Tuesday's analyst calls: Eli Lilly gets price target increase, Nvidia a top pick

Published Tue, Feb 27 20245:38 AM ESTUpdated Tue, Feb 27 20248:45 AM EST

(This is CNBC Pro's live coverage of Tuesday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) A pharma giant and Nvidia were in focus among early analyst calls on Tuesday. Berenberg increased its price target on Eli Lilly on the back of expected strong sales of its weight loss drug, Zepbound. Elsewhere, Citi reiterated Nvidia as a top pick on the back of optimism around artificial intelligence gains. On a more sour note, Citi downgraded Sunoco to neutral from buy as a deal to acquire NuStar Energy still hasn't closed. Check out the latest calls and chatter below. All times ET. 8:22 a.m.: Citi names Snowflake a top pick Citi analyst Tyler Radke named Snowflake a top pick as new project demand strengthens and the cloud stock rolls out new generative artificial intelligence products. "Our intra-Q fieldwork was constructive and indicated ramping consumption and bookings strength, which we think can continue to pick up throughout CY24 as IT budgets improve and new products/use cases mature," he wrote. To be sure, Radke expects some volatility post-results, noting that the "bar is very high" on the heels of another strong Nvidia print that's boosted expectations. However, investors should consider using any weakness as a buying opportunity. Looking ahead, Radke expects Snowflake to benefit from new products and projects and "easy" guidance for the first quarter due to moderate comparisons. "FY profitability should show continued margins expansion as customers scale offsetting some gross margin headwind from GenAI investments," he wrote. "We see possibility of quarterly growth acceleration in the next few quarters with easing comps and contribution from new products starting to layer in." — Samantha Subin 8:16 a.m.: Barclays downgrades paint stock PPG Investors should take a step back from PPG Industries while the company weighs its options for a potential sale of one of its business lines, according to Barclays. Analyst Michael Leithead downgraded the stock to equal weight from overweight after PPG on Monday announced a strategic review for its architectural coatings business, which could include a sale or a partnership, according to the press release. "There was no timetable given for the process / no assurances that the review will result in any transaction. ... The financial disclosures revealed an [North America] Architectural business that is performing much weaker-than-anticipated, likely adding to investor concerns around competitiveness / underperformance relative to end-market trends," Leithead said in a note to clients. If PPG does decide to explore a sale of the business, it's not clear what other companies would be willing and able to strike a deal, according to Barclays. "We do not think there is an immediate logical fit, in our view," the note said. — Jesse Pound 8:13 a.m.: BofA double upgrades Sprouts Farmers Market Bank of America has a completely different outlook on Sprouts Farmers Market . Analyst Robert Ohmes double upgraded the stock to buy from underperform. He also hiked his price target to $70 from $30. The new target signals upside of 16% over the next 12 months. Sprouts is off to a strong start for 2024, soaring 25%. "Our prior Underperform rating reflected concerns over SFM's lack of sales and traffic strength following its implementation of a less promotional strategy (beginning in 2019) that resulted in the loss of 25% of its customer base in 2020," Ohmes wrote. "SFM has moved beyond customer traffic challenges, with store & online traffic positive since 2Q23 & Bloomberg Second Measure data through 1H Feb. showing acceleration (both sales & transactions) into 1Q," he added. — Fred Imbert 7:49 a.m.: Argus upgrades Domino's Pizza Argus upgraded Domino's Pizza to buy from hold on Tuesday, a day after the pizza chain reported solid same-store sales growth. Domino's U.S. same-store sales growth came in at 2.8% in the fourth quarter, topping the 2.2% increase expected from analysts polled by FactSet. Domino's also said it will raise its dividend by 25% and increase its buyback program by $1 billion. "Our upgrade reflects the company's economies of scale, early entry into the pizza delivery business and prospects for growth in international and domestic markets, analyst John Staszak wrote in a note to clients. He raised his price target to $530, suggesting more than 15% upside ahead. Argus is also bullish on Domino's for the long term due to the company's above-average margins, new store plans and history of positive earnings surprises, Staszak said. Shares are up about 11% year to date. — Michelle Fox 7:46 a.m.: Duolingo's stock can jump 20%, Seaport says Language learning app Duolingo is showing