Thursday's analyst calls: Car rental stock gets upgraded, Citi gives up on Spirit Airlines

Published Thu, Jan 18 20245:37 AM ESTUpdated Thu, Jan 18 20248:51 AM EST

(This is CNBC Pro's live coverage of Thursday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Thursday's analyst calls featured an upgrade to a car rental stock and a big downgrade to an airline. Morgan Stanley raised its rating on Hertz to overweight, forecasting strong gains ahead. On the flipside, Citi cut Spirit Airlines to sell, citing uncertainty for the company after a proposed merger with rival JetBlue was blocked. Check out the latest calls and chatter below. All times ET. 8:50 a.m.: Target is well-positioned this year, according to Guggenheim Analyst Robert Drbul maintained his buy rating on Target, but reduced his 2024 estimates given a tougher macroeconomic environment and consumer backdrop. His $160 price target suggests shares could climb more than 15% over the next 12 months. "We believe softer industry trends in discretionary categories will continue well into 2024," Drbul wrote in a Thursday note. "While we still expect a sequential comp improvement driven mostly by traffic, we reduce our FY24 EPS estimate to $9.30 (21 cents above consensus), from $9.75 prior." The analyst said he continues to see three large opportunities for Target, including: Ongoing cost-cutting and efficiency efforts that should save between $2 and $3 billion over the next few years Shrink improvement Fewer markdowns as "lean inventory levels and improved in-stocks lend to margin support" — Pia Singh 8:48 a.m.: Here's what analysts are saying after Charles Schwab's fourth-quarter results Analysts on Wall Street are lowering their estimates on Charles Schwab after the company's fourth-quarter results. "We think SCHW's EPS growth in 2024 will remain muted (in mid-single digits range), with management characterizing 2024 as another transition year," Goldman Sachs analyst Alexander Blostein wrote on Thursday. The firm reiterated a neutral rating on the stock, alongside a $67 per share price target which equates to about 6% upside moving forward. The analyst also lowered his EPS estimates from 2024 to 2026 over lower net interest margin forecasts. Bank of America analyst Craig Siegenthaler restated an underperform rating on Schwab following quarterly results with a $58 per share price target or about 9% downside moving forward. The analyst also lowered his EPS forecasts for the next three years. "A smaller deposit base due to lingering sorting and softer net new assets could continue to negatively surprise investors," Siegenthaler said. "Additionally, if SCHW's organic growth trends at 2-3% in 2024, this may weigh on its premium valuation relative to public broker peers that are growing faster and trading at lower valuations." — Brian Evans 8:38 a.m.: Buy Pinterest as users become shoppers, Argus says Argus moved off the sidelines on Pinterest as the platform has increasingly been viewed as an e-commerce destination. Analyst John Staszak upgraded shares of the social media stock to buy. His $45 price target implies shares can climb 23.6% over the next year. The upgrade comes as Pinterest has tried to increase shopping on the platform through adding products, utilizing artificial intelligence and launching a partnership with Amazon, Staszak said. He also noted that Pinterest has invested in content and personalization, while acknowledging that rising costs tied to these improvements can weigh on earnings. "Pinterest users see the site as a place to shop, with more than half of them intending to purchase prior to visiting the company's platform," Staszak told clients in a Wednesday note. "We expect more of these users, higher engagement (e.g., likes, comments), increased ad prices and higher ad loads (i.e., ads seen per view) to drive growth." Pinterest has risen about 17% since the end of October, a rally Staszak said is connected to the Amazon partnership and outlook for earnings growth this year. Shares advanced nearly 2% before the bell on Thursday following the upgrade. — Alex Harring 8:28 a.m.: This AI 'pure play' can triple its total addressable market by 2027, Oppenheimer says Oppenheimer is turning more bullish on this contact center stock. " NICE is our preferred cloud-based contact center name: we view the company as an AI pure play and are confident they can execute amidst growing competition from larger names like AWS," wrote analyst Timothy Horan in a Thursday note to clients. In the near term, Horan expects the company's AI-enabled product, which offers a 10% to 20% productivity boost, to agents to continue expanding. Some of the company's barriers to entry, which include AI models trained on customer data and vertical integration, should also bode well for the company versus its competition. "In the long run, we think the company's TAM can grow 3x to $22B by 2027, driven by cloud adoption acceleration, enterprises demanding holistic customer service platforms, and the replacement of human labor by AI technology," he said. The firm holds an outperform rating on Nice and a $225 price target implying 10% upside from Wednesday's close. – Samantha Subin 8:02 a.m.: Loop Capital sees 10% upside