Thursday's analyst calls: Target upgrade, liquidity issues for this EV charging stock

Published Thu, Nov 16 20235:45 AM ESTUpdated Thu, Nov 16 20239:49 AM EST

(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.) Thursday's early calls featured a retail upgrade and an EV charging stock downgrade. Wells Fargo raised its rating on Target a day after the company reported better-than-expected earnings. Meanwhile, Citi downgraded Plug Power to neutral from buy, noting that "subpar execution" has led to liquidity issues for the company. Check out the latest calls and chatter below. 9:49 a.m. ET: Deutsche Bank initiates Wayfair with buy rating Deutsche Bank is bullish on online retailer Wayfair , initiating coverage with a buy rating and $55 price target. The bank believes that Wayfair is the pure-play ecommerce leader in home goods and should build on its share position, analyst Lee Horowitz said in a note to clients. The retailer should capture between 2% and 4% of the total available retail market, which suggests ample growth from here, he said. "Better yet, share gains have improved recently as inventory positions normalize and Wayfair is thus able to differentiate in the market based on premium selection, price, and delivery speeds," Horowitz wrote. He also expects macro headwinds to improve in the second half of 2024. Shares of Wayfair are up nearly 45% year to date. Deutsche Bank's price target suggests about 16% upside from Wednesday's close. — Michelle Fox 9:01 a.m. ET: Goldman Sachs initiates TopBuild as buy, touts improving home construction outlook Goldman Sachs says TopBuild is a key beneficiary of an improving home construction market. The firm initiated coverage of the home building material stock with a buy rating and a $355 per share price target on Thursday. Goldman's forecast implies more than 18% upside from Wednesday's $290.09 close. TopBuild stock has added more than 85% this year. BLD YTD mountain TopBuild in 2023 "We look for the company to benefit from our forecast for 13% growth in single-family starts through 2025, furthered by relationships with the largest public builders that are continuing to take share from smaller, private peers as well as the existing home market," analyst Susan Maklari said. — Brian Evans 9 a.m. ET: Bank of America is bullish on Gen Digital Consumer cyber safety vendor Gen Digital is an "underappreciated" software value play, according to Bank of America. The firm initiated the stock with a buy rating and $25 price target, which implies shares rallying nearly 27% from Wednesday's close. "We believe the consumer cyber safety market carries large, underappreciated growth opportunities, with Gen addressing a +$20bn TAM and 44% market share within the current target markets," analyst Jonathan Eisenson wrote in a Thursday note. Eisenson added that the company has the potential to expand internationally, and could see further upsides from cross-sell and upsell opportunities. Although he forecasts revenue growth falling 5% for the next two years due to a saturated market, he believes Gen Digital's differentiated platform contains upsides ahead. — Hakyung Kim 8:45 a.m. ET: Guggenheim upgrades BorgWarner to buy, sees upside from hybrid vehicles Concerns about demand for electric vehicles in the short term is leading investors to dump BorgWarner too quickly, according to Guggenheim. Analyst Ronald Jewsikow upgraded BorgWarner to buy from neutral, saying in a note to clients Thursday that the stock looks undervalued after badly underperforming the S & P 500 in November. The autoparts supplier fell 13% on Nov. 2 after reporting its third-quarter results and trimmed its full-year outlook. However, Jewsikow said the market is underestimating the benefit to BorgWarner of the switch to cleaner vehicles, whether that is all-electric options or hybrids. "While BWA lowered the mid-term eProducts guide, our analysis of emissions regulations shows that increased hybrid content will likely be needed to offset any pure battery electric downside, and is likely to become a source of potential upside revisions over the next 12-18 months. In short, the market ran with the lowered eProducts guide, but failed to consider hybrid content as a key source of upside required by regulations globally," the note said. Guggenheim has a price target of $41 per share for BorgWarner, which is 20% above where the stock closed Wednesday. — Jesse Pound 8:14 a.m. ET: Deutsche Bank downgrade Brazilian mining company Vale Deutsche Bank thinks Vale doesn't have much room to grow in the near term. Analyst Liam Fitzpatrick downgraded the Brazilian mining company to hold and lowered his price target by a dollar to $17, implying just a 12.8% potential increase for the stock over the next 12 months. "While we continue to see medium-term value, several near-term catalysts – iron ore price recovery, Energy Transition Metals stake sale and linked capital return – have played out," Fitzpatrick wrote in a Thursday note. He said his lowered price target reflects higher-for-longer base metal costs that could weigh on the company. Still, the analyst expects flat to small positive growth in iron core production and a modest year-over-year increase in capex for 2024. The company might miss 2023 unit cost guidance for copper and nickel, he added. Vale's shares were down 0.2% in premarket