Friday's analyst calls: Nvidia a top pick, Palantir gets downgrade after 'overhyped AI euphoria'

Published Fri, Jan 5 20245:43 AM ESTUpdated Fri, Jan 5 20248:55 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.) Nvidia and a cloud stocks were in focus among Friday's analyst calls. Bank of America named Nvidia a top pick, calling for $100 billion in free cash flow for the company by 2025. Meanwhile, RBC Capital Markets initiated Snowflake with an outperform rating and a price target that indicates more than 25% upside. Check out the latest calls and chatter below. 8:47 a.m. ET: Stifel lists Wynn, Bowlero and Royal Caribbean as top stock picks in 2024 Stifel thinks Wynn Resorts , Royal Caribbean and Bowlero are the top stock ideas heading into the near year. The firm reiterated buy ratings on all three stocks in a Thursday note, and raised its target prices on Wynn and Royal Caribbean. Stifel's $133 price target for Wynn implies more than 41% upside moving forward, while the firms $160 forecast on Royal Caribbean calls for nearly 70% upside. The firm maintained its $21 per share target on Bowlero, or about 56% upside. "We believe owning a combination of those three names will allow investors to capture the Macau/LV Strip/cruise upside opportunity as well as a highly controversial/ misunderstood story in BOWL," analyst Steven Wieczynski said. Wynn shares are up 3% this year, while Royal Caribbean and Bowlero are down. — Brian Evans 8:24 a.m. Et: Wells Fargo names Carnival a top pick, upgrades to overweight Wells Fargo sees upside ahead for Carnival , upgrading the stock to overweight and naming it a top pick for 2024. The bank pointed to the solid demand Carnival is enjoying, as well as material deleveraging of its debt. The entry point is attractive given its 10% pullback after its fourth quarter earnings report, analyst Daniel Politzer said in a note Friday. "CCL's fundamentals, mgmt execution, and communication have improved, and with its recent 4Q report, we believe CCL threaded the needle for upward est. revisions over the course of 2024," he wrote. While cruises may face some tough comps and geopolitical risks, they are still one of the few discretionary sectors where demand is robust and there is upside for pricing, Politzer noted. — Michelle Fox 8:23 a.m. ET: Oppenheimer downgrades McDonald's, cites tougher setup for same-store sales in 2024 Oppenheimer is moving to the sidelines on shares of McDonald's as the fast-food giant faces a tougher outlook for same-store sales in the new year. "Following outsized double-digit EPS revisions in '23, we are unable to identify another round of catalysts to the consensus model," wrote analyst Brian Bittner in his downgrade to perform. "We also predict an "in-line" SSS year as pricing benefits subside and share gains with low-end consumers may remain stuck in neutral." Bittner is bracing for a period of normalized growth in 2024 after a strong 2023 expected to exceed 9% same-store sales growth and 17% EPS growth "above historic norms." Global unit growth may continue accelerating for the company, but no longer represents a stock catalyst, with management's new unit growth algorithm already anticipating 4%-to-5%-unit growth. "Into 2024 we are not calling for SSS downside, but are unable to uncover clear drivers for traffic/mix reversals despite drivers such as "better burger", unmatched marketing, and accelerating digital," he wrote. – Samantha Subin 8:03 a.m. ET: Occidental, Chevron and Exxon provide most upside in oil sector, Bank of America says Big oil will have some of the greatest value in 2024 as the major players see tailwinds from big acquisitions, according to Bank of America analyst Doug Leggate. Leggate has selected Occidental , Chevron and Exxon as his top picks. All three companies entered into major deals in 2023 that could accelerate cash flow expansion and dividend growth, Leggate wrote. Chevron is purchasing Hess for $53 billion, Exxon is buying Pioneer Natural Resources for $60 billion, and Occidental is acquiring CrownRock for $12 billion. Bank of America is broadly cutting stock price targets in the oil and gas sector on a declining oil curve. But Leggate's top picks "represent some of the greatest absolute upside we see for the broader sector in 2024, while avoiding exposure through outsize commodity volatility," he wrote. Leggate's top pick overall is Occidental. He believes the CrownRock deal will reset the company's ability to shift value from debt back to equity. He has set Occidental's price target at $80, implying 35% upside. Exxon's target is $140, suggesting nearly 37% upside, while Chevron has 19% upside with at a target of $180. — Spencer Kimball 7:33 a.m. ET: Jefferies downgrades Palantir, cites 'overhyped AI euphoria' Jefferies said Palantir's artificial intelligence advantage has been overhyped in the near-term and sees more risk than reward for the stock. The firm downgraded the data analytics stock to underperform from hold on Friday, and lowered its price target to $13 per share from $18. Jefferies' forecast implies about 20% downside from Thursday's close. "While we do believe the company has an AI technology advantage in the long-term, we are concerned that the stock has rallied to unsustainable valuation levels primarily on the back of AI euphoria (and retail trading momentum) with no monetization strategy," analyst Brent Thill said. To be sure, the analyst added that the firm still believes "that the company has potential to gain share in an underpenetrated and large TAM," but noted that "there is more risk than reward at current levels, even when factoring in