Buy/Sell: Wall Street’s top 10 stock calls this week

What has Wall Street been buzzing about this week? Here are the top 5 Buy calls and the top 5 Sell calls made by Wall Street’s best analysts during the week of July 8-12.

Find all top-rated stocks by the best-rated analysts on TipRanks. 

Top 5 Buy Calls:

1. Domino’s Pizza upgraded to Outperform from Neutral at Baird

Baird upgraded Domino’s Pizza (DPZ) to Outperform from Neutral with a price target of $580, up from $530. With the shares down 7.5% from the June peak and with confidence in the fundamental outlook having risen, Baird now sees a more appealing risk/reward on the stock, the analyst tells investors. The firm is optimistic that the “Hungry for MORE” strategy can drive a multi-year stretch of “standout top-line performance,” and it believes continued evidence of strong fundamentals in upcoming quarters can help to support premium valuation metrics, allowing the stock to work higher over the next 12 months as the earnings base rises.

2. Wall Street starts coverage of Tempus AI with bullish views

JPMorgan initiated coverage of Tempus AI (TEM) with an Overweight rating and $42 price target. As a leader in the clinical oncology diagnostics space, Tempus develops and commercializes a portfolio of sequencing-based tests for the detection and management of cancer that serves a $70B total addressable market in its genomics business, the analyst tells investors in a research note.

Meanwhile, TD Cowen initiated coverage of Tempus AI with a Buy rating and $50 price target. The analyst believes Tempus is the largest oncology diagnostics company for comprehensive genomic profiling by test volumes with leading growth in a large total addressable market. The firm sees 32% annual growth over the next three years and a “scalable model” enabling free cash flow by 2026.

Tempus AI was also initiated at Morgan Stanley, BofA, Needham, and William Blair with Buy or equivalent ratings.

3. Needham upgrades Carvana to Buy on “profitable secular growth story”

Needham upgraded Carvana (CVNA) to Buy from Hold with a $160 price target, which is a high on the Street. The analyst thinks Carvana can grow unit sales and industry share by leveraging its digital-first customer experience and “under-utilized” physical footprint. After a volatile past, the Carvana is becoming a “profitable secular growth story,” with increasing retail unit sales and improving gross profit per unit metrics from leveraging a high-fixed-cost base, the analyst tells investors in a research note. The firm thinks the consensus retail unit estimate has troughed, and does not yet anticipate the approaching recovery, upside from management’s pivot to unit growth and optimizations at acquired inspection and reconditioning centers and Adesa locations, or the benefits of a stabilized balance sheet.

Later in the week, BTIG initiated coverage of Carvana with a Buy rating and $155 price target. The company trades at a premium to most e-commerce and auto-related stocks, but its vertically-integrated and in-sourced business model is “simply a better mousetrap in an enormous” total addressable market that investors shouldn’t overlook, the analyst tells investors in a research note. The firm says Carvana has already achieved “industry-leading” EBITDA margins with just 1% share of the total used car market and 6% of the smaller, “but still huge,” digital total addressable market for used cars. The company “looks to be the one in the catbird seat, able to grow share and profits simultaneously,” BTIG contends.

4. Booking Holdings upgraded to Buy at Benchmark

Benchmark upgraded Booking Holdings (BKNG) to Buy from Hold with a $4,700 price target. While the firm acknowledged its “timing may not be optimal given the rash of ongoing economic worries,” as well as some signs of anecdotal trading down in key European markets and how crowded the name is, it added that its prior rating was inconsistent with its long-term view. Increasing resilience in EMEA plus better-than-expected growth in APAC, and to a lesser extent Latin America, give the firm confidence that Booking can outperform consensus over the next 18-plus months and the firm sees no near-term derailment of the share gain story, the analyst tells investors.

5. Gilead upgraded to Outperform from Market Perform at Raymond James

Raymond James upgraded Gilead (GILD) to Outperform from Market Perform with a $93 price target. The analyst says the recent “outstanding” data from the PURPOSE-1 study of long acting lenacapavir in HIV pre-exposure prophylaxis and expected approval of seladelpar in primary biliary cholangitis later this year will drive the company’s revenue growth above current expectations. Lenacapavir PrEP and seladelpar could contribute multi-billion dollar sales growth over the next five years, the analyst tells investors.

Top 5 Sell Calls:

1. Tesla downgraded to Sell from Neutral at UBS

UBS downgraded Tesla (TSLA) to Sell from Neutral with a price target of $197, up from $147. The stock’s valuation premium has widened of late on artificial intelligence enthusiasm, the analyst tells investors. The firm says that after going through the different businesses it can more substantially value, at current levels, it is still left with an over $500B “stub” for Tesla’s future growth. Even if giving that “stub” a five-year time horizon, that implies a five-year future value of $1 trillion. And this is just to justify current share levels, investors would need to see an even larger opportunity to justify a Buy rating, contends UBS. Citing the lack of visibility and the risk that Tesla’s growth opportunities materialize on a longer time horizon, or not at all, the firm downgrades the stock to Sell following the recent share rally.

2. ServiceNow downgraded to Sell at Guggenheim

Guggenheim downgraded ServiceNow (NOW) to Sell from Neutral with a $640 price target. While the company’s Q2 report on July 24 “will be fine,” the second half of 2024 presents risk to consensus subscription estimates, which presents “material risk in the stock,” currently trading at a “rich” valuation, the analyst tells investors. The firm says that while ServiceNow seems to be expecting an uptick in generative artificial intelligence business in the the second half of 2024, its field work indicates this is not likely until 2025, “if ever.” Partner checks were generally positive for Q2, but not as positive as they usually are, added Guggenheim.

3. Spotify downgraded to Sell at Redburn Atlantic

Redburn Atlantic downgraded Spotify (SPOT) to Sell from Neutral with a $230 price target. The analyst worries that positive momentum “has carried the stock, and the forecast expectations, too far.” Spotify’s current market valuation implies 21% compound annual EBIT growth between 2026 and 2030, which overestimates the scope for pricing-driven growth and/or the subscriber opportunity in developed markets, the analyst tells investors. Redburn says this implied growth rate is twice as high as its estimates, even though it “optimistically” assumes annual price increases to Premium plans, gross margins expanding above 32% and operating costs falling to 20% of sales by 2028.

4. Olive Garden parent Darden downgraded to Underperform at Jefferies

Jefferies downgraded Darden Restaurants (DRI), the parent company of Olive Garden, LongHorn Steakhouse, and other restaurant brands, to Underperform from Hold with a price target of $124, down from $154. The analyst sees risk to the company’s near-term fundamentals, driven by share loss in a more promotional environment, low-end weakness persisting, and lesser tailwinds from pandemic capacity destruction. The firm suspects further narrowing of Darden’s traffic versus peers, and subsequent contraction in the stock’s “premium” multiple.

5. On Semiconductor cut to Underweight as Morgan Stanley shifts analog playbook

Morgan Stanley downgraded On Semiconductor (ON) to Underweight from Equal Weight with a price target of $65, down from $70. The firm continues to see analog and MCU shipments bottoming out in Q2, but with multiples expanding, estimate revisions are likely to drive returns from here and the firm is taking a more selective approach in semiconductors. The firm thinks On Semi faces top-line headwinds across auto semi, SiC, and image sensors, tempering its view on margins, the analyst tells investors.