Friday's analyst calls: Big drug stock upgrade, Alibaba downgrade, a new AI play

Published Fri, Dec 1 20235:39 AM ESTUpdated Fri, Dec 1 20238:39 AM EST

(This is CNBC Pro's live coverage of Friday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) There were several notable calls Friday morning on J & J, Spotify and Alibaba. Check out the latest calls below: 8:38 a.m. ET: Wells Fargo believes Chevron will deliver on upside potential in 2024 Chevron will deliver on its upside potential in 2024 after a tough year in which its stock has plummeted, according to Wells Fargo. Although Chevron's stock is down 20% year to date, Wells is maintaining its overweight rating and price target of $197, which would deliver 37% upside from the last closing price of $143.60. Analyst Roger Read noted that the U.S. oil major has led its sector in dividend growth, 5.6%, over the past five years and stands out among its peers for not slashing payouts to shareholders since 2014. The company also has strong clashflow generation with relatively disciplined capital expenditures, Read wrote. Share buybacks will be limited to $3 billion in the fourth quarter this year and the first quarter of 2024 due to a blackout period related to Chevron's pending acquisition of Hess. But buybacks will rise to $4.375 billion after Hess' shareholder vote, Read wrote. — Spencer Kimball 8:20 a.m. ET: Stifel initiates coverage of Boeing with a buy rating Boeing is poised to see accelerating growth in the next two years, which should push shares higher, according to Stifel. The investment firm believes new aircraft production is more likely to improve than get worse and named Boeing a top pick in the space. "Boeing is on track to see build rates improve, which, when paired with BGS strength and modest BDS improvement, should position the company to see material FCF growth over the next 2+ years that we think will drive upside for shares as demand for new aircraft remains very high," analyst Bert Subin wrote in a note Thursday. Subin's $265 price target implies more than 14% upside from Thursday's close. —Michelle Fox 7:52 a.m. ET: Bank of America upgrades Norfolk Southern to buy Norfolk Southern is seeing fundamental improvements and its stock could be poised to erase most of its losses from this year, according to Bank of America. Analyst Ken Hoexter upgraded the railroad stock to buy from neutral, saying in a note to clients on Friday that shipping volumes appear to have bottomed and turned back up. "Carloads are up 2.6% year-year 4QTD, above our prior +1.8% target (now 2.6%), led by stronger-than-expected Intermodal, Coal, and Automotive gains. The positive inflection is set to end 9 consecutive quarters of negative volumes at NS. We target 2024 volume growth of 4.7% y-y, above peers' +3.6% average (aided by E. Palestine comps)," the note said. NSC YTD mountain Norfolk Southern YTD East Palestine refers to the derailment of a Norfolk Southern train in Ohio earlier this year. Shares of Norfolk Southern are still down more than 14% since the derailment. Norfolk has shown "faster service gains than we expected" following two network outages that came after the derailment, Hoexter's note said. Bank of America's new price target on the stock is $248 per share, representing upside of more than 13%. —Jesse Pound 7:41 a.m. ET: Piper Sandler becomes cautious on Texas Roadhouse Piper Sandler moved to the sidelines on Texas Roadhouse amid concerns about the full-service restaurant sector and recent performance. Analyst Brian Mullan downgraded the restaurant chain to neutral from overweight. His $110 price target implies 2.3% downside from Thursday's close. Mullan's downgrade follows his initiation at overweight in July. He said the stock has fallen about 2% since then, while the broad S & P 500 has gained around 1% in the same period. Still, the stock has outperformed all but one full-service restaurant Piper Sandler covers. "In summary, TXRH has not worked on an absolute basis; but has been quite good on a relative basis," Mullan told clients. Mullan said the downgrade is part of an attempt to maintain discipline as the stock is already above the firm's price target after stronger performance since mid-October specifically. He also noted that full-service restaurants are in a challenging position, with traffic struggling, price increases harder to defend and difficult comparable figures to meet. "We think absolute share price could be a challenge for the near future; and in the case that we do get an imminent recession, we'd expect the group (TXRH included) to struggle from here," he said. — Alex Harring 6:59 a.m. ET: JPMorgan downgrades BioNTech, cites limited catalysts for the vaccine maker Investors should sell BioNTech , even after its decline this year, as it continues to face challenges, according to JPMorgan. Analyst Jessica Fye downgraded shares to underweight from neutral. Fye said investors should wait for a "more catalyst-rich period" as the company deals with weakening Covid vaccine demand, as well as limited near-term advances in its oncology pipeline. "While we acknowledge the healthy cash balance and see limited absolute downside from here, we believe downward revisions to long-term estimates and protracted time lines to meaningful pipeline readouts could hinder the stock's ability to recover," Fye wrote on Friday. The U.S. listed shares of BioNTech are down by 