Business

Upgrades for Apple and Shopify; downgrade for Doximity By Investing.com

Published

2 months ago

July 21, 2024

Investing.com

Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.

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Apple

What happened? On Monday, Loop Capital upgraded Apple (NASDAQ:) to Buy with a $300 price target.

What’s the full story? Loop Capital has upgraded Apple based on insights from their Supply Chain Analyst John Donovan. Donovan highlights Apple’s potential to become the leading platform for Generative AI in the consumer market over the next few years. This potential is compared to Apple’s past transformative impacts with the iPhone in social media and the iPod in digital content consumption, both of which significantly boosted the company’s stock performance.

The brokerage’s analysis underscores Gen AI as a potential major growth driver for Apple. They have a price target of $300, which is 33x their projected $9.00 EPS for CY2026. This valuation is positioned at the higher end of Apple’s post-Covid P/E range of 20x to 35x. While there has been speculation about Apple’s potential benefits from Gen AI, Loop’s upgrade is specifically based on Donovan’s detailed assessment.

Despite their optimistic outlook, Loop maintains a cautious approach, noting that the full impact of Gen AI on Apple’s financial metrics will unfold gradually. They emphasize that the upgrade reflects confidence in Apple’s ability to leverage Gen AI to drive future growth, similar to the strategic advancements made with the iPhone and iPod in their respective technological eras.

Buy at Loop means “The stock is expected to trade higher on an absolute basis or outperform relative to the market or its peer stocks over the next 12 months.”

How did the stock react? Apple opened the regular session at $236.20 and closed at $234.40, a gain of 1.67% from the prior day’s regular close.

Shopify

What happened? On Tuesday, BofA Securities upgraded Shopify (NYSE:) to Buy with a $82 price target.

What’s the full story? BofA believes that the company, under the new CFO Jeff Hoffmeister, has turned a corner on balanced growth and margin following years of declining margin. The research team forecasts solid revenue growth and Free Cash Flow conversion from here, driven by solid high single-digit baseline eCommerce growth, steady share gains and disciplined expense spending.

BofA points out that revenue growth and disciplined spending are leading to healthy margin expansion going forward. They forecast a 17.4% operating margin for FY 2026, up from 14.3% in FY 2024.

The research team also notes that normalizing product mix-shift from lower-margin payments should result in a stable gross margin after years of decline (-650 basis points since FY 2017). Shopify is maintaining a ‘disciplined, limited headcount growth’ trajectory as a core tenet for operating leverage.

In an upside scenario, BofA projects FY 2030 revenue and FCF of $29.4 billion (+22% CAGR) and $8 billion (+33% CAGR), respectively.

Buy at BofA means “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 the stock react? Shopify opened the regular session at $67.28 and closed at $69.75, a gain of 8.63% from the prior day’s regular close.

1-800-Flowers.com

What happened? On Wednesday, DA Davidson downgraded 1-800 FLOWERS.COM Inc (NASDAQ:) to Underperform with a $8 price target.

What’s the full story? DA Davidson has analyzed FLWS’ performance, noting that the company, which operates in the late-cycle discretionary consumer sector, has experienced year-over-year sales declines since the pandemic ended. Sales have decreased in every quarter since F3Q22, with the declines worsening from low- to mid-single digits to -8% to -18% Y/Y over the past five quarters. Before the pandemic, when the University of Michigan consumer sentiment index was in the 90s and above 100, FLWS reported several quarters of organic sales growth between +8% and +10% Y/Y. Currently, the Michigan index is in the 60s-70s, having recovered from a low of 50 in June 2022.

The brokerage believes that consumer sentiment needs to consistently exceed 80 for FLWS to return to low-single-digit sales growth. Bloomberg debit card data, which is 94% correlated to sales, indicates a worsening trend, with a -15% Y/Y decline in F4Q24 compared to -13% in F3Q24. DA Davidson suggests that the consensus estimate of -6% Y/Y sales for F4Q24 might be too optimistic, potentially leading to a miss. They also anticipate that FLWS could issue FY25 guidance below market expectations due to ongoing recession-level consumer sentiment, weak everyday gifting, and potential cost inflation.

