Thursday's analyst calls: Bank of America downgrades Boeing on FAA production halt, Tesla downside risks

Published Thu, Jan 25 20245:54 AM ESTUpdated Thu, Jan 25 20249:24 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.) Analyst calls Thursday focused on Tesla and one of the EV maker's customers, Hertz. Wall Street reacted to Tesla's latest quarterly results as well as warning of slower growth for 2024. Shares were down 7% in the premarket, and several analysts lowered their price targets on the stock. JPMorgan, meanwhile, downgraded Hertz, citing headwinds from the company's pullback in its initial EV push. Analysts also reacted to IBM's latest quarterly results. Check out the latest calls and chatter below. All times ET. 8:24 a.m.: JPMorgan upgrades Tal Education, says China stock can be a long-term winner A strong quarter for Chinese tutoring company New Oriental Education is likely a bullish sign for one of its competitors as well, according to JPMorgan. Analyst DS Kim upgraded Tal Education to overweight from neutral, saying in a note to clients that an improving outlook for educations stocks should result in earnings power that will "surprise the market for years." "A strong beat in New Oriental Education's (EDU) Nov-Q and guidance ... suggests to us that the post-policy tutoring business is in a 'Goldilocks' environment with very favorable supply/demand dynamics and stable policy backdrop, and we think TAL's 'supernormal' growth may have become the new normal," the note said. Both of the education stocks have outperformed the KraneShares CSI China Internet ETF (KWEB) significantly over the past 12 months. And while New Oriental may be the bigger and more financially healthy company, Tal is poised to have "faster for longer" growth, JPMorgan said. "While we continue to prefer EDU (OW) as a 'safer' name with more visible earnings/[cash flow] profile, we believe TAL could generate sizable long-term alpha for those who can buy and hold the stock for one to two years. We have OW ratings on both EDU and TAL given our view that they can compound earnings much faster and for longer than most think," the note said. — Jesse Pound 8:23 a.m.: Bank of America upgrades aerospace name Heico to buy Bank of America upgraded aircraft component manufacturer Heico to buy from neutral Thursday, sending shares up more than 1% in premarket trading. Heico shares have pulled back about 10% since its recent high in December, and the analyst thinks the retreat is overdone. HEI 3M mountain HEI 3-mo chart "At the end of 2023, investors started to favor names with stronger exposure to ramping OEM production volumes on concerns over deceleration of aftermarket growth," Bank of America said in a note. "We see continued strength for HEI and believe the pullback is overdone." The Wall Street firm pointed to a number of catalysts to boost the stock, including a recovery in air traffic demand. It also said that the recent grounding of the Boeing 737 Max 9 could pressure existing aircraft supply. — Yun Li 7:56 a.m.: Bank of America names Chinese private tutoring company as top education pick Bank of America is bullish on New Oriental Education & Technology . The firm reiterated its buy rating on the company and named it its top pick in education. Analyst Lucy Yu cited a favorable supply and demand setup within the education sector. "EDU is the sector leader with [a] solid earnings growth outlook, supported by multiple and balanced revenue growth drivers, as well as further room for margin expansion (strong education margin expansion to more than offset weaker East Buy margin). EDU's current valuation looks undemanding at 18x," she wrote in a Wednesday note. Yu raised her price target by $5 to $105, suggesting shares could rally nearly 38% from Thursday's closing price. The company reported it expanded the number of learning centers by 7% quarter-over-quarter in its earnings announcement on Wednesday. It also raised its full-year expansion rate to 20%, up from a previous 15% to 20% range. — Hakyung Kim 7:45 a.m.: Jefferies raises Amazon price target Jefferies thinks Amazon's "harvest mode" will help support "the next leg of outperformance." Analyst Brent Thill raised his price target to $190 from $175, implying 22% upside potential from where shares closed on Wednesday. Thill has a buy rating on shares. Thill said he "expect[s] continued focus on 'Harvest Mode' to support all-time high margins and stock outperformance in 2024." Amazon looks committed to increasing its cost efficiency through recent layoffs in its unprofitable Twitch and video team, the analyst added. He noted that global web services division and advertising opportunities are continuing to fuel revenue growth and rising margins. Amazon shares are up just 3.2% this year, while the overall tech sector in the S & P 500 has risen 5.6%. The company is scheduled to report quarterly earnings on Feb. 1. — Hakyung Kim 7:33 a.m.: Bank of America reiterates chipmaker ASML as a top pick Netherlands-based