Cloudflare (NET) and Domino’s (DPZ) are receiving upgrades from Seeking Alpha analysts due to strong performance metrics and strategic initiatives, respectively, while Goldman Sachs (GS) and Nexstar Media (NXST) face downgrades amid valuation concerns and regulatory uncertainties.
Upgrades
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Cloudflare (NET): Upgrade from Sell to Neutral by Gary Alexander. The upgrade hinges on Cloudflare’s impressive revenue growth and strategic public sector wins, despite its high valuation multiples.
“Cloudflare has been able to sustain a massive rally on the basis of its revenue multiples alone. And to that end, growth acceleration and marquee public sector deals are quite impressive. At the same time, if the market enters into more of a risk-off territory, Cloudflare has very thin FCF and operating margins to stand on (the stock sits at over a >100x multiple of FCF).”
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Domino’s Pizza (DPZ): Upgrade to Buy by Gary Alexander. This upgrade results from strong Q3 results and market share gains, attributed to effective promotions and operational efficiency.
“Management notes as well that the success of recent promotions plus menu changes have improved profitability for franchisees, which is important for franchisees to be encouraged to continue growing their store footprints.”
Downgrades
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Goldman Sachs (GS): Downgrade from Buy to Hold by Bay Area Ideas. The analyst cites Goldman’s valuation concerns, despite the company’s robust growth in investment banking and profitability metrics.
“Yes, Goldman Sachs is seeing continued top line growth acceleration. Yes, they are seeing a strong rebound in investment banking activity. And yes, their profitability is looking very good right now. However, considering the fact that their P/B ratio is shown to be at a ~90% premium to the Financials sector, I would say that a lot of this good news is already getting priced in.”
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Nexstar Media Group (NXST): Downgrade to Hold by Ian Bezek. The downgrade reflects uncertainty surrounding the Tegna deal and weaker-than-expected earnings.
“The Tegna deal could be a game-changer for Nexstar. If the deal goes through and management can wring out those $300 million in projected annual synergies, that would make Nexstar a compelling buy even at today’s higher starting share price. However, I don’t have a high degree of confidence that that deal will close as planned without significant regulatory pushback.”