On any given day, dozens of sell-side analysts offer opinions on numerous stocks across all sectors. Knowing which commentary to focus on can be a major challenge.
When sifting through Wall Street's updates, investors should first and foremost be in tune with companies that best fit their investment strategy. From there, some upgrades, downgrades, and target price changes may merit a bit extra attention. This could be because the analyst has a strong reputation, is offering a contrarian view, or because multiple analysts are signaling the same thing.
Ahead of second-quarter earnings season, analyst activity has started to heat up. Here are three of the more compelling upgrades that should each give investors good reason to be bullish.
Is American Express Stock a Good Reopening Play?
Last week Goldman Sachs analyst Ryan Nash upgraded his rating on American Express (NYSE:AXP) from 'neutral' to 'buy' The bullish shift was noteworthy for several reasons.
One, Goldman Sachs has a strong reputation on the Street for its equity research capabilities. The firm's rating changes tend to move the market more so than others.
Two, not only did the upgrade mark a clear shift in sentiment, but the analyst offered a Street-high $225 price target. At current levels, this represents 30% upside for the global consumer credit card company. Among other reasons, the analyst noted an acceleration in consumer and small business spending as potential catalysts.
While much of the attention has been on airlines, hotels, and leisure stocks as beneficiaries of pent-up demand, credit card companies could get a major boost as well. And a company like American Express which also offers a range of travel services (and is a Warren Buffet favorite) may be one of the best ways to go. In addition to the Goldman upgrade, investors will want to tune into the American Express earnings report on July 22nd for more indications of growth ahead.
Is Chipotle Stock a Buy Ahead of Earnings?
At well over $1,000 per share Chipotle Mexican Grill (NYSE:CMG) may not be on all investors' watch list, but the stock could be a sizzling trade. This is a great example of an 'upgrade by committee' that should be noted.
In the last two days, five firms have issued 'buy' ratings on the popular quick-service restaurant (QSR) chain. Since these ratings were all reiterations rather than upgrades, its not technically an upgrade but carries just as much if not more weight given the unanimous opinion—and remarkably similar price targets ranging from $1,700 to $1,850.
That's not a ton of upside from current levels but could presage yet another post-earnings jump that the market has become accustomed to seeing with Chipotle. The company is slated to report Q2 results after the close on July 20th. Last quarter Chipotle topped earnings expectations on strong digital sales, new restaurant openings, and increased menu prices.
Chipotle did get a noteworthy upgrade last month when Raymond James moved from an 'outperform' to a 'strong buy' conviction. The analyst there cited the company's ability to raise prices in an increased wage environment. Driven by a passionate, almost price-agnostic customer base, this should lead to improved profit margins which are already among the best in the space.
What Does PubMatic Do?
Switching gears to a lesser-known small-cap company, PubMatic (NASDAQ:PUBM) warrants a prime spot on the watch list. That's because the stock was recently upgraded to a 'buy' by one of the top technology sector analysts on the Street.
Last month, Evercore ISI's Mark Mahaney upgraded PubMatic from 'in-line' to 'outperform'. The analyst has historically made some strong calls including a bullish stance on Upwork in March 2020 in anticipation of a pandemic shift to contractor-based work arrangements.
While it sounds like a cool home brewing kit manufacturer, PubMatic is a technology company of a very different breed. It operates under the premise that all advertising will one day be digital—and all digital advertising will become programmatic.
Programmatic advertising refers to the use of software to purchase digital advertising. In contrast to the traditional advertising process which involves a lot of back-and-forth human interaction, programmatic advertising uses machines and algorithms to buy ad space.
Where does PubMatic come in? It provides a cloud-based sell side platform (SSP) that brings together content publishers and advertising firms and agencies. This infrastructure supports real-time programmatic advertising transactions that increases revenue for publishers and enhances the return on investment (ROI) for advertisers.
The Evercore ISI upgrade made it five of seven firms with bullish opinions of PubMatic compared to two 'holds'. The bullish price targets on average imply upside of approximately $20 for the $33-ish stock.
PubMatic stock has had a turbulent ride since its December 2020 Nasdaq listing. After climbing above $76 earlier this year it is currently trading in the low $30's. But given the company's unique platform, expectations for strong digital ad spending growth, and the support of a key analyst, it may be a stock to program into a long-term growth portfolio.
Before you consider PubMatic, you'll want to hear this.
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