continued growth to strengthen its market leadership, and that should send its stock higher, according to Seaport Research Partners. Analyst Aaron Kessler initiated coverage of the company with a buy rating, saying in a note to clients Tuesday that the company is still adding users and revenue at an impressive clip. "We expect Duolingo to generate 20% + long-term revenue growth with 35% growth in 2024 and 25% in 2025 driven by continued momentum in users/MAUs," the note said. Looking forward, Duolingo's customer base could expand beyond just language learners. "while small today, we believe non-language verticals (e.g. Math, Literacy, Music) in aggregate could represent potentially half of the long-term revenue opportunity," the note said. Price target of $222, which is almost 21% above where the stock closed Monday. — Jesse Pound 7:38 a.m.: Morgan Stanley remains overweight on Rivian, says stock can survive 'crisis mode' Morgan Stanley remains bullish on Rivian — if the company can make certain changes to improve its strategy and cut costs. "In a Darwinian era for EVs, Rivian's strategy needs an overhaul," analyst Adam Jonas wrote in a Monday note. "We see Rivian as a 're-launched' company in 2024 with self-help potential and possible strategic value…Rivian is finally entering the 'crisis' mode so frequently required to effect real change in this industry." Jonas maintained his overweight rating but slashed his price target by $10 to $14, suggesting 30.8% upside for the stock from its latest close. Rivian's stock price advanced 1.7% in early morning trading. The stock has fallen more than 54% so far this year, however, and is down 42% over the past 12 months. According to the analyst, Rivian has three critical areas to execute upon: Costs: Jonas expects Rivian to approach break-even gross margin in the fourth quarter of this year, but through relatively flat sales, re-engineering certain products and improving material costs. Capital discipline: The analyst questioned Rivian's buildout of a $5 billion greenfield assembly plant in Atlanta, and said "the company could consider alternative uses of capital." Collaboration: Jonas is looking for an increase in collaboration between auto companies to "achieve greater efficiencies in highly commodities parts" of EVs, especially as the EV supply chain gets impacted by slower demand growth. — Pia Singh 7:08 a.m.: Buy-rated Netflix could be the 'ultimate beneficiary' of media industry shifts, UBS says UBS sees "sustainable double-digit growth ahead" for Netflix . Analyst John Hodulik maintained his buy rating on the streaming company and upped his price target by $115 to $685, which implies shares could add about 16.6%. "While we expect net adds to slow, we believe Netflix still has significant runway as it continues to convert users to paid subs and attracts new cohorts," Hodulik wrote in a Tuesday note. "This, along with price increases and a ramp in the advertising platform should drive accelerating revenue growth in '24." Netflix should be the "ultimate beneficiary" of certain structural changes happening in the media industry as companies shift their focus from subscriber growth towards profitability, Hodulik said. This is happening through efforts such as price increases, platform consolidation and a renewed focus on content licensing. Shares of Netflix gained 1.8% in premarket trading. The stock is up more than 20% this year. — Pia Singh 7:06 a.m.: Wells Fargo says sell Roku Wells Fargo is throwing in the towel on Roku . The bank lowered its rating on the stock to underweight from equal weight. It also slashed its price target on the stock to $51 from $77. The new forecast implies downside of nearly 21% over the next 12 months. Analyst Steven Cahall cited Walmart's acquisition of Vizio as part of the downgrade. "We think WMT is ~1/3rd of ROKU's Device sales/net adds, but the retailer is set to acquire VZIO for its SmartCast O/S," Cahall noted. "This will likely pressure net adds by 2025-26, in addition to WMT likely moving its CTV from the ROKU O/S to SmartCast. ROKU is going to need to reposition given this major shift in the competitive landscape." Roku shares dipped more than 2% in the premarket on the back of the downgrade. For the year, the stock is down nearly 30%. ROKU YTD mountain ROKU in 2024 — Fred Imbert 6:43 a.m.: Investors should pick up shares of Sunrun, according to Evercore ISI and BofA Evercore ISI reiterated its outperform rating on Sunrun and maintained its $43 price target, implying shares could gain a whopping 277% over the next year. "RUN remains committed on executing a disciplined, margin focused strategy in order to drive meaningful cash generation. The company has quickly pushed into its storage first strategy as storage installations in the fourth quarter increased," analyst James West wrote in