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 April 29 – May 3.

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Top 5 Buy Calls:

1. Apple upgraded to Outperform at Bernstein ahead of earnings

On April 29, Bernstein upgraded Apple (AAPL) to Outperform from Market Perform with an unchanged price target of $195. The shares have de-rated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired, the firm told investors in a research note. However, Bernstein believes prevailing weakness in China is more cyclical than structural, and notes that historically Apple’s China business has exhibited much higher volatility than Apple overall, given its “very feature-sensitive installed base.” The firm thinks replacement cycle tailwinds and incremental generative artificial intelligence features set up Apple well for a strong iPhone 16 cycle. Tactically, expectations are low entering the company’s fiscal Q2 results, it adds. Bernstein tells investors to “buy the fear.”

2. Tesla initiated with an Overweight at Cantor Fitzgerald

Cantor Fitzgerald initiated coverage of Tesla (TSLA) with an Overweight rating and $230 price target. Tesla benefits from future upside from its Full Self-Driving software, the introduction of lower-priced models, a global manufacturing footprint with economies of scale, and the industry’s largest Charging Infrastructure, the firm tells investors in a research note. Shares are down 28% year to date, and this is a good entry point for investors who are comfortable taking on volatility, Cantor says.

3. Shopify upgraded to Buy at Citi

Citi upgraded Shopify (SHOP) to Buy from Neutral with a price target of $105, up from $93. The firm has confidence in Shopify’s near-term results following a recent round of conference visits and channel checks, which highlight a more resilient e-commerce backdrop and accelerated share gains up market. Citi’s analysis into the company’s Merchant Solutions business gives it confidence in Shopify’s long-term growth as take-rate expansion accelerates in 2025, fueled by new product and feature adoption “going mainstream.” The shares are trading at a discount on growth-adjusted valuation versus its large cap peers, which creates an attractive entry point, the firm tells investors in a research note.

4. Dollar Tree upgraded to Overweight at KeyBanc

KeyBanc upgraded Dollar Tree (DLTR) to Overweight from Sector Weight with a $150 price target. The firm expects the company’s fundamentals to accelerate into the second half of 2024. Meanwhile, Family Dollar “is at a critical fork in the road,” with a turnaround or divestiture necessary over the next few years, KeyBanc tells investors in a research note. The firm sees the rationalization of stores in the sector benefiting Dollar Tree’s comps and profitability, and headwinds from Inflation, shrink, and the Supplemental Nutrition Assistance Program moderating.

5. Carvana upgraded to Overweight at JPMorgan after earnings

JPMorgan upgraded Carvana (CVNA) to Overweight from Neutral with a price target of $130, up from $70, following the Q1 beat. The company reported another strong print with above seasonal unit growth and further improvement in unit economics, the firm tells investors in a research note. JPMorgan says Carvana’s “rapid progress” on margin expansion and overall EBITDA, combined with existing cash on the balance sheet, “should put to rest any lingering concerns around optionality to reduce debt/interest burden over time.” The thesis and debate have shifted towards Carvana’s ability to continue at this pace of throughput expansion while expanding margins along the way, says the firm. It thinks the company has “significant wiggle room to add some slack to its operations” to drive accelerated growth and demonstrate leverage on fixed costs.

Top 5 Sell Calls:

1. Meta Platforms initiated with an Underperform at Exane BNP Paribas

Exane BNP Paribas initiated coverage of Meta Platforms (META) with an Underperform rating and $360 price target. The company’s artificial intelligence spending is set to spike without new revenue streams to match, the firm tells investors in a research note. Exane BNP Paribas prefers Meta’s generative AI peers that it believes have a clearer path to monetization.

2. Tesla downgraded to Reduce at Phillip Securities

Phillip Securities downgraded Tesla to Reduce from Neutral with a price target of $145, down from $175. The company’s Q1 results were below expectations due to slower vehicle deliveries and pricing pressures, the firm tells investors in a research note. Phillip Securities cut Tesla’s fiscal 2024 revenue and EBITDA estimates by 6% and 19%, respectively, to reflect lower unit growth and margin headwinds. Phillip says electric vehicle industry growth is under pressure from prioritization of hybrids, with Tesla losing market share to traditional car makers.

3. IBM initiated with an Underperform at Exane BNP Paribas

Exane BNP Paribas initiated coverage of IBM (IBM) with an Underperform rating and $145 price target. The firm told investors in a research note that it believes spend intentions are deteriorating for IBM and for containers.

4. Fastly double downgraded to Underperform at BofA

BofA downgraded Fastly (FSLY) to Underperform from Buy with a price target of $8, down from $18, as it argues that near-term risks outweigh the longer-term positive catalysts it sees. Decelerating growth in Fastly’s largest customers, share loss in delivery and limited visibility in the second half cause BofA to question a rebound in 2024 and the firm sees Fastly’s positioning in the edge compute market as a 2025 opportunity instead of a near-term growth driver.

5. Southwest downgraded to Underperform at Jefferies

Jefferies downgraded Southwest (LUV) to Underperform from Hold with a price target of $20, down from $28. The company’s Q1 revenue per available seat mile missed the lowered guide set just three weeks before quarter end, the firm tells investors in a research note. As such, Jefferies no longer underwrites meaningful RASM growth for Southwest despite management continuing to believe revenues can grow high single digits. The airline is reviewing its go-forward strategy as optimization “seems to be failing,” contends the firm. It believes the stock’s 2.7% dividend yield is “vulnerable.”