Monday's analyst calls: Dollar store stock gets an upgrade, Citi sees big gains for this airline

Published Mon, Jan 29 20245:40 AM ESTUpdated Mon, Jan 29 20249:22 AM EST

(This is CNBC Pro's live coverage of Monday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Some of the biggest analyst calls on Monday focused on a dollar store stock and a major U.S. airline. JPMorgan raised its rating on Dollar Tree, citing a better macro setups. Citi also upgraded American Airlines, noting it sees upside of more than 30% over the next 12 months. Check out the latest calls and chatter below. All times ET. 9:22 a.m.: Morgan Stanley upgrades Flywire, sees more growth ahead Morgan Stanley is confident about Flywire's continued growth, upgrading the fintech company to overweight from equal weight on Monday. "We are optimistic that drivers of strong growth from existing customers plus new customer contribution will keep revenue growth in the high-20's/low-30's, and combined with margin expansion, should push EBITDA growth to the 60-80% range each of the next two years," analyst James Faucette wrote in a note to clients. Flywire's net revenue retention should remain stable thanks to tuition costs, which have grown at 6-7% compound annual growth rate over the last 50 years, the continued functional department expansion across verticals and geographic expansion, he said. On top of that, Flywire is signing more clients, he added. However, the market is pricing in significant growth declaration for 2024, Faucette believes. "We think concerns about the sustainability of revenue growth creates one of the most compelling risk-reward opportunities across our SMID-cap fintech coverage," he said. Shares are down nearly 8% year to date. — Michelle Fox 8:48 a.m.: Bank of America upgrades Builders FirstSource, sees 18% upside Bank of America upgraded shares of building products supplier Builders FirstSource to a buy rating from neutral. The Wall Street firm said Builders FirstSource is "the best positioned in our coverage for stronger single-family starts, potential increase in lumber prices and homebuilders' shift to more value-add services." The bank also hiked its 12-month target on the stock to $200 from $153. The new forecast represents an 18% upside from Builders FirstSource's Friday close of $169.52. The stock rose more than 1% in premarket trading following the upgrade. — Yun Li 8:47 a.m.: Morgan Stanley downgrades Brown-Forman on weak spirits demand The American consumer's taste for alcohol is normalizing after the pandemic, which could lead to a rough 2024 for beverage companies such as Brown-Forman , according to Morgan Stanley. Analyst Eric Serotta downgraded the stock to equal weight from overweight, saying in a note to clients that the Jack Daniels parent company is getting hit by a demand slump for alcoholic beverages. "While we continue to view BFb as an attractive [long-term] growth story, we no longer see a catalyst for [short-term] outperformance due to much weaker than expected spirits industry demand, which also increases the risk of heightened promotional activity," the note said. One concern raised by Serotta was that inventory levels for wholesalers suggested that alcoholic beverages in the U.S. may be somewhat oversupplied, raising the possibility that companies will need to cut prices to move their product. Morgan Stanley cut its price target on Brown-Forman to $58 per share from $68. The new target is about 2% above where the stock closed on Friday. — Jesse Pound 8:24 a.m.: TD Cowen downgrades Albemarle on concerns of cash flow, lithium prices The lower price of lithium is making things tight at Albemarle , according to TD Cowen. Analyst David Deckelbaum downgraded the chemical stock to market perform from outperform, saying in a note to clients that the company's announced reduction in capital spending this year wouldn't be enough to raise lithium prices or turn cash flow positive. "Save some aberrations around working capital, which can be volatile, we anticipate that ALB will be burning cash for the foreseeable future while available liquidity on its $1.5bn revolver will be stretched heading into 2025. ALB's cuts to capex effectively push out conversion volume growth at Kemerton and the US but do not limit available supply to the market, which ultimately may need to occur at both Chile and Australia to protect pricing," the note said. Shares of Albemarle have already fallen more than 50% over the past year. "As margins erode in 2024 and 2025, we see ALB trading at 14x 2025E and believe that the broader organization requires a significantly higher lithium price to reignite its growth in the conversion market in emerging areas such as the US, Australia, and Europe," the note said. TD Cowen lowered its price target on Albemarle to $130 per share from $220. The new target is about 8% above where the stock closed Friday. — Jesse Pound 8:14 a.m.: Jefferies raises Costco price target, citing reliable business model Costco's blockbuster gains are far