chipmaker ASML remains Bank of America's top pick in the EU semiconductor capital equipment sector. ASML posted an earnings and revenue beat for the fourth-quarter earlier this week. However, the company said revenue in 2024 is expected to remain flat on a yearly basis. By comparison, revenue jumped 30% year-over-year in 2023. Nonetheless, Bank of America remains bullish on the stock. Analyst Didier Scemama reiterated his buy rating, while raising his price target from €760 to €904 euros. "ASML has industrialized next gen EUV (Extreme Ultraviolet) lithography technology, which we believe will underpin many of the disruptive trends of this decade," Scemama wrote in a Wednesday note. He estimates the company could grow revenue and EBITDA at a 17% and 20% compound annual growth rate, respectively, over the next four years. Shares jumped nearly 9% on Wednesday, pulling the stock up 11.9% in 2024. — Hakyung Kim 7:21 a.m.: BTIG is bullish on Bloom Energy Hydrogen energy equipment maker Bloom Energy is becoming an "emerging leader in hydrogen," says BTIG. Analyst Gregory Lewis the stock with a buy rating and $21 price target, suggesting signaling a 76% rally from Wednesday's close. While hydrogen adoption remains in the early stages, Lewis believes it will gain momentum in the coming years. "While green hydrogen is the future, most BE fuel cells in operation are running on methane (not renewable power just yet) allowing BE to make money today while renewable power capacity catches up and hydrogen adoption accelerates," Lewis said in a client note on Thursday. He thinks demand for the company's fuel cells, or "energy savers," will rise amid the shift to electrification and data center growth. To be sure, shares are down nearly 20% in 2024. — Hakyung Kim 7:09 a.m.: Bank of America downgrades Boeing to neutral Boeing's ongoing struggles following the Alaska Airlines Flight 1282 incident has Bank of America stepping to the sidelines on shares. Analyst Ronald Epstein downgraded the stock to neutral from buy and lowered his price target to $225 from $255. The new price target implies just 5% upside from Wednesday's close. "Boeing has again found itself in the spotlight of materially increased regulatory scrutiny. The subsequent grounding and Federal Aviation Administration (FAA) mandated production rate freeze at current levels will likely prevent Boeing from reaching its 2025/2026 production, delivery, and FCF goals outlined during its 2022 investor day," Epstein wrote in a Thursday note. The FAA has capped production of the 737 Max model, which was involved in the Alaska Airlines incident. Scrutiny has expanded to all 737 Max models, which Epstein said "is a nearly worst-case scenario." Boeing pulled back 3.5% Thursday morning. Shares are down nearly 18% year to date. BA 1D mountain BA falls — Hakyung Kim 6:50 a.m.: Oppenheimer is bullish on DraftKings DraftKings is on pace to become the daily fantasy sports market leader, says Oppenheimer. Analyst Jed Kelly has an outperform rating and $44 price target on shares, implying 14.4% upside potential since Thursday's close. Draftkings could become "a critical player in accelerating the shift in US sports betting from ~$150B wagered illegally/offshore to licensed domestic operators," Kelly wrote in a Wednesday note. He estimates the U.S. legal online sports betting and iGaming markets to reach $15.8 billion and $8.5 billion each by 2025 — of which DraftKings has an estimated 30% to 35% market share. DraftKings shares have been on fire this year, popping 9%. Over the past three months, they've soared 40.6%. DKNG YTD mountain DKNG in 2024 — Hakyung Kim 6:39 a.m.: What analysts are saying about IBM earnings While IBM's fourth-quarter results managed to top Wall Street's expectations, analysts aren't all on the same page when it comes to the company's 2024 outlook. Bank of America remains bullish on the stock. Analyst Wamsi Mohan reiterated his buy rating on the stock and raised his price target to $200 from $170. Mohan expects "multi-year revenue and free cash flow growth" ahead for IBM. "The turnaround at IBM (rev growth and FCF improvement) continues, with a defensive portfolio, attractive dividend yield and underappreciated AI portfolio," Mohan said in a note. On the other hand, JPMorgan and UBS analysts aren't so bullish. JPMorgan's Brian Essex has a neutral rating on shares, while UBS analyst David Vogt kept his sell rating. Essex said that, although IBM has some upside potential, "the setup for the stock is challenging as investors weigh the potential for a global macroeconomic trough ahead and the company manages its way through the tail end of its most recent mainframe cycle." Essex did raise his price target by $20 to $190. Vogt, meanwhile, believes that IBM's earnings quality "remains an issue." He raised his price target by just $5 to $125, suggesting shares will fall 28.1% from Wednesday's close. "While we anticipate pushback on our Sell rating, we note our '24 rev forecast only increases 80 