Micron Technology, Inc. NASDAQ: MU, Lululemon Athletica Inc. NASDAQ: LULU and CrowdStrike Holdings Inc. NASDAQ: CRWD made MarketBeat’s list of most upgraded stocks in the past 90 days. Does this mean you should automatically add them to your portfolio?
To answer that, let’s examine exactly what analyst actions, like upgrades or downgrades, indicate.
Stocks receive analyst coverage for several reasons, not the least of which is potential business from the firm being covered. That doesn’t mean they’re not objective, but regulations require disclosure of any conflict of interest.
That said, no single upgrade or downgrade should influence an investor’s stock purchases. Analyst reports and recommendations are widely distributed to institutional clients who can take a multi-million dollar stake in a company with one buy decision, but they can still apply to individual investors.
While analyst reports are well-researched to a level that almost no individual investor is capable of, due to time, resources and knowledge, it’s still advisable to use caution even when Wall Street is bullish on a stock.
That said, here’s a look at what the professional stock researchers see in Micron, Lululemon and CrowdStrike.
Micron
You’ll find Micron Technology at the top of MarketBeat’s list of Momentum Alerts. The memory storage chipmaker has been trending higher since early 2023.
That rally came despite a decline in earnings in 2023, and another expected this year, although the loss is forecast to narrow dramatically.
So what’s going on? Sales of memory chips skidded industry-wide in 2022, although analysts believe that situation has reversed itself.
As smartphone and PC sales slowed in 2022 and 2023, hardware manufacturers also reduced the pace of chip orders. These days, gear sales are picking up, and manufacturers have worked their way through existing memory chip inventories, meaning that they’re restocking their chip supplies once again.
Analysts are recognizing the turnaround; hence the upgrades. Micron analyst forecasts show a consensus view of “hold,” with 16 analysts boosting their price targets or upgrading ratings since the company’s most recent earnings report. Another reiterated its “outperform” rating.
For example, KeyCorp’s John Vinh lifted his price target to $100 from $90, saying in a note, “[P]ricing is expected to improve through FY24, as industry supply is expected to be below bit demand for NAND/DRAM.”
Lululemon
Right behind Micron on the most upgraded list is Lululemon Athletica, one of the most recent additions to the S&P 500, currently tracked with consumer discretionary stocks in the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY.
The Lululemon chart shows the athletic clothing maker pulling back in the first week of January, along with the broader market, after rallying to a new high on December 29. The pullback in this stock, as with many others, could offer a buy opportunity after many equities became extended in the fourth quarter.
Lululemon analyst forecasts show a “moderate buy” rating, with Wall Street forecasting double-digit earnings growth this year and next. Revenue growth remains in the high teens. That rate has been slowing but still looks good for a well-established large cap.
Analysts and investors have been getting behind the company’s expansion into new geographic markets, and the company has a competitive advantage due to its strong position in the “athleisure” market. This should allow it to maintain its premium pricing.
CrowdStrike
Crowdstrike is the recipient of 26 analyst upgrades in the past 90 days, as investors piled into the stock, sending it 142% higher last year.
That might sound pretty frothy, and indeed, the stock is joining the SPDR S&P 500 ETF Trust NYSEARCA: SPY and other technology stocks in the Technology Select Sector SPDR Fund NYSEARCA: XLK taking a breather as the new year gets underway.
The CrowdStrike chart shows the stock holding well above its 50-day moving average, meaning the selling could be algorithm-driven, rather than a sign of investors losing confidence in the cybersecurity specialist.
In a January 4 research note on the cybersecurity industry, Bank of America analysts maintained their “buy” rating on CrowdStrike, but said they saw more upside potential in 2023 underperformers, namely Fortinet Inc. NASDAQ: FTNT and CyberArk Software Ltd. NASDAQ: CYBR.
Bank of America analysts also said they believed CrowdStrike may become overvalued this year. Analysts’ base case assumption calls for continued strong growth in endpoint detection and response, a technology that monitors endpoints for threats.
B of A also expects CrowdStrike to expand its cloud security and identity protection businesses.
Wall Street’s consensus view of CrowdStrike earnings calls for an increase of a whopping 92% this year, to $2.95 a share. In 2025, that’s expected to grow by another 26% to $3.72 per share.
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