Monday's analyst calls: Cloud stock to rally nearly 30%, Covid vaccine maker gets downgrade

Published Mon, Feb 26 20245:51 AM ESTUpdated Mon, Feb 26 20248:59 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.) Analysts kicked off the week on Monday with high hopes for a cloud name and a downbeat outlook for a biotech stock. Morgan Stanley upgraded HashiCorp, citing an improving cloud market backdrop. On a more negative note, HSBC lowered its rating on Moderna to reduce, citing headwinds around the company's cancer vaccine pipeline. Check out the latest calls and chatter below. All times ET. 8:12 a.m.: Rosenblatt hikes price target on Arm Holdings, says shares can rally another 35% Shares of Arm Holdings look poised to surge another 35%, according to Rosenblatt. Analyst Hans Mosesmann hiked the firm's price target to $180 a share, citing improving royalty trends and the company's "impressive" compute subsystem program which is a "mid-single digit royalty rate adder." "We happened to be in Cambridge recently and came away with increased conviction that royalty trends are richening at a faster clip on the heels of more strategic licensing engagements that are increasingly AI-centric," Mosesmann wrote. Given this strong growth outlook, the firm expects Arm's earnings power to exceed $3 a share in 2026. This also warrants a 50 times price-to-earnings multiple, he added. "We see ARM's P/E multiple supportive of 50%+ levels given secular and royalty shifts we see at ~10% by end of decade if not sooner," he wrote. "Like Nvidia in compute GPUs, Arm's technology is becoming indispensable and more so as AI moves more and more to the Edge." Arm shares rallied another 3% before the bell and have surged 77% since the start of the year. — Samantha Subin 8:11 a.m.: Morgan Stanley upgrades AvalonBay Morgan Stanley upgraded AvalonBay Communities to overweight from equal weight on Monday, citing its potential growth and conservative guidance. The real estate investment trust, which develops and owns multifamily apartment communities, is the sole apartment play the bank rates overweight given the record levels of new apartments and muted sales growth for the group this year, analyst Adam Kramer said in a note to clients. AvalonBay stands out because it has less risk from new supply given the issues are most acute in the Sun Belt and its portfolio is predominantly coastal, he said. The company also has the best estimated earnings growth in 2024 through 2026 among apartments, he added. Shares are down 6% year to date. — Michelle Fox 8:04 a.m.: Goldman initiates Wilson tennis racket maker Amer Sports at a buy rating The future looks bright for Amer Sports , according to Goldman Sachs. The bank initiated coverage of the sports equipment company, which manufacturers the Wilson tennis racket, at a buy rating. Analyst Brooke Roach set a 12-month price target of $21, implying that shares could rally 35% from here. "We view AS as a compelling portfolio of premium, innovation-led brands with healthy growth opportunity," she wrote. Shares of Amer Sport have risen nearly 20% since pricing at $13 during their initial public offering earlier this month. In particular, Roach believes that Amer Sport's Arc'teryx brand offers the company "strong momentum" in the direct-to-consumer growth channel, which could drive higher growth and free cash flow. The brand has an especially strong footing in the Chinese market, offering a compelling future outlook. "We see continued runway for the brand in its fastest growing region (Greater China) as well as opportunities for stronger brand awareness and category expansion (women's / Veilance / footwear) to drive significant growth and margin expansion for the AS organization going forward," the analyst wrote. — Lisa Kailai Han 8:02 a.m.: Gap upgraded to neutral by JPMorgan JPMorgan has restored confidence in clothing retailer Gap . Analyst Matthew Boss upgraded Gap to neutral in a Monday note. He pointed to strength in Old Navy and Gap inventory, marketing and merchandise assortments, and that Gap-owned Athleta could grow in the second half of this year under the leadership of its new CEO, who was previously at competitor athletic apparel brand Alo Yoga. The analyst's $20 price target suggests only 2.8% upside for the stock over the next year. Boss also placed a neutral rating on American Eagle Outfitters, citing tailwinds across its American Eagle and Aerie brands by Google Trends data, which he noted management intends to improve. Gap shares added 1.8% in premarket trading, while American Eagle shares gained more than 2%. — Pia Singh 7:33 a.m.: Morgan Stanley upgrades Sun Country Airlines Investors can look to smaller airlines as one way to play the continued strength in travel, according to Morgan Stanley. Analyst Ravi Shanker upgraded Sun Country Airlines to overweight from equal weight, saying that the company has a good balance between being a low cost option for consumers and freight. "We continue to be impressed by SNCY's flexibility and management's solid execution, consistently delivering on numbers, operational reliability, and cost control. While there have been no signs of a slow down in leisure travel, we believe the diversified business model can respond to fluctuations in leisure with its charter and cargo businesses," Shanker said. The cargo business should be solid even beyond Sun Country's current contract with e-commerce giant Amazon. "That said, we expect SNCY and Amazon to extend the upcoming contract in 2025, especially as there have been no signs of a slowdown in the cargo segment," the note said. Shares of Sun Country are down more than 30% since their recent peak last July, dragging its market cap below the $1 billion mark. Morgan Stanley put a price target of $21 per share on the stock, up 38% from Friday's closing price. — Jesse Pound 7:32 a.m.: Corteva is at an 'attractive valuation entry point' after last year's sell-off, says Wells Fargo Wells Fargo named Corteva a top pick for this year, anticipating an earnings rebound for the company after the agriculture industry's underperformance last year. "We continue to see value in CTVA's strong Seed business, differentiated pipeline and self-help actions, driving margin improvement to the company's 2025 financial targets," analyst Richard Garchitorena wrote in