In this article, we will take a look at the 10 stocks recently upgraded by analysts.
In premarket trading on June 28, major U.S. chipmakers experienced significant declines following a report suggesting that lawmakers in Washington are contemplating imposing new restrictions on chip sales to China. NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) witnessed drops of over 3%, while Nasdaq 100 Index futures declined by 0.5%. The Wall Street Journal reported on Tuesday evening that discussions had taken place regarding potential limitations on the sale of artificial intelligence chips to China. Such measures could escalate tensions between the two countries. According to Bloomberg, China’s technology sector is increasingly focused on competing with major US players like Google and Microsoft in the rapidly evolving global artificial intelligence (AI) race. Individuals ranging from billionaire entrepreneurs to mid-level engineers and veterans of foreign companies share a common ambition: surpassing China’s geopolitical rival in the realm of AI, a technology that holds significant implications for global power dynamics. Notable figures include Wang Xiaochuan, an internet mogul who entered the field following the social media frenzy surrounding OpenAI’s ChatGPT launch in November. These individuals join the ranks of Chinese scientists, programmers, and financiers, many of whom have backgrounds at companies like ByteDance, JD.com, and Google. It is estimated that China will spend approximately $15 billion on AI technology this year, fueled by this collective drive.
The U.S. Federal Reserve will announce the results of its annual bank stress tests on June 28. These tests assess the financial health of big banks by evaluating their balance sheets under hypothetical severe economic scenarios. The results determine the amount of capital required for the banks to remain healthy and the extent to which they can distribute capital to shareholders through dividends and share buybacks. Major U.S. banks are expected to demonstrate sufficient capital to withstand potential banking sector turbulence. The Fed established the stress tests after the 2007-2009 financial crisis to ensure banks can withstand similar shocks in the future. Initially, large banks struggled to pass the tests, and adjustments were made to address the Fed’s concerns. Over time, banks have become more proficient in the tests, and the Fed has increased transparency. The pass-fail model was replaced with a more customized capital regime, reducing the drama surrounding the tests.
Oil prices experienced fluctuations, alternating between gains and losses, as investors assessed conflicting macroeconomic signals while also considering indications of potential weakness in the near-term market. Following a 2.4% decline in the previous session on June 27, West Texas Intermediate (WTI) futures initially dropped but later recovered to trade close to $68 per barrel. The market remained uncertain as investors evaluated various factors influencing oil prices, leading to a back-and-forth movement in the market.
European shares advanced on June 28, buoyed by strong economic data from the United States, which alleviated concerns about a significant economic slowdown. Investors were also anticipating remarks from central bankers at a forum later in the day for further insights into future policy decisions. The release of data on Tuesday, indicating increased new orders for vital U.S.-manufactured capital goods and improved consumer confidence, helped improve market sentiment, reported Reuters. Concerns over a potential global economic slowdown due to tightening monetary policies had weighed on investor sentiment in recent days. Market participants are particularly interested in a panel discussion involving central bankers, including European Central Bank President Christine Lagarde, Federal Reserve Chair Jerome Powell, Bank of Japan Governor Kazuo Ueda, and Bank of England Governor Andrew Bailey. Their comments are expected to provide valuable guidance on future monetary policies.
On the U.S. stock market front, Goldman Sachs analysts led by Jason English have raised his recommendation on Kellogg Company (NYSE:K) from Neutral to Buy. At the same time, UBS analysts have upgraded Moderna, Inc. (NASDAQ:MRNA) from Neutral to Buy. Meanwhile, notable stocks, including The Sherwin-Williams Company (NYSE:SHW) and Guidewire Software, Inc. (NYSE:GWRE) were spotted gaining value after receiving upgrades from analysts. Check out the complete article to see some other stocks recently upgraded by analysts.
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10. Sunstone Hotel Investors, Inc. (NYSE:SHO)
Number of Hedge Fund Holders: 16
Analyst Stephen Grambling at Morgan Stanley upgraded Sunstone Hotel Investors, Inc. (NYSE:SHO) to Equal-weight from Underweight on June 27, citing lower competitive supply and leverage as reasons for the upgrade. Grambling mentioned that Sunstone Hotel Investors, Inc. ranks favorably among lodging real estate investment trusts (REITs), with the group’s least competitive supply and second-lowest leverage. The price target for Sunstone Hotel Investors, Inc. was raised to $10 from $9, indicating a potential upside of 4.1% based on the last closing price.
Here is what Baron Real Estate Income Fund has to say about Sunstone Hotel Investors, Inc. in its Q2 2022 investor letter:
“Exceptionally strong leisure demand and the resumption of business travel are contributing to robust business fundamentals for the Fund’s hotel REIT investment in Sunstone Hotel Investors, Inc. (NYSE:SHO). Given that economic worries have now emerged, we are closely monitoring business fundamentals and our hotel REIT investments. At their current share prices, however, we believe the company is valued at steep discounts to replacement cost and our assessment of intrinsic value.”
