model for both Crocs and HEYDUDE. They stress the need for sales and merchant teams to fully embrace data analytics for allocation and distribution decisions and to stop MAP holidays within core styles and silhouettes. Reviewing the spring '25 product lineup, the team notes that offerings for both brands are becoming more focused. New products like the Crocs Echo Wave Mule and Echo Surge Sneaker, along with the return of the Bae platform clog, are expected to perform well. The introduction of the Wally and Wendy Comf and updated styles from HEYDUDE show promise, provided demand is accurately planned and properly allocated. The increased focus on HEYDUDE may further pressure competitors like Vans and other canvas casual footwear brands in the near term.
Buy at Williams Trading means “The stock’s total return (price appreciation plus dividend yield) is expected to exceed more than 15% over the next 12-month investment horizon.”
Roku
What happened? On Friday, Guggenheim upgraded Roku Inc (NASDAQ:ROKU) to Buy with a $75 price target
*TLDR: Monetization is improving. Investors are likely to realize management's efforts to improve ad sales.
What’s the full story? Guggenheim expects investor enthusiasm for Roku to grow leading into the 3Q earnings in November, as the company progresses in broadening video inventory advertising sales via third-party demand-side platforms and improving home screen monetization. This progress is anticipated to bolster confidence in Roku as a unique top-line acceleration story in 2025. The brokerage’s revised rating reflects financial estimates ahead of consensus for 2024 and 2025, and an attractive relative valuation based on a 15% normalized OIBDA margin, which they believe the company will achieve through revenue growth and cost management.
Despite concerns about Roku’s slow leadership response in the connected TV marketplace and competitive pressures in advertising and CTV, Guggenheim believes that strengthened monetization and leadership execution by Roku Media President Charlie Collier and CFO Dan Jedda should bolster growth and disciplined performance over the next three to six months. This is expected to drive further investor enthusiasm and better position the company for long-term outperformance.
Buy at Guggenheim means “Describes stocks that we expect to provide a total return (price appreciation plus yield) of 10% or more within a 12-month period.”
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