As a result, DA Davidson has lowered its sales and EBITDA estimates for FLWS to below consensus levels. The brokerage has also reduced its target multiple from 5.5x to 5.0x and its price target from $9 to $8, based on a 5.0x CY25E EBITDA of $106M (down from $109M).

Underperform at DA Davidson means “Expected to produce a total return of -15% to +15% on a risk adjusted basis over the next 12-18 months.”

How did the stock react? 1-800-Flowers.com opened the regular session at $10.40 and closed at $10.01, a decline of 9% from the prior day’s regular close.

Doximity Inc.

What happened? On Thursday, Wells Fargo downgraded Doximity Inc (NYSE:) to Underweight with a $19 price target

What’s the full story? Wells Fargo acknowledges that while Doximity has an appealing financial profile with consistent Free Cash Flow margins of over 35%, their biopharma survey indicates a slowdown in growth. This is expected to continue driving a downward rerating in the stock. The research team’s survey suggests that market share gains may be plateauing due to several factors. These include a shrinking percentage of clients reporting digital ad budget growth, a client wallet mix towards Doximity that is approaching a plateau, and the fact that bundling products doesn’t always translate into more same-store sales.

Additionally, a large new account/brand in FY25 is positively skewing growth dynamics, likely creating tough comparisons for FY26. Some clients have also pulled back spend, and some competitors are capturing market share.

Furthermore, Wells Fargo points out that brand lifecycles could increasingly become a hurdle to Doximity’s growth prospects. Surveyed clients reported less desire to rely on Doximity to advertise more mature brands, reflecting the research team’s channel checks. This suggests that the net revenue retention rate could encounter more pressure over time as brands mature, which in turn may lead to declining ad spend with Doximity.

Underweight at Wells Fargo means “Total return on stock expected to lag the Overweight- and Equal Weight-rated stocks within the analyst’s coverage universe over the next 12 months.”

How did the stock react? Doximity opened the regular session at $27.03 and closed at $27.59 , a decline of 4.83% from the prior day’s regular close.

Owens & Minor

What happened? On Friday, Citi upgraded Owens & Minor Inc (NYSE:) to Buy with a $19 price target.

What’s the full story? The bank believes the 40% sell-off since the first-quarter earnings report has been excessively harsh. OMI has demonstrated strong momentum in its core P&HS business, with the de-stocking of PPE seemingly concluded. In the long term, Citi views Chinese tariffs as a potential advantage for OMI’s products manufactured in the Americas. Despite recent headlines concerning GLP-1, the bank notes that PD (pharmacy distribution) continues to grow above market expectations, a trend they anticipate will persist. Citi sees minimal risk to the FY24 numbers, reinforcing their positive outlook.

The new price target of $19 reflects a 9.3x FY25 P/E multiple and a 6.0x FY25 adjusted EBITDA, which is significantly lower than OMI’s peers and its historical valuation. This adjustment underscores Citi’s belief that OMI is undervalued and presents a compelling opportunity for investors with a higher risk appetite. The bank’s analysis suggests that the recent market reaction has been overly punitive, and they expect OMI to benefit from both its current business momentum and favorable long-term factors.

Buy at Citi means “Buy (1) ETR of 15% or more or 25% or more for High risk stocks.”

How did the stock react? Owens & Minor opened the regular session at $14.75 and closed at $14.82, a gain of 1.44% from the prior day’s regular close.

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Business

Kamala Harris builds big cash lead over Donald Trump with $361mn fundraising haul

Published

1 hour ago

September 6, 2024

Alex Rogers

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Kamala Harris’s campaign has said it raised $361mn in August, surpassing Donald Trump’s haul of $130mn and extending the Democratic candidate’s financial advantage as the US presidential race heads into its final two months.

Harris’s campaign said it had $404mn in cash on hand at the end of last month against $295mn for Trump. Overall, the vice-president has raised more than $615mn since jumping into the race in July.