from over, according to Jefferies. "Looking ahead, COST remains one of our top picks due to its higher-income customer base and robust consumables offerings," analyst Corey Tarlowe wrote in a Jan. 29 note. Tarlowe maintained his buy rating on the stock, which has gained more than 37% over the past 12 months. He also increased his price target by $27 to $782, which implies 13.8% potential upside for the stock. Shares traded about 1% higher in premarket trading. Costco's stable and reliable business model continues to drive the retail giant's top-line growth, as seen by its year-over-year revenue increases of 9.9% last year, Tarlowe said. He noted that Costco's membership renewal rate continues to grow driven by its value proposition, and that Costco has a significant opportunity in existing U.S. and international markets to occupy more warehouses. Tarlowe added that Costco's fresh food growth has been strong, and non-foods and big-ticket items are improving. — Pia Singh 8:11 a.m.: Citi names Sherwin-Williams a best investment idea Sherwin-Williams has become a favorite of Citi. Analyst Patrick Cunningham reiterated his buy rating while announcing the stock as a top pick. Cunningham's $360 price target implies shares can climb 19.3% over the next year. Cunningham said an improvement in the price and cost landscape should help the stock. Specifically, he pointed to stickiness in pricing, while noting raw materials can see deflation. The company also has the potential to gain share in a down housing market or see upside if it improves, he said. And Cunningham also highlighted Sherwin-Williams' continued investments in stores, people and innovation, which he said can help win new costumers and keep current ones coming back. "We are encouraged by SHW's share gains and see upside beyond the guide," he told clients. Sherwin-Williams has slipped more than 3% since the start of the year, pulling back after jumping more than 31% in 2023. SHW 1Y mountain SHW in past year — Alex Harring 7:51 a.m.: Warner Bros. has limited upside, according to Wells Fargo Wells Fargo downgraded Warner Bros. Discovery to equal weight from overweight, expecting limited earnings for the media and entertainment company this year. Analyst Steven Cahall lowered his price target by $4 to $12, implying shares have a potential upside of just 13% from the stock's latest close of $10.62. Shares dropped 1.7% in premarket trading. Although Cahall said Warner Bros. has strong franchises and gaming, and that its HBO slate should be much stronger this year, he noted that the company's Networks business is under pressure from ratings declines and subscription cancellations. "With above-average leverage, it renders WBD's multiple on the more modest side of Media stocks," Cahall wrote in a Monday note. "Deleveraging/FCF could add to equity value, while secular challenges creates multiple compression risk." — Pia Singh 7:06 a.m.: Bernstein upgrades Hershey to outperform, says company can overcome GLP-1 concerns Hershey shares could make a comeback, according to Bernstein. Optimistic on improving volume and market share from product innovation seen in recent months, analyst Alexia Howard upgraded Hershey to outperform from market perform. She assigned a $235 price target, which suggests shares could climb about 23.5%. Saying the company can survive concerns over GLP-1 weight loss drugs, Howard wrote in a Monday note that "Hershey has the pricing power and innovation capabilities to continue to drive sales growth in the category, while other parts of the portfolio (and potentially further acquisitions) are likely to support volume growth." The analyst added that continued top-line growth due to higher cocoa and sugar prices, the potential for decent gross margin performance this year based on pricing as well as an attractive stock valuation—making shares the cheapest they've been in the past decade—puts the stock in a sweet post. Shares gained 0.9% during Monday's premarket trading session. The stock is up about 2% so far this year. HSY YTD mountain HSY this year — Pia Singh 6:41 a.m.: Jefferies raises price target on Meta on strong quarterly expectations Jefferies is bullish on Meta Platforms ahead of the tech giant's earnings due Thursday after market close. "Our recent digital ad checks have been the most positive we've seen in several years, giving us conviction in Q4 rev at the high end of guidance and Q1 revenue guidance above the street at the high end," analyst Brent Thill wrote in a Sunday note. "We see the potential for META to deliver high-teens reported revenue growth in FY24." The analyst maintained his buy rating and raised his price target by $30 to $455, which implies 15.4% potential upside from Friday's close. Shares traded 0.4% higher in premarket trading on Monday. According to Thill, catalysts for the stock include: AI investments driving increased Instagram user engagement Advertiser ROI has improved, coming from Advantage+ shopping campaigns and other AI ad tools Reels could be