Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Pinterest, Editas Medicine, Gap, and Adobe, and a downgrade for PTC Therapeutics.
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What happened? On Monday, Stifel upgraded Pinterest (NYSE:PINS) to Buy with a $32 price target.
What’s the full story? Stifel’s analysts report that their checks have been relatively muted in terms of ad spend allocation, and this despite positive feedback on the company’s tech-stack improvements since Bill Ready became CEO. However, Stifel now believes the company’s native technology enhancements, along with the recent launch of its Amazon (NASDAQ:AMZN) partnership, are likely to boost its performance in the holiday season.
The analysts acknowledge that not all agencies and brands think Pinterest is the right platform on which to advertise their products, but they expect more brands to increase their spending on Pinterest over time.
Buy at Stifel means: “We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.”
How did the stock react? Shares rose from $25.92 to $26.79 on thin volume around 4AM New York time. PINS opened the regular session at $26.64 and closed unchanged, for a gain of 2.6% from the prior close.
Editas Medicine
What happened? On Tuesday, Citi upgraded Editas Medicine (NASDAQ:EDIT) to Buy with an $11 price target and opened a 30-Day Upside Catalyst Call.
What’s the full story? Citi sees more favorable risk/reward at Editas and attributes the upgrade to the recent 30% drop in Editas’ share price, which they think is unwarranted by any fundamental changes in the company’s outlook.
The analysts also identify two key catalysts that could drive near-term share upside for Editas.
The first one is this Tuesday's Food and Drug Administration advisory committee meeting for Vertex Pharmaceuticals' (NASDAQ:VRTX) proposed sickle-cell disease treatment, exa-cel (exagamglogene autotemcel), as the analysts believe this may have a positive readthrough for Editas’ proposed EDIT-301 gene-editing therapy. Citi also opened a positive 30-day Catalyst Watch.
The second catalyst is the expected update on EDIT-301 data by the end of 2023, possibly at the next American Society of Hematology (ASH) annual meeting in December.
Citi’s analysts expect the update to include a meaningful number of patients, allowing a more thorough evaluation of EDIT-301’s efficacy and safety profile than in prior updates with smaller sample sizes.
Buy at Citi means: “ETR [estimated total return] of 15% or more or 25% or more for High-risk stocks.”
How did the stock react? Shares jumped from $6.26 to $6.52 in thin trading around 5AM. EDIT opened the regular session at $6.64 and closed at $6.57, for a gain of 5.1%.
Gap Inc.
What happened? On Wednesday, Wells Fargo upgraded Gap (NYSE:GPS) to Overweight with a $16 price target.
What’s the full story? Wells analysts argue that the macro environment is likely weighing on the valuation of the entire discretionary sector, which is in a negative revision cycle and trading at trough multiples. However, Wells' team suspects Gap's valuation has declined to a greater extent than that of its peers, reaching historical lows of around 4x earnings before interest, taxes, depreciation and amortization (EBITDA) due to not only macro pressures, but also company-specific headwinds since late 2021.
Wells analysts believe the Street is underestimating the margin potential of GPS, as the company’s profitability is at a near-all-time low with a new leadership team taking over. The analysts expect Gap to improve its margin structure and deliver earnings upside in the future.
Overweight at Wells Fargo means: “Total return on stock expected to be 10%+ over the next 12 months. BUY.”
How did the stock react? Shares jumped from $12.39 to $12.75 in thin trading just after 5AM. GPS opened the regular session at $12.87 on a 1,000-lot print and closed at $13.06, for a gain of 5.3%.
Adobe
What happened? On Wednesday night, DA Davidson upgraded Adobe (NASDAQ:ADBE) to Buy with a $640 price target and added it to its new Best-of-Breed Bison list, introduced by the brokerage a couple weeks ago.
What’s the full story? For its “Best-of-Breed Bison” list, DA Davidson applies 12 evaluation criteria to identify the best companies in the market - and they think that ADBE meets all of them.
DA’s analysts highlight ADBE’s market leadership in a large and growing total addressable market (TAM), its robust and predictable revenue streams, its sustainable competitive advantage, its exceptional financials, its powerful brand, and its shareholder-oriented management team. The analysts also use mobile app data analysis to show that ADBE’s new artificial intelligence (AI) features are driving user growth, making it one of the few companies that can claim that.
DA’s analysts reviewed Sensor Tower data to show that the addition of AI product Firefly into the mobile apps has led to higher user growth and usage for ADBE’s Express and Creative Cloud apps. They further believe that ADBE’s ease of access across platforms, including mobile, is a differentiating capability in the market - which, in turn, attracts more casual creators.
Buy at DA Davidson means: “Expected to produce a total return of over 15% on a risk adjusted basis over the next 12-18 months.”
How did the stock react? Shares gained a bit during after hours and premarket trading on the headline. However, Adobe lost 1.3% during Thursday's session and finished the week negative, sliding 6.1% over those five trading sessions from the prior week's close to end at $508.12.
PTC Therapeutics
What happened? On Friday, Citi downgraded PTC Therapeutics (NASDAQ:PTCT) to Sell with a $17 price target.
What’s the full story? Citi has lowered its rating on PTC to Sell from Neutral, as it sees increased uncertainty and risk for the biotech company. Citi’s analysts point out that PTC’s new royalty agreement with Royalty Pharma (NASDAQ:RPRX) improves its near-term financial position, but reduces its future royalties for its Evrysdi spinal muscular atrophy treatment, which they considered one of the company’s key growth drivers.
Citi’s analysts also note that PTC (NASDAQ:PTC) announced new regulatory and development headwinds for several of its pipeline programs, such as sepiapterin (for treatment of phenylketonuria [PKU], an amino acid disorder), vatiquinone (for treatment of nerve disorder Friedreich's ataxia), and Upstaza (for treatment of a neutransmitter disorder, severe aromatic L-amino acid decarboxylase [AADC]).
These headwinds include requests for additional trials and program timeline delays, which lower the chances of success for these programs. Citi’s analysts adjust their probabilities of success for various programs accordingly, resulting in a lower calculated valuation for PTC.
Citi lastly mentioned the existing overhang regarding a negative opinion on PTC's muscular dystrophy treatment, Translarna, from EU regulators (the European Medicines Agency's Committee for Medicinal Products for Human Use [CHMP]). Citi said this could lead to market withdrawal in the EU if not reversed. Citi’s analysts see binary risk to Translarna and increased uncertainty across PTC’s pipeline programs.
Sell at Citi means: “Sell for negative ETR [expected total return]”
How did the stock react? Shares were already getting hammered following a weak earnings report Thursday. The rating change further pressured the shares and contributed to the total 22.7% Friday drop shares underwent from Thursday’s close. PTCT ended the week at $18.51.