“Make no mistake: this election will be hard-fought and hard-won,” said Harris campaign manager Julie Chávez Rodriguez. “But with the undeniable, organic support we are seeing, we are making sure we are doing everything possible to mobilise our coalition to defeat Donald Trump once and for all.”

Jaime Harrison, the Democratic party’s national committee chair, said August was “the best grassroots fundraising month in presidential history”.

Trump raised more money than President Joe Biden in the second quarter of the year as he united the Republican party, became the first ex-president convicted of a crime through his New York “hush money” trial and debated the president for the first time in the 2024 cycle.

But Democrats have been energised since Harris replaced Biden following his withdrawal from the race on July 21.

Harris now enters the autumn with a significant advertising advantage. Overall, pro-Harris political groups have booked about $380mn in ads from September to election day on November 5, compared with $195mn for Trump, according to AdImpact.

The Trump campaign has also boasted about its ability to raise funds from small-dollar donors. But it has benefited from one of the biggest individual donors this cycle — Tim Mellon, a reclusive scion of the billionaire American banking dynasty. Mellon has given $125mn to Make America Great Again, a pro-Trump super-political action committee, according to the latest federal filings.

“With Republicans united and a growing number of independents and disaffected Democrats crossing partisan lines, the Trump-Vance campaign has momentum for the final stretch of the race,” said Trump campaign adviser Brian Hughes, referring to Ohio senator and vice-presidential nominee JD Vance.

“These fundraising numbers from August are a reflection of that movement and will propel President Trump’s America First movement back to the White House so we can undo the terrible failures of Harris and Biden.”

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Business

Greece won’t be turning into Switzerland or Sweden any time soon as economy continues to suffer after years of recession

Published

5 hours ago

September 6, 2024

Anna Maria Jakubek, AFP

Greek barista Kyriakos Giannichronis has seen the headlines about his country’s newly booming economy after years of recession — but he does not feel the wealth.

The Athens resident only has about 150 euros ($170) to spare at the end of the month, and that is despite getting a good deal on rent and making a little more than minimum wage.

Many Greeks face similar challenges — which is why Prime Minister Kyriakos Mitsotakis is widely expected to announce new benefits in a keynote speech this weekend.

“I am responsible enough for what I make, but… everything is going up and up. And the amount we get paid is around the same each year,” he said.

“Things look like they’re getting better, but it doesn’t seem like it,” the 27-year-old told AFP.

Living standards in Greece remain low despite the Mediterranean country’s substantial rebound which has the economy growing at two percent — a higher rate than in much of Europe.

The reason for the two sides of the coin is that Greece has significant ground to make up after a near-decade economic crisis and pandemic recession.

The economy “is growing and all the right measures are improving, but starting from a very low basis,” economist Nikos Vettas told AFP.

“Even if you have an increase now, this improvement is not enough to catch up,” said Vettas, who heads the Greek foundation for economic and industrial research IOBE think-tank.

To further complicate matters, housing and food prices had gone up because of inflation, which only now is on its way down.

“The cost of living actually neutralised part of the increase in the wages that we had, and as a result the real incomes of many households are suffering,” Vettas said.

Mitsotakis’ conservative government — which is dipping in the polls — has blamed the high cost of living on soaring energy prices that followed the war in Ukraine.

His New Democracy party is currently polling at around 22 percent, a far cry from the 40.56 percent it won in national elections last year.

Mitsotakis is expected to announce a new round of benefits in the prime minister’s annual economy speech in Thessaloniki this weekend.

‘Life is so expensive’

Last year, the country of just over 10 million people had the second lowest GDP per capita in purchasing power within the European Union.

Only Bulgaria fared worst, according to EU data agency Eurostat.

It also found that average annual income in Greece was half the European average in 2023.

And the Greek minimum wage is 830 euros, some 900 euros below that of France.

“So how are you supposed to live, if you have to rent a house with 500 euros?” asked Athens hairdresser Christina Massiou.

“Life is so expensive that you can’t set aside money for emergencies,” the 24-year-old added.

She and her friend Alexandra Siouti, who works at a PR agency, spoke from under a palm tree at a beach near Athens.

They had gone to relax and “escape from reality”, Massiou said.

