Recent analyst actions include notable calls on stocks including Palantir Technologies (PLTR) and Morgan Stanley (MS) receiving upgrade. On the downside, Johnson & Johnson (JNJ) is being downgraded by Mike Zaccardi on valuation concerns following a 50% rally, and Tripadvisor (TRIP) is cut to Sell by Gary Alexander due to deteriorating fundamentals and competitive pressures.
Upgrades
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Palantir Technologies (PLTR): Upgrade Hold to Buy by Envision Research. The analyst points to a drastic slowdown in insider selling activity and upcoming Q4 earnings catalysts, including AI-driven government contracts and potential defense budget increases, as reasons for the more bullish outlook.
“The pace of insider selling has slowed drastically, a change too large to ignore in my view. Combined with the latest EPS revisions and business development (especially with the potential defense budget increase), I now see a more skewed return/risk curve for PLTR now, leading to a rating upgrade to buy.”
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Morgan Stanley (MS): Upgrade Sell to Hold by Bay Area Ideas. The analyst acknowledges being overly critical previously, citing strong Q4 fundamentals with 10% revenue growth and 21% EPS growth, though valuation concerns prevent a more bullish rating.
“In hindsight, my sell rating was too harsh for a solid firm like Morgan Stanley. As stated just above, despite some hiccups here and there in their Q4, the company’s fundamentals are looking good. However, ‘good’ may not be enough to fully justify the current valuation. Morgan Stanley is now at its most expensive valuation in recent memory.”
Downgrades
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Johnson & Johnson (JNJ): Downgrade Buy to Hold by Mike Zaccardi, CFA, CMT. The analyst cites stretched valuation following a 50% rally over the past 12 months, with shares now trading above 21x forward EPS and offering limited margin of safety despite solid fundamentals.
“JNJ now trades at more than 21 times expected EPS. That’s a near-market multiple and more than a full turn pricier compared to its long-term average. I simply think that’s stretched. … If we assume a generous 20x multiple and $11.50 of current-year non-GAAP EPS, then shares should trade near $230. That just doesn’t leave much of a margin of safety anymore.”
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Tripadvisor (TRIP): Downgrade Hold to Sell by Gary Alexander. The analyst points to deteriorating fundamentals and loss of competitiveness in the OTA market, with Tripadvisor’s core segment growth turning negative while peers like Expedia, Booking Holdings, and Airbnb accelerate bookings growth.
“It’s not difficult here to grasp that the three main OTA companies are seeing accelerating bookings while Tripadvisor has shown sharp deceleration to a negative y/y decline. Tripadvisor has a problem with market share, not with the overall travel economy. … This is no longer a stock worth holding onto: lock in losses and move on elsewhere.”