Monday's analyst calls: Boeing upgrade, Bank of America bullish on this sports betting stock

Published Mon, Nov 20 20235:42 AM ESTUpdated Mon, Nov 20 20239:15 AM EST

(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.) Among the biggest calls Monday were upgrades to an aerospace giant and a coffee chain. Deutsche Bank upgraded Boeing to buy , citing strong free cash flow. Meanwhile, JPMorgan upgraded Dutch Bros to overweight, highlighting recent measures to improve liquidity. The bank also lowered its rating on Krispy Kreme to neutral, in part citing "execution" risks. Elsewhere, Bank of America raised its rating on Penn Entertainment to buy, citing potential gains from its ESPN Bet sportsbook . Check out the latest calls and chatter below. 9:15 a.m. ET: Chegg downgraded by Morgan Stanley on weaker fundamentals Morgan Stanley downgraded Chegg on Monday to underweight from equal weight. The stock has rallied 40% off its lows in October, creating an unattractive risk/reward, analyst Josh Baer said. At the same time, the online education company is seeing weaker web traffic and download trends, he wrote in a note to clients. "YoY growth in web traffic exited October at 0%, continuing a trend of decelerating monthly growth rates since August," he said. "Latest top of funnel proxies including web traffic and app download data continue to conflict with management's commentary around improvements in customer retention and acquisition since the initial ChatGPT-induced impacts." Baer also believes consensus revenue estimates remain too high and said that quarter-over-quarter subscriber trends versus the pre-Covid average have worsened each quarter. Shares dropped 6% in premarket trading. — Michelle Fox 9:14 a.m. ET: Morgan Stanley dramatically cuts SolarEdge, Enphase price targets Investors should expect the clean tech bellwethers SolarEdge and Enphase to trade at depressed levels until consumer demand turns around and there is more visibility into the companies' earnings, according to Morgan Stanley. The investment bank slashed its price target for SolarEdge 50% to $89 from $176, and cut its target for Enphase by 30% to $94 from $135. The dramatic cut reflects significantly lower earnings estimates for the two companies in 2024 and 2025, primarily due to lower volume shipments. Morgan Stanley cut its earnings per share forecast for SolarEdge by 95% in 2024 and 57% in 2025. Enphase's earnings per share forecast was slashed 26% in 2024 and 22% in 2025. "For either of these stocks to trade closer to its historical valuation multiples, there needs to be, at a minimum, an improvement in the demand outlook to underwrite earnings estimates with any level of confidence," analyst Andrew Percoco wrote. The revised targets implies more than 12% upside for SolarEdge from the company's closing stock price Friday of $78.99, and just over 1% for Enphase from its Friday closing price of $92.86. Percoco maintained an equal weight rating for the two companies because the risk-reward skew is somewhat balanced, assuming demand doesn't soften further. — Spencer Kimball 8:46 a.m. ET: HSBC initiates Caterpillar with a hold rating HSBC initiated Caterpillar with a hold rating on Monday morning. Despite Caterpillar's status as the global leader in construction machinery, analyst Helen Fang sees "profits falling in 2024e as infrastructure-related bills will take time to play out and slowdown signs emerge." "We like CAT for its leading position, but given the headwinds facing the US machinery market (North America contributes c50% of its revenue), we initiate at Hold," she wrote. Fang's $250 price target is slightly below the stock's Friday closing price of $253.07. To be sure, the analyst noted that Caterpillar's strengths include its in-house construction manufacturing, as well as strong after-sales services and high-quality dealership. Additionally, the company currently has the highest net operating cash flow versus its peers. — Lisa Kailai Han 8:36 a.m. ET: B. Riley slashes its price target for the Children's Place by more than half The outlook for the Children's Place looks precarious, according to B. Riley. The firm downgraded shares of the clothing retailer to neutral from buy, simultaneously slashing its price target to $19 from $45. Shares of the Children's Place, which closed at $19.11 on Friday, traded 2.7% lower before Monday's opening bell. Despite coming in above its third-quarter earnings guidance, analyst Jeff Lick