Always pay close attention to new stock price targets from firms, like Needham.
While the firm won’t always get it right, price upgrades are still worth paying attention to.
Perhaps they’re seeing favorable industry trends that are impacting a covered stock. Maybe the financial health of a stock based on earnings or guidance is improving. Or, perhaps, they liked what they heard in a meeting with management. Whatever the case, it’s a good idea to look into the reasoning for a price upgrade.
However, never use new stock price targets as your sole reason for buying.
For one, there’s no such thing as a perfect analyst. Two, do your due diligence with technical and fundamental analysis. After all, the last thing you want to do is buy into a stock that’s become excessively overbought. Third, look at how other firms rate the same stock. If Needham is bullish on a stock, but four others rate is as a sell, look into why.
With that in mind, let’s take a quick look at Needham’s new price targets.
Wix.com (WIX)
Needham just raised its price target on cloud-based development stock, Wix.com (NASDAQ:WIX) from $190 to $200, with a buy rating. All after the company increased its free cash flow guidance, driving Needham’s free cash flow estimates even higher.
The firm added, “We think WIX is still early in a product-driven growth cycle with the launch of WIX studio, which drove bookings acceleration in 2Q and should lead to broad revenue acceleration in ’25E and continued FCF margin expansion,” as quoted by Investing.com.
Helping, WIX also just approved a $200 million share buyback program. It also crushed earnings with earnings per share of $1.67, which beat by 31 cents. Revenue of $435.7 million, up 11.7% yearly, beat by $1.95 million.
It increased its full-year bookings outlook to a new range of $1.802 billion to $1.822 billion, representing 13% to 14% growth. Prior guidance called for growth of between 12% and 14%. It also expects to generate free cash flow of $460 million to $470 million, or 26% to 27% of revenue for 2024 from prior calls for free cash flow of $445 million to $455 million, or 26% of revenue.
However, I wouldn’t buy the WIX stock just yet.
While it’s fundamentally strong, it’s technically overbought, failing at triple-top resistance. Wait for it to bottom out before buying.
F5 Inc. (FFIV)
Needham also raised its price target on F5 (NASDAQ:FFIV) to $235, with a buy rating.
F5 posted earnings per share of $3.36, which beat analysts’ estimates by 39 cents. Revenue of $695.5 million, down 1% year over year, beat by $9.5 million. For the fourth quarter, F5 expects to deliver revenue ranging from $720 million to $740 million compared to expectations of $717.04 million. It is also issued guidance for EPS of $3.38 to $3.50 compared to estimates of $3.33.
“Macro pressure and relatively cautious management guidance seemed to have put F5 into the penalty box ahead of its Q3 results, but instead, the company solidly beat estimates and offered guidance well above the Street expectations,” as noted by TheFly.com. The firm also liked F5’s pipeline strength, closure rates, and software growth.
I’d wait to buy FFIV on pullbacks, too. After gapping higher on earnings, the stock has been technically overbought on relative strength index, moving average converganced/divergance (MACD), and the Williams percent range (Williams’ %R).
Taiwan Semiconductor (TSM)
Needham analysts also have new stock price targets on oversold shares of Taiwan Semiconductor (NYSE:TSM) to $210 from $168 with a buy rating.
“The firm anticipates that TSMC will increase its revenue growth forecast for 2024 from the previously stated ‘low- to mid-20s’ to ‘mid- to high-20s,’ as noted by Investing.com.
Analysts at UBS also reiterated its buy rating on the stock with a $150 price target. According to UBS, “after a series of customer discussions and more supply chain work, they were making slight adjustments to their 2025 EPS model to $4.87 from $4.95,” as noted by Seeking Alpha.
TSM said its July 2024 revenue jumped 44.7% yearly thanks to growing demand for its artificial intelligence chips. Plus, it reported 40% revenue growth in its second-quarter earnings report and raised its revenue outlook. For the third quarter, TSM now expects to see revenue between $22.4 billion and $23.2 billion, which is better than expectations for revenue of $22.47 billion.
Technically, wait to buy TSM, too. After rebounding from a low of $133.57 to $167.19, it’s now struggling at its 50-day moving average. However, if TSM can break above its 50-day, it could refill its gap around $185.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.