Investing.com — Here's your professional summary of Wall Street analysts' top takeaways over the past week: Updates for Best Buy , Lululemon and Collegium Pharma; Downgrade for Maxeon Solar and Medifast.
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Best Buy
What happened? On Monday, Citi twice upgraded Best Buy (NYSE to Buy with a $100 price target.
What is the full story? Citi is twice upgrading BBY stock from Sell to Buy. The research team believes the catalyst trajectory looks positive from here, with upside potential for both earnings and valuation. This is based on ongoing technology replacement cycles, new innovations in artificial intelligence driving incremental demand, and margin execution remains strong.
Last week's 1Q25 earnings report demonstrated that GM's execution remains best-in-class, with company-specific drivers able to offset external pressures, such as increased promotional activity. Simply put, that was a change of thesis from Citi's previous negative thesis. The research team recognizes the SSS risk of the second half in the face of consumer uncertainty (electoral distraction and shorter holiday calendar).
However, Citi believes it is prudent to look at the multi-year opportunity ahead as the business returns to growth and an attractive margin expansion story develops. The research team is raising its TP to $100 (from $67) based on higher EPS estimates (led by sales and margin) and a raised target multiple of 14x EPS for FY26.
Buying on Citi means “Buy (1) ETR of 15% or more or 25% or more for subprime stocks.”
How did the stock react? Best Buy opened the regular session at $85.96 and closed at $86.94, a 2.50% gain from the previous day's regular close.
Maxeon Solar Technologies
What happened? On Tuesday, Goldman Sachs twice downgraded Maxeon Solar Technologies Ltd (NASDAQ to Sell with a $1 price target.
What is the full story? Goldman Sachs revised its stance on MAXN following the company's earnings report for 4Q23 and 1Q24, released on May 30. The report showed that both gross margins and EBITDA fell short of GSe/Factset consensus expectations, leading to weaker-than-expected guidance. for 2Q24 and all of 2024. Additionally, MAXN has yet to secure the DOE loan and, in a surprising move, announced an equity investment from TZE. This investment, along with a debt restructuring plan, is expected to significantly alter MAXN's capital structure. The proposed issuance of new shares is likely to dilute value for existing shareholders, as ownership of TZE will exceed 50.1% after the transaction and almost 350 million convertible shares will become active.
The Goldman Sachs research team notes that while equity investment and debt restructuring should mitigate liquidity concerns amid challenging market conditions, greater uncertainty remains regarding future financing, including the DOE loan guarantee. Given the combination of market weakness, weak guidance, risks associated with future capacity additions and timing, as well as uncertainty and potential risk of capital structure dilution as MAXN addresses its liquidity issues, Goldman Sachs has downgraded MAXN's Buy to Sell rating. The firm has also adjusted its 12-month price target for MAXN to $1, representing a 46% drop, versus the roughly 22% rise previously projected across its coverage.
Selling at Goldman means that “a buy or sell allocation in an investment list is determined by a stock's total return potential relative to its coverage universe.”
How did the stock react? Maxeon Solar Technologies opened the regular session at $1.76 and closed at $1.75, a 5.41% drop from the previous day's regular close.
Medifast
What happened? On Wednesday, DA Davidson downgraded Medifast (NYSE to Underperform with a price target of $17.50.
What is the full story? The downgrade follows a meeting with Medifast, which led to a change in revenue projections: Sequential flattening is now expected in the first quarter of 2025 instead of the fourth quarter of 2024. As a result, estimated sales for 2025 have decreased 5% year after year. year, and projected earnings per share (EPS) have been reduced by 29%.
Medifast's advertising campaign for its GLP-1 offering, initially scheduled for June, has been delayed until July. The impact of these announcements on customer acquisition will not be revealed until November. With the stock down 64% so far this year, DA Davidson suggests the possibility of further decline. Medifast's current marketing spend (5%-6% of sales) is notably lower than its weight loss and telehealth competitors (25%-50% of sales), raising concerns about its competitive position .
An underperformance on DA Davidson means that “a loss in value of more than 15% is expected on a risk-adjusted basis over the next 12 to 18 months.”
How did the stock react? Medifast opened the regular session at $20.43 and closed at $22.02, a drop of 8.30% from the previous day's regular close.
lululemon
What happened? On Thursday, HSBC improved Lululemon Athletica Inc (NASDAQ to buy with a price target of $425.
What is the full story? HSBC analysts report that Lululemon saw a notable share rise but faced challenges after hitting an all-time high in January 2024. Doubts about the resilience of North American growth raised concerns, and the company's March guidance company failed to meet consensus expectations, a significant departure from its consistent “beat-and-rise pattern.” Consequently, the stock is down 40% year-to-date, in contrast to a more stable sporting goods sector. .
While first-quarter comparable sales in “Americas” remained stable, some of the pain was self-inflicted due to inventory shortages in various colors and sizes, particularly in women's products. However, global comparable sales increased 7%, driven by strong performance in mainland China and other international markets. Although America still accounts for 73% of group sales, the increase in international sales suggests a potential scenario in which international revenues reach half of the group's business.
Despite limited earnings revisions, the recent compression in multiples has led to what analysts consider an overly punished stock.
How did the stock react? Lululemon opened the regular session at $337.23 and closed at $323.03, a 4.91% gain from the previous day's regular close.
Pharmacy faculty
What happened? On Friday, Jefferies updated pharmaceutical college Inc (NASDAQ to buy with a price target of $44.
What is the full story? Jefferies has expressed a more optimistic view on COLL, which is currently trading at just 4 times EBITDA following the departure of the CEO. The company believes the risk/reward ratio is tilted to the upside. This optimistic view is driven by several factors. First, Jefferies notes that Q2 trends appear strong and consensus EBITDA is likely too low. Secondly, the company believes that the benefits of LOEs (base case) are underestimated.
Additionally, Jefferies highlights the significant cash generation expected through 2028, predicting net cash will eclipse market cap at F28. As a result of these factors, the company has upgraded COLL to Buy with a price target of $44. This target is based on an equal weighting of 5xC25 adjusted EBITDA and a DCF analysis. Despite recent leadership changes, Jefferies sees potential for growth and profitability in COLL's future.
Buy at Jefferies means “Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more over a 12-month period.”
How did the stock react? Collegium Pharma opened the regular session at $32.62 and closed at $33.19, a gain of 5.84% from the previous day's regular close.
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