noted that gross margins have fallen while costs have risen. "PLCE's go-forward gross margin and cost structure required to satisfy PLCE's transformed revenue model is much different, more complicated, and less advantageous than PLCE's 2H23 guidance issued in August and our modeling contemplated," he wrote. "The net result of all this is lower gross margins, higher SGA rate, lower EBITDA, lower free cash flow, higher required inventory levels, higher immediate/short-term debt balances and, most importantly, much higher uncertainty." — Lisa Kailai Han 8:12 a.m. ET: Jefferies upgrades Dorian to a buy rating Transit restrictions in the Panama Canal are likely to boost shares of Dorian , according to Jefferies. The firm upgraded shares of the gas shipping company to a buy rating from hold, lifting its price target to $50 from $37. This implies a 28% upside from the bank's Friday close of 28%. Dorian stock was up 1% before the bell. LPG YTD mountain Dorian in 2023 "The recent Panama Canal restrictions, however, change the outlook considerably, tightening VLGC capacity and raising both spot and forward charter rates. The sector is already underpinned by strong US liquids export growth, which is likely to continue next year," wrote analyst Omar Nokta. Nokta noted that Dorian has a history of paying out dividends and achieving strong earnings, adding that the firm seems to maintain a focus on returning capital to shareholders. — Lisa Kailai Han 8:09 a.m. ET: Melius initiates Dell as buy, calls it an 'inexpensive' AI play Dell Technologies is a an "inexpensive" way to play the boom in all things artificial intelligence-related, Melius Research analyst Ben Reitzes said in starting research coverage with a buy recommendation Monday. Dell shares would rise another 29% (after climbing 83% in 2023) to reach Melius's two-year price target of $95. Dell should sell for 12 times estimated fiscal 2026 earnings and will benefit from an "AI Halo Effect," Reitzes wrote. Dell will see "growing benefits from their expansion into the AI server market [and] ... deserves a sustained premium to peers given that it is a structural share gainer with superior scale and an accomplished management team," he added. — Scott Schnipper 7:42 a.m. ET: UBS remains bullish on Ulta, says shares can rally more than 35% Investors should expect "more of a glow up than a blow up" for Ulta , according to UBS. Analyst Michael Lasser has a buy rating on the beauty stock. His $560 price target implies a 36.8% upside from where shares finished Friday. Lasser said third quarter earnings due next week may show some signs of stress. But the analyst said the stock can rally over the next several quarters as Ulta shows an ability to perform and uphold its strategy for double-digit earnings growth. The company should be able to reaffirm in guidance for the full 2023 year and is well positioned entering 2024, he added. "ULTA remains a top pick in our view," Lasser said. "We continue to believe ULTA's shares have amongst the best risk-reward in the hardline, broadline, and food retail sector." — Alex Harring 7:40 a.m. ET: Compass Minerals could have 52% upside from here, says JPMorgan Shares of Compass Minerals appear to be trading cheap, according to JPMorgan. JPMorgan upgraded shares of the mining company to neutral from underweight, although it slashed its December 2024 price target to $24 from $36. However, this updated target is still 52% higher than the stock's Friday closing price of $23.67. "We note that Compass is largely a salt and specialty potash company, and recent transaction multiples have been in excess of Compass' current public market valuation," wrote analyst Jeffrey Zekauskas. Meanwhile, Compass has also improved prices and margins within its core salt operation, although Zekauskas noted that this profitability was balanced by elevated costs within its plant nutrition business. "Compass is not a large generator of free cash flow relative to the commodity companies we recommend even without the capital expenditures on the lithium project, nor does it pay a substantial dividend. But with its large capital project now on hold, we view the shares as de-risked and relatively less expensive compared to its historical trading range," the analyst added. — Lisa Kailai Han 7:37 a.m. ET: JPMorgan raises forecast on Birkenstock, expects higher revenue growth JPMorgan thinks Birkenstock's "best-in-class" brand is being misunderstood by Wall Street. The firm