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Thursday’s analyst calls: Concert stock gets an upgrade, more gains ahead for Microsoft

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(This is CNBC Pro’s live coverage of Thursday’s analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Analysts cheered a concert stock and a tech giant on Thursday. Morgan Stanley raised its rating on Live Nation, noting the stock is poised to do well in the long haul. Bank of America also hiked its price target on Microsoft , citing meetings with company executives earlier this week. Check out the latest calls and chatter below. 8:06 a.m. ET: Morgan Stanley initiates WK Kellogg at equal weight WK Kellogg’s near-term challenges balance out its benefits, according to Morgan Stanley. The bank initiated the cereal stock, a spinoff from the larger Kellogg’s, at an equal-weight rating. Analyst Pamela Kaufman set a price target of $13, almost unchanged from the stock’s Wednesday closing price of $12.76. Catalysts for the stock include a history of superior execution on strategic priorities, a portfolio of iconic brands and margin expansion opportunity. On the other hand, investment risks include concentrated exposure to North American cereal, combined with recent market share losses within cereal. Additionally, the company has elevated cash needs given its capex investment plans and intended dividend payouts, Kaufman said. Plus, the analyst is not certain that the company can successfully execute its margin expansion targets. “We are Equal-weight with 4% upside to our $13 base case as we believe valuation reflects KLG’s near-term challenges with downside risk supported by an inexpensive valuation and an attractive dividend,” she wrote. Shares of WK Kellogg have dipped 13% since splitting from Kellogg earlier this year. — Lisa Kailai Han 8:04 a.m. ET: Piper Sandler upgrades Foot Locker Piper Sandler upgraded shares of Foot Locker to overweight, calling the sneaker company one of the best situated “turnaround stories.” “We come away incrementally more positive on FL’s margin expansion opportunity in 2024, and while we don’t yet have clarity on the return to growth of NKE product, we think FL is best positioned among this group in the next 6-12 months,” wrote Abbie Zvejnieks in a Thursday note to clients. The analyst expects Foot Locker to benefit from deflation across certain categories — a tailwind for the company’s key customer base. Foot Locker’s array of product offerings from major brands should also give the company a leg up as inventory levels improve, she added. “We expect to see some margin recapture in 2024 as inventory levels improve and FL is able to bring in more newness which should increase the mix of full price sales,” she wrote. Zvejnieks lifted the firm’s price target to $33 a share, reflecting about 16% upside from Wednesday’s close. The stock rallied about 4% before the bell. For the year, the stock is down more than 24%. FL YTD mountain FL in 2023 — Samantha Subin 7:49 a.m. ET: Guggenheim hikes price target for Home Depot, sees growth ahead in pro segment Home Depot is set up to impress investors in a transition period before its plans to grow its pro segment take off, according to Guggenheim. Analyst Steven Forbes said in a note to clients that a recent tour of an updated Home Depot location and meetings with management left him more complicated on the company’s efficiency initiatives. “With improved conviction around HD’s near-term operating outlook and increased optimism as it pertains to the company’s out-year secular growth profile, we are increasing our 12-month price target to $370 and reiterating our BUY rating,” the note said. The new target is more than 7% above where the stock closed Wednesday. The out-year growth is expected to come from Home Depot’s professional customers, and the company just made an acquisition to improve that business. “In late November, HD announced the acquisition of International Designs Group, the parent company of Construction Resources. With showrooms across the East Coast and Southeast (39 in total), we believe this acquisition represents a ‘first look’ into HD’s next phase of footprint growth—as PROs rely heavily on showrooms to drive the decision process with homeowners who are looking to complete complex renovations and remodels,” the note said. Shares of Home Depot have underperformed in 2023, gaining less than 9%. But the stock has been hot recently, jumping 13% over the last month. — Jesse Pound 7:44 a.m. ET: BMO Capital Markets says investors should sideline FMC for now Investors should keep FMC in the “penalty box” for at least the next two-to-three quarters, according to BMO Capital