Verizon still too cheap, says Barclays: 4 big analyst picks

Investing.com — Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Verizon Communications, American Express , PACCAR, and Chewy.

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Verizon Communications upgraded to Buy following Q3 beat

Barclays upgraded Verizon Communications (NYSE:VZ) to Overweight from Equalweight with a price target of $38.00 (from $37.00), as reported in real time on InvestingPro, Tuesday's strong Q3 results.

The mobile behemoth reported earnings and revenues Tuesday morning that that surpassed expectations, and also bumped up its yearly free cash flow outlook on enticing promotional offers and the high-speed 5G network, which it said attracted more subscribers in Q3.

Following these results, Barclays analysts wrote that the share price still seems too low: "We believe the expected improvement in second derivatives across unit growth, ARPU [average revenue per user], service revenue, EBITDA and free cash flow is still not reflected in valuation."

Shares jumped more than 9% on the earnings news Tuesday, although they were pulling back a bit amid a larger market retreat Wednesday, losing 1.2% to $33.88.

American Express picks up another upgrade

Citi upgraded American Express (NYSE:AXP) to Neutral from Sell and raised its price target to $154.00 from $143.00, following the company’s better-than-expected Q3 results last week.

The analysts noted that, even with a modest slowing in spend growth, overall spending remains robust. Additionally, they wrote, net interest income and card fees have surpassed expectations, and credit stands below its pre-pandemic levels.

Citi highlighted the resilient credit quality of American Express in comparison with those of other credit card issuers, reflecting the lack of inflation impact on the high-end consumer. Citing better loan growth, continued card fee growth, and reduced credit loss assumptions, Citi revised its 2024 EPS forecast to $11.45 from $10.57.

Earlier in the week, Piper Sandler also raised American Express's rating to Neutral from the prior Underweight rating, setting a price target at $151.00.

Shares were recently nearly unchanged at $144.49.

PACCAR upped to Buy at Deutsche

Deutsche Bank upgraded PACCAR (NASDAQ:PCAR) to Buy from Hold and raised its price target to $115.00 from $94.00 following the company’s better-than-expected Q3 earnings Tuesday.

Following those results, Deutsche analysts highlighted said PACCAR is a "best-in-class Machinery company that has historically executed very well in a downturn given relatively mild decremental margins."

The analysts particularly highlighted the company's stalwart Parts business, adding that they also see "strong potential for continued share gain vs. truck OEM peers on the back of strong customer reception to PCAR's new line of trucks.

They say that, overall, "PCAR's stock looks too cheap," and that, "if our model is right, 2024 EPS could be nearly $1 ahead of the current Street forecast.

Shares climbed more than 4% on Tuesday after the earnings results, and were bucking the market slump Wednesday, adding another 0.9% to $85.61 in recent trading.

Chewy raised to Neutral at UBS

UBS upped Chewy (NYSE:CHWY) to Neutral from Sell on Wednesday with a price target of $20.00 (from $25.00).

The analysts said they believe potential near-term challenges are now baked into the stock. While acknowledging the remaining "legitimate questions" about the company's long-term earnings power, they "see limited potential downside for at least the short run given the stock is trading at 0.6x EV/sales, well below its 2.3x historical avg."

They also believe Chewy's recent expansion into Canada "offers the potential to expand its customer base over the long-run," citing Google Trends data search activity. But they believe all of these tailwinds are balanced by the fact that the company "has already tapped into a significant portion of the domestic pet specialty profit pool, meaning incremental gains will likely be harder to harvest."

Shares were rising in the premarket, but reversed to about a 1% retreat, changing hands at $16.93 around midday.

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