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HomeUncategorizedUpgrades and Downgrades: Shake Shack Receives Upgrade; Old Dominion Faces Downgrade.

Upgrades and Downgrades: Shake Shack Receives Upgrade; Old Dominion Faces Downgrade.

Upgrades and Downgrades

Last week’s Wall Street analyst highlights: Upgrades for Shake Shack, G-III Apparel, Sea, and Textron; downgrading for Old Dominion.

GIII Apparel Group


Barclays cut G-III Apparel (NASDAQ:GIII) to Underweight with a $23 target on Monday.

The complete story? An anticipated 2% revenue headwind over three years due to Macy’s store closures on 2/27/24, the impact of lost licenses on the business over the next five years, and subdued search interest in owned brands suggest a longer timeframe to counterbalance revenue headwinds drove Barclays’ downgrade.

The investment bank believes GIII will continue to license new brands. However, nothing is known about possible deals, their start, and if they can replace Calvin Klein and Tommy Hilfiger.

The analysts also think acquisitions outside the women’s and outerwear industries might increase execution risk.

Underweight at Barclays indicates “The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon.”

How did stocks react? On premarket news, GIII shares fell 4.25% to $31.87 from $33.11. GIII finished the regular session at $29.73, down 10.56% from $32.23.

Sea Ltd.


JPMorgan raised Sea Ltd (NYSE:SE) to Overweight with a $70 target on Tuesday.

The complete story? In the present competitive climate, JPMorgan expects SE to increase ecommerce commissions while lowering sales and marketing expense. The investment bank expects ecommerce to boost SE earnings soon.

However, experts warn that high take-rates may cause earnings expectations to fluctuate with competitive conditions. This earnings projection volatility may affect share price. Investors should trade earnings forecast changes, says JPMorgan. They anticipate ecommerce to boost profit forecasts soon.

JPMorgan defines overweight as “over the duration of the price target indicated in this report, we expect this stock will outperform the average total return of the stocks in the Research Analyst’s, or the Research Analyst’s team’s, coverage universe.”

How did stocks react? Sea Ltd. stock rose from $53.62 to $54.50 premarket. Other publications revealed the information 5 minutes after Investing.com Pro subscribers. Sea Ltd. began at $54.32 and finished at $55.75, up 3.43%.

The Old Commonwealth

BofA downgraded Old Dominion (NASDAQ:ODFL) to Neutral with a $446 price target on Wednesday.

The complete story? BofA downgraded due to limited upside to their price objective (PO) due to a high multiple and disappointing volume growth. The investment bank raised its PO to $446 from $443 based on 35.5x its 2024 EPS estimate due to better-than-expected pricing from its mid-1Q24 update and earnings leverage when demand recovers. Despite decreasing its 2024 and 2025 EPS predictions by 1% to $12.55 and $14.65 owing to reduced volume expectations,

Given the constrained Less-than-Truckload (LTL) environment and anticipated profit leverage when demand rebounds, BofA remains constructive on top carriers.

Old Dominion has become a best-in-class LTL operator, boosting sales and EPS above the industry average and improving its operating ratio to a top level, according to analysts. Given its strong service standards, they think ODFL can grow market share. Due to its high valuation multiple, they see limited potential.

BofA says “Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks.”

How did stocks react? Old Dominion finished the regular session at $435.46, up 1.25% from $430.15.

Shake Shack

On Thursday, TD Cowen upgraded Shake Shack (NYSE:SHAK) to Outperform with a $125 price objective.

The complete story? TD Cowen expects Shake Shack to improve its adjusted EBITDA over many years due to higher 2024-26E restaurant margins and G&A. The investment bank expects favorable EBITDA revisions due to the brand’s multi-pronged efficiency measures and disciplined investments, which it undervalues.

A new CEO brings a narrative change and traffic opportunities as the brand exploits its scale to enter the next phase of business.

Analysts raise their price objective to $125 and rank shares as their top small to mid-cap and second pick. TD feels a skilled new CEO can boost traffic, expand via improved marketing and operations, and advance the brand’s digital journey. Like fast casual peers, analysts believe Shake Shack should trade at a premium to the 5-year average EV/EBITDA multiple.

Outperform at TD Cowen indicates “The stock is expected to achieve a total positive return of at least 15% over the next 12 month.”

How did stocks react? Shake Shack finished the regular session at $104.44, up 3.45% from $100.96.

Textron

BofA upgraded Textron (NYSE:TXT) to Buy with a $105 target Friday.

The complete story? BofA’s PO is based on 2025 forecasts and a 0.90x relative P/E multiple (vs. 0.85x) to the 2025e market multiple. Despite post-COVID demand reduction, Industrial cost consolidation, and a strong Systems pipeline that could boost outyear growth, BofA noted their higher multiple accounts for improved Aviation performance. Due to Bell’s aging portfolio and probable budget cuts to the Future Vertical Lift (FVL) program, the relative multiple remains below the historical average of 0.95x.

Textron Aviation can gain from rising business jet demand and industry backlogs, experts say. Bell should gain from commercial helicopter demand and the Future Long Range Assault-Aircraft program.

Textron Systems should gain from rising local and international military spending. BofA analysts said Textron’s robust financial sheet supports shareholder-friendly dividends and share buybacks.

Buy at BofA implies “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.”

How did stocks react? Premarket reports lifted TXT stock 1.45% to $92.05. Textron finished at $92.13, up 2% from $93.16.

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