Markets. The firm downgraded the chemical manufacturing firm to market perform from outperform, accompanying the move by lowering its target price to $63 from $80. This still implies a potential 9% upside for the stock. Shares of FMC have plunged 54% this year, but analyst Joel Jackson still believes that it’s better to move to the sidelines for now given the stock’s current valuation versus potential risks and rewards. “We are worried about an L-shaped recovery for this stock until credibility can be re-established with (hopefully) better visibility around crop chems de-stocking and future earnings power (including how the well-scrutinized diamides insecticide portfolio holds up),” he wrote. — Lisa Kailai Han 7:28 a.m. ET: Apple could continue to outperform again in 2024, according to Citi Three major catalysts could propel shares of Apple in 2024, according to Citi. Shares of the tech titan have already rallied 52% this year versus the S & P 500’s 23%, but analyst Atif Malik thinks there’s more to come. Malik set a target price of $230 for the buy-rated stock, implying a 16% upside. That’s because, for one, Apple’s services business remains its bright spot heading into the new year. “With an increasing installed base and penetration/attach rate, we believe Apple Care, iCloud and other licensing services will be the fastest growing services segments, reaching about 45% of the total services revenue in FY2025 and driving upside to Street’s overall gross margins,” Malik wrote. The analyst is also bullish on Apple’s talks to bundle Paramount’s content for their respective streaming services. Malik thinks that strong smartphone demand trends will continue to boost Apple’s stock next year. Additionally, potential upside catalysts for the company include upgraded and extended personal assistance features. “We believe Apple is best positioned to take advantage of AI adoption in smartphones as its superior ‘shared memory architecture’ with AP/GPU microprocessors will allow it to handle AI computation better than the android ecosystem where there is a higher need to add/upgrade more DRAM memory,” the analyst wrote. — Lisa Kailai Han 6:55 a.m. ET: D.R. Horton and Lennar are Goldman Sachs’ top homebuilder picks D.R. Horton and Lennar are Goldman Sachs’ two best-positioned homebuilder names for the new year. The bank listed the two buy-rated stocks as two of its top names heading into 2024. While analyst Susan Maklari kept Lennar’s 12-month price target unchanged at $138, she boosted D.R. Horton’s to $150 from $142, corresponding to a 4% increase for the stock. Both names have rallied more than 60% this year. But if Maklari is right, there should be more upside to come as interest rates look more favorable to consumers next year. “Although affordability remains constrained, we believe moderating mortgage rates as well as consumer expectations for appreciating home values should support housing demand next year,” she wrote. This should especially prove true as homebuilders continue to leverage financial incentives to support their sales, Maklari added, which should ultimately culminate in a focus on sales volumes over price. “As such, we look for strength into the selling season, with potential upside as rates move off the recent peak,” she wrote. Maklari forecasts that single-family starts could grow 8% in 2024, to 982,000. — Lisa Kailai Han 6:34 a.m. ET: Goldman Sachs lists Delta and United as top airline picks Goldman Sachs is standing by Delta and United as its top two airline picks heading into 2024. Shares of Delta have rallied 25% this year, while United is up 10%. The bank’s respective $47 and $52 price targets imply a potential upside of 14% and 25% for either stock. Against a backdrop of continued unit cost inflation in 2024, Goldman Sachs analyst Catherine O’Brien is favoring names “with exposure to markets with improving demand characteristics per the framework above in addition to relatively less cost headwinds into 2024.” Specifically, O’Brien believes that growth will accelerate in Delta’s idiosyncratic, less cyclical, high-margin businesses. She also cited a robust balance sheet and exposure to recovering end markets as additional catalysts. On the other hand, the analyst is bullish United’s leasing exposure to the less-recovered Pacific market. She also sees potential in the company’s focus on growing exposure to premium travel, a category that has outperformed post-pandemic. — Lisa Kailai Han 6:07 a.m. ET: Goldman Sachs names General Electric a top pick, sees more than 25% gains Goldman Sachs reiterated its buy rating on General Electric , calling it a top pick, citing a strong portfolio of diversified assets. Shares of the multinational