Friday's analyst calls: Nvidia the winner from Meta's AI push, chip stock upgrade

Published Fri, Jan 19 20245:37 AM ESTUpdated Fri, Jan 19 20248:48 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.) Chipmakers were in focus among analyst chatter early Friday. UBS raised its rating on Texas Instruments, noting it expects a better for the stock going forward. Meanwhile, Wells Fargo called Nvidia the winner from Meta Platforms' AI spending push. Check out the latest calls and chatter below. All times ET. 8:48 a.m.: Pactiv Evergreen restructuring paying off, initiated at buy at Jefferies Packaging maker Pactiv Evergreen is a cheap stock with a "clear path To unlock value," Jefferies analyst Philip Ng said in initiating coverage with a buy rating and $18 price target (27% upside). PTVE is 2% higher premarket Friday. Pactiv's "great value" is underscored by its 11.3% free cash flow yield, at the same time as it is "still in the early innings of its turnaround" using a "retooled portfolio," Ng wrote Friday. Jefferies is counting on Pactiv drawing a higher P/E multiple as a result of an improved balance sheet. CEO Michael Green has been on the job for almost three years and his "restructuring initiatives [are] already driving better returns," Ng wrote. — Scott Schnipper 8:39 a.m.: Mizuho names Mondelez International and Kraft Heinz top large-cap food picks Mondelez International and Kraft Heinz are investors best bets in the large-cap food space for 2024, according to Mizuho. Managing director John Baumgartner listed the pair as his two top picks among large food stocks for the new year. Both have buy ratings from the company. Mondelez, the maker of Oreo and Ritz, is Baumgartner's growth pick. His $83 price target implies a 13.8% upside. The company was able to advance what Baumgartner called a "very under-appreciated global revenue growth story" in 2023. For the 2024 fiscal year, he said the company's revenue and earnings per share growth should once again outperform the long-term algorithm. "Although MDLZ's growth in developing markets is unlikely to sustain +20% again in FY24, we believe new distribution growth and associated market share gains help to limit downside risks should category growth slow more than expected," he said. "Further, we expect ongoing contribution from cost efficiencies to fund reinvestment and provide incremental support for EPS growth." Baumgartner selected Kraft Heinz as his best large-cap growth idea. He has a $43 target for the stock, reflecting an upside of 16.2%. More active and profitable retail merchandising can boost Kraft Heinz's North American market, the analyst said, while international markets could see 5% growth. He's also watching for any information about new overhead cost efficiencies. Both stocks have inched higher since 2024 kicked off, but the pair diverged in 2023. While Mondelez jumped more than 8% last year, Kraft Heinz slid more than 9%. — Alex Harring 8:21 a.m.: Evercore ISI upgraded IBM, cites 'underappreciated AI tailwinds' Investors may be overlooking IBM's AI opportunities, according to Evercore ISI. Analyst Amit Daryanani upgraded the technology company to an outperform rating, citing "underappreciated AI tailwinds" that should boost the company's consulting and software businesses. "We think as Enterprises look to deploy AI tools to enhance productivity – the process will be complicated and messy, furthermore we think data security and not running enterprise data on public LLM models will be a key focus – IBM with their unique set of consulting and software assets can help solve this bottleneck and enable enterprise customers to deploy AI tools on and off premise more seamlessly," he said in a Friday note. Looking ahead, the analyst expects IBM to benefit from enhanced enterprise IT spending to improve productivity, anticipating a lift in demand for its Watsonx software suite. Demand for AI could also bring its consulting practice to a $1 billion business. Given this outlook, Daryanani lifted the firm's price target to $200 from $165 a share, reflecting 20% upside from Thursday's close. Shares gained more than 2% before the bell. — Samantha Subin 8:19 a.m.: Bank of America downgrades Celsius, citing stronger energy drink competition Energy drink stock Celsius may be close to hitting a wall, according to Bank of America. Analyst Jonathan Keypour downgraded the beverage stock to neutral from buy, saying in a note to clients that the company's recent sales slowdown could be a sign that renewed competition is hurting momentum for Celsius. "CELH US sales continue to be very