NVIDIA (NASDAQ: NVDA) isn’t the most upgraded stock at the end of the Q3 earnings reporting season, ending a trend that has been in place for nearly two years. While potentially bad news for the market, the reason why should give investors hope that the rally in equities is broadening and the S&P 500 will sustain its uptrend. NVIDIA, now ranked 12th on MarketBeat’s list of Most Upgraded Stocks, has been supplanted by consumer names and companies well-positioned for the second wave of AI. The second wave of AI is the implementation of AI models and applications, a segment of the industry expected to grow faster and be larger than infrastructure, which was the first wave.
Walmart Emerges as the Most Upgraded Stock Following Q3 Earnings Season
Walmart (NYSE: WMT) is the most upgraded stock from the Q3 earnings reporting season. The company received 38 positive revisions or upgrades over the last 90 days, 16 since the Q3 results were released. Activity since the release includes a single downgrade to Hold, but the $91 price target aligns with the broad consensus in mid-December. The consensus aligns with the market price but is rising in 2024 because of the revisions trend, up 50% for the year and 15% since the Q3 release with most fresh targes above it. The revision trend leads to a new all-time high and the potential for a move to $115 or higher.
The reason why is performance. Walmart continues to prove its leadership position, outgrowing its competition while taking market share. Results in 2024 include persistent outperformance, solid margin, improving guidance, and sufficient cash flow for robust capital returns. The capital return includes the dividend and share buybacks that offset share-based compensation and reduce the count incrementally compared to the prior year. The outlook for 2025 is for growth, cash flow trends, and capital return to continue. Among the catalysts for the stock price is the failed merger of Kroger (NYSE: KR) and Albertson’s (NYSE: ACI), which leaves Walmart’s grocery business untouched and safely behind its moat.
Meta Platforms: Moves Up Into 2nd Position
Meta Platforms (NASDAQ: META) is not a newcomer to the most upgraded stock list but has moved to the 2nd position. The stock received 37 positive revisions during the quarter, 19 after the Q3 release. Highlights from the Q3 release include better-than-expected 19% top-line growth and leveraged gains on the bottom line aided by AI.
AI is helping to drive engagement and monetize traffic across the Meta Platforms family of apps, including Facebook, and its impact is expected to grow. The only bad news from the report is that AI spending is expected to ramp up in 2025, but it is offset by the long-term gains the investment is expected to drive. Meta is also deepening its partnership with Oracle, using the Oracle cloud to train its Llama AI models while Oracle embeds it into its services.
Analysts rate Meta Platforms as a Moderate Buy and see it advancing slightly at the consensus. However, the consensus target is rising in 2024, up nearly 100%, and the revision trend is still positive. The recent targets lead to the high-end range near $800, roughly 30% upside from mid-December price points.
Salesforce: A Force to Be Reckoned With
Salesforce (NYSE: CRM) is among today's best-positioned AI service companies. The business has used data mining and machine learning since its inception and has built on its leadership position. Today, Salesforce is the #1 platform for integrated CRM services, allowing businesses to generate, store, track, and utilize their data while improving efficiency and keeping customers happy.
Highlights from Q3 include mixed results relative to consensus forecasts. Still, the bar was set high, and sustained growth, leveraged bottom-line results, cash flow, a fortress balance sheet, and capital returns offset weaker-than-expected earnings. Salesforce buys shares and now pays a dividend. The company joined the ranks of wannabe Dividend Aristocrats, initiating a token distribution early in the year. The payout is worth about 12% of the earnings, which leaves ample room for annual increases, which may run in the double-digit range because of earnings growth.
Regarding the analysts, Salesforce stock received 37 positive revisions in Q4, 22 since the Q3 results were released. The consensus target implies a low-single-digit increase from the $355 level but is rising, up more than 50% in the last year and 15% in December, with revision leading to higher levels. The high-end range puts this market near $450 in 2025, another 30% upside.
