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Wednesday, February 5, 2025

Wall Street Whispers: What Drove Markets Monday?

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Wall Street Analysts Weigh In: Planet Fitness, Petrobras, and More

Wall Street analysts are buzzing with insights into various sectors today, from fitness to energy, with several stocks catching their attention. The focus is on growth potential, valuation, and macroeconomic factors that are shaping future prospects.

Key Takeaways:

  • Planet Fitness receives a "bullish fresh pick" from Baird due to its attractive valuation and potential for growth in a slowing economy.
  • Morgan Stanley predicts strong gains for Petrobras after a difficult year, citing management changes and a focus on strategy continuity.
  • Analysts see a super cycle in play for Summit Materials, driven by tight U.S. cement supply and demand.
  • JPMorgan upgraded BJ’s to neutral, citing the company’s investment in itself and benefitting from consumers trading down.
  • Concerns remain for Amazon’s Kuiper project, potentially impacting the company’s future earnings.

Planet Fitness: A Bullish Bet in a Slowing Economy?

Baird analyst Jonathan Komp sees opportunity in Planet Fitness, even as the economic outlook appears to be slowing. Komp has maintained his outperform rating on the stock and placed a $92 price target, implying 13.5% upside from Friday’s closing price.

Komp highlighted Planet Fitness’s strong consumer value proposition and high-margin franchise model, which he believes will hold strong even in a challenging macroeconomic environment. He also cited the potential for accelerated unit growth after 2024, fueled by lower interest rates and relief from escalating building costs.

"We are highlighting PLNT as an attractive idea for a slowing growth environment," Komp remarked. "New leadership has addressed unit economic challenges, and we see multiple potential drivers – especially better marketing – lining up for 2025."

Komp acknowledged that Planet Fitness shares have trailed the S&P 500 this year, but he attributes this to the improving fundamental setup for 2025. He believes the stock looks attractive at its current valuation, with a forward enterprise value to EBITDA multiple of 17.2, which represents a 6% discount compared to other peers in the franchisee business.

Petrobras: A Turnaround Under New Management?

Morgan Stanley analyst Bruno Montanari believes Petrobras is poised for a rebound after struggling in 2024. He has upgraded the Brazilian oil giant to overweight from equal weight and raised his price target to $20 from $18, suggesting 38.9% upside from Friday’s close.

Montanari attributed the upgrade to the recent management changes, including the appointment of a new CEO in June, which has relieved some pressure on the stock. He noted that the stock is down nearly 10% year-to-date, but he believes volatility will subside as the noise surrounding the management shakeup fades.

"With management changes now behind, we believe the noise level will gradually diminish, which could remove some of the volatility component," Montanari wrote. "The message of the new CEO and CFO in recent conference calls and meetings leads us to believe in strategy continuity, with the coexistence of a responsible increase in investments and dividend distribution, as long as there is spare cash availability."

However, it is important to note that recent executive changes can sometimes lead to shifts in strategy, which could impact the future direction of the company. Investors will be watching closely to see how the new CEO navigates the evolving energy landscape.

Summit Materials: Riding the Super Cycle Wave

Morgan Stanley analyst Angel Castillo sees a "super cycle" in play for Summit Materials, which he believes will lead to significant gains for the building material producer. Castillo has initiated coverage of the company with an overweight rating and assigned a $51 price target, implying 26.4% upside from Friday’s close.

Castillo cited tight US cement supply and demand as a key driver of the super cycle, along with Summit’s vertically integrated business model, exposure to the resurgent housing market, and strong pricing power. He acknowledged that the super cycle will be a multi-year phenomenon, but he expects fractionally lower demand for 2023 to 2024 before the cycle takes full effect.

"We see attractive risk/reward on the back of tight US Cement S & D, vertically integrated business model, exposure to troughing residential market, inorganic growth opportunity, and strong industry pricing," Castillo wrote.

While Castillo’s analysis suggests a bright outlook for Summit Materials, it is important to remember that the super cycle’s timing and duration can fluctuate based on various macroeconomic factors, such as interest rate changes, inflation, and global economic conditions. Investors will need to closely monitor these variables to assess the sustainability of the super cycle.

BJ’s Wholesale Club: From Underweight to Neutral

JPMorgan analyst Christopher Horvers has upgraded BJ’s Wholesale Club to neutral from underweight, taking a more optimistic stance on the company’s future. He also raised his price target to $78, which still represents 5.8% downside from Friday’s closing price.

Horvers acknowledged that the downgrade from 2022 was based on an anticipated long period of disinflation, which would have hurt BJ’s. However, he now sees a modest reflationary environment emerging, benefiting the company’s grocery business and its overall investment in itself. He also highlighted the growing trend of consumers trading down in a value-seeking environment, which is driving sales for BJ’s.

"Looking ahead, we expect modest reflation in grocery while the company is benefitting from its efforts to drive share by reinvesting in the business," Horvers wrote. "We are squarely at the point where the channel is seeing a lift from trade down in a hyper-value seeking consumer environment."

Despite his upgraded outlook, Horvers cautioned that BJ’s is likely to see flat or down earnings for the third consecutive year. He also noted that the company’s fiscal year 2024 guidance could be conservative.

Amazon: Kuiper Project Raises Concerns

Wells Fargo analyst Ken Gawrelski has lowered his price target on Amazon by $7 to $225, citing concerns about the company’s Kuiper satellite internet project. Despite the lower target, Gawrelski maintained his overweight rating on the stock.

Gawrelski’s move reflects the significant upfront costs associated with Kuiper, which is expected to launch commercially by the end of 2025. He also reduced his outlook for operating income between 2025 and 2027 by around 3%, suggesting that the project could impact the company’s profitability in the coming years.

"Upon further inspection, see the potential for an attractive longer term business, but question synergy with the other core businesses at Amazon," Gawrelski wrote to clients. "As such, we believe the market would value additional clarity on the strategic rationale for the project."

Gawrelski’s concerns highlight the growing uncertainty surrounding Amazon’s new venture. Investors will be watching closely to see how the Kuiper project unfolds and its potential impact on the company’s overall growth trajectory.

Conclusion

The analyst calls and chatter from Wall Street offer a glimpse into the evolving landscape of the stock market. From the potential for a resurgence in the energy sector to the continued uncertainty surrounding the tech industry, these insights provide valuable information for investors seeking to make informed decisions.

Article Reference

Sarah Thompson
Sarah Thompson
Sarah Thompson is a seasoned journalist with over a decade of experience in breaking news and current affairs.

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