strong with considerable opportunity supported by rising consumer awareness. However, it remains unclear if recent market share and velocity (dollar sales per points of distribution) declines are merely seasonal or not. With Monster (MNST) pushing to expand Reign Storm and reclaim lost Bang distribution, and Red Bull maintaining strong marketing, competition could weigh on growth this year," the note said. Shares of Celsius have nearly doubled over the past 12 months, but the stock peaked in September and has struggled since then. Bank of America has a price target of $65 per share on Celsius, which is less than 10% above where the stock closed on Thursday. The price would still put Celsius at a valuation premium compared to Monster, the note said. — Jesse Pound 8:03 a.m.: Block is on track for 'best-in-class' EPS growth, BMO Capital Markets says BMO Capital Markets thinks Block could be on pace for exceptional earnings growth moving forward. The firm reiterated Block stock as a top pick for 2024 alongside an outperform rating and a $84 per share price target on Thursday. BMO's forecast implies more than 30% upside from Thursday's $64.47 close. The stock has slipped nearly 17% from the start of the year. "We continue to expect SQ to deliver best-in-class EPS growth (doubling through 2025E, with further meaningful growth in 2026E) and sequential improvement in SQ's adjusted operating margin throughout 2024E (reaching 13% by 4Q24E)," analyst Rufus Hone said. — Brian Evans 7:53 a.m.: Buy beat-down AT & T, Oppenheimer recommends Oppenheimer sees multiple reasons for optimism on AT & T despite underperformance. Analyst Timothy Horan upgraded the telecommunications giant to outperform. His $21 price target shows the potential for shares to rally 28% in the next 12 months, which would be a reprieve from recent losses. "T has underperformed the market and peers the past few years as the company underwent a difficult transition to position itself as a pure connectivity provider," Horan wrote to clients Friday. "We believe these headwinds have moved to the rearview, and the stock is set to benefit from a number of tailwinds." These tailwinds include: "Massive" improvements to both wireless and wireline network capacity and coverage, which can drive up average revenue per user. Improvements in broadband subscriber and revenue trends, helped by fiber builds and Fixed Wireless. The potential to merger DirecTV with Dish. Expense reduction that has in turn helped free cash flow and the balance sheet. "Attractive" valuation at 15% free cash flow and 7% dividend yields. Shares of AT & T advanced 1.4% in Friday premarket trading. The stock has fallen more than 2% in the new year, deepening losses after sliding almost 9% in 2023. The stock has dropped all of the last four completed calendar years. That marked its longest annual losing streak since a seven-year period between 1999 and 2005. — Alex Harring 7:23 a.m.: Marvell dethrones Nvidia as Citi's top semi pick Citi has swapped out Nvidia for Marvell Technology as its favorite semiconductor stock. Analyst Atif Malik moved Marvell to the No. 1 spot. Malik has a buy rating and price target of $75, reflecting an upside of 10% from Thursday's close. "We like the stock setup in 2024 on continued AI optics growth, layering of custom ASIC AI project sales, and bottoming out of noncloud markets like enterprise networking and carrier," he told clients in a Friday note. Meanwhile, he bumped Nvidia, an artificial intelligence darling and member of the "Magnificent 7," down to the second-favorite stock slot. His downgrade follows a run of more than 20% in shares heading into a popular trade show and the expiration of the firm's positive catalyst watch. Both stocks have performed well recently. Marvell has climbed more than 13% so far in the new year, building on 2023's advance of nearly 63%. Nvidia has added more than 15% in 2024, adding to last year's whopping return of almost 239%. Marvell shares rose 1.7% before the bell on Friday. NVDA MRVL 1Y mountain MRVL and NVDA in past year — Alex Harring 7:03 a.m.: 2024 is the 'Year of the Temu', Bernstein says Bernstein reiterated PDD Holdings as its top Chinese internet stock pick for the new quarter while shouting out its increasingly popular e-commerce brand. Analyst Robin Zhu raised his price target on U.S. shares of the Chinese company by $10 to $180, now implying an upside of 26.7% over Thursday's close. He also has an outperform rating on the stock. Zhu called 2024 the "Year of the Temu," a reference to PDD's online marketplace. He said Temu continues