Wednesday's analyst calls: Citigroup gets an upgrade, Goldman downgrades Charles Schwab

Published Wed, Jan 3 20245:40 AM ESTUpdated Wed, Jan 3 20248:51 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.) Banks and fintech stocks were in focus among Wednesday's early analyst calls. Wolfe Research raised its rating on Citigroup and named JPMorgan Chase a top pick. Meanwhile, KBW downgraded SoFi Technologies, noting the lender could see big losses going forward. Goldman Sachs also lowered its rating on Charles Schwab. Check out the latest calls and chatter below. 8:27 a.m. ET: Kymera Therapeutics has limited near term catalysts, BofA says It's time to move to the sidelines on Kymera Therapeutics , according to Bank of America Securities. Analyst Geoff Meacham downgraded Kymera to neutral from buy. His $30 price target, cut from $45, still represents 18% upside from Tuesday's closing price of $25.35. Shares declined more than 3% in premarket trading. While the analyst remains positive on the longer term outlook for the biotech company, he said there are few catalysts over the near term. "Fundamentally, Kymera's targeted protein degradation (TPD) platform could be best-in-class with expanding opportunities in immunology and oncology, which differentiates the pipeline," Meacham wrote on Wednesday. "That said, while we remain impressed with the pipeline derisking thus far and with clear differentiation among TPD peers, 2024 looks likely to be more about validation of prior data versus many new data reveals." Kymera is coming off a lackluster year. In 2023, shares were up just 2%, below the S & P 500's 24% advance — Sarah Min 8:18 a.m. ET: Barclays upgrades Yum Brands, downgrades Wendy's While casual dining has outperformed quickservice restaurants, that scenario could change if consumers rein in spending this year, Barclays said Wednesday. "Quickservice as the segment will benefit from trade-down to value and franchised as it insulates against volatility, generating a high margin annuity stream of royalty income without having to actually operate any restaurants," analyst Jeffrey Bernstein wrote in a note to clients. With that in mind, he upgraded Yum Brands to overweight from equal weight. The KFC, Pizza Hut and Taco Bell parent underperformed quickservice in 2023, up 2% versus 10% for the segment. "YUM is a large cap, global restaurant portfolio company with three industry leading, global quick service brands, expected to deliver an average 6% unit & 3% comp growth over the next three years," Bernstein said. At the same time, he downgraded Wendy's to equal weight from overweight. He expects the fast-food chain to deliver an average 3% unit growth and 2% comp growth over the next three years. — Michelle Fox 8:16 a.m. ET: Morgan Stanley downgrades Keurig Dr Pepper Keurig Dr Pepper may not have the sales momentum to match its recent stock rally, according to Morgan Stanley. Analyst Dara Mohsenian downgraded the beverage stock to equal weight from overweight, saying in a note to clients that the stock is now looking pricy after a rebound in the final months of 2023. "A higher valuation also now reflects a higher bar after significant stock outperformance in H2, moving us to the sidelines and an EW rating," the note said. Signs of weak demand could be a sign that the stock is at risk of a pullback, Mohsenian said. "Coffee is still not fully recovering as much as expected, and cold drink is now dissipating as yoy industry pricing moderates as reflected in US scanner data," the note said. — Jesse Pound 8:14 a.m. ET: Mizuho names Chevron as top oil pick, downgrades Exxon and Occidental The global oil market will have limited upside in 2024 due to supply growth in the U.S. that is challenging OPEC's ability to support prices, according to Mizuho. Analyst Nitin Kumar is recommending defensive stocks that can create their own catalyst through their asset base or a very low balance sheet. Chevron is a top pick with a stock price target of $187, implying 25% upside from the last close of $149.48 per share. The oil major's Permian productivity supports a target of more than 1 million barrels of oil equivalent per day by the end of the decade, while its acquisition of Hess adds high quality, deepwater assets, Kumar wrote. Chevron's discounted value is supported by 8% debt to its current market capitalization. Kumar is more bearish than Wall Street's consensus on Exxon and Occidental , downgrading the two stocks to neutral from buy. The analyst believes these stocks' value and risks to cash returns make them less defensive in 2024. Kumar slashed Exxon's price target 12% to $117 from $133 previously. The new target still implies 14% upside from Exxon's last close of $102.36. Occidental's price target was cut 12.5% to $63 from $72 previously. The adjusted target