By Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Southern Co .
What happened? On Monday, Mizuho downgraded Southern Company (NYSE:SO) to Neutral with a $90 price target.
*TLDR: Mizuho sees limited catalysts for further outperformance despite a 21% P/E premium. Strong load growth and robust capital plan should support SO’s 5-7% EPS growth rate and maintain a strong balance sheet through 2026.
What’s the full story? Mizuho downgraded Southern Company to Neutral, after previously upgrading it in April 2023 when shares were trading at a 4% P/E premium to the group. The firm initially argued that shares could re-rate to a double-digit premium as Vogtle Unit 4 neared completion. However, with shares now trading at a 21% P/E premium to the electric utility group, Mizuho sees few catalysts for further outperformance.
Despite moving to the sidelines on SO, Mizuho believes that strong load growth in SO’s service territory, driven by data center demand and reshoring of manufacturing, should make the company’s 5-7% EPS growth rate more durable. The firm also believes that management can maintain a robust capital plan, a strong balance sheet with 17% FFO/Debt, and minimal equity needs of $350 million per year through 2026.
Neutral at Mizuho means “The stock’s total return is expected to perform in line with the unweighted, expected total return of the analyst’s industry coverage universe over the next 12 months. “
Shopify
What happened? On Tuesday, Redburn-Atlantic upgraded Shopify (NYSE:SHOP) to Buy with a $99 price target
*TLDR: Redburn-Atlantic highlights Shopify’s innovation, social media integrations, and Shop Pay as key growth factors. The firm is forecasting 29% revenue CAGR and 40% EBIT margin by 2026.
What’s the full story? Redburn-Atlantic highlights Shopify’s industry-leading innovation, social media integrations, user-friendly platform, and unique Shop Pay button functionality as key factors positioning it to capitalize on structural growth. The firm’s extensive ecosystem and platform capabilities have cemented Shopify as the ecommerce provider of choice for merchants of all sizes, with significant enterprise merchant wins anticipated in 2025.
Redburn-Atlantic upgrades its recommendation on Shopify to Buy, citing the company’s multi-faceted moat characterized by scale, high switching costs, and an impenetrable three-sided network. The firm forecasts a 29% net revenue CAGR from 2023-26 and a 40% EBIT margin by 2026, resulting in projections 24% above 2026 EBIT consensus. The price target is set at $99, based on above-consensus earnings and a fair multiple in line with peers in the internet, fintech, and software sectors.
Buy at Redburn-Atlantic means “Redburn Atlantic argues that the stock price will rise by at least 15% over one year. For high beta stocks the hurdle rate may be commensurately higher. “
Resmed
What happened? On Wednesday, Wolfe Research downgraded ResMed Inc (NYSE:RMD) to Underperform with a $180 price target.
*TLDR: Wolfe rates RMD Underperform with a $180 target, citing disruption risks from Lilly’s GLP-1 medication. Analysts see 10% upside and 30%-40% downside risk, projecting mid-single digit growth.
What’s the full story? Wolfe analysts rate RMD shares as Underperform with a $180 target price, applying a 20x P/E multiple to NTM EPS of roughly $9. This lower multiple reflects anticipated disruption risks to RMD’s business in 2025-2026 due to Lilly’s potential launch of an obstructive sleep apnea indication for its GLP-1 medication tirzepatide. Wolfe’s total addressable market analysis suggests a 15%-25% long-term impact on the CPAP opportunity, leading to a sustainable growth rate more likely in the mid-single digits rather than high-single digits.
The analysts present two comparison sets: HSD med tech growers with a 25x-27.5x P/E and MSD med tech growers with a 15x-20x P/E. They believe RMD’s growth expectations align more with the upper end of the MSD range. A doctor survey projects a negative 6% impact on CPAP prescription volumes, framing the potential shift from HSD to MSD growth. Wolfe sees a 10% upside potential with a 30%-40% downside risk over the next 12-24 months.
Underperform at Wolfe means “The security is projected to underperform analyst’s industry coverage universe over the next 12 months.”
DoorDash
What happened? On Thursday, BTIG upgraded DoorDash Inc (NASDAQ:DASH) to Buy with a $155 price target.
*TLDR: BTIG raises estimates for DASH due to near-term strength and long-term growth drivers. Positive EBIT and net income expected in 2H; rideshare-delivery sector shows secular growth.
What’s the full story? BTIG has been closely monitoring DoorDash due to a positive category bias, strong execution, and upward pressure on estimates. The analyst highlights three key reasons for raising estimates: ongoing near-term strength and under-appreciated long-term drivers, important milestones with positive EBIT and net income expected in the second half, and the rideshare-delivery sector being a rare area of secular growth in consumer-facing Internet.
The analyst emphasizes the desire to increase exposure to DASH relative to more mature categories like eTravel, online dating, and real estate services. BTIG sees significant potential in DASH’s continued growth and milestones, positioning it as a compelling investment opportunity.
Buy at BTIG means “A security which is expected to produce a positive total return of 15% or greater over the 12 months following the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return. “
What happened? On Friday, B. Riley initiated coverage on Reddit (NYSE:RDDT) at Buy with a $75 price target.
*TLDR: B. Riley sees Reddit’s unique platform and early monetization phase driving growth. Attractive risk/reward profile at 31x 2025 EBITDA, with potential for significant leverage.
What’s the full story? B. Riley highlights Reddit’s unique value proposition to users, advertisers, and content licensees through its platform, which supports tens of millions of users across over 100,000 communities. This creates a vast and growing repository of curated content. The broker believes Reddit is in the early stages of monetizing its platform through advertising and data licensing, positioning it for healthy top-line growth and margin gains in the coming years.
At approximately 31x 2025 estimated EBITDA, B. Riley finds the risk/reward profile attractive, given the prospects for above-industry growth and significant leverage over the next several years. The broker sees Reddit’s potential for continued expansion and profitability as a compelling investment opportunity
Buy at B. Riley means “We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation.”
