Thursday analyst calls: Disney draws praise for earnings, AmEx, Alibaba get downgrades

Published Thu, Feb 8 20246:24 AM ESTUpdated Thu, Feb 8 20248:11 AM EST

(This is CNBC Pro's live coverage of Thursday analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Disney's earnings release Wednesday drew mostly praise from analysts, who cited the company's broad array of products and hopes that some new releases will raise the company's outlook further. However, one analyst soured on American Express, saying that the company's outperformance this year will need some help if it is going to continue. Elsewhere, hopes for a soft landing in the credit sector could boost Discover and Ally Financial, and Goldman Sachs raised its view on Roblox after a solid earnings report. 8:03 a.m. ET Macquarie downgrades Alibaba as sales growth slows A soft fourth quarter for Alibaba could be a sign that the e-commerce giant is in a transition period, according to investment firm Macquarie. Alibaba reported on Wednesday that its sales growth slowed in the fourth-quarter sales, and its U.S.-traded shares fell more than 5%. Macquarie analyst Ellie Jiang downgraded the stock to neutral from outperform, saying in a note to clients that there is no quick rebound coming for Alibaba. "While the soft numbers were somewhat anticipated by the market, we foresee high competitive intensity and macro uncertainty persisting for the time being, which would push BABA into a new investment cycle and potentially blur earnings visibility in upcoming periods," the note said. The investment needed to re-charge growth could hurt earnings in the coming quarters, according to Jiang. "We see some savings from non-core units to partially offset incremental investments, but expect group earnings to enter a declining trajectory," the note said. — Jesse Pound 8:01 a.m. ET Needham upgrades Disney after quarterly results Disney could benefit moving forward by continued cost saving efforts and the growth of its direct-to-consumer segment, according to Needham. The firm upgraded Disney to buy from hold on Thursday alongside a $120 per share price target. Needham's forecast implies more than 21% upside from Wednesday's $99.14 close. Disney stock has climbed nearly 10% from the start of 2024. Analyst Laura Martin also highlighted the company's focus on growth of its ESPN segment, with the recently announced bundle with Warner Bros. Discovery and Fox for a new streaming platform potentially helping churn. "Longer term, we believe bundling can lower churn by up to 50%," Martin said. "In Sept 2024, DIS will offer its new Sports JV as part of its bundle, and in fall 2025 DIS will offer a new flagship ESPN+ service to its Disney+ and Hulu subs. Larger bundles lower churn and raise LTV, we believe." — Brian Evans 7:39 a.m. ET TDCowen upgrades Spirit Aerosystems, sees enhanced cash flow ahead TDCowen expects better days ahead for Spirit Aerosystems, upgrading the airline equipment manufacturer to outperform from market perform on Thursday. Spirit Aerosystems has been under scrutiny due to issues uncovered with its parts on Boeing's aircrafts, including a production defect in the 737 Max 8 bulkhead and, most recently, the door plug that blew out mid-air on a Boeing 737 Max 9 operated by Alaska Airlines. However, Spirit Aerosystems has indicated investments in the fourth quarter have stabilized the 737 line, said analyst Cai von Rumohr. "The slower ramp, coupled with improving labor retention following last June's IAM wage hike, should allow for better productivity, a MAX 9 blessing in disguise," he wrote in a note to clients. While cash flow could remain in the red in the first half, that should start to build in the second half, due to ramping cash and earnings before interest and taxes as volume and productivity increase, a likely settlement with Airbus, lower capital expenditures in 2025-2026 and substantial room to improve inventory turns, he said. "While we estimate FCF in 2026 will reach $325MM (3.5% of sales or $2.75/share), it could be considerably stronger," von Rumohr said. Shares have lost nearly 11% year to date, but were up 2% in premarket trading. — Michelle Fox 7:29 a.m. ET Oppenheimer is bullish on theme park operator Amusement park company Cedar Fair could deliver a "fun" investment opportunity ahead of its merger with Six Flags. Oppenheimer initiated coverage on Cedar Fair with an outperform rating. The firm's price target of $49 per share implied 19.2% upside potential from Wednesday's close. In the merger of the two companies, Cedar Fair will give up its master limited partnership structure. The MLP status allowed the company not to be taxed when paying distributions to shareholders. The deal will make Cedar Fair North America's largest regional theme park operator, according to analyst Ian Zaffino. "The merger should deliver meaningful synergies, and provide additional upside through operational improvements at underearning SIX," Zaffino wrote in a Wednesday note. "The elimination of the MLP structure should help broaden the shareholder base, improve liquidity, and potentially improve the valuation as well—FUN now trades at ~7.4x 2025E stand- alone EBITDA and ~6.9x "fully-synergized" 2025E PF EBITDA." Shares rose more than 1% Thursday before the bell — Hakyung Kim 7:26 a.m. ET Morgan Stanley downgrades Hertz, dims outlook following fourth-quarter results Morgan Stanley says more work needs to be done for Hertz to successfully pivot its company strategy. The firm downgraded the car rental