“I have seen the older generations say that things are getting better. For them maybe,” Siouti, also 24, told AFP.

“But younger people don’t have many opportunities here to start their life and invest in their dreams.”

No Switzerland or Sweden

Last month, the economy ministry said household net disposable income had risen in recent years, putting Greece in 16th place in the European Union.

The data confirmed the “significant progress our country has achieved in the last five years”, the ministry said in a statement.

But the ministry acknowledged that it was not cause for celebration or a reason to “underestimate the real difficulties that many of our fellow citizens face”.

“It is obvious that Greece has not turned into Switzerland or Sweden,” it said.

Vettas, the economist, noted that some sectors have fared better than others.

“We have witnessed in the last three or four years a sharp increase in the salaries of professions where they have some speciality, some expertise,” he said.

“Either at the upper end or the lower end,” Vettas added, giving the examples of computer scientists and construction workers.

But for those employed in a sector like hospitality — a big industry in Greece — “it’s not easy to see how you’re going to improve their position”.

Giannichronis, the barista, said he was trying to remain zen about the economic situation, despite having to think about money all the time.

“I’m not furious because it wouldn’t do me any good. Things are the way they are. We can’t change much,” he said.

What he can control is how to budget his own expenses and help his friends better manage theirs, he added.

“But if I was angry about it too, then I would start to lose myself and go crazy on the streets shouting… and I don’t want that.”

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Business

Salesforce to acquire Own for $1.9 billion in cash

Published

13 hours ago

September 5, 2024

Jordan Novet

Marc Benioff, CEO of Salesforce.com, speaks during a keynote at the Dreamforce 2023 conference in San Francisco on Sept. 12, 2023.

Marlena Sloss | Bloomberg | Getty Images

Salesforce announced Thursday that it would pay $1.9 billion in cash for Own Co., a startup specializing in tools for backing up data in cloud-based applications. Salesforce intends to close the deal in the quarter ending in January 2025 if regulators give it their blessing, according to a statement.

The startup, formerly known as OwnBackup, was valued at $3.35 billion in a 2021 funding round. Salesforce Ventures, the cloud software company’s venture arm, invested in that round and earlier ones.

The proposed deal would mark the return of sizable deals for Salesforce, less than two years after co-founder and CEO Marc Benioff said the board was eliminating a committee on mergers and acquisitions.

Benioff’s pronouncement came after activist investors bought stakes in Salesforce and raised questions about profitability after the company had splurged on expensive assets, including MuleSoft and Slack, without delivering major growth in return.

The decline in value for Own reflects a more sluggish backdrop for software companies.

In late 2021, investors became less interested in cloud software, which had seen a surge in adoption in 2020 thanks to remote-work policies instituted after Covid. Central banks raised rates to ward off inflation, prompting money-losing cloud companies to focus more on profitability. Enterprises aiming to slim down information-technology budgets consolidated their purchases, burdening single-product companies, including startups and publicly traded companies.

Anaplan, Avalara, Coupa, Everbridge, Qualtrics, Sumo Logic and Zendesk all went private.

Own, which had specialized in helping Salesforce clients, sought to diversify. In its 2021 funding announcement, it touted its intent to work with Microsoft’s Dynamics enterprise software that competes with Salesforce’s core applications. Support for ServiceNow followed.

Salesforce in recent weeks has also revealed plans to buy smaller startups PredictSpring and Tenyx.

Salesforce said the Own acquisition wouldn’t impact Salesforce’s shareholder return initiatives, and said the deal would be accretive to free cash flow starting in the second year after the deal closes.

In April, data-management software maker Informatica said it was not in talks to be acquired after media outlets reported Salesforce was interested in buying the company for around $10 billion.

“We’re going to be looking at products organically, but, yes, we will continue to look at products inorganically,” Benioff told analysts on Salesforce’s May earnings call. “But as we’ve committed to you, if we’re looking at a large-scale acquisition, we’re going to make sure that it is not dilutive to our customers, that it’s accretive, that it has the right metrics.”

WATCH: Salesforce CEO Marc Benioff goes one-on-one with Jim Cramer