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Tuesday’s analyst calls: Goldman’s top retail play, BofA sees big gains for this shoe stock

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(This is CNBC Pro’s live coverage of Tuesday analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Analysts on Tuesday focused on retail names along with some tech stocks. Goldman Sachs named Target its top long idea for 2024 as disinflationary trends take hold. Bank of America also initiated Crocs with a buy rating and a price target that implies strong gains ahead. Elsewhere, Morgan Stanley upgraded HP Inc to overweight from equal weight. Check out the latest calls and chatter below. 7:41 a.m. ET: Don’t overlook this sports streamer’s path to profitability, Cantor Fitzgerald says FuboTV is a pure play on the cord-cutting trend that investors are underestimating, according to Cantor Fitzgerald. Analyst Brett Knoblauch initiated coverage of the sports streamer’s shares at an overweight rating. His $5 price target implies an upside of 60.3% for the stock. “FUBO, in our view, is one of the best pure-play ways to play cord-cutting and the associated shift of advertising dollars away from linear TV and to connected-TV (CTV),” he wrote in a note to clients on Tuesday. Knoblauch said the company is a major sports streaming service with a path to profitability that’s more realistic than the market is anticipating. Specifically, he said investors may be overlooking: Its growing importance to TV network owners amid the shift to streaming from linear. The ability to raise prices for subscribers. Upside to advertising revenue. The likelihood of turning positive on adjusted EBITDA and free cash flow by the end of 2025. Shares jumped nearly 3% before the bell on the back of Knoblauch’s call. — Alex Harring 7:38 a.m. ET: Bank of America initiates coverage of Crocs Investors should be encouraged by Crocs’ growth story and leading margins, according to Bank of America. Analyst Christopher Nardone initiated coverage of the casual footwear retailer with a buy rating and a $128 price target, which suggest 22.4% potential upside for the stock. Shares ticked up 1.5% in premarket trading. The stock has lost 3.5% this year. CROX YTD mountain CROX in 2023 “The Crocs business has strong momentum having increased sales at a 25% CAGR since 2019 (sales +14% YTD),” Nardone wrote in a note. “We expect continued strong sales at Crocs coupled with incremental progress at HD will lead to multiple expansion from depressed levels.” Some of Croc’s share price success this year has been “obscured” by the poor performance and challenges facing the company’s HeyDude brand, which Nardone believes is priced in. HeyDude, which Crocs acquired in February 2022 for $2.5 billion, saw revenues slump 8.3% in the third quarter. “We think Crocs will remain strong and conservatively forecast 6% sales growth for the brand in F24E (vs 12% in F23E),” Nardone said, adding that the company has strong free cash flow that remains under-appreciated. “We are encouraged by positive Spring ’24 order book trends for Crocs but model lower total sales growth in ’24 given wholesale uncertainty.” — Pia Singh 7:13 a.m. ET: Citi downgrades Macy’s, cuts price target on buyout offer skepticism Citi Research analyst Paul Lejuez downgraded Macy’s to sell from neutral, citing the firm’s skepticism on its recent buyout offer actually materializing. The firm’s $14 price target suggests shares of the legacy retailer could lose roughly 32% over the next 12 months. Shares have soared nearly 79% this quarter, but they are up just 0.6% for the year. Macy’s jumped 21% on Monday alone after the retailer received a $5.8 billion buyout offer . “In this interest rate environment and with the secular challenges M faces, it may be difficult to finance,” Lejuez said. “We believe M has more real estate value than the other department stores but we believe monetizing is easier said than done.” The analyst added that the retailer’s Herald Square location in New York City, for example, is worth less than it was pre-pandemic. Macy’s sales have slowed over the past year as it struggles to compete with online competitors. — Pia Singh 7:01 a.m. ET: Goldman Sachs upgrades fresh food retailer Sprouts Farmers Market Goldman analyst Leah Jordan upgraded natural and organic food retailer Sprouts Farmers Market to buy from sell, citing optimism on new store trends and volume. Her 12-month price target of $49 suggests 5.3% upside for the stock. “We have been wrong on our prior Sell rating for SFM, as the company has executed better-than-expected amid its transformation focusing on health enthusiasts,” Jordan wrote in a note. According to the analyst, Sprouts Farmers Market is seeing higher new store productivity indicated by improved traffic and search results by state, lower promotion risk as its customer base skews higher income, and potentially increased wallet share opportunity as loyalty program efforts ramp up over the next year. Jordan forecasted “limited earnings growth” across the speciality retail coverage group in 2024, however. Still, the risk of deflation next year will likely hit packaged food harder than fresh food retailers, she noted. The stock has popped 43.7% this year, beating the broader market. Shares are up 1.1% in early morning trading. — Pia Singh 6:28 a.m. ET: Barclays downgrades Airbnb, Expedia on cautious travel outlook Barclays is more cautious on travel