stock to equal weight from overweight on Thursday, and lowered its price target to $10 per share from $15. Morgan Stanley's forecast implies more than 14% upside from Wednesday's $8.76 close. Hertz stock has slipped more than 15% from the start of the year. "Following 4Q results, we have incrementally lower confidence that HTZ is fundamentally changing its fleet strategy," Morgan Stanley's Adam Jonas said. "While the targeted 20k reduction in global EV units (1/3 of EV fleet) is an important first step, we think more needs to be done." — Brian Evans 7:02 a.m. ET Morgan Stanley upgrades Discover and Ally Financial over expected soft credit landing Morgan Stanley says a soft credit landing is becoming more likely, and thinks Discover and Ally Financial are the best ways to play the potential outcome. The firm upgraded both credit stocks to overweight from equal weight on Thursday. Morgan Stanley's $47 per share price target on Ally Financial implies nearly 32% upside from Wednesday's $35.68 close. On Discover Financial, the firm's $133 price target forecasts more than 25% upside moving forward. "ALLY is the best way to play lower rates in our coverage, given its exposure to slower moving loan yields and faster-moving funding costs," analyst Jeffrey Adelson said. The analyst noted positive catalysts for Discover Financial are the company's new CEO Michael Rhodes as well as its student loans sale and its resumption of a stock buyback program. "The potential upcoming sale of the student loan book could translate to ~$2B of freed up capital, with a gain on the sale potentially driving EPS accretion in 2025/26," Adelson added. — Brian Evans 6:33 a.m. ET Goldman Sachs upgrades Roblox Goldman Sachs is growing more bullish on Roblox after the company's fourth-quarter earnings report. The firm upgraded the game creation stock to neutral from sell on Thursday, and increased its price target to $48 per share from $35. Goldman's forecast implies more than 7% upside from Wednesday's $44.74 close. Roblox stock has slipped about 2% from the start of the year. The company reported better-than-expected bookings in the fourth-quarter, and also beat Wall Street estimates on the top and bottom line. "While Roblox's advertising opportunity is still in early stages, management highlighted 69 brand activations in Q4, which we view as a positive leading indicator," analyst Eric Sheridan said. "Looking longer term, we see Roblox as a well-positioned company in the gaming/interactive entertainment space as well as an emerging thematic player around the metaverse and creator economy themes." — Brian Evans 6:03 a.m. ET Here's what analysts are saying after Disney's first quarter results Wall Street is lauding Disney's first-quarter earnings beat alongside the company's new strategic initiatives. Disney reported a beat on the top and bottom lines on Wednesday after the closing bell. Highlights from the report included forecast profitability for the company's streaming segment this year, as well as news that Disney would invest $1.5 billion in Fortnite maker Epic Games to create new games and a collective entertainment universe. "Disney continues to benefit from a global diversified portfolio," Morgan Stanley analyst Benjamin Swinburne wrote on Thursday. The analyst reiterated an overweight rating on Disney stock alongside a $110 per share price target, or about 11% upside moving forward. "Disney laid out a clear plan to drive longer-term streaming revenue growth, both with subscribers and ARPU. It must execute, but the strategy is in place," he added. "Our key takeaway from the report and call is the same as last quarter, which is that DIS is making progress against management's lengthy to-do list," Goldman Sachs' Brett Feldman said. Feldman his buy rating on Disney and a $120 per share price target, implying more than 21% ahead. Feldman specifically highlighted the company's cost saving efforts which could translate to roughly $5 billion in free cash flow in 2024. Bank of America also reiterated a buy rating on Disney stock, and stood by its $110 per share price target. While analyst Jessica Reif Ehrlich said she is hoping for stronger box office numbers from Disney's slate of forthcoming releases, she noted that Disney has "a collection of best-in-class premiere assets" which will aid growth moving forward. — Brian Evans 5:46 a.m. ET Morgan Stanley downgrades American Express, says positive catalysts have already played out Morgan Stanley says American Express may have trouble reaccelerating discount revenues growth, which is the company's largest business segment. The firm downgraded the stock in the credit card company to equal weight from overweight on Thursday, but increased its price target to $222 per share from $212. Morgan Stanley's forecast implies more than 6% upside from Wednesday's $209.08 close. American Express stock has gained nearly 12% from the start of the year. Shares have outperformed peers thanks to a strong revenue and earnings per share outlook in the company's fourth-quarter earnings report. But analyst Jeffrey Adelson says the positive outlook for 2024 is now already "baked" into American Express' stock price, and the company now needs to focus on execution of other key efforts. "The largest component of AXP's revenues, discount revenues, have slowed throughout 2023, and exited the year with a growth rate of just 5%," Adelson said. "We now view the good news delivered on earnings, including the dividend raise, as now largely in the price." — Brian Evans