Alibaba Downgrade, Micron Upgrades Among Today's Top Calls On Wall Street

On The Sidelines:

Atlantic Equities analyst James Cordwell downgraded Alibaba (BABA) to Neutral from Overweight with a price target of $140, down from $185. While the stock is "inexpensive," the plans detailed at the company's recent investor event provide little confidence that Taobao and Tmall's performance will improve near-term, Cordwell told investors in a research note. Further, management's commitment to "ongoing aggressive investment" has left the analyst less optimistic regarding renewed capital allocation discipline. While external capital raising for some divisions "could admittedly close some of the valuation disconnect," short of an AliCloud spin such developments "would only be modest catalysts," Cordwell added.

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Improved 'inventory Digestion':

Bank of America analyst Vivek Arya upgraded Micron (MU) to Buy from Neutral with a price target of $100, up from $76. The company's "strong" second quarter outlook is addressing his prior "key concern" regarding extended inventory digestion and the accompanying DRAM price pressure in the PC market, the analyst told investors in a research note. Arya added that the second quarter will likely mark the bottom of the mini-cycle as Micron stands to benefit from the DDR5 ramp in data center, improving chip supply clogging up production of 5G smartphones, and better supply discipline.

Summit Insights analyst Kinngai Chan also upgraded Micron to Buy from Hold. The analyst contended that the downside risk of Micron's customers buying ahead of demand is now priced-in into the stock. Further, while there is further risk of contract price declines in the first quarter due to weaker seasonal demand, he expects DRAM prices to stabilize through the second half of 2022 as demand for DDR5 ramps up.

Non-Strategic Deal: 

KeyBanc analyst Michael Turits downgraded Oracle (ORCL) to Sector Weight from Overweight without a price target. While the acquisition of Cerner (CERN) should be accretive to earnings, it would be near-term neutral to sales growth and dilutive to EBIT margins, Turits told investors in a research note. Further, while Cerner would complement Oracle's existing healthcare solutions, verticals have seemed less of a focus than strategic initiatives in enterprise software-as-a-service, database, and cloud, the analyst added. Turits believes the acquisition money could instead have been used for stock buybacks, to finance more strategic acquisitions, or fund cloud capex. Given his view that the deal is non-strategic, the analyst now believes Oracle is fairly valued.

More Upside Elsewhere: 

JPMorgan analyst Lisa Gill downgraded Cigna (CI) to Neutral from Overweight with a price target of $248, down from $270, in conjunction with her 2022 outlook. While Cigna is well positioned on a long-term basis, other managed care names have more near-term upside, Gill told investors in a research note. The analyst believes the company's U.S. medical margins will improve in 2022, partially driven by its pricing strategy. However, this could result in slower membership growth next year. Further, Cigna's Evernorth segment could face tough comps next year due to lower vaccine volumes and the loss of two health plan clients, Gill added.

The analyst also downgraded HCA Healthcare (HCA) to Neutral from Overweight with an unchanged price target of $270. Gill believes HCA is the best positioned hospital operator in the U.S., but believes other companies she covers offer greater near-term upside. The analyst expects "modest" EBITDA growth in 2022 reflecting labor pressures and the roll-off of temporary COVID-19-related tailwinds.

Hard To Capitalize On Omicron Wave: 

Baird analyst Joel Beatty downgraded Vir Biotechnology (VIR) to Underperform from Neutral with an unchanged price target of $36. The analyst notes that shares have increased about 65% since late November following the first news reports of the omicron variant. However, he believes much of this move is not supported by the fundamentals given that while the company's COVID-19 antibody treatment does appear to retain activity against the variant, he sees several factors that will make it difficult for Vir to capitalize on the omicron wave now accelerating its spread across the U.S.

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