upward estimate revisions." Palantir shares more than doubled in 2023. In Friday's premarket, however, they fell 3.8%. PLTR 1D mountain PLTR falls — Brian Evans 7:16 a.m. ET: BTIG downgrades PayPal over long road to regain revenue growth BTIG said PayPal's return to revenue growth will extend beyond 2024, leading it to downgrading the stock to neutral from buy. "Our concern is that the core branded checkout business of PYPL is facing headwinds at a greater rate than Braintree is adding transaction margin dollars. As such, [chief executive officer Alex Chriss] will be seeking to improve Braintree margins while also stabilizing branded checkout trends." Shares have slipped nearly 5% so far in 2024. — Brian Evans 6:33 a.m. ET: Piper Sandler says Tesla and Rivian will outperform peers Electric vehicle companies Tesla and Rivian are best positioned to navigate a constantly evolving auto picture thanks to their respective vertical integration. The firm reiterated an overweight rating on Tesla as well as a neutral rating for Rivian on Thursday, with price targets of $295 and $21, respectively. Piper Sandler's forecast implies about 24% upside for Tesla and roughly 8% for Rivian. Analyst Alexander Potter said that as automakers pull back on orders for components connected to advanced driver assistance systems after stocking up during the pandemic, "this development reinforces our view that vertically-integrated automakers (e.g. TSLA and eventually RIVN) are best-positioned to navigate the rapidly-changing automotive landscape." Tesla shares are down 4.3% in early 2024, but remain more than 115% higher over the past 12 months. Rivian has already lost nearly 17% this year. — Brian Evans 6:22 a.m. ET: Wells Fargo names Boeing a top stock pick for 2024 Wells Fargo says aviation giant Boeing can continue to grow despite already high valuations in the aerospace sector. Analyst Matthew Akers named the stock a top pick, reiterating an overweight rating and raising its price target to $280 from $230. UBS' forecast implies about 14% upside from Thursday's close. "In the end however, what matters most for BA is FCF, and we remain ahead of consensus for 2024 cash. In particular, we estimate the re-start of deliveries to China could unlock ~$0.5-1B of cash on 737 inventory liquidation, along with another ~$0.5B on 787," Akers said. Boeing shares soared 36.8% in 2023. In early 2024, however, they've lost 6%. — Brian Evans 6:05 a.m. ET: Jefferies downgrades Okta Jefferies thinks the outlook for Okta is looking murky. The firm downgraded the cybersecurity stock to hold from buy on Friday. Analyst Joseph Gallo cited a recent security breach as a negative overhang for the stock, but noted he still remains positive on the overall strength of the company. "In order for shares to warrant a re-rating further past our PTs 6x CY25 rev multiple, we believe further improvement in execution and re-acceleration of growth is required which will take time," Gallo said. To be sure the analyst raised his price target on the stock to $95 per share from $85, or about 14% above Thursday's close. The stock has slipped about 8% from the start of the year. Gallo also mentioned peer Zscaler as a top pick in the note, noting the company can benefit from an improving macroeconomic outlook. — Brian Evans 5:43 a.m. ET: Bank of America forecasts $100 billion in free cash flow for Nvidia by 2025, names it a top pick Nvidia's generative artificial intelligence prominence will continue for at least the next two years and help grow free cash flow and expand new initiatives, according to Bank of America. The firm reiterated a buy rating on the chip stock in a note with a $700 per share price target and labeled Nvidia a top pick. BofA's forecast implies nearly 46% upside from Thursday's $479.98 close. Analyst Vivek Arya asserted that Nvidia's dominance can help push free cash flow to as much as $100 billion in 2024 and into 2025, while about $65 billion to $75 billion of those funds could be used for new growth opportunities. "NVDA's relatively depressed trading multiple – just 24x/20x CY24/25E PE versus 67%/26% EPS growth – is partly due to uncertainty in CY25 growth prospects, and partly due to a very hardware dependent business unlike other large-cap software/internet peers that have recurring revenue profiles," Arya said. "In our view NVDA's solid FCF generation creates optionality in addressing these concerns, and in helping to expand its trading multiple back to its historical median 35x-40x," Arya added. Nvidia had a monster year in 2023, rallying more than 200%. The stock, however, is down 3% in the first week of 2024. NVDA 1Y mountain NVDA in past year — Brian Evans 5:43 a.m. ET: RBC initiates Snowflake with an outperform rating Snowflake is coming off a strong year, and RBC thinks there are more gains ahead. The bank initiated the coverage of the cloud company with an outperform rating and a price target of $230 per share. That forecast implies upside of 25.2% from Thursday's close. "Cloud remains the center of gravity for data," analyst Matthew Hedberg wrote. "Despite 2023 cloud optimization trends, we believe platforms that can support a multi-cloud, cross-cloud strategy will win." He also said he's bullish on Snowflake's long-term "growth opportunity and think upside to consensus estimates seems likely. Key catalysts include improving cloud optimization trends, rapid adoption of Snowpark, and over time, adoption of new GenAI offerings." Snowflake shares rallied more than 38% in 2023. However, they got off to a slow start for 2024, losing 7.7% in the first few sessions of the year. — Fred Imbert