reiterated an overweight rating on the footwear stock in a Monday note, and raised its price target to $50 per share from $48. JPMorgan's price target implies nearly 20% upside from Friday's $41.79 close. "We see management's 'under-promise/over-deliver' mentality as misunderstood (conservatism > caution) driving material revenue and adj. EBITDA upside both near-term and multi-year relative to current Consensus expectations which embed +16.8% revenue growth CAGR FY23-26 (versus the trailing 8 years of 20% revenue growth) and 31.5% FY26 adj. EBITDA margins (versus the trailing 12 months 34% adj. EBITDA margin)," analyst Matthew Boss said. Shares are down 9% since the company went public earlier this year. — Brian Evans 7:33 a.m. ET: Wingstop downgraded at Northcoast Research after 67% rally in 2023 Wingstop was downgraded to neutral at Northcoast Research after surging 67% in 2023 and nearing the broker's $235 price target. "[S]hare price has finally caught up" with advancing sales, "menu innovation, technology improvements and marketing & advertising" and the likelihood of "industry-leading sales and earnings growth for some time," wrote analyst Jim Sanderson on Monday. Wingstop shares have climbed an average of 32.5% annually for each of the past five years, according to FactSet. — Scott Schnipper 7:31 a.m. ET: BMO Capital Markets names Sherwin-Williams a top pick BMO Capital Markets named paint manufacturer Sherwin-Williams as one of its top picks, citing "reasonable upside" to its "above-consensus estimates." Analyst John McNulty noted that higher margins are likely to drive upside for the stock's future consensus estimates. "With trends heading in the right direction, solid upside to our target, we see SHW as offering one of the most compelling risk/ rewards in our space justifying its move to a 'Top Pick,'" he wrote. The firm already had an existing outperform rating on the stock. "While management is likely to start 2024 conservatively with a new CEO in place, we have even greater conviction the risk is solidly to the upside for our above-consensus estimates and believe we could see closer to L/M-teens EPS growth in each year," McNulty added. His updated target price of $301, raised from $280, implies a 11% upside for the stock. — Lisa Kailai Han 7:07 a.m. ET: Bank of America upgrades Penn Entertainment to buy Shares of Penn Entertainment could take off with the company's new initiative, according to Bank of America. Analyst Shaun Kelley upgraded the entertainment conglomerate to buy rating from neutral, raising his price objective to $30 from $27. This new forecast implies 22% upside from Friday's close. As a catalyst, the analyst cited ESPN Bet, the company's new sportsbook. "We think ESPN Bet creates an asymmetric risk-reward, with 1) initial download and app activity much stronger than anticipated, 2) initial offers showing promotional discipline, and 3) stable Q3 earnings being better than expected for PENN's core gaming business," he wrote. Additionally, Kelley also noted the company's "prudent" cost-saving measures over time, adding that the company may also outperform its peers due to less exposure to competition in Chicago, Tunica and Atlantic City. The company also experienced less margin expansion after Covid-19, meaning there's less room for margins to reverse. Penn Entertainment shares have struggled this year, losing 17.3%. PENN YTD mountain PENN in 2023 — Lisa Kailai Han 6:53 a.m. ET: Deutsche Bank upgrades Boeing, says free cash flow will boost shares Deutsche Bank thinks there's a bright future ahead for Boeing . The bank upgraded the aerospace and defense company to a buy rating from hold. The stock added 1.6% in Monday's premarket trading. "Our upgrade rationale is simple: aircraft deliveries are accelerating, and we think there's a credible case to be made that this improved performance can be sustained. And if that's correct, then the momentum on deliveries should carry through to a positive inflection in FCF revisions," wrote analyst Scott Deuschle. Ultimately, Deuschle thinks this boost in free cash flow will continue to drive shares of Boeing even higher. His updated price target of $270, lifted from $205, implies a 30% upside from where shares closed on Friday. Deuschle noted that his updated free cash flow forecasts for Boeing have now risen above Wall Street consensus. — Lisa Kailai Han 6:32 a.m. ET: BofA upgrades Vale, cites higher iron ore prices Bank of America upgraded Vale