Wednesday's analyst calls: Top casino stocks for 2024, Ferrari gets a downgrade

Published Wed, Dec 13 20235:36 AM ESTUpdated Wed, Dec 13 20239:19 AM EST

(This is CNBC Pro's live coverage of Wednesday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Casinos and a luxury car maker were highlighted among the biggest analyst calls Wednesday. Deutsche Bank named Wynn Resorts and Las Vegas Sands its top gaming stocks, citing likely revenue expansion, among other factors. Meanwhile, HSBC downgraded Ferrari to hold from buy. The stock fell slightly on the back of the rating change. Elsewhere, KBW upgraded D.R. Horton , citing a favorable backdrop for the housing market. Shares ticked slightly higher in the premarket. Check out the latest calls and chatter below. 9:19 a.m. ET: Rosenblatt bumps up price target for supplier of lab tests to Nvidia Viavi Solutions saw its price target raised 20% to $12 (implying 35% upside) at Rosenblatt Securities, with analyst Mike Genovese (buy) highlighting its indirect sales of lab test equipment to Nvidia. Viavi is "well positioned" to meet demand tied to AI 800G networks, and mentioned "800G Lab Test for AI semiconductor and Optical customers as a significant source of new demand on its earnings call in early November. The company is positioned to be the market leader in Lab Test for AI 800G since it supplies Lab Test equipment to Nvidia via Fabrinet for 800G transceivers and active optical cables," Genovese wrote Wednesday. Rosenblatt estimates Fabrinet made about 350,000 800G transceivers for Nvidia in the September quarter, and expects that to double in two years, and said it might even triple. "Viavi also sells 800G Lab Test equipment to other transceiver makers that should see volumes massively ramp over the next year from low levels today, such as Lumentum, Coherent and AAOI," Rosenblatt said. — Scott Schnipper 8:50 a.m. ET: Wells Fargo initiates coverage of Roblox, says Wall Street is underestimating 'untapped' advertising opportunity Wells Fargo initiated coverage of Roblox with an overweight rating, saying that Wall Street is underappreciating the advertising opportunity for the online gaming company. The firm sees "RBLX as a growing audience platform w/ deep engagement, rather than a gaming platform," wrote Ken Gawrelski in a Wednesday note. "Expect material contribution from ad business in '25, enabling margin expansion exceeding Investor Day targets of 100-300bps annually." The analyst expects advertising to serve as a "significant earnings stream" for the company over the long haul, fueled by solid user engagement. Ad growth should also support upside to bookings and EBITDA. He estimates 2025 bookings to come in 7% above consensus expectations as Wall Street overlooks the "large untapped advertising opportunity." Roblox shares have rallied nearly 48% since the start of 2023. The firm placed a $49 price target on shares, reflecting nearly 17% upside from Tuesday's close. — Samantha Subin 8:49 a.m. ET: Citi names Clorox a top 2024 pick As companies return to historical growth trends next year, Clorox stands out, Citi said in a note Wednesday. The bank believes after two years of above-algorithm top-line growth in 2022 and 2023 for companies, along with large gross margin recovery in 2023, the theme for 2024 will be mean reversion. Clorox is likely to outperform since it is showing positive inflections after the temporary impact of this summer's cyberattack . "We believe CLX offers the best risk-reward in our coverage as it recovers from the August cyberattack, which drove a -26% reported volume decline in F1Q24 (-18% organic sales growth) and the stock down -15% from the August peak," wrote analyst Filippo Falorni. Clorox indicated on its last earnings call in November that there is no more impact from the cyberattack on the company's operations, he noted. In addition, he thinks Clorox's updated guidance for fiscal 2024 is conservative. — Michelle Fox 8:10 a.m. ET: Citi downgrades Church & Dwight, cites expensive valuation Church & Dwight stock is trading too expensive to be considered a good buy, according to Citi. The bank downgraded shares of the consumer goods company to sell from neutral, citing a lofty relative valuation after the stock's outperformance in 2023. Shares of Church & Dwight are up 17% this year. "While we don't see risk to consensus estimates and expect 2024 to be in-line with CHD's Evergreen targets, we believe buy-side expectations are elevated and could see a relative multiple de-rating without significant upside to numbers, similarly to what happened in Q3 when the lack of a guidance raise drove a negative stock reaction despite a beat on the quarter," wrote analyst Filippo Falorni. Falorni's price target of $90 implies that shares could fall nearly 5% from their Tuesday close. — Lisa Kailai Han 7:41 a.m. ET: Microsoft has even more AI upside, Truist says Microsoft is not going to stop being a leader in the stock market any time soon, according to Truist. Analyst Joel Fishbein initiated coverage of the software giant with a buy rating, saying in a note to clients that the stock still has room to run after a banner year. "In a year when shares of the software behemoth have risen by over 50% (S & P 500 up 19%), we expect many investors to be wondering where the upside potential is from here. Though their early execution in the generative AI market has been impressive, we believe that MSFT is poised to deliver further upside to expectations as projects go into production," the note said. Microsoft's AI products are seeing strong interest from corporate clients, Truist said. "Over 80% of the enterprise IT buyers that we polled in our 2024 IT Spending Survey indicated that they are either currently using Copilot or plan to test it in the months