a Monday note. "We see a clear and focused strategy to get there, with the recent selloff creating an attractive valuation entry point." Garchitorena's $65 price target on the overweight-rated stock implies shares could gain more than 18%. He's more confident on Corteva's progress towards its 2025 targets after its Jan. 31 quarterly report, which reflected a beat on earnings and revenue expectations for the fourth quarter. Garchitorena noted that Corteva could benefit from lower U.S. natural gas prices, which could be a tailwind for fertilizer producers this year, and also said that crop protection destocking will no longer be as much of a challenge by the second half of this year, allowing the company to make a comeback in earnings growth. Corteva's stock is down 11% during the past 12 months, but is up about 14.6% year-to-date, outperforming the broader market so far. Shares added nearly 0.4% in premarket trading. CTVA YTD mountain CTVA year to date — Pia Singh 6:53 a.m.: Citigroup is Wells Fargo's favorite large-cap bank stock Wells Fargo thinks Citigroup looks even more attractive after the Capital One-Discover deal announcement. Analyst Mike Mayo assigned an overweight rating and $70 price target, which suggests more than 25% upside for shares. Citi remains the firm's No. 1pick in large-cap banks, he said. Citigroup is "in the mid stages of resolving its regulatory consent order regarding the need to modernize systems (data, controls, compliance, risk)," Mayo wrote in a Sunday note. "While we don't see near-term catalysts to accelerate results (short of a soft landing economy), we do project earnings can accelerate long term (late 2024E and beyond), assuming successful execution of its multi-year restructuring." Mayo noted that Capital One Financial's agreement to buy Discover Financial Services in a $35 billion deal "provides a concrete data point that Citi's cards are unappreciated" especially after the firm's likely peak loan losses in 2024. The U.S. credit card industry is currently attractive, the analyst added, saying that cards are an area of growth at banks as post-pandemic losses decelerate. Citigroup shares are up about 11.5% over the past year, boosted by its cost-cutting efforts. The stock was flat in premarket trading. — Pia Singh 6:27 a.m.: TD Cowen expects KKR shares to jump more than 30% TD Cowen named KKR a top pick, calling for strong gains in the alternative asset manager. Analyst Bill Katz raised his price target by $14 to $128 on the outperform-rated company, which has seen roughly 74% share price growth over the past year. His new target suggests shares could gain more than 33% over the next year. There's "room to grow" in nascent credit capital markets platforms, and KKR could be a beneficiary of this expansion, Katz said. The alternatives industry remains in "growth mode" and has improved from its 2021 slump, the analyst said. — Pia Singh 5:56 a.m.: Jefferies raises Salesforce price target ahead of earnings Salesforce is an attractive buy for the long run, according to Jefferies. "Our CRM survey indicates a modest improvement in demand. Our checks indicate manufacturing and tech verticals are rebounding while public sector demand remains strong," analyst Brent Thill said. He upped his price target by $25 to $350, implying roughly 19.5% upside for the company, which will report fiscal fourth-quarter results on Wednesday. Thill expects high-single-digit future subscription revenue growth for Salesforce in the near to medium-term, lending to an "attractive" risk-reward setup for the stock. Marginal improvement in customer plans to adopt artificial intelligence also lend to Jefferies' investment thesis. Salesforce has the "second easiest comps of the year" in the fourth quarter, Thill said, adding that the company's focus on driving top-line growth and higher margins will lead to higher valuation for shares over time. He forecasted 11% top-line growth, in line with Wall Street's expectations, for fiscal year 2024. The stock, which has jumped more than 80% over the past year, added about 0.3% before the bell on Monday. — Pia Singh 5:52 a.m.: HashiCorp could benefit from resurgence in cloud migration projects, Morgan Stanley says Improvement in the cloud demand environment could bode well for HashiCorp's top line, according to Morgan Stanley. Analyst Sanjit Singh upgraded the software company to overweight from equal weight and raised his price target by $7 to $30, which suggests more than 27% upside for the stock. "A resurgence in cloud initiatives is translating to better demand for HCP after a difficult year thus far," Singh said, noting HashiCorp's services in automating cloud infrastructure positioning and security. "While LT debates around monetization and competition have yet to be resolved, we think risk-reward now skews attractive given an improving cloud demand backdrop." The firm expects cRPO bookings to bottom in the fourth quarter and improve throughout fiscal year 2025, which it said should lead to 20% revenue growth in fiscal year 2026 and beyond. A company's cRPO, or current remaining performance obligations, refers to revenue in the upcoming 12 months. HashiCorp shares jumped about 6% in premarket trading. The stock is down roughly 6% this year. HCP YTD mountain HCP in 2024 — Pia Singh 5:52 a.m.: HSBC downgrades Moderna The outlook is not promising for Moderna , according to HSBC. The bank lowered its rating on the Covid-19 vaccine maker to reduce from hold. It also raised its price target to $86 from $75, but the new forecast still implies downside of more than 13% going forward. "Besides the COVID-19 vaccine outlook, Moderna's personalised cancer vaccine programme ... has been at the centre of debate regarding the company's prospects," analyst Yifeng Liu wrote. "Although two Phase 3 studies have kicked off in adjuvant melanoma and adjuvant NSCLC (in collaboration with Merck & Co.), the patient recruitment update should guide market's confidence as data updates are not likely to be available in near term, given the relatively low event rate for these indications," the analyst added. Moderna shares have gotten off to a sluggish start for the year, losing 3%. To be sure, the stock rallied more than 9% last week on the back of a surprise quarterly profit. MRNA YTD mountain MRNA year to date — Fred Imbert