to grow above expectations in China and can outperform Wall Street estimates for 2024. The analyst said there's a case to make for expecting more upside to shares in the new year, even after the stock climbed more than 79% in 2023. To be sure, shares have pulled back almost 3% in the new year. "Even amid a challenging environment for China top-down, we don't think it's ambitious to call for PDD valuation to go from a low teens multiple of domestic 2024E profits to a similar multiple of 2025E profit," Zhu wrote to clients. When looking at Temu specifically, Zhu said 2024 can be the year the business "grows beyond brown envelopes sent via air" and expands in new markets. But Zhu said aggregate user subsidy levels should fall as markets mature. And the analyst said he may reexamine Temu's valuation if quarterly losses peak or if embattled retailer Shein goes public. — Alex Harring 6:59 a.m.: Loop Capital hikes Netflix price target, says 'dominance is becoming even clearer' Loop Capital sees even more upside ahead for Netflix as its leadership in the streaming space crystalizes. Managing director Alan Gould raised his price target by $35 to $535, now reflecting the potential for shares to rally 10.2% from where they ended Thursday's session. Gould also reiterated his buy rating on the streaming giant. "The rationalization of the streaming industry is starting and NFLX's dominance is becoming even clearer," he wrote to clients Friday. "As the traditional studios pivot their strategy from profit to growth, not only is the competition raising subscription prices and reducing content spend, but they are again licensing content to NFLX — even DIS and HBO." Gould noted the stock's recent outperformance, with Netflix shares up about 42% from the company's last earnings report. By comparison, the Magnificent 7 and S & P 500 have climbed around 7% and 11%, respectively, in the same period. Looking ahead, Gould said that the fourth quarter should be the first since 2021 that Netflix reports double-digital revenue growth, a feat he said is largely due to subscriber gains instead of an increase in annual revenue per user. This comes as Netflix has cracked down on password sharing. Gould is also expecting strong guidance for the first quarter, citing quality shows. "We continue to recommend NFLX despite the strong stock move," he said. That's because of "our view that the competitive environment is improving, consolidation should eliminate some competition, and these factors should lead to upside bias in future estimates." Gould is more bullish than many on Wall Street, as the average price target of analysts polled by LSEG is $484.42. The highest price target for Netflix is $600, per LSEG. — Alex Harring 6:50 a.m.: Near-term upside hindered for Hertz by EV repair and depreciation challenges, Jefferies says Troubles with electric vehicles is just one of many challenges for Hertz , according to Jefferies. Analyst Harold Antor downgraded the stock to hold from buy and slashed his price target by $4 to $8. Antor's new target price implies a downside of 11%, while his old forecast reflected an upside of 33.5%. "EV repair issues, higher opex and DPU will limit near-term profitability," he wrote to clients, using acronyms for electric vehicle and depreciation per unit. "Given the remediation of these issues are neither simple nor quick, we don't have a ton of conviction in even our reduced 2024 EBTIDA estimate, limiting near-term upside." Antor lowered his 2024 EBITDA estimate by 35% to around $500 million. While he said that valuation appears cheap for the stock, he has "limited confidence" in estimates for 2024 and 2025 after two consecutive quarters of major misses to Wall Street expectations There's also a "lack of visibility" on when elevated expenses tied to electric vehicles, operating expenditures and depreciation will start moderating, the analyst added. Notably, the company announced earlier this month that it would sell about one third of its electric vehicle fleet amid a strategy shift. He said 2024 will be a "transition year" for the company as it battles headwinds. Shares slipped 1.5% before the bell on Friday. The stock has dropped about 13.5% in January, taking another leg down after tumbling 32.5% in 2023. — Alex Harring 6:06 a.m.: HSBC becomes less bullish on Discover as earnings forecast sours HSBC moved to the sidelines on Discover as the earnings outlook became less optimistic. Saul Martinez, the firm's head of U.S. financials research, downgraded the bank to hold from buy and cut his price target by $14 to $107. Martinez's