a "material tailwind" by the end of the first half of 2024 Click-to-Messenger/WhatsApp ads are continuing to scale, potentially driving revenue growth in fiscal year 2024 Meta shares have ripped 11.4% higher to start 2024. Last year was the stock's strongest ever, soaring 194.1%. — Pia Singh 6:20 a.m.: Morgan Stanley downgrades Norfolk Southern, says rail stock is lagging its peers Investors should stay away from Norfolk Southern after the company posted disappointing quarterly results, according to Morgan Stanley. "NSC's 4Q miss and 2024 commentary reflected similar volume and cost concerns as other Rail prints this season but the gap to peers, modest LT targets and lack of a concrete new plan to get there, leaves current consensus EPS expectations and stock multiple less justifiable than peers, in our view," analyst Ravi Shanker wrote in a Monday note. Shanker downgraded the stock to underweight from equal weight. His $175 price target — down from $185 — implies 25.3% downside for the stock from Friday's close. According to the analyst, Norfolk Southern was the worst-performing rail stock in 2023. The company's operating ratio gap vs. peers has only grown, despite rail stocks overall improving on volumes and other constraints this year, he said. Shanker also noted that Norfolk Southern's long-term guidance isn't ambitious, with the higher-end of its guidance over three years failing to get the company up to par with where its peers currently are and where Norfolk Southern was a year ago. The company on Friday reported earnings of $2.83 per share, excluding items. That's below a $2.87 per share StreetAccount forecast. Shares dropped 1.5% in premarket trading, adding to the stock's losses of just under 1% so far this year. — Pia Singh 5:57 a.m.: Colgate-Palmolive has upside opportunity this year, according to Raymond James Raymond James is optimistic on Colgate-Palmolive shares following the company's fourth-quarter earnings and full-year outlook. Analyst Olivia Tong upped her rating to outperform from market perform and set her price target to $91, which implies 9.9% potential upside for the stock. "CL is still in the early innings of improved top and bottom-line growth, balancing contribution from volume vs price, emerging markets vs developed, and across the product portfolio," Tong wrote in a Monday note. "We see solid potential for CL to continue to drive sales growth ahead of its long-term target ranges and towards the upper end of peers, in turn driving upside in the shares." Colgate-Palmolive's efforts on product innovation, premiumization in oral care and opportunity to seize pet category growth as pet company Hills decelerates are part of Tong's investment thesis on the stock. The company has an "ability to become a consistent compounder again" and regain market share as inflation and currency headwinds are more manageable compared to the past, she added. Shares of the company, which are up about 3.9% so far this year, added 0.7% in premarket trading on Monday. — Pia Singh 5:40 a.m.: JPMorgan upgrades Dollar Tree, citing stronger 2024 macroeconomic setup Due to consumer spending and merchandising headwinds, JPMorgan thinks low-end retailers are in for a better year. Analyst Matthew Boss upgraded Dollar Tree to overweight from neutral. He also raised his price target by $35 to $157, implying roughly 18.3% upside from the stock's latest close at $132.73. "Said differently, we see 3+ years of multi-price-point "self-help ̇ driving mid-single-digit comps at a mid-teens margin profile at DT with the FDO [Family Dollar] store fleet optimization changing the investment narrative to a potential "win-win ̇ catalyst path in FY24," Boss wrote in a Monday note. According to the analyst, growth catalysts include the acceleration of 600 Family Dollar planned store closures and a larger total addressable market for Dollar Tree, as well as a fixed price point structure that allows disinflation to be a potential multi-year opportunity for merchandise sales. Shares are up 0.4% in premarket trading. The stock has slid about 6.6% so far this year. — Pia Singh 5:40 a.m.: Citi upgrades American Airlines American Airlines shares are off to a strong start for 2024, and Citi expect even more gains from here. The bank upgraded the airline to buy from neutral, raising its price target to $20 from $14. The new forecast implies upside of 32%. "North America's network carriers' diversified revenue streams and solid demand for premium cabin offerings appear to provide them with superior positioning in this post-pandemic environment," analyst Stephen Trent wrote. "Against this supportive backdrop, American's ongoing deleveraging focus and continued low capex, along with protracted industry capacity constraints, should continue to support the likes of American Airlines." American shares are up more than 10% year to date thus far. The stock lagged the broader market in 2023, rising just 8%, while the S & P 500 jumped 24.2%. AAL 1Y mountain AAL in past year — Fred Imbert