AMD downgraded to Market Perform due to its high valuation: 4 big analyst cuts

Investing.com — Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Advanced Micro Devices, Home Depot , Lowe’s, and Lululemon Athletica.

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AMD downgraded to Market Perform

Northland Capital Markets downgraded Advanced Micro Devices (NASDAQ:AMD) to Market Perform from Outperform, as reported in real-time on InvestingPro.

The analysts noted that the growth in the AI chip market in 2023 was driven by factors such as the popularity of ChatGPT, price increases, double ordering, and stockpiling by Chinese companies.

Looking ahead, the analysts forecast AI chip revenue to reach $125 billion in 2027, with AMD potentially earning $16B in AI revenue and capturing a 13% market share. However, they believe that AMD's current share prices already reflect much higher AI revenue expectations for 2027.

Oppenheimer downgrades Home Depot and Lowe’s

Oppenheimer downgraded Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) to Perform from Outperform, adopting a more cautious short-term view of the home improvement retail sector.

While maintaining a positive outlook on the long-term potential of the sector and its leading players, the analysts expressed concern that the market might be overly complacent towards Home Depot and Lowe's. The analysts suggested that the current stock prices may not fully reflect the potential for ongoing fundamental challenges at these companies, especially in the early part of fiscal 2024.

Upcoming initial 2024 guidance from HD, LOW could prove unfavorable catalysts for shares. Investors looking to play prospects for strengthening trends in the sector, and at HD and LOW, beginning later in 2024, are likely to be presented better entry points, in coming weeks and months. Our price targets for HD and LOW go to $345 and $230 (from $360 and $275).

Lululemon Athletica cut at HSBC

HSBC downgraded Lululemon Athletica (NASDAQ:LULU) to Hold from Buy with a price target of $500.00.

The bank remarked on Lululemon's significant growth outperformance in the sporting goods industry over the past 15 years, citing a constant FX sales CAGR of 27% from 2008 to 2022. This rate is notably triple the combined 9% sales CAGR of Nike (NYSE:NKE), Adidas (OTC:ADDYY), and Puma. In more recent times, Lululemon's sales growth continued to outpace its peers, with a 32% increase in 2022 and an estimated 21% growth for 2023, compared to the peer average of 12% and 4%, respectively.

However, the analysts pointed out that this exceptional performance is already reflected in Lululemon's share price, which reached an all-time high on Jan 1, after a roughly 60% increase in 2023. Looking ahead, the analysts anticipate a narrowing of the sales growth outperformance gap due to expected growth moderation. For 2024-2025, they project Lululemon's sales CAGR at constant FX to be 13%, which only modestly outperforms the peer average by 5%.

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