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Monday’s analyst calls: Netflix to jump another 20%, Bernstein sticks by this high-flying chip stock

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(This is CNBC Pro’s live coverage of Monday’s analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) A streaming giant and a chipmaker winner were in focus Monday as part of the early analyst chatter. Oppenheimer increased its price target on Netflix, calling for upside of nearly 20%. Bernstein, meanwhile, reiterated an outperform rating on Taiwan Semiconductor, noting that margins will fare better than the Street expects going forward. Check out the latest calls and chatter below. All times ET. 7:12 a.m.: Nvidia, Western Digital among Morgan Stanley’s top AI picks Morgan Stanley’s recent Technology, Media & Telecom conference reinforced investors’ high levels of interest in artificial intelligence, and that some areas of the industry are going through a “bottoming process.” Analyst Joseph Moore said he continues to be positive on AI stock picks, and named Nvidia , Western Digital and Microchip Technology as his favored names coming out of the conference. Computer drive manufacturer Western Digital is the firm’s top pick. Moore noted that the company posted higher revenue and earnings guidance, and that the company’s NAND business will retain its “significant value proposition” given that the CEO will remain with that side of the company. Western Digital had announced in late October that it will split its hard disk drive and NAND memory businesses into two separate public companies. — Pia Singh 7:11 a.m.: Morgan Stanley downgrades Petrobras shares after the oil company cut its dividend Morgan Stanley has moved to the sidelines on Bazilian petroleum company Petrobras . Analyst Bruno Montanari lowered his price target by $2 to $18, suggesting about 21.8% potential upside for the stock, which is trading 0.8% higher in premarket trading. Shares are down more than 7% so far this year. “We downgrade PBR shares to equal-weight from overweight as we have lower confidence in additional shareholder returns via extraordinary dividends in the near term, leaving the risk-reward proposition more balanced,” Montanari wrote in a Friday note. “The PBR positioning has been mostly driven by the company’s compelling valuation relative to major oil stocks, which is no longer the case.” Petrobras plunged 11.5% on Friday after the company’s quarterly results reflected a lower-than-expected regular dividend, disappointing investors. Given the stock’s more-than-72% return over the past 12 months, the analyst said he is waiting to see more evidence that the company’s capital remuneration account will be used to fund more dividends in future quarters. — Pia Singh 6:29 a.m.: Duolingo initiated at overweight by JPMorgan JPMorgan’s Bryan Smilek initiated coverage of online learning platform Duolingo at an overweight rating, forecasting “premium” revenue growth ahead. “Duolingo’s freemium strategy, product obsession, & social-first marketing strategy have driven its industry-leading scale, strong brand reputation, & highly efficient acquisition (~90% of user growth organic),” Smilek wrote in a Monday note. “We believe DUOL is well-positioned to deliver sustainable 20%+ Bookings/Revenue growth.” Smilek’s $270 price target implies the stock can gain about 26.4% over the next year. Shares are down 5.9% year to date, but are still up 11.4% over the past month after the company surpassed fourth-quarter earnings and revenue expectations. The stock added 1.1% in premarket trading Monday. DUOL YTD mountain DUOL year to date Smilek expects Duolingo — which has 6.6 million paid subscribers — to see deeper monetization and paid subscription growth, projecting paid subscribers to double to 12.3 million by 2026. His bull case is also encouraged by the company’s use of generative AI to enhance its products and cut costs. — Pia Singh 6:06 a.m.: Morgan Stanley downgrades Hyatt to equal weight, cites ‘balanced risk-reward’ Morgan Stanley is confident in Hyatt’s continued performance after the hotel chain’s strong fourth-quarter performance, but thinks shares could be overvalued. Analyst Stephen Grambling downgraded Hyatt to equal weight from overweight and lowered his price target by $7 to $149. That suggests shares could edge lower by about 0.4%. Shares are up about 20.2% year to date. “The pivot to asset light and simplification of the business model has driven outperformance, leaving a more balanced risk-reward,” Grambling wrote in a Monday note, noting the stock’s three-month run-up. “We continue to appreciate the underlying story and see substantial proceeds from asset sales still driving best in-class FCF/share growth.” Hyatt reported a beat on quarterly earnings on Feb. 23, posting earnings of 64 cents per share, excluding items, while analysts polled by FactSet had called for earnings of 38 cents per share. Grambling’s 2024 EBITDA estimates are near the top end of consensus guidance, largely reflecting higher royalty and licensing fees offsetting incremental asset sales, he said. — Pia Singh 5:44 a.m.: Netflix shares could gain nearly 20% from here, according to Oppenheimer Oppenheimer is more bullish on Netflix , citing the streaming giant’s ability to grow its long-term subscriber base. Analyst Jason Helfstein reiterated his outperform rating and raised his price target on shares by $110 to $725, which suggests roughly 19.9% potential upside from Friday’s close. Shares of Netflix have jumped more than 24% this year. NFLX YTD mountain NFLX year to date “We believe NFLX’s initiatives such as password sharing rules, advertising and optimizing subscriber plan choices will drive subscriber growth and average revenue per membership (ARM), therefore leading to higher revenue,” Helfstein wrote in a Sunday note. “We believe NFLX’s dominance will continue, given its clear advantage in producing high-engagement content and monetizing that content more effectively than peers.” The analyst estimated a high likelihood of subscriber additions beating Wall Street’s estimates in the future, given forecasts assume a major slowdown in paid sharing and ad-tier subscriptions. Helfstein sees subscribers being 17 million higher than the consensus over the next three years as competition in streaming eases with other streaming platforms prioritizing profitability — while Netflix acquires more content and retains its dominant market share in U.S. television viewership. — Pia Singh 5:44 a.m.: Bernstein sticking by Taiwan Semiconductor Taiwan Semiconductor shares are off to a strong start for the year, and Bernstein expects them to continue doing well. Analyst Mark Li reiterated his outperform rating on the stock, calling for stronger gross margins, especially in the second half of the year. “While many worry about 2H24 margins, we expect an HoH improvement. Our 2025 & 2026 gross margin (GM) forecast is also above consensus,” Li wrote. “Many now expect TSMC’s GM to dip HoH and they attribute the 3-4% drag from 3nm and 1-2% drag for capacity sharing between 5nm & 3nm. We agree the 1-2% drag is incremental from 1H24 to 2H24, but in the 2Q23 earnings call (link) TSMC guided 4Q23 also had 3-4% drag from 3nm too.” “We agree TSMC may not enjoy much operating leverage from depreciation, as TSMC guided its 2024 depreciation will be up close to 30% YoY, slightly faster the growth of low- to mid-20s% in revenue this year. However labor cost certainly won’t rise as fast as revenue. … Hence instead of a dip, we project TSMC’s GM to rise to 53.5-54.6% in 2H24.” U.S.-listed shares of Taiwan Semiconductor are up a whopping 40.7% year to date. The firm raised its price target on them to $150 from $125, implying upside of just 2%. However, it also increased its forecast on Taiwan-listed shares, calling for a 15% increase over the next 12 months. — Fred Imbert

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