Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Ford, Ultragenyx Pharma, Yext, T-Mobile, and Repare Therapeutics.
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Ford Motor
What happened? On Monday, Citi upgraded Ford Motor (NYSE:F) to Buy with a price target of $16.
What’s the full story? The note hit in the premarket, but after the 7 a.m. starting point at which retail investors are able to access the market. The spike was rapid. Citi wrote:
Our upgrade reflects an improved risk/reward proposition anchored by: (1) Our more constructive view of U.S. auto demand (post our survey) and our above consensus 2023E EPS. (2) Ford’s recent CMD [capital markets day] and re-segmentation, which increase the likelihood that Ford Pro will drive improved sentiment and possibly SoP [standard operating procedure] treatment—particularly since Pro also appears mostly insulated from China/Europe NEV competitive concerns, and with SW/services set to comprise a more meaningful portion of EBIT over the next few years.
It is these types of notes, and at these times, that make for the fast banger scalp trades. Those who were paying attention were able to scalp the order flow on the headlines and make nearly 3% in under four minutes. This is a prime example of what can happen trading analyst research headlines in the premarket and why speed and access matter.
A Buy at Citi is described as:
The Investment rating definitions are: Buy (1) ETR [expected total return] of 15%
How did the stock react? The headlines hit around 8:38 a.m. in New York, and shares of Ford jumped from $12.38 to $12.70 in the first minute. Ford opened the regular session at $12.66 and closed Monday at $12.59.
Ultragenyx Pharmaceuticals
What happened? On Tuesday, Evercore upgraded Ultragenyx (NASDAQ:RARE) to Outperform with an $80 price target.
What’s the full story? Evercore sees potential future updates as being a drag on Ultragenyx's valuation, however those apparently are not reflected in the valuation. The firm wrote:
We remain cautious on the Angelman’s update which is coming later this year (we just don’t know if the data will convince investors of a true signal) but think at current levels there is little baked into the stock for either program and thus the risk-reward is skewed to the upside.
The call is the potential impact of osteogenesis imperfecta (rare bone disorder) showing “faster response in younger subjects aged 5-25.” It would appear that, with the younger group responding quicker to setrusumab, the study may be able wrap up at the faster end of the completion time frame. Evercore commented:
Because younger patients respond more quickly to setrusumab and have a higher background rate of fracture (the primary P3 efficacy endpoint which is event driven) we think the study could complete on the faster side of the 12-18 months after completion of enrollment.
Upside comes further from two potential catalysts in the P3 program:
(1) Data on change from baseline fracture rate from the 24 patients in this P2 portion of ORBIT (timing TBD but they are encouraged by the early look)” and (2) P3 interim analysis to assess separation of the arms and level of fracture rate reduction (timing also TBD).
Evercore's Outperform is described as follows:
Outperform- the total forecasted return is expected to be greater than the expected total return of the analyst's coverage sector.
How did the stock react? The upgrade hit at 5:58 a.m. New York time, and after InvestingPro's real-time update, shares jumped from $51.25 to $53.55. Ultragenyx opened the regular session at $54.01 and closed Tuesday at $51.48.
Yext
What happened? On Wednesday, Roth/MKM upgraded Yext (NYSE:YEXT) to Buy with a $12.50 price target.
What’s the full story? Following a strong earnings report that saw Yext beating analyst expectations and raising guidance, Roth/MKM issued an upgrade noting:
Revenues and EBITDA of $99.5mn / $14.4mn came in above the Street's $98.5mn / $11mn and company's guidance of $98-99mn / $10.5-11.5mn. 2Q Guide Above Street: For 2Q, Yext expects Rev/EBITDA of $101.5-102.5mn and $11-12mn, both above the Street's $101mn / $8mn. FY ‘24 outlook moving up, still conservative: Yext revised annual outlook to $404-407mn / $49-51mn in Rev/EBITDA vs. the previous $402-406mn / $44-46mn.
Roth/MKM said at the time of publication they would be buyers into Wednesday morning’s strength. Roth/MKM commented:
We would be buyers on this strength as Yext remains an undervalued SaaS company with positive FCF & significant capital cushion. And, modest fundamental improvement from the current Street model could lead to a material uptick in valuation multiples.
A Buy from Roth/MKM is defined as:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months.
How did the stock react? Shares of Yext surged on earnings, and the impact of the upgrade was difficult to discern. Shares jumped to $11.30 after earnings, up from the $9.60 Tuesday close, before giving back some of the gains. Roth/MKM pushed their upgrade at midnight New York time, after which shares spiked on the 4 a.m. premarket open to $11.30 and kept rising. Yext ended Wednesday at $13.29, up 38.4%.
T-Mobile
What happened? On Thursday, Wolfe Research upgraded T-Mobile (NASDAQ:TMUS) to Outperform with a $160 price target just before 6 a.m. in New York
What’s the full story? Wolfe was rather to the point with this upgrade, listing three key points for their clients to consider:
1) Current valuation vs. healthy fundamentals imply minimal downside risk, 2) While to a lesser degree, continued outperformance on financial results, 3) Continued ARPA [average revenue per account] growth from the NT sell-through opportunity of FWA [fixed wireless access].
That's against the backdrop of TMUS' relative underperformance by TMUS shares in 2023: The stock is down nearly 10% even as S&P 500 has risen over 11% on the basis of stock prices only. And that’s it; it was rather straightforward.
Wolfe describes an Outperform as:
The security is projected to outperform analyst's industry coverage universe over the next 12 months.
How did the stock react? On the release of the note, shares jumped $1 to $127.80. Shares ended Thursday at $130.32.
Repare Therapeutics
What happened? On Friday, in the premarket session, Stifel upgraded Repare Therapeutics (NASDAQ:RPTX) to Buy with a $16 price target.
What’s the full story? Stifel has actionable comments in their note, but the reason I’m highlighting this is that it was out premarket after 6 a.m., and the phrasing “upgraded to Buy” generated a slew of upside activity. As for what Stifel said, the succinct summation would be this two-part sentence, which buffers its call and then proceeds to describe the valuation play into upcoming catalysts:
Without a clear monotherapy efficacy signal this stock call is not without risk, but at this valuation we recommend owning into combination data starting in 4Q23.
Stifel describes their Buy rating as:
We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.
How did the stock react? At 6:26 a.m. in New York, shares spiked $1 to $12.46. RPTX opened the regular session trading $12.88 and closed at $12.02, rising just under 1%, although the real trade on this was the headline in the premarket and the 9:30 a.m. opening volatility. Pull your charts and you’ll see what I mean.
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