a Monday note, adding that Sunrun is also benefiting from the market trending in the direction of higher storage offerings. He expects the company's storage installations will "grow substantially in the coming quarters." Sunrun's customer base is one underappreciated aspect of the company, West pointed out. The company, which ended last year with about 933,000 customers and 781,000 subscribers, could gain more value through additional products and services, he said. Bank of America also reiterated its buy rating on the residential solar stock in a Monday note. The firm kept its $21 price target, saying shares are "ready to inflect" with hardware cost deflation and investment tax credit boosting growth. The battered-down stock—which is down 42% so far this year—declined 1.1% in premarket trading Tuesday. — Pia Singh 6:17 a.m.: Citi continues to favor Nvidia, maintains optimism on semi stocks Nvidia is one of Citi Research's top semiconductor picks as the artificial intelligence market continues to grow, analyst Christopher Danely said in a Tuesday note. Danely's $820 price target on the buy-rated blockbuster chipmaker suggests 3.6% potential upside for shares since Monday's close. Although consensus estimates for semiconductors fell 17% during earnings season, that "likely doesn't matter," Danely said. He noted that valuation remains one of the biggest risks for semi stocks, however. "While demand is mixed, we remain bullish on the group and expect overall semi revenue growth of at least 11% YoY in 2024 given units declined a whopping 19% in 2023, the biggest decline since 2001," Danely wrote. The analyst mentioned that companies focused on semiconductor equipment should grow on positive capex revisions and HBM, or high-bandwidth memory chips. The DRAM market should also improve, he said. Citi also named Micron Technology its top semiconductors pick and reiterated its buy rating on the stock, expecting continued upside for shares. — Pia Singh 5:56 a.m.: Goldman Sachs stock is at an 'attractive entry point,' Edward Jones says Edward Jones initiated coverage of Goldman Sachs with a buy rating. "With a premier investment-banking franchise, we believe that GS is well-positioned to benefit from a more favorable environment for capital-markets activity, particularly for mergers & acquisitions and equity initial public offerings," analyst James Shanahan wrote in a Monday note. "The current share price represents an attractive entry point for long-term investors." The firm added that it expects lower earnings volatility as Goldman shifts its focus away from consumer finance, notably its Marcus and GreenSky lending platform, and towards its asset and wealth management divisions. Goldman's shares are up roughly 7.2% over the past year and 1.1% in 2024. — Pia Singh 5:38 a.m.: Citi downgrades Sunoco as NuStar Energy acquisition remains incomplete Sunoco appears to be overvalued since its share price run-up, according to Citi. Analyst Apiro Dounls downgraded the gas station owner to neutral from buy but kept his $65 price target, which implies shares could gain 6.4% over the next 12 months. The firm had previously upgraded the stock to buy after Sunoco announced in January that it would acquire pipeline operator NuStar Energy. "We continue to expect both of those merits to be realized; however, SUN has largely closed the valuation gap since the deal announcement. Investors largely accepted the accretion and synergy merits," Doubles wrote in a Tuesday note. With the deal not yet closed and little incremental data, we're downgrading to Neutral and see risk-reward as more balanced following outperformance." Sunoco shares have gained more than 32% over the past year, and 1.1% since the start of the new year. The stock now trades in line with diversified peers, the analyst said. "With the deal not yet closed, we don't expect SUN to be able to demonstrate success here for the next several quarters," Doubles said. — Pia Singh 5:38 a.m.: Berenberg hikes Eli Lilly price target Eli Lilly has been on a tear this year, and Berenberg expects even more gains from here. Analyst Kerry Holford reiterated his buy rating on the stock and raised his price target to $850 from $680. The new forecast implies upside of 10% from Monday's close. Holford cited prescription trends around the company's weight loss drug Zepbound for the target increase. "Early prescription trends for Zepbound in obesity are encouraging," the analyst said. "Our discussions with obesity experts confirm that patient demand for drug therapy remains high and support an appreciation of Zepbound's superior clinical profile. We forecast Zepbound to achieve almost USD5bn sales in its first full year on market." Shares have rallied 32% year to date, and they're up 143% over the past 12 months. LLY YTD mountain LLY year to date — Fred Imbert