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 August 12-16.

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Top 5 Buy Calls:

1. Piper Sandler upgrades Starbucks to Overweight following CEO news

Piper Sandler upgraded Starbucks (SBUX) to Overweight from Neutral with a price target of $103, up from $85, following the news that the company has hired Brian Niccol as CEO. The firm thinks “it is hard to overstate what a big deal this is” and will likely prove to be for the stock over time, and as such, would be a buyer of Starbucks. At the end of the day, the firm’s view “is and has been that there is nothing structurally wrong with the U.S. business, such that it can’t be fixed.” In addition to some operational issues which could stand to improve, Piper believes it has been clear for some time that the stock is clearly suffering from a “faith in management” issue with the investment community. With the appointment of Brian Niccol as CEO that faith in management issue has just been resolved in a very definitive way, the firm argues.

Baird upgrades Starbucks on favorable risk/reward under new CEO

Baird also upgraded Starbucks to Outperform from Neutral with a price target of $110, up from $81. The firm sees a more favorable risk/reward on Starbucks shares following the hiring of Brian Niccol as CEO. Baird acknowledges near-term risks related to the external operating environment, but believes Niccol brings “a skill set that will prove valuable in strengthening internal operating fundamentals for the company.” The stage is set for healthier growth in the years ahead, and sentiment on the shares will remain positive even if Starbucks’ operating results are lackluster for the next few quarters, the firm tells investors in a research note.

Stifel upgrades Starbucks to Buy, raises target to $110

Meanwhile, Stifel upgraded Starbucks to Buy from Hold with a price target of $110, up from $80, following the appointment of Brian Niccol as Chairman and CEO. Starbucks remains a “healthy and relevant brand” across most generational cohorts, but it lacks a coherent growth strategy and struggles with execution, the firm tells investors in a research note. Stifel assumes Niccol’s top priority will be reversing the negative U.S. transaction trend. Many of the company’s current objectives to accomplish that feat, including improving throughput, product innovation, and digital marketing, may remain the same, but prioritization and execution should be much better under the new leadership, contends Stifel. It expects the shares to remain supported by positive sentiment over the next few quarters, even if near-term results fall short of Street estimates.

TD upgrades Starbucks to Buy on “hall of fame” CEO hire

TD Cowen upgraded Starbucks to Buy from Hold with a price target of $105, up from $81. The firm has “increased conviction” in the company’s U.S. around following the hiring of Chipotle’s (CMG) Brian Niccol as CEO. Starbucks picked up a “hall of fame restaurant CEO,” and his appointment “suggests a new era is underway,” TD tells investors in a research note. The firm sees similarities between Chipotle’s 2018 turnaround for a premium brand, and what Starbucks needs in 2024 to improve traffic.

Deutsche Bank upgrades Starbucks to Buy from Hold

Deutsche Bank also upgraded Starbucks to Buy from Hold with a price target of $118, up from $85. The news of Brian Niccol being appointed as CEO increases conviction in the success of a turnaround and return to a “healthier growth story,” the firm tells investors in a research note. Deutsche says this is a “home run hire” for Starbucks as Niccol is a revered CEO with a proven track record of success in restaurants. It believes Niccol’s strengths in operations, marketing and innovation, and experiences at both Chipotle and Taco Bell, which are culture-forward, young brands with strong value propositions, are particularly valuable as Starbucks transitions its strategy to broaden its marketing appeal, improve operations, reinvigorate culture and enhance value messaging. Deutsche thinks Starbucks’ weak fundamentals will be largely overlooked in the near-term as investors give Niccol time to develop a long-term strategy to reaccelerate growth and unlock value creation.

Starbucks upgraded at Evercore ISI on increased chance of U.S. turnaround

Evercore ISI upgraded Starbucks to Outperform from In Line with a price target of $120, up from $80. The firm sees an increased probability of a U.S. brand turnaround with the hiring of Brian Niccol as Chairman and CEO, and ultimately sees 3-year earnings growth of 15%-plus as possible, based largely on a traffic-led same-store sales recovery in the U.S. Niccol’s hiring can mark the beginning of the company moving from Founder-led to Founder-inspired, which will help the company strengthen its management bench, Evercore argues.

2. Chipotle upgraded to Outperform from Neutral at Wedbush

Wedbush upgraded Chipotle to Outperform from Neutral with a price target of $58, up from $54. The firm notes the company has announced that Brian Niccol, Chairman and CEO, has accepted the role of Chairman and CEO of Starbucks. He will leave the company effective August 31, and will join Starbucks on September 9. Scott Boatwright, currently Chipotle’s COO, will serve as interim CEO. Jack Hartung, who recently announced his retirement as Chipotle’s CFO, has agreed to stay with the organization indefinitely and will assume the role of President of Strategy, Finance, and Supply Chain. Wedbush credits both leaders with Chipotle’s turnaround in addition to Brian Niccol, and believes the company is both in a good place and in good hands. Further, the firm continues to believe Chipotle can sustain market share gains in a more challenging macro backdrop for restaurants.

