Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.
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Cloudflare Inc .
What happened? On Monday, Morgan Stanley upgraded Cloudflare (NYSE:NET) to Overweight with a $130 price target.
*TLDR: Strong 2025 expected due to product cycles and Edge AI. Cloudflare is projected to sustain 28% revenue CAGR.
What’s the full story? Morgan Stanley cited multiple product cycles, growing Edge AI contributions, and a fully ramped enterprise sales force as key factors for a strong 2025, with potential revenue growth acceleration throughout the year. The analysts project Cloudflare sustaining a 28% revenue CAGR from CY23-28e, reaching ~$5B in ARR with >25% FCF margin.
The valuation is based on a 50X EV/FCF multiple, aligning with large-cap peers, and implies ~18X EV26e sales. In a bullish scenario, higher revenue from Edge AI inference could drive >30% revenue CAGR through 2028, positioning Cloudflare as a rare 30%+ topline grower in enterprise software at scale.
Overweight at Morgan Stanley means “The stock's total return is expected to exceed 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.”
CVS Health Corp.
What happened? On Tuesday, Deutsche Bank upgraded CVS (NYSE:CVS) to Buy with a $66 price target.
*TLDR: Deutsche Bank upgraded CVS due to earnings potential. MCO segment and leadership changes influenced the upgrade.
What’s the full story? Deutsche Bank noted that CVS earnings and the business’s multiple appeared to be at trough levels. The analysts believed CVS had undertaken significant steps towards enhancing profitability. A crucial factor in their analysis was a detailed examination of the company's Managed Care Organization (MCO) segment, which they concluded had the potential for an earnings recovery that could surpass market expectations.
The analysts also emphasized that the investment thesis was bolstered by several factors, including a recent change in leadership and sustained strength in its Pharmacy Benefit Management (PBM) services. They noted a controlled decline in the pharmacy segment, which, combined with a compelling risk/reward scenario, supported their decision to upgrade the stock rating.
Buy at Deutsche Bank means “Based on a current 12- month view of TSR, we recommend that investors buy the stock."
American Airlines
What happened? On Wednesday, Seaport upgraded American Airlines (NASDAQ:AAL) to Buy with a $20 price target.
*TLDR: Seaport upgraded AAL on 2025 revenue improvement expectations.
What’s the full story? Seaport upgraded American Airlines Group Inc. from Neutral to Buy, citing confidence that the airline could improve revenue performance in 2025 based on first-quarter schedules and a recent credit card deal. The analysts projected a positive shift in the stock's risk/reward profile and set a new price target of $20, reflecting a boosted outlook for 2025.
During American Airlines' 2024 Investor Day, management emphasized core strengths, such as robust performance in key markets, premium revenue, and digital modernization. They highlighted operational excellence, effective cost management, and free cash flow as critical elements for potential margin expansion and balance sheet restoration. However, Seaport noted that these factors were excluded from their model due to the airline's consistent revenue misses in 2024.
Buy at Seaport means “The investment outlook and risk/reward over the following 12 months are favorable on an absolute basis and relative to the peer group."
Willis Towers Watson
What happened? On Thursday, Raymond James upgraded Willis Towers Watson (NASDAQ:WTW) to Strong Buy with a $400 price target.
*TLDR: Raymond James favors WTW’s strategic success and growth potential. Analysts raised EPS estimates amidst efficiency and margin expansion expectations.
What’s the full story? Raymond James praises WTW’s effective implementation of its "Grow, Simplify, and Transform" strategy over the last three years. This strategic approach resulted in accelerated organic revenue growth, $450 million in cost savings, and an adjusted operating margin expansion of 310-360 basis points from 2021 to 2024. During a recent Investor Day, management revealed a new strategy aimed at boosting efficiency and optimizing the portfolio, with expectations for mid-single-digit organic growth and margin expansion in the Health, Wealth & Career (HWC) segment for fiscal year 2025.
The analysts noted that WTW's Risk & Broking (R&B) segment is projected to achieve mid-to-high single-digit organic growth with 100 basis points of margin expansion annually for the next three years. Raymond (NS:RYMD) James raised its 2025 and 2026 operating EPS estimates to $17.55 and $18.55, respectively, while maintaining the 2024 estimate, accounting for the Tranzact divestiture and expected improvements in free cash flow conversion. Although acknowledging risks such as potential quarterly volatility and pension liability challenges, the analysts expressed confidence in WTW's ability to outperform peers in organic growth and margin improvements while also considering inorganic growth opportunities.
Strong Buy at Raymond James means “The security is expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months."
Altria
What happened? On Friday, BofA upgraded Altria (NYSE:MO) to Buy with a $65 price target.
*TLDR: BofA highlighted Altria's favorable outlook, citing tax benefits. Analysts noted strong shareholder returns.
What’s the full story? BofA identified several key themes that they believed could bolster investor sentiment and lead to positive earnings revisions for Altria Group Inc.. Among these were potential benefits from Republican administration priorities like lower corporate taxes and tariffs, improving economic conditions for lower-income consumers which could enhance the convenience channel, and the net benefits of Altria’s new $600 million "Optimize & Accelerate" cost savings program. Additionally, the analysts noted that a rising market might continue to benefit value stocks.
With Altria's stock trading at its average valuation since mid-2017 and positive earnings potential, the analysts saw a favorable risk-reward scenario leading into 2025. They also highlighted management's commitment to shareholder returns through a progressive dividend policy, currently yielding over 7%, and ongoing buybacks. BofA set a price objective of $65, based on 11.5 times their 2026 EPS estimate of $5.65, marking a 5-10% premium over its average price-to-earnings ratio since July 2017, when the FDA announced a more aggressive regulatory plan.
Buy at BofA means “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.”
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