for Costco Costco is set up for a big 2024 even without a fee increase, according to Loop Capital. Analyst Laura Champine hiked her price target for Costco to $755 per share from $710, saying in a note to clients that the membership-based retailer is seeing inventory improvements. "We visited several clubs earlier this week, and are happy to report that the in-stock issues we saw in early January have been fixed. We now see a more localized assortment, even within markets," the note said. The new price target is 10% above where the stock closed on Wednesday. Costco has shown the ability to improve its numbers by hiking its membership fee in the past, but Loop Capital's optimism doesn't even account for a fee hike this year. "Our revised estimates imply an acceleration in top-line growth in F2024 even with the one fewer week in the fiscal calendar," the note said. Costco shares are coming off a monster year, rallying 44.6% in 2023. They are up 3.7% in early 2024. — Jesse Pound 7:27 a.m.: Netflix can rise 16% as streaming company turns focus to pricing, according to UBS UBS is bullish on Netflix , noting multiple tailwinds to the streaming stock and expecting largely in-line fourth-quarter results. Analyst John Hodulik upped his price target by $60 to $560, which suggests shares could jump more than 16.5% over the next 12 months. "We believe Netflix is the main beneficiary as the industry increases prices, consolidates platforms, cuts spend & renews focus on licensing, likely driving upside to estimates & the multiple," Hodulik said. "We have increased conviction in LT operating leverage, especially as peers pull back on spend." The analyst expects Netflix to focus on pricing this year after honing in on paid sharing last year. He estimated that paid sharing will drive about 5% uplift to revenue, and that growth in Netflix's ad-tier subscription plan and better targeting will drive growth. — Pia Singh 6:54 a.m.: Plug Power still rated underweight by Morgan Stanley after ATM announcement Plug Power announced a $1 billion at-the-market equity program after market close on Thursday, which came in slightly earlier than expected, analyst Andrew Percoco said. He estimates the company will need to use between $250 and $500 million from this program — which public companies use in order to generate capital — before the end of the first quarter of this year to manage its cash burn-rate. The analyst holds a $3 price target on the stock, which plunged more than 60% last year after the company failed to deliver on revenue promises. With Percoco's target, shares have 9.9% potential upside. The stock has already lost 39% so far this year and plummeted more than 16% in Thursday premarket trading. Upside risks include significant customer announcements and lower-than-expected green hydrogen costs, Percoco said. — Pia Singh 6:44 a.m.: Bank of America upgrades Apple Bank of America raised its rating on Apple to buy from neutral. The bank also hiked his price target on the tech giant to $225 per share, implying upside of 23%. "We upgrade Apple to Buy from Neutral, given: 1) stronger multi-year iPhone upgrade cycle driven by need for the latest hardware to enable Generative AI features to be introduced in 2024/2025 (large part of installed base still on iPhone 11), 2) higher growth in Services as Apple better monetizes its installed base," analyst Wamsi Mohan wrote Thursday. Apple shares were up more than 1% in the premarket following the upgrade. — Fred Imbert 6:36 a.m.: Evercore ISI reiterates outperform rating on Microsoft, is bullish for the long run Evercore ISI maintained its outperform rating on Microsoft, believing the tech company's risk/reward profile skews positive given its enterprise business and vast array of AI products. The firm's $432 price target implies shares could gain about 10.9% over the next year. "We expect that the '3 A's' (AI, Azure, and Activision) will help power positive estimate revisions over the course of CY24," analyst Kirk Materne wrote in a Thursday note. "Clearly, the primary focus for investors in the coming quarters will be Azure growth and the monetization of Microsoft 365 Copilot but it should be noted that a more positive PC cycle, the integration of Activision into the gaming business, and continued traction in cybersecurity will also help drive growth in 2024." Materne said his longer-term view on the stock hinges on three factors: Microsoft remains "well-positioned" to continue grabbing wallet share, especially as customers look to consolidate and reduce spending Microsoft is in the early stages of monetizing generative AI across Azure and Office platforms Microsoft's acquisition of Activision Blizzard boosts the tech company's gaming offerings — Pia Singh 6:33 a.m.: Mizuho names Affirm, Robinhood as top stock picks in recovering fintech and payments group Buy-rated Affirm and Robinhood are among Mizuho's top fintech and payment picks for 2024. "While delinquencies may creep up across the consumer lending space, we believe investors will begin to look toward 2H24 and a lower rate environment, which will be beneficial to this sub-sector," analyst Dan Dolev wrote in a note. Dolev placed a $65 price target on Affirm and $15 on