09. Saia, Inc. (NASDAQ:SAIA)
Number of Hedge Fund Holders: 20
BofA Securities analyst Ken Hoexter, on June 27, upgraded Saia, Inc. (NASDAQ:SAIA) from a Neutral rating to a Buy rating. Along with the upgrade, the analyst has raised the price target for Saia, Inc. from $311.00 to $388.00. This upgrade suggests a more optimistic outlook for the company’s stock, as the analyst expects it to perform well and potentially increase in value.
Wedgewood Focused SMID Cap Strategy made the following comment about Saia, Inc. in its Q1 2023 investor letter:
“As we continue to familiarize our clients with our SMID portfolio’s holdings, we would like to discuss our significant exposure to the U.S. Transportation industry. We currently have three transportation holdings and have been substantially overweight the industry in comparison to the Russell 2500 index for several years. While these undoubtedly are cyclical business models, we see many long-term tailwinds for the domestic Transportation industry, which will provide attractive growth levels and will allow these companies to improve their returns on investment over time.
Saia, Inc. (NASDAQ:SAIA) is one of the country’s largest providers of less-than-truckload (or LTL) transportation. LTL transport involves picking up multiple small loads at the sources of shipments, carrying them to sorting, or cross-docking, facilities, then reallocating all of these loads to different trucks that will deliver these multiple small loads per truck to their destinations. Less-than-truckload transportation is a much more complicated business than truckload and involves greater capital intensity than the truckload business. Whereas a truckload business requires little more than one human and an old truck, an LTL business requires a greater degree of logistics, sorting/cross-docking facilities, as well as humans and trucks…” (Click here to read the full text)
08. Wingstop Inc. (NASDAQ:WING)
Number of Hedge Fund Holders: 27
Wingstop Inc. (NASDAQ:WING), a company in focus, received an upgrade from Northcoast Research on June 27. The research firm upgraded Wingstop’s rating from ‘neutral’ to ‘buy’. Along with the upgrade, Northcoast Research set a price target of $228 for Wingstop Inc. stock. This suggests that the analyst believes Wingstop Inc. stock has the potential to increase in value and recommends buying shares at the current level.
Carillon Eagle Small Cap Growth Fund made the following comment about Wingstop Inc. in its first quarter 2023 investor letter:
“Wingstop Inc. (NASDAQ:WING) is a franchisor and restaurant operator that specializes in cooked-to order chicken wings in a fast-casual setting. The stock performed well, driven by continued quarterly results in excess of Wall Street expectations. Wingstop continues to benefit from its new chicken sandwich, a new relationship with a leading food delivery service, and chicken wing input costs that are moderating.”
07. XPO, Inc. (NYSE:XPO)
Number of Hedge Fund Holders: 30
XPO, Inc. (NYSE:XPO) is an American transportation and logistics company. On June 27, BofA Securities analyst Ken Hoexter upgraded XPO, Inc. from Neutral to Buy. Along with the upgrade, the analyst has increased the price target for XPO, Inc. from $57.00 to $65.00. This upgrade indicates a more positive outlook for the company’s stock, as the analyst expects it to perform well and believes it has the potential for increased value.
Alger Mid Cap Focus Fund made the following comment about XPO, Inc. in its Q4 2022 investor letter:
“XPO, Inc. (NYSE:XPO) is the fourth largest less-than-truckload (LTL) service provider in North America. Following its late October spin-off of RXO, Inc., which provides freight brokerage services and last mile logistics, XPO has become a solid pureplay LTL company. During the period, shares of XPO outperformed after the RXO spin-off transaction was consummated in late October and helped unlock the sum of parts value as the market was undervaluing both assets. Moreover, shares of most LTL companies rallied from October to mid-November as part of a broader rally in cyclical stocks.”
06. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 31
Coterra Energy Inc. (NYSE:CTRA) is a Texas-based energy company involved in hydrocarbon exploration. On June 27, Coterra Energy Inc. experienced a 1.7% increase in its trading as J.P. Morgan raised its rating on the natural gas producer from Neutral to Overweight. The bank also set a price target of $31 for the stock. J.P. Morgan analysts, led by Arun Jayaram, commented on the current market environment where most exploration and production (E&P) companies are focused on maintaining their capital expenditure (capex) programs. The analysts believed the market would significantly reward companies capable of delivering higher volumes. The analysts specifically highlighted the positive remarks made by Coterra Energy Inc. during J.P. Morgan’s energy conference the previous week, considering it the most optimistic among the companies they cover. They anticipated that Coterra Energy Inc. would remain within its capex guidance for the current year and projected a greater impact in 2024 as the company renegotiates its contracts at reduced leading-edge rates.