ahead," the note said. Truist's position is not contrarian. The vast majority of analysts have a buy or strong buy rating on Microsoft, with an average price target of $405.53 per share, according to LSEG. While most Wall Street shops issue 12-month price targets, Truist used a three-year price target of $600 per share. Shares of Microsoft were up less than 1% in premarket trading at about $376. MSFT YTD mountain MSFT in 2023 — Jesse Pound 7:32 a.m. ET: Wells Fargo downgrades Johnson & Johnson on limited EPS growth Wells Fargo downgraded Johnson & Johnson to equal weight from overweight. The firm also lowered its price target by $7 to $163, implying just 5.1% potential upside. "We believe EPS growth will be muted the next few years due to Stelara LOE, medtech growth target seems optimistic and talc litigation will likely remain an overhang," analyst Larry Biegelsen wrote in a Wednesday note. "The Stelara LOE will create a headwind to EPS growth in the next few years, which we believe is partly why JNJ now expects to grow EPS commensurate with sales. Historically, JNJ targeted growing EPS faster than sales." Stelara has been a key sales driver for Johnson & Johnson since 2019, pulling in $9.7 billion in revenue in 2022. Sales of the drug—which are expected to decline after the pharma giant lost exclusivity for U.S. sales in September—still beat analyst expectations for the third quarter, boosting Johnson & Johnson's stock. The firm estimates 2024 underlying earnings per share growth of closer to 3%, which is below the company's sales growth guidance, Biegelsen said. 2025 EPS should also be muted as the company's Stelara sales remain lower throughout the next few years, the analyst added. Shares are down 12.2% for the year, but have gained 5.3% over the past month. — Pia Singh 7:28 a.m. ET: Bank of America names General Electric as one of its top 2024 industrials picks Bank of America said General Electric could see the fastest earnings growth next year among the firm's industrials portfolio. Analyst Andrew Obin named the stock one of his top picks for 2024, forecasting 59% year-over-year earnings per share growth in 2024. He sees rising profits in GE's aerospace division and smaller losses in the renewable sector as driving the gains. Obin has a $135 price target on shares, implying 10.3% upside potential from Tuesday's close. "We see GE as benefiting from competitors' distractions at both Aerospace and Vernova. We view the cancellation of one of three of GE's offshore wind projects as a positive, as it allows GE to avoid a loss-making contract," Obin wrote in a Wednesday note. "We forecast GE … will become a pure-play aerospace stock in April." Shares gained more than 2% during premarket trading on Wednesday. — Hakyung Kim 7:06 a.m. ET: Deutsche maintains buy rating Nio, but says company needs to reduce costs Deutsche Bank Research is standing by China-based electric vehicle maker Nio , keeping its buy rating and $11 price target on the stock while stressing that the company needs to continue reducing costs. That 12-month target implies 51.3% potential gain for shares, which have plunged more than 25% this year. "Beyond the obvious need to reduce cash burn, we think management might have misread the market backdrop, over-hiring and attempting to bring in-house capabilities that are no longer critical to the company's success," analyst Edison Yu wrote in a Wednesday note. Despite Nio's 10% staff reduction in November, Yu said further rationalization" may be necessary through additional headcount reductions or other savings methods for the company to "right size its cost structure." The analyst said Nio's potential plan to spin off its battery manufacturing unit as early as this month could be a positive move for the company. He added that Nio's internal chip development theme could also be spun out, as it can attract a strong valuation potentially higher than the company's battery unit. — Pia Singh 6:36 a.m. ET: Deutsche names Wynn, Las Vegas Sands top gaming stocks Buy-rated Wynn Resorts and Las Vegas Sands are Deutsche Bank's top gaming picks heading into next year. "We believe WYNN and LVS represent the best opportunities for outperformance in 2024," analyst Carlo Santarelli wrote in a Wednesday note. The firm assigned a $124 price target on Wynn, implying 43.8% potential gain for the stock over the next 12 months. The firm's $65 price target on Las Vegas Sands indicates shares can jump nearly 36%. According to Santarelli, catalysts behind the firm's outlook on both stocks include: Net revenue growth and margin expansion for both companies are "visible and likely," and also a differentiating factor amongst its gaming peers Consensus forecasts on the stocks are "rational and achievable" Fundamental headwinds, such as reinvestment levels, are already well-known, and China headwinds are also understood and have rarely impacted the companies' Macau performance historically Both companies have reached "normalized trading levels on normalized earnings" Shares of Wynn are lower by 4.6% this year, while Las Vegas Sands stock is down 0.5% in 2023 — Pia Singh 6:27 a.m. ET: Bank of America raises price target on Broadcom on positive management meeting Broadcom is a "best-in-semis" stock with its double-digit earnings per share growth and path towards long-term profitability, according to Bank of America. Analyst Vivek Arya reiterated his buy rating on the semiconductor company and raised his price target by $50 to $1250, which suggests shares could pop 16.6% over the next 12 months. Broadcom's shares have jumped more than 91% this year. Arya's price increase on the stock follows a virtual investor meeting with the company's leadership, during which the analyst said management pointed to potentially driving double-digit