suggests just 5% upside from the company's last close of $60.05. — Spencer Kimball 7:54 a.m. ET: Eli Lilly named Bank of America's top biopharma pick This year, Bank of America thinks investors should put their money into the biopharma sector, calling the industry "attractive" with quality growth names continuing to come out on top. Eli Lilly and Merck are the firm's favorite large-cap names in biopharma. Both stocks were unchanged in premarket trading. "Lilly is well-positioned to weather competitive threats with its breadth of portfolio, making it our top pick," analyst Geoff Meacham wrote in a Wednesday note, noting that Eli Lilly's GLP-1 products will continue to strengthen the company. The drug manufacturer leads the biopharma sector on revenue growth through the end of the decade, he said. "Merck is another one of our favorites given its top-tier revenue growth profile," Meacham added. Merck's product pipeline is another strength, the analyst said, noting the company's sotatercept and TROP2 drugs, which made advancements this year. — Pia Singh 7:39 a.m. ET: Goldman initiates coverage of China EV play Nio Electric vehicle startup Nio could have some early mover advantages, according to Goldman Sachs. Analyst Tina Hou initiated Nio with a neutral rating, saying that "as an early mover, Nio's strengths include its premium brand recognition and margin tailwinds from battery price declines." She forecasted 31% revenue CAGR between the end of 2023 and end of 2025, mainly driven by 40% volume growth. The company has been losing market share in China's NEV market, however. Hou said that growth momentum could remain soft on Nio's fewer new model launches, as the car maker has a more mature product portfolio compared to its peers. — Pia Singh 7:37 a.m. ET: Buy-rated First Solar should have 'resilient' earnings this year, Mizuho says Mizuho Securities named First Solar a top renewable energy pick for 2024. The firm has a buy rating on the stock with a $196 price target. That target suggests 13.8% upside for the stock, which has struggled over the past year as rising interest rates made it harder for solar companies to finance their projects. Shares shed nearly 1% in premarket trading. "We expect strong pricing in the U.S. in 2024 (and even beyond 2026) despite oversupply in China, due to limited vertically integrated manufacturing capacity in the Western world…this is positive for FSLR," analyst Maheep Mandloi wrote in a Wednesday note. First Solar's earnings should be resilient, Mandloi wrote, as the company's volumes and average selling prices are "locked in" and sold out through 2026 with mostly take-or-pay contracts. — Pia Singh 6:53 a.m. ET: Bernstein sees difficult setup ahead for Tesla, thinks shares could plunge nearly 40% This year looks like a tough one for Tesla , Bernstein said after the electric vehicle maker reported fourth-quarter deliveries that came out broadly in-line with analysts' consensus expectations. Analyst Toni Sacconaghi thinks that for 2024, Tesla will likely see lower margins and disappoint on volumes. He holds a $150 price target on the stock, suggesting 39.6% downside ahead. "We do not believe that Tesla can further cut prices enough to drive sufficient demand elasticity without potentially becoming [free cash flow] negative," he said in a Tuesday note, adding that Tesla has already had to cut prices to drive year-over-year unit growth this year. The company's models will be another year older in 2024 and market penetration will be higher. "The stock now trades at ~200x trailing TTM FCF, and nearly100x EPS, which is out of whack relative to higher margin growth tech companies," Sacconaghi said. "We believe more investors will begin to increasingly question the company's growth narrative, particularly since we believe that Tesla will struggle to grow deliveries 20% in 2024 (and 2025)." Shares, which soared in 2023, dipped 1% in premarket trading. — Pia Singh 6:40 a.m. ET: KeyBanc upgrades Verizon to overweight, reflecting optimism on wireless industry Investors should pick up shares of beaten-down Verizon Communications , according to KeyBanc Capital Markets. Analyst Brandon Nispel upgraded the stock to overweight and assigned a $45 price target, indicating shares could jump 15.7% from Tuesday's close. Shares of Verizon — the largest wireless service provider in the U.S.