conglomerate have already surged 85% this year, as ongoing geopolitical conflicts have boosted the stock. Going by his $155 price target, Goldman Sachs analyst Joe Ritchie still sees potential upside of nearly 28%. “We remain Buy rated as GE is a unique collection of assets with under-earning potential and a proven strong management team to execute the turnaround,” he wrote. GE YTD mountain GE in 2023 Specifically, Ritchie praised General Electric’s aerospace business as a “best-in-class asset,” commending the successes of its management team. The division, he wrote, is “uniquely positioned to benefit from tight supply dynamics in the industry.” Ritchie also believes that increased investor interest around General Electric’s spinoff of its Vernova renewable energy division could spur stock growth. The business has been a “turnaround story,” with management specifically focusing on accelerating profits for the onshore and grid segments. Ritchie foresees less offshore losses impairing profitability going forward, further boosting General Electric stock. — Lisa Kailai Han 5:58 a.m. ET: Morgan Stanley upgrades Six Flags, cites Cedar Fair merger An upcoming merger should boost shares of Six Flags , according to Morgan Stanley. The bank upgraded the amusement park stock to overweight from equal-weight, simultaneously lifting its price target to $32 from $29. This implies a potential upside of more than 25% from the stock’s Wednesday close. Shares of Six Flags have climbed close to 10% this year, despite a “tepid ’23 weighed down by adverse weather and challenging post-pandemic reopening comps” for U.S. parks, wrote analyst Thomas Yeh. “We see a return to mid-single digit revenue growth in 2024 for the regional theme parks group, benefiting from the easing of difficult comps and a strong start to season pass sales,” the analyst said. He also believes that attendance growth should rebound next year. More specific to Six Flags, Yeh is bullish the company’s proposed merger with fellow parks operator Cedar Fair, believing that the new company looks well-poised to capture earnings and revenue growth. The deal is expected to close in the first half of next year. “Our pro forma growth outlook is underpinned by our view that cost synergies are highly achievable, with further upside if the combined entity can deliver incremental revenue opportunities and execute on stand-alone efficiency initiatives,” he wrote. — Lisa Kailai Han 5:35 a.m. ET: Morgan Stanley upgrades Live Nation as concert company taps into global music opportunities Odds are in Live Nation Entertainment’s favor for the long term, according to Morgan Stanley. The bank upgraded shares of the entertainment company to overweight from equal weight and lifted its price target to $110 from $100. This implies a 25% upside from Wednesday closing price. Analyst Cameron Mansson-Perrone cited a higher earnings outlook as one catalyst. “LYV has generally seen a significant upward revision in earnings while shares have continued to lag, creating the opportunity in our view to get more bullish here,” he wrote. He’s also optimistic about the company’s prospects in the long run, due to an excellent business model. He believes that it’s possible for Live Nation to generate double-digit earnings growth in the next few years as the company both taps into global markets and expands its venue portfolio. “We have increased conviction in durable long-term growth given Live Nation’s unique ability to capture the expanding global live music opportunity,” Mansson-Perrone said. Live Nation shares have been on a tear this year, surging more than 26%, as consumers attend more concerts in 2023. Taylor Swift’s Eras Tour became the first to rake in $1 billion in ticket sales. LYV YTD mountain LYV in 2023 — Lisa Kailai Han 5:35 a.m. ET: Bank of America raises Microsoft price target Microsoft has soared more than 56% this year on excitement around artificial intelligence. Bank of America sees the stock going even higher over the next year. Analyst Brad Sills raised his price target on shares to $430 from $415. The new forecast implies upside of nearly 15% from Wednesday’s close. Sills said he’s more confident in the tech giant after meeting with company executives earlier this week. “We come away from the meetings with higher conviction on the durability of growth in the core Office and Azure growth franchises,” he said in a note. “We believe that there is potential for commercial office to accelerate from the current mid-teens growth level in the coming quarters from the gradual contribution from the new M365 copilot.” MSFT YTD mountain MSFT year to date — Fred Imbert

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