Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Caterpillar
What happened? On Monday, Morgan Stanley (NYSE:MS) downgraded Caterpillar (NYSE:CAT) to Underweight with a $332 price target.
*TLDR: Morgan Stanley sees mounting pressures and potential de-stocking downturn for CAT’s Construction Industries. Analysts predict 2025 EPS 10% below consensus, suggesting negative risk-reward for CAT shares.
What’s the full story? Morgan Stanley analysts see mounting pressures for Caterpillar’s Construction Industries segment. They have been cautious about US Non-Residential construction activity and CAT earnings throughout the year. Now, they observe rising evidence of a potential de-stocking downturn for US construction equipment. Factors such as optimistic expectations of non-residential growth driven by near-shoring, a normalizing supply chain, an increasingly competitive market, and deteriorating used equipment markets have led to bloated channel inventories that need to be de-stocked.
As a result, the analysts foresee increased risk of downward earnings revisions for CAT, with their 2025 EPS estimate now 10% below consensus. Combined with CAT shares’ year-to-date outperformance and a valuation that places an above mid-cycle multiple on what they believe are closer to peak earnings, the analysts suggest a negative risk-reward scenario.
Underweight at Morgan Stanley means “The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.”
Etsy
What happened? On Tuesday, Goldman Sachs (NYSE:GS) downgraded Etsy (NASDAQ:ETSY) to Sell with a $45 price target.
*TLDR: Goldman Sachs issues Sell rating for Etsy due to persistent GMS declines and low growth visibility. Analysts foresee further negative revisions and unfavorable risk/reward despite Etsy’s YTD underperformance.
What’s the full story? Goldman Sachs has issued a Sell rating for Etsy, citing three main concerns. Firstly, the bank notes that Gross Merchandise Sales (GMS) declines have persisted longer than expected, with low visibility on a return to positive growth, contrary to the Street’s 2025 GMS forecast of +3% year-over-year. Secondly, Goldman Sachs expects Etsy to continue losing market share in global eCommerce (excluding China) due to muted active buyer growth and an increasingly competitive market. Lastly, the bank warns that Street Adjusted EBITDA estimates could be revised lower if GMS declines persist or if Etsy increases growth investments, which would reduce valuation support for the shares.
Despite Etsy’s 39% year-to-date stock underperformance, Goldman Sachs sees an unfavorable risk/reward scenario due to the potential for further negative revisions to medium-term consensus estimates.
Sell at Goldman Sachs means “Being assigned a Buy or Sell on an Investment List is determined by a stock’s total return potential relative to its coverage universe.”
Estee Lauder
What happened? On Wednesday, HSBC (LON:HSBA) downgraded Estee Lauder (NYSE:EL) to Hold with a $100 price target.
*TLDR: EL’s restructuring affects staff morale and risks losing quality managers. Internal candidates likely to replace CEO Freda; future management should influence restructuring.
What’s the full story? HSBC is not expecting the shake-up it believes is necessary. As the restructuring progresses, it comes with collateral damage, affecting staff morale and potentially leading to the loss of quality managers who may find it difficult to trust their career paths within the firm. HSBC now views the implementation of the cost-cutting program as an indication that the replacement of CEO Freda will likely be an internal candidate. Given the length of non-compete clauses in the sector, if an external candidate had been secured, the market would have likely heard about it by now. Future management should have a say in what is cut and what is enhanced.
Stéphane de la Faverie, executive group president, and Jane Lauder, executive VP of enterprise marketing and chief data officer, are leading the restructuring program together. It would be logical for the group to be led by one or both of them. However, despite their qualities, they are partly responsible for the group’s track record and might find it challenging to implement the type of reset or cultural change that HSBC feels is needed.
Hold at HSBC means “… the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce…”
Alcoa
What happened? On Thursday, B.. Riley upgraded Alcoa (NYSE:AA) to Buy with a $50 price target
*TLDR: Alcoa’s Q3 adjusted EBITDA of $455M beat estimates; B. Riley upgrades to Buy. B. Riley raises 2025 EBITDA estimate to $2.4B, citing strong cash flow and alumina prices.
What’s the full story? On Wednesday Alcoa reported a third-quarter adjusted EBITDA of $455 million, surpassing B. Riley’s estimate of $383 million and the FactSet consensus of $386 million. The brokerage attributed this beat primarily to lower-than-expected intersegment eliminations. As a result, B. Riley has upgraded Alcoa from Neutral to Buy, citing the company’s successful execution of profitability savings programs, the full realization of higher alumina prices, and an increased likelihood of debt paydown, which could ultimately lead to higher shareholder returns.
Despite concerns about the sustainability of current alumina prices in the long term, B. Riley believes that Alcoa’s cash flow generation in the medium term will remain robust, bolstered by the timely acquisition of Alumina (OTC:AWCMY) Limited. The brokerage has revised its 2025 adjusted EBITDA estimate from $1,764 million to $2,412 million, translating to a 2025 FCFE of $983 million, or a 9% yield. Additionally, B. Riley has adjusted its fourth-quarter adjusted EBITDA estimate from $413 million to $563 million.
Buy at B. Riley means “We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation. “
Datadog
What happened? On Friday, UBS upgraded Datadog (NASDAQ:DDOG) to Buy with a $150 price target.
*TLDR: UBS upgrades Datadog to Buy, citing improved spending and strong cloud growth prospects. UBS expects Datadog’s revenue growth to reach 25-30% in 2025-2026, despite premium valuation.
What’s the full story? UBS has upgraded Datadog shares to a Buy from a Neutral, following the latest industry checks that indicate potential improvements in second-half spending and strong medium-term growth prospects for the AWS/Azure cloud infrastructure sector. The analysts believe these trends could help Datadog maintain or even modestly accelerate its mid-20% growth rate in the coming quarters.
Despite Datadog shares trading at a premium—10 times the estimated 2026 revenues and 34 times the estimated 2026 free cash flow—UBS sees potential upside. This optimism is based on the expectation that revenue growth estimates for 2025 and 2026 could increase to the 25-30% range, up from the current 25-26%, with UBS estimates being approximately 200 basis points higher than consensus.
Buy at UBS means “FSR is > 6% above the MRA” where FSR means Forecast Stock Return.