sales growth by moving a significant percentage of its VMWare base to a subscription model. Management also emphasized strong generative AI presence across its products as well as strong long-term free cash flow margin and EBITDA margin, Arya added. "We see AVGO as that rare combination of compelling valuation," The analyst wrote in the Tuesday note, adding that his new price target reflects "ongoing growth momentum" for the company. — Pia Singh 6:15 a.m. ET: Disney's parks are an 'underappreciated' asset, says Morgan Stanley Morgan Stanley reiterated its overweight rating on Disney and upped its price target by $5 to $110, which implies 20.8% potential upside for the stock. The firm has a $135 per share bull case on the stock. "We remain OW as we see its Park assets limiting downside risk, and see opportunities for the company to improve and unlock value in its Media business," analyst Benjamin Swinburne wrote in a Wednesday note. "We believe Disney's Experiences segment, which includes its global parks, resorts, cruises, vacation, and consumer products businesses, is an underappreciated asset in DIS shares." Disney's fiscal year 2024 guidance indicates growth in its experiences segment and increasing focus on efficiency, Swinburn said, as the company is planning for $14 billion in operating free cash flow, marking a return to pre-pandemic levels. The firm said it expects Disney to deliver roughly 14% segment [operating income] growth and reach direct-to-consumer profitability. Generating [direct-to-consumer] earnings power is likely the "single most important driver" of shares in the next few years, Swinburne said. Shares of the entertainment giant were just above flat in premarket trading. The stock has gained 4.8% this year. — Pia Singh 6:03 a.m. ET: Thermo Fisher Scientific is a standout life sciences play, Wolfe Research says Wolfe Research initiated Thermo Fisher Scientific as a top pick in life science and diagnostics tools stocks, which remains an "attractive industry," according to Wolfe Research. Analyst Doug Schenkel assigned an outperform rating to the stock with a $575 price target, implying shares stand to gain 15.6% from the stock's latest close at $497.37. Shares are down 9.7% for the year, fueled by declining sales due to lower Covid-19 product demand but have gained 11.7% over the past month. "We expect that TMO shares will outperform the peer group over the next year as confidence builds in the outlook for a return to MSD/HSD revenue growth and sustained margin improvement," Schenkel wrote in a Wednesday note. "We also note that TMO management is top-tier when it comes to "playing offense when others are playing defense" – we estimate TMO has $20-30B to deploy. We also view 2024 estimates as de-risked." The analyst expects revenue growth over the next decade, which contributes to the stock's "compelling" risk/reward. — Pia Singh 5:57 a.m. ET: JPMorgan lowers outlook on R1 RCM after company's business transformations Analyst Anne Samuel downgraded R1 RCM to neutral, citing changes in the company's business strategy. Over the past two years, the health care revenue management firm acquired peer company Cloudmed, subsequently oversaw a management transition and then acquired revenue cycle management company Acclara in December. "Following a series of transformative events, we see less visibility in the model drivers and go-forward strategy combined with NT pressure on the growth algorithm from acquisition integration," Samuel wrote about the stock. "We are stepping to the sidelines as we await management execution on integrating so many moving pieces, which result in reduced visibility." The stock has been under pressure in the past six months, losing 40%. Year top date, it's down 7.6%. RCM 6M mountain RCM in 2023 — Pia Singh 5:36 a.m. ET: Shares of homebuilder D.R. Horton could continue rallying next year, says KBW Keefe, Bruyette & Woods upgraded D.R. Horton to outperform from market perform, driven by its increasingly positive outlook on homebuilders and mortgage servicers into next year. Shares of the homebuilding company have gained 56.8% this year. DHI YTD mountain DHI in 2023 "We view current housing supply/demand dynamics as favorable on net for the homebuilders and believe they have more room to run. The sector has outperformed YTD, up 65% vs. the S & P 500's 20%. Despite the rally, valuations are below historical averages," the firm wrote in a Tuesday note. "For homebuilders, we believe new home sales and public builderse can continue to gain share on account of land, better capitalization than private developers, and mortgage buydown incentives," the firm wrote in a Tuesday note, adding that house prices will still remain stubbornly high and low in supply, however. "While growth is modest, existing sales will remain anemic, hovering near the lowest per capita since 1970." — Pia Singh 5:36 a.m. ET: HSBC downgrades Ferrari The bank lowered its rating on Ferrari to hold from buy, citing limited earnings growth potential heading into the new year. "Margin improvement and cash generation are ahead of mid-term targets – 2024e EBIT consensus is already at the lower end of the 2026e targets but these targets (according to management) are unlikely to be revised before 2025," analyst Michael Tyndall wrote. "As a result, the potential for mid-term earnings upgrades and results surprise has diminished," Tyndall added. "We also observe that historically Ferrari has had a very small earnings surprise in 4Q, likely because it manages its deliveries in a way to achieve or slightly outperform its guidance." Ferrari's U.S.-listed shares have been on a tear this year, surging 73%. Earlier this week, they hit an intraday all-time high of $372.42 per share. RACE YTD mountain RACE in 2023 — Fred Imbert