Buy/Sell: Wall Street's Top 10 Stock Calls This Week - Saturday, Dec. 10

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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 Dec. 5-9, 2022. First, let's start with the top 5 buy calls.

Estee Lauder (EL) – Deutsche Bank Upgrades Stock to Buy, Raises Price Target to $266

On Dec. 6, Deutsche Bank analyst Steve Powers upgraded Estee Lauder to Buy from Hold with a price target of $266, up from $209. The analyst sees increased likelihood of China reopening by the start of Estee's fiscal 2024 and has increased confidence in its makeup margin expansion.

Although the company is likely to face challenges over the next several quarters, such difficulties as well-telegraphed by its recent guidance, Powers tells investors in a research note. Moreover, recent developments in China "give more credibility to category resurgence in that market" by the second half of 2023, the analyst adds.

General Electric (GE) – Oppenheimer Upgrades the Stock to Outperform With a Price Target of $104

On Dec. 6, Oppenheimer analyst Christopher Glynn upgraded General Electric to Outperform from Perform with a $104 price target based on 2024 estimates, and assuming 12-times EV/EBITDA for GE Healthcare, 13-times for Aviation, and 8-times for combined Power & Renewable Energy/RE, discounted back one year at 12%.

Aviation performance reflects strong momentum along the industry recovery path amidst widespread industry supply-chain challenges impacting the commercial business and internal production challenges serving military markets, the analyst argues. At Power, consistent and broad-based profitability improvement affirms an intact turnaround trajectory/runway, even if it holds mediocre absolute profitability as of yet, he adds.

Domino’s Pizza (DPZ) – BTIG Upgrades Stock to Buy With a Price Target of $460

On Dec. 5, BTIG analyst Peter Saleh upgraded Domino's Pizza to Buy from Neutral with a $460 price target. The analyst believes the company's margins have bottomed and are set to rebound in 2023 due to higher menu pricing and organic improvements in driver availability.

He expects Domino's to enter 2023 with the highest level of menu pricing in more than a decade, and says management could take price on the $7.99 carry-out offering, further bolstering sales and margins next year. Improvements in fundamentals in 2023 should translate into a "resurgence" in development in 2024, and in turn a higher share price, as the "narrative shifts to bullish from bearish."

Crowdstrike (CRWD) – Daiwa Upgrades the Stock to Buy, Seeing 46% Upside in Shares

On Dec. 5, Daiwa analyst Stephen Bersey upgraded Crowdstrike to Buy from Outperform with a price target of $181, down from $193. Although the quarter's operating results "looked solid," management's weakening outlook commentary and tepid guidance weighed on investor sentiment, Bersey tells investors in a research note.

However, the analyst "significantly" raised his non-GAAP earnings estimates for fiscal years 2023 and 2024 due to better operating margins driven by good cost control. He now sees 46% upside in Crowdstrike shares.

United Airlines (UAL) – Morgan Stanley and Argus Upgrade Stock to Buy Equivalent Ratings

On Dec. 5, Morgan Stanley analyst Ravi Shanker upgraded United Airlines to Overweight from Equal Weight with a $67 price target to reflect a relative preference for legacy airlines in 2023. The analyst sees 2023 as a "Goldilocks sweet spot" for United, with all the tailwinds of the late pandemic recovery and the initial gains from the transition to the capacity phase of United NEXT.

The following day, Argus analyst John Staszak also upgraded United Airlines to Buy from Hold with a $52 price target. Demand for air travel should continue to recover from the pandemic with "strong growth" expected in business and international travel, the analyst tells investors in a research note.

Staszak further notes that United Airlines should benefit from constrained industry capacity due to delayed aircraft deliveries, boosting his FY22 EPS view to $2.00 from $1.30 and his fiscal 2023 view to $5.80 from $5.40.

Now, let's move on to the top 5 sell calls during the week.