3. Brinker upgraded to Overweight from Sector Weight at KeyBanc

KeyBanc upgraded Brinker (EAT) to Overweight from Sector Weight with a $72 price target. The 11% selloff in the shares post the earnings report presents a compelling entry point even as estimates are reset lower, the firm tells investors in a research note. KeyBanc believes Brinker’s fiscal Q4 results are “misunderstood” and that the company deserves credit for the level of same-store sales and traffic outperformance it achieved. While the decision to reinvest some of its growth upside will weigh on fiscal 2025 earnings, Brinker is making the right choices for the long-term viability of the business, contends the firm.

4. Deutsche upgrades Robinhood on “exceptionally attractive” growth potential

Deutsche Bank upgraded Robinhood (HOOD) to Buy from Hold with a price target of $24, up from $21. Within the brokers, asset managers and exchanges group, near- and long-term upside is best for the e-brokers, the firm tells investors in a research note. As a part of a mid-Q3 outlook for the sector, Deutsche upgraded Robinhood to Buy. The company’s growth potential is “exceptionally attractive,” the firm tells investors in a research note. Deutsche sees strong long-term earnings growth potential for Robinhood, supported by solid growth in transaction revenue and good cost control across a more diversified business base. The firm also sees Robinhood’s future revenue being less dependent on cryptocurrency, assuming good continued core customer growth in usage of equities, options, and general investing, along with related cash and lending products. All in, Deutsche sees an attractive risk/return profile for the stock.

Robinhood upgraded to Overweight from Neutral at Piper Sandler

Piper Sandler also upgraded Robinhood to Overweight from Neutral with a price target of $23, up from $20. The shares have fallen 27% since reaching a 52-week high of $24.36 on July 16 and this pullback presents an attractive entry point “into an innovative, fast growing brokerage platform,” the firm tells investors in a research note. In the near term, Piper expects Robinhood’s net interest income headwinds from future rate cuts to be largely offset by the second order effects of increased trading activity and margin loan growth. It also expects Robinhood to benefit from the launch of a new web-based trading platform and the rollout of index options and futures trading later this year.

5. Deutsche upgrades Eli Lilly to Buy on high growth outlook

Deutsche Bank upgraded Eli Lilly (LLY) to Buy from Hold with a price target of $1,025, up from $725. The firm says the company’s “big beat and raise” in Q2 “settled some nerves in a volatile macro backdrop.” Deutsche sees Lilly shares outperforming for its “high growth outlook and low beta.” Aside from Novo Nordisk (NVO), there are no alternatives within pharma that is projected to have annual low-double-digit revenue into the 2030s, the firm investors in a research note. Deutsche says the “step change increase” in Mounjaro’s outside the U.S. sales caught it by surprise, creating a new large revenue base to help drive and sustain outsized growth.

Top 5 Sell Calls:

1. Kraft Heinz initiated with a Sell at Goldman Sachs

Goldman Sachs initiated coverage of Kraft Heinz (KHC) with a Sell rating and $34 price target, implying 3% downside. The firm initiated coverage of the packaged food sector with a “selectively constructive view.” While Goldman sees the potential in Kraft Heinz’s turnaround efforts, it believes the path of improvement “will likely be choppier and longer than current consensus expectations” given the company’s elevated exposure to private label risk while brand positioning is mixed.

2. Hershey cut to Hold at Argus on Q2 miss, rising costs

Argus downgraded Hershey (HSY) to Hold from Buy. The firm cites the company’s recent Q2 earnings and revenue miss, with the management indicating that it continues to see customers seek value options and reduce the number of trips to the store. Given the changing consumer behaviors in an inflationary environment, along with high cocoa and sugar prices raising input costs, a neutral stance is appropriate, Argus tells investors in a research note.

3. Wells starts Gartner at Underweight on moderating growth

Wells Fargo initiated coverage of Gartner (IT) with an Underweight rating and $435 price target. While the company remains well positioned to capture a sizable total addressable market, with moderating growth and consensus estimates already reflect a recovery, there is more share upside elsewhere, the firm tells investors in a research note. Wells is concerned that Gartner is seeing moderation across several key metrics including client wins, sales force productivity, and wallet retention. The firm is modeling a reacceleration in revenue next year, but not as high as consensus or Gartner’s 10%-plus medium-term target.

4. Wells starts Cintas at Underweight on premium to peer Rollins

Wells Fargo initiated coverage of Cintas (CTAS) with an Underweight rating and $735 price target. The company is the industry leader in uniform rental and facility services is a “best-in-class operator,” the firm tells investors in a research note. However, Wells says Cintas now trades at a slight premium to fellow best-in-class operator from the pest control industry, Rollins (ROL), which it has never done historically. Rollins’ business has proven to be more recession-proof, adds the firm.

5. Truist double downgrades Pacira on imminent generic Exparel launch

Truist double downgraded Pacira BioSciences (PCRX) to Sell from Buy with a price target of $8, down from $30. A generic Exparel launch is imminent within the next 12 months, which led Truist to cut 2025 sales estimates by 37% on Pacira’s lead asset, the firm tells investors in a research note. Truist thinks a court win on appeal to the recent patent ruling is unlikely. It also believes Pacira will face investor concerns regarding credibility and can’t rule out a potential scenario of restructuring and a strategy shift.