stock on the back of the bank's more optimistic view on the iron ore outlook. Analyst Caio Ribeiro upgraded shares of the mining company to buy from neutral. His updated price objective of $20, up from $16, implies a potential upside of 32%. "We see the higher iron ore prices driving higher [free cash flow] generation, which could open the possibility of higher shareholder returns," Riveiro wrote. "We also like Vale's exposure to copper and nickel prices and could see a turnaround in the operation after the recent stake sale." Shares of Vale were up 1.2% before the bell. Still, the stock is down 10% year to date. VALE YTD mountain VALE in 2023 — Lisa Kailai Han 6:13 a.m. ET: ChargePoint receives downgrade from Bank of America and Wolfe Research Bank of America and Wolfe Research downgraded shares of ChargePoint , citing a guidance cut and significant uncertainty ahead. Bank of America analyst Alex Vrabel downgraded the electric vehicle charging firm to neutral from buy. He accompanied this move by slashing the price target to $2.50 from $11.50, which still corresponds to a 24% upside. Similarly, Wolfe Research analyst Shreyas Patil downgraded the company to peer perform from outperform. "We now see shares as somewhat fairly valued and pricing in near term risks," Vrabel wrote. Wolfe Research's Patil also noted increased risk factors regarding medium-term demand. "With CHPT's Commercial customers, the slowdown in orders which manifested earlier this year appears to have accelerated, including softness from workplace customers. And on the Fleet side, several customers on multi-year agreements have been deferring purchases," he wrote. — Lisa Kailai Han 5:47 a.m. ET: Jefferies upgrades Six Flags Investors should get in on shares of Six Flags Entertainment due to the company's recently announced merger with Cedar Fair, according to Jefferies. Ahead of the merger, which is expected to close next year , Jefferies lifted shares of Six Flags to buy from hold. The updated price target of $32, raised from $25, corresponds to a 35% upside from the stock's Friday closing price of $23.70. The Cedar Fair management team is expected to run the combined company in a C-corp structure, while the Six Flags CEO and CFO will lead the transition. "FUN management has achieved more consistent execution, which should translate well to SIX rich asset based structure," wrote analyst David Katz. He noted that the new company will also have a broader geographic coverage across North America. "Assuming the combined company can achieve its targets, the implied value to SIX holders is $30-50," the analyst added. — Lisa Kailai Han 5:42 a.m. ET: JPMorgan downgrades Krispy Kreme JPMorgan lowered its rating on the doughnut chain to neutral from overweight, maintaining its $13 per share price target. That forecast is just below where the stock closed on Friday. Analyst John Ivankoe noted that, while the stock is outperforming the S & P 500 year to date, and the company has global brand recognition, there have been execution issues. "We can say through experience that execution has not always been consistent in terms of every package containing product made in the past 24 hours which is actually an issue as the "Krispy Kreme perfection famously fades by the hour/day," he noted. Still, "the underlying appeal of Krispy Kreme is enormous, and of course there is only one authentic Krispy Kreme doughnut." Year to date, shares are up 26%. DNUT YTD mountain DNUT in 2023 — Fred Imbert 5:42 a.m. ET: JPMorgan lifts Dutch Bros to overweight, sees 26% upside ahead JPMorgan thinks it's time for investors to bet on coffee chain Dutch Bros . The bank upgraded the stock to overweight from neutral, lifting its December 2024 price target to $35 from $30. This implies a 26% increase from Friday's close. As a catalyst, analyst John Ivankoe specifically pointed to the company's recent liquidity improvements. "The company completed ~$345m primary equity raise on September 7 which added ~8% to shares outstanding but allowed net debt/ebitda (incl. capital leases) to drop from 4.4x to ~2.0x and provide substantial available liquidity to the company," he wrote. The analyst added: "New labor investments focusing on shop managers is not a surprise as this partly closes the gap vs peers in addition to compensating for increased responsibilities within the 'people pipeline.'" Shares of Dutch Bros added 3.4% in premarket trading. BROS 1D mountain BROS rises — Lisa Kailai Han