Street Calls of the Week: Netflix downgrade; upgrade for Lockheed Martin

Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: downgrades for Netflix, Crocs and Etsy; upgrade for Lockheed Martin .

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Lockheed Martin

What happened? On Monday, JPMorgan upgraded Lockheed Martin (NYSE:LMT) to Overweight with a $518 price target.

What’s the full story? JPMorgan has observed that Lockheed Martin has not kept pace with the broader market, remaining unchanged year-to-date compared to an 8% rise in the market, and falling 5% over the past year while the market climbed 26%. The bank points to a combination of macroeconomic factors, such as the deceleration in defense budget growth and political disturbances, and specific company issues that have made the defense sector less attractive amidst a market buoyed by AI and other leading sectors.

Despite these headwinds, the defense industry recently received the FY24 budget it required, easing some concerns, and JPMorgan anticipates additional funding to support defense initiatives in Ukraine, Israel, Taiwan, and others. While political uncertainty is expected to continue, especially during an election year, the heightened geopolitical risk highlights the sector’s significance. JPMorgan suggests that any shift in market sentiment could favor defense stocks, with LMT positioned as a key indicator, potentially benefiting in relative terms.

Overweight at JPMorgan means “(over the duration of the price target indicated in this report, we expect this stock will outperform the average total return of the stocks in the Research Analyst’s, or the Research Analyst’s team’s, coverage universe)”

How did the stock react? Lockheed stock traded higher on the premarket headlines from $451.47 to $457.44, a gain of around 1.50%. Lockheed opened the regular session at $458.57 and closed at $453.08, a gain of 0.60%.

Crocs

What happened? On Tuesday, mid-morning at 10:05am Williams Trading downgraded Crocs (NASDAQ:CROX) to Hold with a $125 price target.

What’s the full story? Williams Trading has downgraded its rating for Crocs from ‘Buy’ to ‘Hold’, trimmed its estimates, and reduced the price target from $135 to $125. This decision follows recent checks indicating that the Crocs business is operating on, or slightly better than, plan. However, the firm’s checks also suggest that sales of HEYDUDE, while improving, particularly in men’s, are not robust enough to yield a year-on-year increase in 2024.

In addition, Crocs announced that HEYDUDE President, Rick Blackshaw, is stepping down effective immediately. Terence Reilly, current President of Stanley 1913 and former SVP & Chief Marketing Officer at Crocs, has been appointed as the new EVP & President of HEYDUDE, effective April 29th. While Mr. Reilly has demonstrated success at Stanley and fits into the culture at Crocs, Williams Trading believes it will take some time for HEYDUDE to regain momentum. The firm views it as challenging for Crocs stock to perform well until HEYDUDE sales can demonstrate sustainable growth.

Hold at Williams Trading means “The stock’s total return (price appreciation plus dividend yield) is expected to exceed more than 15% over the next 12-month investment horizon .”

How did the stock react? Crocs stock opened the regular session at $122.62. Shares rose and dipped into 10am. Once the downgrade hit, shares fell from $123.19 down to $120.27. Crocs closed at $120.68, a decline of 2.17%.

Beyond

What happened? On Wednesday, Maxim initiated coverage on Beyond (NYSE:BYON) at Buy with a $50 price target.

What’s the full story? Maxim’s optimistic outlook is driven by Beyond’s potential to leverage key trends identified in Maxim’s industry report, “Consumer Internet: 24 Trends for 2024,” which include international expansion, blockchain integration, and mobile technology adoption.

The firm will keep a close eye on the interest rate landscape, recognizing that lower rates could bolster the home e-commerce sector’s performance. Maxim’s endorsement reflects a confidence in Beyond’s strategic positioning to capitalize on these evolving market dynamics and drive growth.

Buy at Maxim means “Fundamental metrics and/or identifiable catalysts exist such that we expect the stock to outperform its relevant index over the next 12 months.”

How did the stock react? Beyond stock traded higher on the premarket headlines from $25.53 to $24.43, a gain of around 3.52%. Beyond opened the regular session at $24.31 and closed at $23.86, a gain of 1.27%.

Etsy

What happened? On Thursday, Morgan Stanley downgraded Etsy (NASDAQ:ETSY) to Underweight with a $55 price target.

What’s the full story? Morgan Stanley acknowledges that Etsy has been a major beneficiary during the COVID era, maintaining approximately 165% growth in Gross Merchandise Sales (GMS) since 2019. However, the bank believes Etsy is nearing market saturation, making it challenging to add new customer cohorts.

Despite attracting 57 million new buyers and reactivating 51 million since 2021, Etsy’s core GMS has declined by 5% year-over-year, with the total GMS from past buyers remaining flat. This decline is partly due to a 7% year-on-year decrease in GMS per buyer, impacted by a tough macroeconomic environment for discretionary purchases. Although Morgan Stanley models GMS acceleration on the back of an easing macro, it expects GMS to only reach a compound annual growth rate (CAGR) of approximately 3% from 2023 to 2026 due to the diminishing greenfield opportunity.

This leads the bank’s 2025/2026 GMS estimates to fall below consensus. Given the expectation that the majority of GMS growth will come from buyer growth, fueled by marketing, the firm sees an inherent trade-off between GMS growth and profitability. As a result, it finds it difficult to envision Etsy driving significant GMS growth and margin expansion simultaneously unless it can sustainably increase frequency.

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.”

How did the stock react? Etsy opened the regular session at $65.37 and closed around $67.15, a decline of 0.27% since Wednesday’s close.

Netflix

What happened? On Friday, Canaccord downgraded Netflix (NASDAQ:NFLX) to Hold.

What’s the full story? Canaccord states Netflix’s revenue benefited from robust member additions, driven by the expansion of its paid sharing offering. Profitability also outperformed guidance. Looking ahead, Q2 revenue aligns with expectations, while operating income guidance surpasses consensus.

Netflix provided FY24 revenue guidance of 13-15% year-on-year, slightly below consensus at the midpoint, and increased its FY24 operating margin guidance to 25% from 24%. Despite these mostly solid results and outlook, Canaccord sees limited growth catalysts for the next few quarters. Given that the stock is up approximately 90% over the last 12 months and about 25% year-to-date, the brokerage suggests that investors may be better off looking elsewhere for upside and is downgrading the stock to ‘Hold’.

Hold at Canaccord means “The stock is expected to generate returns from -10% to 10% during the next 12 months.”

How did the stock react? Netflix opened the regular session at $567.90 and closed at $555.04, a decline of 9% since Thursday’s close.