Robinhood, indicating 58.5% and 40.8% potential upside for shares, respectively. Both stocks added more than 1% in premarket trading. The analyst said he's "highly bullish on the upside opportunity" for direct deposit usage in Affirm's products, as well as on the company's diverse funding channels, partnerships and "superior underwriting." The company's "Affirm Card" is also a "game-changer" to credit payments and could bring buy-now-pay-later and other payment forms to brick-and-mortar stores, he said. For investing platform Robinhood, Dolev noted that share gains in retail trading across products should continue, with upbeat sentiment benefitting equity and options trading. New products can drive positive estimate revisions in the long run, he said. Other Mizuho top picks include Block and Fidelity National Information Services. — Pia Singh 6:03 a.m.: Paramount Global gets an upgrade from CFRA Research CFRA raised its rating on media and entertainment giant Paramount Global to buy from hold, saying shares could benefit from a potential company ownership change. Shares are "event-driven," analyst Kenneth Leon said, noting that there has been media speculation of merger talks among RedBird Capital, Warner Bros. Discovery and other media giants such as NBCUniversal-parent Comcast. Paramount's largest shareholder is Berkshire Hathaway with a 14.4% equity stake, Leon noted. "We think the current share price is an attractive entry for our upgrade to a Buy rating," Leon wrote in a note. "PARA has great media assets and massive libraries in television and movie content, with the Showtime and Paramount+ bundle working." Leon's $16 price target on the stock implies shares could jump about 23% over the next 12 months. The stock edged up about 0.3% in premarket trading. — Pia Singh 5:51 a.m.: JPMorgan upgrades Grab Holdings, sees more than 30% upside JPMorgan thinks it's time for beaten-down Grab Holdings stock to bounce back, citing improving delivery margins and a "reasonable" underlying valuation. Analyst Ranjan Sharma upgraded Grab to overweight and set a $3.80 price target for the stock, suggesting 30.1% potential upside since Wednesday's market close. Shares rose 3.4% in premarket trading. "Financial results in 1H24 are likely to drive positive revisions in near-term earnings expectations with ongoing industry growth, easing competition and rationalization in delivery industry," Sharma wrote in a Thursday note. On-demand delivery competition has eased and Grab's delivery EBITDA margin improved between 2022 and last year, leading Sharma's thesis that shares are likely to maintain or improve delivery margins in 2024. — Pia Singh 5:36 a.m.: Morgan Stanley upgrades Hertz to overweight on EV dumping decision Hertz Global Holdings' recent decision to dump electric vehicles from its fleet bode well for the stock, according to Morgan Stanley. Analyst Adam Jonas upgraded the car rental company to overweight. He lowered his price target to $15 per share from $16, but the new forecast still implies upside of more than 79% from Wednesday's close. "HTZ's aggressive EV strategy has exacerbated significant challenges in both fleet cost and opex/unit, driving a significant retrenchment in consensus expectations," Jonas wrote in a Wednesday note. "We believe the actions announced last week, while driving a sharp negative revision to FY24 and driving a sell-off in the stock, help mitigate longer-term risk to the stock." Hertz announced on Jan. 11 that it would sell about 20,000 EVs, including Teslas, to buy more gas-powered vehicles due to higher expenses related to EV repair. The company had aimed to transition a quarter of its fleet to electric by the end of 2024. Although risks remain, including residual value risk related to EVs remaining in Hertz's fleet, the de-fleeting announcement and market selloff provides "improved risk/reward" relative to Morgan Stanley's valuation, Jonas said. "Forward estimates have fallen far-enough below our forecast for normalized earnings to drive an upgrade to this strategically consequential rental car giant," he said. Shares gained more than 5.7% in premarket trading Thursday. — Pia Singh 5:36 a.m.: Citi downgrades Spirit Airlines to sell Citi is throwing in the towel on Spirit Airlines . The bank lowered its rating on the budget airline to sell from neutral and slashed its price target on the stock to $4 from $13. The new forecast implies nearly 35% downside from Wednesday's close. The downgrade comes after a federal judge earlier this week blocked the company's proposed merger with JetBlue due to antitrust concerns. Week to date, Spirit shares are down nearly 60%. SAVE 5D mountain SAVE 5-day chart "Although JetBlue and Spirit can still appeal Tuesday's court ruling ... it is unclear why JetBlue wouldn't cut its losses here and recognize that it avoided a risky bid on a highly levered carrier with steep losses," analyst Stephen Trent wrote. "Citi assumes that each carrier goes their separate way – and although it would be hard to rule out entirely the appearance of other Spirit Airlines suitors, a new bid seems unlikely w/o the carrier first restructuring its debt," Trent wrote. Spirit shares were down more than 4% in the premarket. — Fred Imbert