Street Call of the Week

This week's analyst ratings included a downgrade of Reddit by Wells Fargo to Equal-weight with a $115 price target, citing concerns over AI-driven search competition impacting user engagement and ad revenue, forecasting significant revenue and EBITDA shortfalls in the coming years. Conversely, Evercore upgraded Hewlett Packard Enterprise to Outperform with a $22 price target, highlighting multiple catalysts for upside, including the potential Juniper deal and margin improvements. HSBC downgraded UnitedHealth Group to Reduce with a $270 price target, citing medical loss ratio pressures, policy risks for Optum Rx, and declining ROEs. Stifel upgraded Planet Fitness to Buy with a $120 price target, noting stabilizing gross joins and potential growth catalysts from pricing strategies and policy changes. Finally, JPMorgan upgraded Waste Management to Overweight with a $277 price target based on anticipated revenue and EBITDA growth driven by the Stericycle acquisition and sustainability initiatives.

Analysis

Wall Street analysts presented a mixed outlook on several key companies this past week. Reddit (RDDT) was downgraded by Wells Fargo to Equal-weight with a $115 price target, primarily due to anticipated pressure on its user base and advertising revenue from Google's AI-driven search enhancements. Wells Fargo projects Reddit's ad revenue to fall 6% and 14% below consensus in 2026 and 2027 respectively, with EBITDA also trailing by 2% and 15%. The bank also reduced its three-year logged-in Daily Active User (DAU) growth outlook for Reddit from 13% to 10%, citing concerns that achieving Meta-like monetization levels is unrealistic and that its data licensing business poses long-term risks to community health and ad monetization. Conversely, Hewlett Packard Enterprise (HPE) received an upgrade to Outperform from Evercore, with a $22 price target and potential upside to $30. This optimism is based on several scenarios, including the successful closure of the Juniper deal potentially driving double-digit EPS growth, or significant margin improvements through cost-cutting measures. UnitedHealth Group (UNH) faced a downgrade to Reduce by HSBC with a $270 price target, stemming from concerns over medical loss ratio (MLR) pressures expected in 2025 and potentially 2026, underappreciated policy risks for its Optum Rx division, and declining ROEs justifying a lower valuation multiple. HSBC anticipates prolonged earnings cuts as new leadership navigates Medicare Advantage complexities. Stifel upgraded Planet Fitness (PLNT) to Buy with a $120 price target, citing stabilizing gross membership joins and catalysts such as a potential Black Card price increase, which could boost comparable sales by 3-4%, and the potential for gym memberships to become HSA-eligible. Lastly, JPMorgan upgraded Waste Management (WM) to Overweight with a December 2025 price target of $277. The bank expects WM's valuation gap with peers to narrow, driven by high single-digit revenue and high single-digit to low double-digit EBITDA growth targets over the next five years, supported by synergies from the Stericycle acquisition and accelerating sustainability initiatives, despite near-term skepticism.

Key Decisions for Investors

• For Reddit (RDDT), investors should closely monitor user engagement metrics, particularly logged-out user trends, and the tangible impact of AI search competition on advertising revenue and data licensing strategy before making new commitments.
• Investors in Hewlett Packard Enterprise (HPE) should assess the progress of the Juniper acquisition and internal cost-cutting initiatives, as these are key to realizing the multiple upside scenarios outlined by Evercore.
• Regarding UnitedHealth Group (UNH), investors may consider reducing exposure or adopting a cautious stance given the highlighted risks an_d await greater clarity on future earnings guidance and the management of MLR pressures and policy changes.
• For Planet Fitness (PLNT), the stabilizing membership trends and potential pricing power present an opportunity, and investors should watch for developments regarding HSA eligibility for gym memberships as a significant growth accelerant.
• Investors considering Waste Management (WM) should evaluate its execution on integrating Stericycle and realizing synergies, alongside progress in its renewable natural gas projects, which are crucial for achieving targeted growth and valuation re-rating.