Top Analyst Insights: Palantir, Starbucks, DoorDash, and Wynn Resorts - Key Takeaways for Investors
Palantir Technologies: Time to Consolidate Gains
What Happened? Raymond James downgraded Palantir Technologies (NYSE: PLTR) to Market Perform and removed its price target.
TLDR: Palantir downgraded mainly due to valuation concerns after a significant run-up in 2024.
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Raymond James remains optimistic about Palantir's long-term prospects in AI but has downgraded its rating to Market Perform from Outperform. The firm's assessment points to a need for Palantir’s shares to consolidate their substantial gains over the past couple of years to justify their high valuation. Palantir's stock has surged over 120% year-to-date and nearly sixfold over two years, compared to the S&P 500's 20% and 50% gains, respectively. With a valuation at 26.1x FY25 sales, Palantir stands as the richest software name among its peers.
The inclusion of Palantir in the S&P 500 on September 9th triggered a 23% spike over the last 14 days. However, Raymond James suggests that significant positive estimate revisions are the only remaining catalyst, indicating that the stock might need time to settle.
Market Perform at Raymond James implies that the stock is expected to perform in line with the S&P/TSX composite index over the next 12 months and could be a source of funds for higher-rated securities.
Starbucks: Facing Strategic Challenges
What Happened? Jefferies downgraded Starbucks (NASDAQ: SBUX) to Underperform with a $76 price target.
TLDR: Jefferies downgrades Starbucks due to strategic execution issues and low EPS growth projections.
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Jefferies downgraded Starbucks to Underperform, citing difficulties in executing necessary strategic changes despite efforts by the new CEO. The brokerage highlights operational, cultural, value perception, and technological challenges that need time to resolve. They project the F25 guidance to reset to low single-digit EPS growth, which is disappointing compared to the consensus of 11-12%. Additionally, negative same-store sales trends in the US and internationally are anticipated.
Jefferies forecasts that the current 25x PE ratio will move toward the 23x peer average and below the 21x implied two-year forward PE. The new price target of $76 suggests a potential 20% downside.
Underperform at Jefferies implies a total return of minus 10% or less within a 12-month period.
DoorDash: Strong Growth Prospects
What Happened? Keybanc upgraded DoorDash Inc (NASDAQ: DASH) to Overweight with a $177 price target.
TLDR: Keybanc sees robust growth in DoorDash, with strong favorability over Uber. Projected 2025 EBITDA of $2.6B and $3.5B in 2026, exceeding consensus estimates.
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Keybanc has increased confidence in DoorDash’s growth prospects, supported by rising food delivery usage. Their survey indicates 39% of respondents prefer DoorDash, 23 points higher than Uber. Moreover, 8% of respondents now use DoorDash for grocery deliveries, marking a 300 basis point increase since December 2023.
Keybanc projects a 17% and 15% growth in gross order value for 2025 and 2026, respectively, beating consensus estimates. They also estimate a 2025 EBITDA of $2.6 billion and $3.5 billion in 2026. The $177 price target is based on a 20x 2026 estimated EV/EBITDA multiple.
Overweight at Keybanc suggests that the stock is expected to outperform the analyst’s coverage sector over the next 6-12 months.
Starbucks: Operational Stability Under New Leadership
What Happened? Bernstein-SocGen upgraded Starbucks to Outperform with a $115 price target.
TLDR: Starbucks aims for balanced growth under CEO Brian Niccol, focusing on operational stability. Analysts predict improved margins and sales growth, making the stock attractive for long-term investors.
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Bernstein-SocGen analysts believe Starbucks will achieve balanced growth under the leadership of CEO Brian Niccol, who has a proven track record with Taco Bell and Chipotle. His focus on operational stability rather than aggressive growth is expected to realign Starbucks’ strategy.
The analysts anticipate organizational changes to reduce layers and streamline decision-making, resulting in lower G&A expenses. This operational focus is projected to drive traffic growth and restore pre-Covid operating margins of approximately 18.5%.
Despite ongoing investments in labor, equipment, and technology, operating margins are expected to improve to historical highs by 2028. The current stock valuation presents an attractive entry point for long-term investors, with a normalized FY26 EPS of $4.28.
Outperform at Bernstein-SocGen means the stock is expected to outpace the relevant index by more than 10 percentage points.
Wynn Resorts: Favorable Risk-Reward
What Happened? Morgan Stanley downgraded Wynn Resorts (NASDAQ: WYNN) to Overweight with a $104 price target.
TLDR: Morgan Stanley sees favorable risk-reward for Wynn due to low valuation and UAE growth potential. Wynn’s strong Las Vegas and Boston performance aids cash flow, but China recovery is crucial.
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Morgan Stanley cites a favorable risk-reward scenario for Wynn Resorts, driven by low valuation and growth opportunities in the UAE. The bank notes strong performance in Las Vegas and Boston, contributing to healthy cash flow, but emphasizes the importance of China’s macroeconomic conditions and Macau's recovery.
Despite estimated higher consolidated leverage of around 4x by the end of 2024, Morgan Stanley expects Wynn to de-lever quickly, projecting a leverage ratio of less than 16x by 2022.
By 2025, Morgan Stanley forecasts Wynn’s geographic EBITDA exposure to be approximately 50% from Macau, 40% from Las Vegas, and 10% from Boston. An upcoming project in the UAE is identified as a potential growth catalyst.
Overweight at Morgan Stanley implies that the stock’s total return is expected to exceed the average total return of the analyst’s industry coverage universe on a risk-adjusted basis over the next 12-18 months.
Analysis and Breakdown
What Does This Mean for You?
- Palantir Technologies: The stock has seen significant gains, and while its long-term prospects in AI remain strong, it might need to consolidate its recent gains. If you're holding Palantir, be prepared for potential short-term volatility.
- Starbucks: Facing strategic challenges, Starbucks might not deliver the expected EPS growth in the near term. If you own Starbucks stock, consider the potential for underperformance relative to its peers.
- DoorDash: With strong growth prospects and consumer preference, DoorDash is positioned well for the future. If you're looking for growth stocks, DoorDash could be a favorable option.
- Wynn Resorts: Despite strong performance in the US, Wynn's exposure to China and Macau adds risk to its outlook. The UAE project presents a growth opportunity, but macroeconomic conditions in China will be crucial.
Understanding these insights can help you make informed decisions about your investment portfolio, balancing between growth opportunities and risk management.
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Invest wisely and keep these key takeaways in mind to navigate the financial markets with confidence.