stocks looking ahead to 2024, anticipating that “pent-up travel demand” will become exhausted as a softer demand environment hits consumers’ leisure spending budgets. “We think online travel growth slows from here,” Young said in a Tuesday note. “We do think the travel category will deliver outsized growth in 2024, particularly in online channels, but we remain very cautious around recession risks.” Analyst Trevor Young downgraded Airbnb to underweight from equal weight on indications that demand is slowing down and pressures from hotel peers, such as consumers’ frustration with fees, is picking up. His $100 price target on the stock indicates roughly 30% downside. Young also downgraded Expedia to equal weight from overweight and maintained his $150 price target, which suggests shares can gain just over 1%. Although the stock has soared this year, bookings growth may “remain subdued,” the analyst said. Both stocks have gained more than 67% this year. — Pia Singh 6:09 a.m. ET: JPMorgan upgrades Rio Tinto JPMorgan Analyst Patrick Jones upgraded global mining group Rio Tinto to overweight from neutral on the firm’s higher medium-term outlook for commodities and fixed income, including on iron ore, where it expects the market to “remain relatively balanced.” Shares jumped 2.8% in premarket trading. “RIO has a best-in-class balance sheet with minimal debt and substantial capital headroom,” the analyst wrote in a Tuesday note. “We expect RIO to shift to a more balanced deployment of capital between cash returns & organic growth over the medium-term, but still offer relatively strong dividends.” The firm also upgraded Norwegian aluminum and renewable energy company Norsk Hydro to overweight from underweight, and steel and mining company ArcelorMittal to overweight from neutral. — Pia Singh 5:59 a.m. ET: In a deflationary environment, Target is Goldman’s favorite Goldman named Target its “best long idea” for fiscal year 2024 and upgraded Dollar Tree and Best Buy to buy. “As we look into FY24, we are more bullish on the potential for stock upside in the hardlines/broadlines universe than we have been in the last two years,” analyst Kate McShane wrote in a Tuesday note.McShane highlighted several catalysts behind the optimism, including: Constructive outlook on the health of the consumer based on continued labor market strength, which could normalize the demand for services and goods, benefitting retailers like Target Goldman’s view that fiscal year 2024 could be a “year of sales inflection” for several retailers More favorable sales backdrop, with a lean inventory environment, improved supply chain and advancements in tech that could drive promotion personalization to drive margin growth McShane said she sees long-term growth for Target tied to market share gains across categories from various mall-based retailers on strong merchandising, as well as a recovery to operating margins as costs and markdowns normalize. — Pia Singh 5:36 a.m. ET: JMP upgrades Zillow Group, says consensus estimates are too low Zillow Group has already outperformed the broader market this year, but JMP still views its stock price as a “compelling opportunity.” Analyst Nicholas Jones upgraded his rating to market outperform from market perform and assigned a price target of $60, which implies shares stand to gain 36.9% from Monday’s close. Shares gained 2.6% in premarket trading. The stock is up more than 40% this year. Z YTD mountain ZIllow in 2023 Jones said he thinks consensus estimates on Zillow are too low for 2025 and 2026 given building pent-up residential real estate demand and increasing expectations that rates will lower in the second half of next year, which should lead to an increase in volume. “As ZG benefits from our estimated growth and profitability patterns, we expect the stock price to benefit from multiple expansion,” Jones wrote in a Tuesday note. “Further, we see upside to our above-consensus numbers as ZG scales its newer solutions, which we will continue to monitor from here.” — Pia Singh 5:36 a.m. ET: Morgan Stanley upgrades HP Inc Morgan Stanley raised its rating on HP Inc. to overweight from equal weight. The bank also hiked its price target on the stock to $35 from $31. The new forecast calls for 16% upside. Analyst Erik Woodring cited an improving tech hardware market, particularly for PCs, for the upgrade. “We see it as an underappreciated play on the PC market recovery that should also benefit from re-accelerating capital returns and operational efficiency,” the analyst wrote. HP Inc shares are up 12% year to date, lagging the S & P 500 in that time. This underperformance, Woodring said, is a “function of the weaker demand environment, concerns about the print business, and its largest shareholder (Berkshire Hathaway) selling down its > 10% ownership stake.” A securities filing released Monday showed Berkshire lowered its stake in HP to 5.2%. “However, we believe many of these negative catalysts are either past us ( Buffet selling ), or already captured in valuation (weak demand, print concerns),” he added. “And with the PC market set to inflect to growth next year – a key driver of multiple expansion and [free cash flow]- and HP expected to return to elevated shareholder returns, we believe now is the time to get more constructive, with both positive EPS growth and multiple expansion key drivers of outperformance.” — Fred Imbert

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