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Southwest Airlines

What happened? On Monday, JPMorgan downgraded Southwest Airlines (NYSE:LUV) to Underweight with a $25 price target.

*TLDR: JPMorgan downgrades Southwest on overvaluation and limited upside. Analysts see margin challenges, lagging United’s performance.

What’s the full story? JPMorgan downgrades Southwest Airlines to Underweight, citing its inflated valuation premium as untenable. The analysts maintain their $25 year-end 2025 price target but argue Southwest’s best days for margins and return on invested capital are behind it. Even as Elliott Management pressures the airline toward a turnaround, the analysts see the path to reclaiming industry-leading profitability as herculean. At 15x and 13x projected 2025 and 2026 earnings, respectively, Southwest trades at a significant premium to peers, leaving little room for upside.

The analysts question who, beyond Elliott, might drive incremental buying. Since Elliott’s involvement became public, Southwest shares have risen just 10%, lagging United Airlines’ 74% surge and matching the S&P 500’s gain. Southwest’s valuation, combined with its operational challenges, leaves the analysts skeptical of its ability to deliver superior returns.

Medtronic

What happened? On Tuesday, Citi upgraded Medtronic (NYSE:MDT) to Buy with a $107 price target.

*TLDR: Citi upgrades MDT on emerging growth catalysts. Key drivers include ablation, RDN, and robotics.

What’s the full story? Citi upgrades MDT to Buy from Neutral as growth catalysts emerge. The bank notes that while FY3Q25 revenue of $8.29B (up 4.1% y/y organic) slightly missed consensus, EPS of $1.39 exceeded expectations. The stock initially dropped 7% but rebounded as the market focused on key drivers: Cardiac Ablation Solutions surged 22% y/y, driven by PulseSelect and Sphere-9 with Affera, offsetting cryo declines; renal denervation (aka RDN) awaits a CMS National Coverage Determination by October 2025, with ~98% of 70+ comments supporting the technology; and the Hugo surgical robot is nearing an FDA submission for urology applications.

The bank sees these initiatives as pivotal for MDT’s growth trajectory, with management’s strategic execution instilling confidence. Despite short-term volatility, the underlying momentum in high-growth segments positions MDT for sustained outperformance. Citi believes the market is beginning to price in these opportunities, making the stock an attractive buy.

Arista Networks (NYSE:ANET)

What happened? On Wednesday, UBS upgraded Arista Networks to Buy with a $115 price target.

*TLDR: UBS upgrades Arista, sees robust data center growth. Hyperscalers’ investments drive Arista’s upside potential.

What’s the full story? UBS' optimism stems from robust data center capital expenditure growth, projected at a 25% compound annual rate through 2027. Key metrics—purchase commitments, deferred revenue, and finished goods inventory—accelerated last quarter, signaling that Arista’s 2025 revenue guidance of 17% is likely conservative.

UBS forecasts 19% growth, with potential to approach 25%. At 35x and 28x its 2025 and 2026 estimated earnings per share of $2.51 and $3.00, respectively, the bank sees a favorable risk-reward profile.

Arista’s revenue is heavily concentrated among “Cloud Titans,” with Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) accounting for over 10% of sales annually since 2022. Oracle (NYSE:ORCL), a smaller customer, saw its revenue nearly triple in 2024. As hyperscalers aggressively invest in front-end and AI-driven back-end infrastructure, Arista stands to benefit, given its established technology footprint with these clients.

UBS expects hyperscalers’ data center capex to surge over 40% in 2025 before moderating to around 30% in 2026 and 2027, providing a durable tailwind despite slight revenue recognition lags.

Walker & Dunlop

What happened? On Thursday, Keefe Bruyette & Woods upgraded Walker & Dunlop (NYSE:WD) to Outperform with a $105 price target.

*TLDR: KBW upgrades WD, sees rent growth recovery. Multifamily demand rebound boosts WD’s outlook.

What’s the full story? KBW upgrades WD to Outperform, citing two pivotal factors that could propel the stock: improving multifamily rent growth through 2026 and pent-up demand for acquisitions and refinancing that has built since 2022. The analysts note that WD, a pure-play multifamily brokerage and services firm, has lagged its CRE brokerage peers this year and over the past two years. This underperformance stems from higher-for-longer interest rates, which suppressed transaction volumes and servicing growth. Though rate pressures have eased, uncertainty around GSE privatization persists; however, KBW believes the status quo or stable GSE multifamily share is the more likely outcome.

Trading at 13-15x cash EPS for 2025-2026, WD offers an attractive entry point as the outlook brightens. The analysts expect accelerated rent growth and a rebound in transaction activity to drive momentum for the company, positioning it for a recovery. With these catalysts on the horizon, KBW sees compelling upside potential for WD.

Hawaiian Electric

What happened? On Friday, Evercore upgraded Hawaiian Electric (NYSE:HE) to Outperform with a $14 price target.

*TLDR: Evercore upgrades HE, cites settlement strength and undervalued shares. Legislative progress and credit upside bolster investment case.

What’s the full story? Evercore sees Hawaiian Electric in a stronger position than during its previous comparable valuation. The brokerage argues the market underappreciates the Hawaii Supreme Court’s decision and the low odds of insurers disrupting the settlement.

HE’s improved standing stems from a definitive settlement agreement, a bolstered balance sheet post-debt reduction, robust capital market access, enhanced liquidity, and potential legislative support. Shares trade at a 45% discount to forward EPS, presenting an attractive opportunity.

Insurers face unappealing options: a U.S. Supreme Court appeal—unlikely to succeed—or pursuing liens against individual policyholders, which incentivizes settlement participation. Even if insurers delay, Maui’s 2nd Circuit Court can advance the process with minimal disruption, aided by Judge Cahill’s support.

Meanwhile, progress on wildfire insurance legislation and liability limits, combined with HE’s healthy FFO-to-debt ratio of ~15%, could drive multiple credit rating upgrades, potentially restoring its investment-grade status.

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