trading. The stock is down 11.2% for the year, but has rebounded more than 12% so far this quarter. — Pia Singh 7:59 a.m. ET: ITT is 'where the margin opportunity is,' Bank of America says in upgrade Wall Street should go "where the margin opportunity is" and buy shares of ITT , according to Bank of America. Analyst Andrew Obin upgraded the manufacturing stock to buy from neutral and raised his price objective, saying ITT is a "high-quality operator" navigating a challenging macro environment. "We are upgrading ITT shares to Buy on: resilient end market exposure (oil & gas, Aerospace & Defense), differentiated Auto exposure, underappreciated margin expansion opportunities, and best-in-class execution," Obin wrote on Thursday. While many companies covered by the analyst are now getting hurt by destocking, ITT has already contended with destocking at the start of this year, the note said. The analyst expects ITT is better set up than its peers. "ITT reported some of the best orders in our coverage in 3Q and backlog coverage provides strong visibility into '24 growth," he added. ITT shares have already outperformed this year, up more than 32%. The analyst's $125 price objective, raised from $105, means shares could rise another 16% from Wednesday's closing price of $107.46. The stock popped 1.7% in Thursday premarket trading. — Sarah Min 7:28 a.m. ET: JPMorgan upgrades Tencent Music Entertainment on double-digit earnings potential JPMorgan thinks Tencent Music Entertainment is poised to emerge as a "double-digit earnings compounder" as the online music industry continues to grow. Analyst Alex Yao upgraded the streaming services platform to overweight from neutral. He gave the company a new price target of $10, which implies shares could jump 21.2%. "Extrapolating recent positive business momentum into the next 2-3 years, we expect TME to rise as a 20% CAGR earnings compounder over 2023-25E with high visibility and a strong track record, driven mostly by its online music operation," Yao wrote in a note. According to Yao, online music has overtaken social entertainment as the primary profit driver for the company in the third quarter of this year, leading to a stronger-than-expected profit growth recovery in 2024. Further margin improvement and growth runway for online music—which is supported by both subscription and ads—should propel Tencent Music Entertainment's earnings growth over the next 2 to 3 years, he said. Shares moved 1.2% lower in premarket trading. The stock has soared more than 29% this quarter, but is still lower by about 0.4% for the year. — Pia Singh 7:23 a.m. ET: Deutsche Bank upgrades Goodyear Tire & Rubber on its turnaround potential Deutsche Bank thinks Goodyear Tire & Rubber is seeing a turning point, making it a good pick for investors. Analyst Emmanuel Rosner upgraded the stock to buy on the back of the company's announcement of its "Goodyear Forward" transformation plan, which includes steps to achieve margin expansion and optimize its portfolio over the next 24 months. Rosner's $21 price target suggests the stock could gain 49.6%. "With a credible operational turnaround path, strategic portfolio optimization through large non-core divestitures, and new leadership coming in to execute, we think Goodyear is about to start a new chapter," Rosner wrote in a Thursday note. "We see strong potential for the company to improve its profitability and narrow the gap with its peers through self-help, de-leverage its balance sheet, and unlock large shareholder value." The firm also raised its 2024 and 2025 estimates on the company to reflect its expected cost savings and revenue improvement efforts. Shares of Goodyear jumped 3.2% in premarket trading, continuing its rally this year. — Pia Singh 7:05 a.m. ET: Analysts are bullish on Microsoft's AI innovation, impressed by recent product announcements After two days of Microsoft's Ignite conference in Seattle, several analysts are bullish on the tech giant's product launches and future market leadership. Here's what the major firms have to say. Goldman Sachs analyst Kash Rangan : According to Rangan, "further establishing itself within the hardware and infrastructure layer extends Microsoft's broad range of Gen-AI services across the IT stack and builds on Microsoft's momentum as a key-Gen AI leader." The analyst reiterated his buy rating and $450 price target on the stock. He noted Microsoft's unveiling of its first-ever custom cloud CPU, Azure Cobalt, and AI accelerator chips, Maia 100, during the conference. Jefferies analyst Brent Thill: Microsoft is "innovating across all fronts at a record pace, Thill said, adding he is bullish on the ability of the company's AI assistant software Copilot to drive revenue higher in 2024. Microsoft's AI cybersecurity solution Security Copilot, which was only recently expanded through an early access program on Oct. 19, already has tons of pent-up interest, Thill said. Bank of America analyst Vivek Arya: Microsoft's new products were built in-house and are expected to ramp in early 2024, Arya said. He noted that while its custom silicon products are strong, the company is still deepening its relationships with GPU and accelerator suppliers Nvidia and Advanced Micro Devices. Barclays analyst Raimo Lenschow : The analyst reiterated his overweight rating and $421 price target on the