Carvana (CVNA) – Wedbush Downgrades to Underweight With $1 Price Target

On Dec. 7, Wedbush analyst Seth Basham downgraded Carvana to Underperform from Neutral with a price target of $1, down from $9, following a Bloomberg report saying that a group of about 10 creditors holding $4 billion of the company's debt have signed a cooperation agreement to present a united front in restructuring negotiations. This move will help avoid the infighting among lenders that has occurred in other restructurings recently, he adds.

Separately, the analyst notes that Carvana's director of investor relations, Mike Levin, recently left the company. Combined with the fact that many Carvana bonds have been trading at 50 cents on the dollar, indicating investors see a high probability of default, he views this news negatively for Carvana's shares.

The analyst believes these developments indicates a higher likelihood of debt restructuring that could leave the equity worthless in a bankruptcy scenario, or highly diluted in a best case scenario.

Shopify (SHOP) – UBS Initiates Coverage With a Sell Rating and $30 Price Target

On Dec. 8, UBS analyst Kunal Madhukar initiated coverage of Shopify with a Sell rating and $30 price target. The analyst warns that his projections for personal consumer expenditures on goods suggests that consensus estimates for gross merchandise value and revenue are not de-risked for a recession in the first half of 2023.

Madhukar adds that his surveys suggest Amazon's (AMZN) Buy with Prime could be a significant risk to Shopify's top line over the long-term, especially to the extent its Payment solution gets "disintermediated."

Royal Caribbean (RCL) – JPMorgan Double-Downgrades the Stock to Underweight With a Price Target of $106

On Dec. 6, JPMorgan analyst Daniel Adam double-downgraded Royal Caribbean to Underweight from Overweight with a price target of $47, down from $106, after assuming coverage of the name.

Despite roughly $10 billion of capital raises so far this year and free cash flow generation that should cover most, but not all, of its future commitments, Royal could face a $400 million funding shortfall by the end of next year, Adam tells investors in a research note. Additionally, in order to achieve its investment grade credit rating target by 2025, Royal likely needs to raise an additional $3.5 billion, via either equity or asset sales, the analyst adds.

He believes that at current levels, a $3.5 billion equity deal would be 20% dilutive to shareholders. Adam prefers Norwegian Cruise Line (NCLH) to Royal Caribbean, as he sees near-term funding requirements for the former as "less onerous."

Expedia (EXPE) & TripAdvisor (TRIP) – Wolfe Research Downgrades Both Stocks to Underperform

On Dec. 7, Wolfe Research analyst Deepak Mathivanan downgraded Expedia and TripAdvisor to Underperform from Peer Perform with price targets of $85 and $17, respectively. The analyst also downgraded the online travel sector to Market Underweight from Market Weight.

Travel demand is likely to moderate amid the macroeconomic slowdown in 2023 and consensus estimates do not appear to reflect the magnitude accurately, Mathivanan tells investors in a research note.

In addition, many online travel companies have ventured into less efficient customer acquisition channels over the last 12-18 months and have seen unit economics erode relative to. 2019, the analyst adds. He believes the group will likely to be pressured with negative estimate revisions over the next 12-18 months.

Regarding Expedia, Mathivanan notes the company "appears to be between a rock and a hard place from market share losses and margin compression during a downturn in 2023." He also thinks TripAdvisor’s core auction marketplace could face headwinds when demand slows down in fiscal 2023 and online travel agencies seek to improve efficiencies on marketing spending.

United Therapeutics (UTHR) – Goldman Sachs Initiates Coverage of the Stock With a Sell Rating and a Price Target of $230

On Dec. 5, Goldman Sachs analyst Chris Shibutani initiated coverage of United Therapeutics with a Sell rating and $230 price target. With a DPI formulation launched and reimbursement coverage in hand, the company has potentially fewer catalysts that can drive performance of the business at levels that would be necessary to propel further outperformance of the stock, Shibutani tells investors in a research note.

The analyst believes longer-term estimates likely underappreciate the potential impact of competitive dynamics within the core pulmonary arterial hypertension market, from both anticipated novel drug entrants and generics to United's portfolio.

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