— gained almost 1% in premarket trading. Behind this upgrade are several reasons, Nispel wrote in the Tuesday note, including lower competition and favorable set-up for the wireless industry this year and potential for Verizon to show better postpaid phone net add performance, which should hopefully improve year-over-year in every quarter in 2024. "With VZ trading at historically low absolute/relative EV/EBITDA, improving Wireless KPIs and financial metrics, investors are likely to see a deleveraging story with the potential for share repurchases into '25," Nispel added. Verizon's consumer broadband business should also outperform peer AT & T, given Verizon's growing FiOS and 5G Home services, as well as other customers, according to Nispel. Verizon's free cash flow is also higher quality than AT & T's, the analyst said. — Pia Singh 6:14 a.m. ET: Goldman thinks Apple could benefit from 2024 PC demand recovery Apple is a "quality compounder," according to Goldman Sachs. The buy-rated tech stock should benefit from a recovery in industry PC demand in 2024 as well as its strong track record of share gains, according to analyst Michael Ng. Ng wrote in the Tuesday note that he is "selectively positive on PC exposed stocks" in 2024, and added that AI beneficiaries should continue to outperform in 2024. Some PC stocks, like Dell, will be a major beneficiary of increasing AI server demand in 2024, Ng mentioned. Apple, part of the Magnificent Seven group of tech stocks, surged 48.2% last year, driving a bulk of the broader market's gains. It lost 3.6% on Tuesday after a Barclays downgrade, however, and slumped 0.5% in premarket trading Wednesday. AAPL 1Y mountain AAPL in past year — Pia Singh 5:57 a.m. ET: Goldman Sachs downgrades Charles Schwab on lower rate outlook Goldman analyst Alexander Blostein downgraded Charles Schwab to neutral from buy, saying the stock's valuation is not capturing the earnings risk re-introduced for the company this year as interest rate cuts are implemented. Although expectations for lowered rate cuts have recently bode well for capital markets stocks, Blostein said he expects capital velocity and transaction activity to remain below historical averages in 2024 as the higher cost of capital continues "working its way through the ecosystem." "The perceived "rates winners" vs. "rates losers" stock moves have left valuation multiples for many stocks at or above normalized levels and broadly out of sync with our updated growth expectations," Blostein wrote in a Tuesday note. "We expect this will result in wider dispersion in share price performance in 2024." Shares traded about 1% lower in premarket trading Wednesday. — Pia Singh 5:40 a.m. ET: KBW is cautious on Sofi Technologies, says stock could lose more than 30% Slowing origination growth and sluggish growth in Sofi's technology segment could be a drag on Sofi Technology's revenue and earnings, according to Keefe, Bruyette & Woods. KBW analyst Mike Perito lowered his rating to underperform from market perform, and also cut his price target by $1 to $6.50. That suggests the stock could decline 32.6%. Shares traded 4.8% lower in the premarket. "Achieving (and sustaining) profitability in 4W23/2024 could be possible; however, we believe there are more downside scenarios to this outcome than upside, which at a premium valuation shifts us to a more cautious stance," Perito wrote in a Tuesday note. "Capital constraints and limited profitability should slow origination growth in 2024, and while opportunities exist for growth in financial service and technology fee revenues, the duration of those opportunities is much longer than the market anticipates, in our view." Given that the stock has recently outperformed, Perito thinks additional upside is limited to roughly 20%, while downside could be as high as roughly 64%. The analyst assumed about a $1.8 billion valuation on Sofi's technology segment, which he said puts the market value of the bank at about $7.8 billion—which is significantly lower than peer consumer banking company Ally, suggesting a ceiling. — Pia Singh 5:40 a.m. ET: Wolfe Research names JPMorgan Chase a top pick, upgrades Citigroup JPMorgan Chase are the banks to be in for 2023, according to Wolfe Research. The firm raised its price target on the stock to $198 from $181, with the new forecast implying upside of 15.1%. Shares posted record on Tuesday, ending the day at $172.08 per share. That's also about 0.5% below an intraday all-time high set in October 2021. Wolfe also raised its rating on Citigroup to outperform from peer perform. The firm said that, under its base case scenario — which calls for 100 basis points in rate cuts this year — JPMorgan Chase and Citigroup have "greater net interest income resiliency." "Our analysis below suggests that the consensus bar for JPM is much lower versus peers – 2024 cons. is implying -6% decline in NII vs. the annualized 4Q23 run rate, suggesting JPM could withstand more NII pressures vs. peers and still meet cons. expectations," they wrote. On Citigroup, they wrote: "While we still believe management's revenue targets are much too aggressive, this has little bearing on our investment case, with valuation upside largely predicated on 'self-help' levers." — Fred Imbert