stock, saying he came away from the conference "impressed" by Microsoft's continued advancement in its AI products, notably Azure Copilot, Service Copilot and internally developed Azure Maia. Early feedback for Microsoft's 365 Copilot product indicates a satisfied user base, Lenschow added. — Pia Singh 6:17 a.m. ET: Bank of America downgrades Advance Auto Parts, sees bumpy road ahead after disappointing third-quarter earnings Investors should steer clear of Advance Auto Parts , according to Bank of America. The firm downgraded shares from neutral to underperform and lowered its price target on the stock by $17 to $43. The new target suggests shares could drop more than 22% over the next 12 months. The stock has plunged 62.1% this year. AAP YTD mountain AAP in 2023 Advance Auto Parts' results for the third quarter were "disappointing," the firm said. The company missed earnings expectations—except for its stronger-than-anticipated sales growth for the period—and management also lowered the company's outlook for 2023. "AAP announced the planned sale of assets (not included in our FY24E), a new cost cutting initiative, and a new CFO. However, we think AAP's transformation is going to be messy and free cash flow will likely remain under pressure for at least the next twelve months," analyst Elizabeth Suzuki wrote in a Wednesday note. She added that Advance Auto Parts, which once became the largest auto parts retailer in FY14, will likely be the fourth largest of auto parts retailers in the U.S. after its revised outlook for 2023. Shares of the company, which has over 5,000 retailers across the U.S., declined 3.2% in premarket trading Thursday. — Pia Singh 5:58 a.m. ET: Mizuho upgrades Intel to buy, says its 2024 product launches could lead to share gains Mizuho Securities raised its outlook on Intel , citing confidence in its 2024 product roadmap. Analyst Vijay Rakesh upgraded the semiconductor manufacturer to buy from neutral. He gave the stock a $50 price target — $13 higher from the previous one — which implies 23.1% upside for shares since Wednesday's close. "We believe INTC is lining up significant new server product launches and Foundry customer announcements in the next six months," Rakesh wrote in a Wednesday note. Foundry Services is Intel's chip manufacturing segment. According to Rakesh, Intel has a slate of data center and AI product launches that could put it above its peers and make 2024 one of its busiest and 'most prolific' years, especially compared to the last two to three years. Intel is seeing sales ramp from its Sapphire Rapids processors, the analyst said, adding that the company's Emerald Rapids fifth-generation processors launching in mid-December could be another growth catalyst into next year, along with its Sierra Forest release in the first half of 2024. "Despite losing market share to AMD in the general compute server market over the past few years, we see INTC maintaining its market leadership position and see potential for INTC to recapture some lost market share," Rakesh said. — Pia Singh 5:45 a.m. ET: Citi downgrades Plug Power Citi lowered its rating on Plug Power to neutral from buy and slashed its price target on the electric vehicle charging stock to $5 from $12. The new forecast implies upside of just 15% over the next 12 months. "At the time of initiation, we had seen PLUG as a catalyst rich story with near term upside despite medium-term challenges," wrote analyst Vikram Bagri. "While the catalysts did not play out (GA commissioning, 45V clarification, H2 hubs, breakeven margins, strong sales growth), subpar execution has led the company into liquidity challenges." Plug Power shares have been reeling this month, losing more than 26% after the company reported a bigger-than-expected loss for the third quarter and revenue that missed expectations. "The nascent hydrogen economy is about to burgeon over the coming decade, and PLUG stands as the leader with its vertical integration strategy and global partnerships," Bagri said. "However, we believe margin expansion will take longer than expected to play out." — Fred Imbert 5:45 a.m. ET: Wells Fargo upgrades Target, says margins have stabilized There's plenty of room for Target to run despite its near-term challenges, according to Wells Fargo. Analyst Edward Kelly upgraded the big-box retailer to overweight and upped his price target by $28 to $148 — which implies shares could jump roughly 13.4% from Wednesday's close. "We see TGT's Q3 update as a material inflection," Kelly wrote in a Wednesday note. "Macro uncertainty is undeniable, but margin clarity shifts the range of earnings outcomes for this beaten up name much higher … the risk/reward remains favorable." According to the analyst, Target's gross margin upside dramatically reduces its earnings risk and "opens the door" to a stronger recovery. Other catalysts behind the new rating include the company management's positive tone on margins, higher earnings power if sales improve and macroeconomic weakness, which could bolster Target's already stronger position against its peers. Target posted a beat on fiscal third-quarter earnings and revenue expectations on Wednesday, but said it is still seeing weaker discretionary spending. Shares had jumped more than 17% on the earnings. The stock was 0.7% higher in premarket trading Thursday. — Pia Singh