05. Old Dominion Freight Line, Inc. (NASDAQ:ODFL)
Number of Hedge Fund Holders: 37
Thomasville, North Carolina-based Old Dominion Freight Line (NASDAQ:ODFL) is a leading less-than-truckload (LTL) motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. The company operates through a network of more than 250 service centers throughout the United States. On June 27, BofA Securities upgraded its rating on Old Dominion Freight Line from ‘neutral’ to ‘buy’. The analyst’s recommendation indicates a positive outlook on the company’s stock. Additionally, BofA Securities set a price target of $391 for Old Dominion Freight Line Freight Line. This upgrade suggests the analyst believes the stock has the potential to increase in value.
04. Guidewire Software, Inc. (NYSE:GWRE)
Number of Hedge Fund Holders: 40
On June 27, Stifel upgraded its outlook for Guidewire Software, Inc. from Hold to Buy. Prior to this upgrade, as of June 1, the average one-year price target for Guidewire Software, Inc. was estimated to be $84.15. Various forecasts ranged from a low target of $60.60 to a high target of $99.75.
Alger Small Cap Focus Fund made the following comment about Guidewire Software, Inc. in its Q1 2023 investor letter:
“Guidewire Software, Inc. (NYSE:GWRE), offers on-premises and cloud-based solutions for property and casualty (P&C) insurance companies, automating processes such as premium billings, claims management, and policy fulfillment. Under the InsuranceSuite brand, the company provides three core systems: BillingsCenter, ClaimsCenter, and PolicyCenter. During the period, shares contributed to performance after the company reported strong fiscal second quarter results, where revenues and operating profits exceeded analyst estimates. Moreover, strong performance was attributable to ongoing cloud traction as the company continued to see large cloud momentum across tier-1 and tier-2 carriers. Management also raised gross margin guidance by another 200 basis points for the full year, approximately 500 basis points ahead of what management projected in October 2022. We believe the company appears well positioned to capitalize on cloud transitions over the long-term.”
03. Kellogg Company (NYSE:K)
Number of Hedge Fund Holders: 40
Kellogg Company is a Michigan-based food manufacturing company that produces a wide range of food products. The company reported strong earnings in the first quarter of 2023 with revenue of $4.05 billion, up 10.4% from the same period last year. Year-to-date, its operating cash flow amounted to over $276 million. On June 26, Kellogg Company received an upgrade from Goldman Sachs analysts led by Jason English. The analysts raised their rating on Kellogg Company shares from Neutral to Buy and increased their price target from $78 to $83. Following this news, Kellogg Company stock experienced a 1.8% increase in recent trading, reaching $66.79. However, it is important to note that the stock has seen a decline of 6.3% so far this year.
02. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 40
UBS analysts, on June 26, upgraded Moderna, Inc. shares from Neutral to Buy, with a revised price target of $191 per share (previously $221). They believe that Moderna, Inc. value extends beyond its COVID vaccine. The analysts note that Moderna, Inc. shares have declined approximately 35% year-to-date and around 75% from their pandemic highs in 2021.
The analysts justify their upgrade for two main reasons. Firstly, they consider the current valuation to reflect the significant risks to COVID vaccine revenues but not the potential of Moderna’s pipeline beyond COVID. Secondly, they highlight positive progress in Moderna’s pipeline, including the development of mRNA vaccines for respiratory syncytial virus (RSV), flu, and cytomegalovirus (CMV).
UBS believes that Moderna, Inc. potential for mRNA vaccines beyond COVID is undervalued. They specifically identify the CMV vaccine as a major potential driver of upside over the next one to two years. Additionally, they see a substantial market opportunity exceeding $10 billion for Moderna’s RSV vaccines. The analysts estimate that the combination of COVID and RSV vaccines alone adds significant value to Moderna’s stock, with a valuation of $123 per share.
01. The Sherwin-Williams Company (NYSE:SHW)
Number of Hedge Fund Holders: 68
The Sherwin-Williams Company is an American paint and coating manufacturing company, based in Ohio. In the first quarter of 2023, the company reported an operating cash flow of $88.2 million, mainly driven by higher profits. Due to its strong cash position, the company was able to return $458.2 million to shareholders through dividends and share repurchases.
On June 26, BMO Capital analysts upgraded The Sherwin-Williams Company from a Market Perform rating to Outperform. The analysts cite a more favorable outlook for demand in the paints and coatings industry as the reason for the upgrade. According to the report, BMO Capital sees potential upside for The Sherwin-Williams Company due to a fading impact of raw materials in the near-term and indications that the housing market may not be as dire as previously anticipated. As a result of their optimistic view, BMO Capital has raised their price target for The Sherwin-Williams Company shares to $275 per share, up from the previous target of $269 per share.
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This article is originally published at Insider Monkey.
