Microsoft earns upgrade on GenAI prospects: 5 big analyst picks

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Microsoft, DraftKings, SiteOne Landscape Supply, Wingstop, and CarMax.

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Microsoft has no more Sell ratings as Guggenheim upgrades

Guggenheim upgraded Microsoft (NASDAQ:MSFT) to Neutral from Sell, as reported in real-time on InvestingPro. Following this upgrade, there are no more sell-side analysts that rate Microsoft with a Sell or equivalent rating.

Guggenheim admitted they were “dead wrong” to recommend Microsoft as Sell. “The Generative AI narrative is too positive a force to contend with, even though the troubling dynamics we thought might develop, did,” mentioned in a client note.

And like every other person on the planet, we’ve come to expect that the GenAI “narrative” will become more than just a story, though we still question how much monetization will be realized and over what timeframe.

DraftKings shares gain on JPMorgan upgrade

DraftKings (NASDAQ:DKNG) shares rose more than 3% pre-market today after JPMorgan upgraded the company to Overweight from Neutral and raised its price target to $37.00 from $26.00.

The upgrade is based on the recent underperformance of the company’s shares, despite the sector's attractiveness and strong growth prospects in existing and new markets. Additionally, the firm noted that DraftKings' efficient cost control measures, combined with its competitive strengths like product, scale, and brand recognition, position the company well against emerging competitors such as PENN Entertainment's (NASDAQ:PENN) ESPNBet and Fanatics.

SiteOne Landscape Supply raised to Buy at UBS

UBS upgraded Siteone Landscape Supply (NYSE:SITE) to Buy from Neutral and raised its price target to $200.00 from $145.00.

The rationale behind the upgrade includes the observation that the company's earnings have already hit their low point, with expected positive EBITDA growth in the second half of 2023 and further acceleration in 2024 and 2025. The resilience to macroeconomic risks is also highlighted, attributed to its 36% maintenance mix and the normalization of demand that occurred between 2020 and 2021.

Additionally, UBS sees momentum in recent deals that should drive growth, and the company has the financial capacity and management expertise for further expansion.

2 more upgrades

Stifel upgraded Wingstop (NASDAQ:WING) to Buy from Hold and raised its price target to $200.00 from $180.00.

We believe the company is poised to successfully lap difficult comp comparisons in the 2H23 as menu innovation and delivery channel growth, augmented by rapid expansion in the national ad fund, continue to build top-of-mind awareness and drive incremental usage.

Wedbush upgraded CarMax (NYSE:KMX) to Outperform from Neutral and raised its price target to $90.00 from $85.00.

The firm believes that CarMax is approaching an inflection point in growth and market share performance while continuing to improve profitability. The firm noted that CarMax underperformed the retail used car industry's unit growth in the third quarter of the previous year due to challenging comparisons and a focus on profit rather than unit sales. However, in 2023, the underperformance gap has narrowed, making it a more attractive investment option.

CarMax is scheduled to report Q2 earnings results on Thursday.

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