bps while PTI increases just190 bps, hardly a step function in growth and profitability considering the stock is up 8% in the after-market," Vogt said in a Thursday note. — Hakyung Kim 5:58 a.m.: Wells Fargo downgrades DuPont Wells Fargo downgraded DuPont de Nemours to equal weight from overweight — citing a lack of catalysts in 2024 as weaknesses continue in China. The chemicals maker issued a net sales and adjusted earnings per share outlook for the first-quarter that came in under analysts' expectations. Shares fell 14% Wednesday following the weak forward outlook. Analyst Michael Sison lowered his price target to $69 from $85, implying just 7.5% upside from Wednesday's close. "We see ongoing destocking in DD's industrial businesses and weakness in China as concerning," Sison wrote in a Wednesday note. "While growth could turn the corner in 2H24, we believe the stock lacks a near-term catalyst to drive meaningful multiple expansion." — Hakyung Kim 5:53 a.m.: Downside risks are ahead for Tesla, according to analysts Tesla's fourth-quarter results has analysts thinking the stock might encounter some headwinds in 2024 after more than doubling in 2023. The electric vehicle maker missed on both earnings and revenue estimates, and said on an investor presentation that vehicle volume growth "may be notably lower" than the prior year, adding that the company is "currently between two major growth waves." Morgan Stanley's Adam Jonas noted that the company provided little-to-no details on demand visibility or confidence in its profit outlook. "Our team is left with the impression that either (a) visibility is poor, or (b) there are downside risks in the broader EV market outside of Tesla's control," Jonas wrote in a Thursday note. He noted in a Wednesday note that Tesla's profitability will likely drop toward the $2 earnings per share range in 2024. Jonas has an overweight rating and $345 price target on shares, implying 66% upside potential. Other analysts are more bearish on the stock. UBS analyst Joseph Spak advised investors to "wait on the sidelines" until the growth outlook picks up again. He reiterated his neutral rating, and inched down his price target by $4 to $225, just 8% above Wednesday's close. "We see little reason for investors to initiate new, or add to existing, positions. TSLA acknowledged slower growth, admitted cost reduction tougher, [and] we see continued evidence of slower EV adoption in US/Europe and high competition in China," Spak said in a note on Thursday. Goldman Sachs also kept its neutral rating on shares with a price target of $220, or just 5.9% above Wednesday's close. Although analyst Mark Delaney believes in Tesla's longer-term growth potential, he cited slower growth in the near-to medium-term, and the likelihood of more cost reductions as overhangs on the stock. Barclays lowered its price target on shares by 10% to $225, while keeping its equal weight rating. "Not as bad as feared, but a cloudy path ahead reinforces some downside risk for now," analyst Dan Levy wrote in a Thursday note. Levy believes the company's fundamentals remain challenged and said margins look unclear. "Tesla's vague volume outlook is a reminder that despite hopes of [a] volume ramp, it is nevertheless at the whim of a choppy macro / weak EV demand environment," said Levy. 2024 may hold a "bumpy road ahead" for Tesla, per Wells Fargo analyst Colin Langan, forecasting margin erosion to continue. Langan has an equal weight rating on shares, and lowered his price target to $200 from $223. Toni Sacconaghi of Bernstein also reiterated his underperform rating and $150 prce target after the report. He noted: "While 2024 will be a challenging year, it is becoming increasingly apparent that 2025 will likely not be better, with continued pressure on growth and margins." — Hakyung Kim 5:53 a.m.: JPMorgan downgrades Hertz Hertz's electric vehicle push has dug a big hole for the company to climb out of, according to JPMorgan. The bank lowered its rating on the stock to neutral from overweight and lowered its price target to $11 from $17 per share. The new forecast still implies nearly 30% upside. "The company continues to work to extract itself from a failed electric vehicle strategy which has led to—we estimate—more than $0.5 bn of losses thus far stemming from the depreciating value of used EVs to higher collision repair costs and lower utilization resulting from a paucity of available spare parts to repair damaged Teslas," analyst Ryan Brinkman wrote. Earlier this month, Hertz announced it is selling one-third of its electric-vehicle fleet amid low rental demand and high repair costs. "We believe the company remains inexpensive on normalized earnings but do not expect the firm to approach normalized earnings until sometime beyond 2025 and believe also that 2024 is likely to prove a transition year," he added. Hertz' shares fell more than 3% in the premarket. For the year, the stock is down more than 18%. HTZ 1D mountain HTZ falls — Fred Imbert