33% in 2023. The analyst lowered her price target to $99 from $106 per share. The new price target implies just a 5% gain from Thursday's close. In Friday premarket trading, the stock slid 3.4%. —Sarah Min 6:34 a.m. ET: This little-known search company is a buy on the generative AI opportunity, Wells Fargo says Search engine company Elastic NV is a buy on the generative AI opportunity, according to Wells Fargo. Analyst Andrew Nowinski upgraded shares to overweight from equal weight, and hiked his price target, saying he expects Elastic will start gaining meaningful revenue from generative AI on its search platform. He also sees further upside from the company's expansion into log analysis markets. "We believe Elastic is well-positioned to capture GenAI workloads, leveraging key features like ESRE and vector search. Elastic is also capitalizing on recent M & A activity to gain share in the log analytics/SIEM markets, leveraging the new ESQL, which makes it easier to convert from a legacy vendor," Nowinski wrote on Thursday. "Finally, we see further upside to the current valuation (~5x EV/Sales) if either of these new catalysts take off," he said. The upgrade follows Elastic's latest earnings report, which exceeded expectations. On Thursday, the company posted fiscal second-quarter earnings of 27 cents per share on revenue of $311 million. Analysts polled by FactSet anticipated earnings of 24 cents per share on revenue of $304.4 million. The analyst's $115 price target, hiked from $70 previously, implies 43% upside from where the stock closed Thursday, at $80.36. The stock jumped 18% in the Friday premarket. —Sarah Min 6:25 a.m. ET: Morgan Stanley downgrades Alibaba Morgan Stanley cut Alibaba to equal-weight from overweight and lowered the firm's price target to $90 from $110. The firm cited a slower turnaround for its cloud business. "Our previous OW thesis on Alibaba was premised on the assumptions of a fundamental turnaround in core businesses, reorganization to unlock shareholder value, and sizeable capital management potential. However, we have turned more cautious on each of the above given recent developments," stated the note. The new target still represents 20% upside from Thursday's close. Morgan Stanley said PDD Holdings was its top China e-commerce pick, saying its Temu business was "not fully valued by the market." —John Melloy 5:53 a.m. ET: Citi downgrades Spotify, says risk-reward is no longer compelling It's time to move to the sidelines on shares of Spotify , according to Citi. Analyst Jason Bazinet downgraded the streaming stock to neutral from buy, but left his price target unchanged, saying expectations may be too high after a double in the stock this year. "While we like Spotify's strategy and execution, we no longer believe the risk-reward is compelling," Bazinet wrote on Thursday. "And, when we look at consensus estimates, we see a few reasons to be a tad more cautious." SPOT YTD mountain Spotify, year-to-date Of note, the analyst worries consensus expectations for Spotify's ability to raise the average revenue per use (ARPU), while simultaneously reducing the number of users who stop using the platform, are too confident. "While our forecast (and the Street's) expects Premium subs to continue growing, any surprises may cause a material re-rating of the equity as investors shift from EV-persub metrics to more traditional levered FCF multiples," Bazinet wrote. Spotify shares are up by 134% this year. The analyst's $190 price target implies shares can rise just 2.6% from where they closed Thursday. The stock is down 1.5% in Friday premarket trading. —Sarah Min 5:40 a.m. ET: UBS upgrades Johnson & Johnson to buy, cites improved outlook Johnson & Johnson is a buy given the improved outlook in its pharmaceutical business, UBS said. Analyst Danielle Antalffy upgraded shares to buy from neutral ahead of the firm's upcoming analyst day, citing an "increasingly bullish" view on the company's ability to deliver upside on total sales. Specifically, the analyst said the potential in Darzalex, the prescription drug to treat multiple myeloma, is underappreciated. "Our Buy rating reflects our increased confidence into JNJ's ability to deliver above-consensus Pharma sales growth and at least in-line MedTech growth for the next few year," Antalffy wrote on Friday. "Importantly, our conviction in the Pharma outlook is driven more by existing, already commercially available drugs in DARZALEX, STELARA (generic erosion overdone given precedent and launches on the horizon), and TREMFYA, which we believe to be underappreciated," Antalffy added. The stock is down by more than 12% in 2023. However, the analyst's $180 price target, raised from $167, suggests 16% upside from Thursday's close. The stock was higher by nearly 1% in Friday premarket trading. —Sarah Min 5:30 a.m. ET: Bank of America hikes Costco price target Bank of America hiked its price target on Costco to $655 from $610 after the warehouse retailer reported a 4.4% increase in November sales, excluding gasoline and FX impact. "We reiterate our Buy rating and expect COST (and other warehouse clubs) to gain share in the current environment as consumers continue to adjust to higher prices, making COST's value proposition more attractive," wrote analyst Robert Ohmes. COST YTD mountain Costco YTD The new target represents a 10% increase from Thursday's close. —John Melloy