Wall Street’s Biggest Calls: Boeing Downgraded, Banks Upgraded, and More
The stock market saw a flurry of activity on Tuesday, with analysts issuing a range of upgrades and downgrades across various sectors. From aerospace to finance and technology, Wall Street’s analysts are taking a close look at the market and making their predictions for the future. Some companies saw their stock prices rise on the back of positive ratings, while others faced downward pressure due to concerns about their growth prospects.
Key Takeaways:
- Boeing (BA) was downgraded to "underweight" by Wells Fargo due to concerns about the company’s ability to generate cash flow.
- Multiple banks saw upgrades: Deutsche Bank upgraded both Bank of America (BAC) and Wells Fargo (WFC) to "buy," while JPMorgan (JPM) was downgraded to "hold."
- Southwest Airlines (LUV) was upgraded by Evercore ISI on the back of positive catalysts, such as capacity discipline and new revenue initiatives.
- Simon Property Group (SPG) was downgraded by Piper Sandler due to concerns about slowing earnings growth for the mall operator.
- M&T Bank (MTB) received an upgrade from JPMorgan, who cited the regional bank’s ability to benefit from lower interest rates.
- International Flavors & Fragrances (IFF) was upgraded by Mizuho, who believes the company is well-positioned in the short-cycle specialty chemicals market.
- Deutsche Bank (DBK) was upgraded by Barclays, who sees significant upside potential for the German banking giant.
- Unity Software (U) was upgraded by Morgan Stanley, who believes the company’s growth expectations are now "derisked."
- Coca-Cola Femsa (KOF) received an upgrade from Goldman Sachs, who cited the company’s strong market position in Mexico.
- NetApp (NTAP) was upgraded by Loop Capital on the back of its bullish outlook for the data infrastructure company.
A Deeper Dive into the Key Calls
Boeing’s Cash Flow Concerns: Wells Fargo’s downgrade of Boeing to "underweight" was driven by concerns about the company’s ability to generate cash flow. "We think BA had a generational FCF opportunity this decade, driven by ramping production on mature aircraft and low investment need," said the analysts at Wells Fargo. However, they now believe that Boeing’s production delays and added costs will lead to slower growth in cash flow, capped by a new aircraft investment cycle.
Shifting Bank Dynamics: Deutsche Bank’s view on the banking sector is shifting, with the firm highlighting opportunities within the coverage group. The firm downgraded JPMorgan citing "less upside" while upgrading both Bank of America and Wells Fargo on their perceived greater potential. This shifting sentiment comes amidst evolving market conditions and the bank group’s current position as "somewhat in no man’s land."
Southwest Airlines’ Positive Catalysts: Evercore ISI’s upgrade of Southwest Airlines to "outperform" reflects optimism about several positive catalysts for the airline. This includes the company’s anticipated shift to capacity discipline, new revenue initiatives outlined at an upcoming investor day, and the strong underlying value of the airline’s fleet.
Simon Property Group’s Slowing Growth: Piper Sandler’s downgrade of Simon Property Group is driven by concerns about the mall operator’s slowing earnings growth. "Our rating change is based on anticipated slower earnings growth for SPG versus shopping centers over the next 2 years," analysts stated. This marks the first time Piper Sandler has downgraded the company since late 2009.
M&T Bank’s Interest Rate Benefit: JPMorgan’s upgrade of M&T Bank reflects the firm’s belief that the regional bank is well-positioned to benefit from declining interest rates. "We’ve not seen an opportunity such as this one (with the peer group poised to continue to re-rate higher and MTB shares further poised to also regain their historical wide relative premium over and above a revaluing peer group)," said the analysts.
International Flavors & Fragrances’ Short-Cycle Advantage: Mizuho’s upgrade of International Flavors & Fragrances reflects the firm’s belief that the flavors and fragrance company is a strong player in the short-cycle specialty chemicals market.
Deutsche Bank’s Upside Potential: Barclays’ upgraded rating of Deutsche Bank is based on the firm’s belief in the German banking giant’s underlying fundamentals and significant upside risk to consensus forecasts.
Unity Software’s Growth Derisking: Morgan Stanley’s upgrade of Unity Software reflects a shift in the firm’s perspective on the company’s growth potential. "Growth Expectations for U Now Look Derisked, With Clear Potential Upside Drivers Ahead," stated analysts.
Coca-Cola Femsa’s Strong Position: Goldman Sachs’ upgrade of Coca-Cola Femsa highlights the Mexican beverage company’s strong market position and stable demand for soft drinks in the country.
NetApp’s Bullish Outlook: Loop Capital’s upgrade of NetApp is driven by the firm’s bullish outlook for the data infrastructure company, calling it a stock they’ve been chasing for over a year.
Other Notable Calls
Beyond the major calls, several other analysts shared their insights on various companies.
- Autodesk (ADSK): HSBC upgraded the software company following strong Q2FY25 earnings.
- Apple (AAPL): Bernstein reiterated its "outperform" rating, citing the upcoming iPhone event with the unveiling of the iPhone 16.
- Lockheed Martin (LMT): Melius upgraded the defense company, citing its strong international exposure and favorable position in Europe’s defense recapitalization.
- Ferrari (RACE): Bernstein reiterated its "outperform" rating, citing the luxury car company’s strong market position.
- Forge Global Holdings (FRGE): UBS upgraded the investment company, citing a "path to profitability."
- Allegro Microsystems (ALGM): UBS initiated coverage of the auto semis supplier with a "buy" rating.
- Fair Isaac (FICO): Oppenheimer initiated coverage of the provider of credit scores with an "outperform" rating.
- Nvidia (NVDA) & Broadcom (AVGO): Cantor Fitzgerald reiterated its "overweight" rating for both semiconductor companies.
- IBM (IBM) & Conagra (CAG): Goldman Sachs added both stocks to its conviction buy list.
- Amazon (AMZN), Meta (META), & Uber (UBER): JPMorgan reiterated its "best ideas" status for all three companies.
- Joby Aviation (JOBY): H.C. Wainwright initiated coverage of the electric aviation company with a "buy" rating.
- Ero Copper (ERO): Bank of America initiated coverage of the Brazilian copper company with a "buy" rating.
- HA Sustainable Infrastructure Capital (HASI): RBC initiated coverage of the climate investment solutions company with an "outperform" rating.
- Novartis (NVS): Jefferies downgraded the pharma company, citing delays in the pipeline launches.
This wave of analyst calls demonstrates the dynamic nature of the market and the constant flow of information that shapes investor sentiment. While these calls represent individual analysts’ perspectives, they often serve as valuable indicators of evolving market trends and company-specific developments. Investors should always carefully consider their own investment strategies and conduct thorough research before making any decisions based on analysts’ calls.