new target reflects the potential for upside of 10.3%, down from 24.7% with the previously expected level. His downgrade came Thursday, when Discover posted $1.54 in GAAP EPS, down from $3.74 a year prior. Discover's stock finished the session down more than 10%. Following the report, Martinez reduced his 2024 and 2024 forecasts for EPS by 9% and 15%, respectively. He anticipates deterioration in the loan growth outlook that should weigh on net interest income, while also noting that credit losses should peak in the first half of 2024 at a high rate. "The reductions largely reflect a softer outlook for loan growth, driving a sharp reduction to our net interest income (NII) estimates," he said. "We also expect much higher net charge offs (NCOs) and some uncertainty persists about the extent to which compliance and risk costs pressure total expenses." Ultimately, he said the new rating reflects a challenging environment with slower loan growth, higher credit losses and increasing expense levels. But he noted the sale of Discover's student loan portfolio, a return to share buybacks and the eventual easing of credit pressures can all help the stock. — Alex Harring 5:42 a.m.: Buy DraftKings amid correction, Stifel says Stifel doesn't want investors to miss an ongoing opportunity to buy into DraftKings . Analyst Jeffrey Stantial upgrade the sports betting stock to buy from hold and raised his price target by $5 to $45. Stantial's new price target implies shares can jump 19.9% over the next year from Thursday's close. While admitting others may not agree, Stantial said to take advantage of a slight pullback from the late 2023 highs. With near-term headwinds such as seasonality as ESPNBet promotions fading, he said investors can now focus attention on fundamentals such as healthy same-state growth rates, marketing and promotional discipline and efficiencies in fixed costs. Taken together, he said these fundaments can drive up what he deemed an "already impressive" path for guided EBITDA. "Our timing here is not without controversy, as we approach a potential hold-driven Q4 miss & Flutter U.S. listing," he wrote to clients. "However, we prefer to own into forthcoming market share stabilization/inflection vs. waiting to de-risk these catalysts, while valuation appears attractive on our fine-tuned estimates." Shares popped 1.6% in Friday premarket trading following Stantial's Thursday upgrade. Despite the recent correction, the stock has gained about 6.5% since the start of 2024. That builds on 2023's rally of more than 200%. DKNG 1Y mountain DKNG in past year — Alex Harring 5:37 a.m.: Wells Fargo calls Nvidia 'clear beneficiary' of Meta's AI push Artificial intelligence darling Nvidia got another feather in its cap after Wells Fargo donned it a winner of Meta's push into the technology. Analyst Aaron Rakers called Nvidia "the clear beneficiary" following a Thursday video update from Meta CEO Mark Zuckerberg about the Facebook parent's use of AI. During the call, Zuckerberg shared plans to have about 350,000 H100 graphics processing units, which Nvidia makes, by the end of 2024. Alternatively, he said the fellow Big Tech company could seek around 600,000 equivalent processors to the H100. Zuckerberg's update comes as Nvidia, a member of the "Magnificent 7," continues to rally. Shares have climbed more than 15% so far in January, extending gains after surging almost 239% in 2023. More broadly, he called the Meta chief's update a sign of "continued positive validation that the AI infrastructure buildout remains in its early innings." — Alex Harring 5:37 a.m.: UBS upgrades Texas Instruments Texas Instruments investors should see a better performance from the stock this year after a lackluster 2023, according to UBS. UBS raised its rating on Texas Instruments to buy and increased its price target to $195 from $170. The new forecast implies upside of nearly 17% from Thursday's close. "We believe it should be among the first to see orders inflect higher given less reliance on distribution (i.e. for TXN there is very little lag time between orders and revenue turning higher) and TXN also has cleaner comps and fundamentals as it was one of the few companies not to employ supply agreements during the peak," wrote analyst Timothy Arcuri. "The stock trades on orders and FCF – both of which look set to inflect positively," he added. The analyst also raised its revenue forecast for 2024 and 2025. Shares were up nearly 2% after the upgrade. Texas Instruments rose just 3.2% in 2023, lagging the semiconductor sector and the S & P 500. — Fred Imbert