Wednesday's analyst calls: Snack and coffee maker gets an upgrade, Dell to rally 35%?

Published Wed, Feb 28 20245:34 AM ESTUpdated Wed, Feb 28 20248:40 AM EST

(This is CNBC Pro's live coverage of Wednesday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) A snack giant and a PC maker were among the biggest analyst calls early Wednesday. Loop Capital initiated Dell Technologies with a buy rating and a price target that implies more than 35% upside. Meanwhile, Stifel upgraded J.M. Smucker to buy from hold, citing strength in the company's key brands. Check out the latest calls and chatter below. All times ET. 7:48 a.m.: McDonald's can stand out in first quarter, Guggenheim says McDonald's seems like an increasingly smart pick as investors push up restaurant multiples despite a tough industry backdrop, according to Guggenheim. Analyst Gregory Francfort reiterated his buy rating on the fast-food chain's stock, while upping his price target by $10 to $325. Francfort's updated target reflects the potential for shares to rise 10.6% from Tuesday's close. Francfort said he's been surprised to see investors lean aggressively into pushing up multiples of high-valuation restaurant stocks over the past three months given the increase in 10-year interest rates. However, he said the exclusion of McDonald's from this group makes the stock more attractive, especially given the likelihood of a tough first quarter. "We think this dynamic has made McDonald's shares look increasingly reasonable," he told clients. "We see the potential for a relatively healthy near-term comp at MCD to stand out in what we expect will be a challenged 1Q24 earnings season." While Francfort slightly trimmed his expectations for full-year earnings per share, he said near-term sales upside can help McDonald's differentiate itself in the first quarter earnings season. Meanwhile, he said the broader industry will have to contend with the "slow start" to 2024. McDonald's stock has bucked the market's ascent this year, shedding nearly 1%. The stock also underperformed in 2023, gaining just 12.5%. — Alex Harring 7:43 a.m.: KBW upgrades LendingTree to outperform The near-term outlook for LendingTree looks promising, according to Keefe, Bruyette & Woods. The investment banking firm upgraded shares of the loan platform to an outperform rating from market perform. Analyst Ryan Tomasello accompanied the move by raising his price target to $45 from $24, implying that shares could rise 38% from here. LendingTree stock has risen 7.6% in 2024. "While macro and convert execution risk provide a range of valuation scenarios, we believe the risk-reward skews positive," Tomasello wrote. One catalyst the analyst sees for the lender this year is a recovery in insurance advertising. "As a leader in the largest SEM advertising category with some of the largest direct carrier partners like Progressive, we believe TREE is well-positioned on a relative competitive basis to capitalize on what could be a multi-year growth cycle," the analyst said. Additionally, Tomasello is optimistic that LendingTree could effectively address concerns around its convertible note maturities — which have been the primary overhang on the stock recently — in the first half of the year. "Importantly, we believe avoiding equity-linked dilution is a top priority for management. With $112mn of cash and $284mn of the convert remaining, we think TREE has a viable path to addressing the maturity via a combination of additional repurchases at a discount and/or refinancing the remaining portion, while keeping net leverage < 4x," he added. Tomasello added that the company could also sees an earnings recovery this year led by its insurance segment, ultimately turning its guidance for 2024 conservative. — Lisa Kailai Han 7:34 a.m.: Amphenol's AI opportunity continues, BofA says Amphenol has more upside ahead after a year defined by artificial intelligence, according to Bank of America. Analyst Wamsi Mohan raised his price target by $2 to $117 while keeping his buy rating on the hardware stock. With the increase, Mohan forecasts shares will rise 8.4% over Tuesday's closing level. "We reiterate Buy rating on APH given strong execution, improving margins, and a period of above trend growth," he wrote to clients. Amphenol, which is the world's second largest maker of electronic and electrical connectors, saw demand surpass expectations for much of 2023 due to the artificial intelligence boom, Mohan said. He said a chunk of that growth stems from the fact that the company has been involved with Nvidia's NVLink, which allows for communication among servers, since the technology was created. Looking ahead, he sees the opportunity around AI broadening. In fact, Mohan said Amphenol should see AI-related sales from additional companies like Advanced Micro Devices and Google. Amphenol shares have climbed nearly 9% in 2024 after rising more than 30% in 2023. — Alex Harring 7:12 a.m.: Expect headwinds to hurt FedEx earnings, Wells Fargo says Wells Fargo anticipates less upside ahead for FedEx shares as earnings appear challenged. Analyst Allison Poliniak-Cusic trimmed $5 off her price target to $260, while keeping her rating at equal weight. Poliniak-Cusic's new target implies the shipping stock can add 7.7% over the next year from where it ended Tuesday. "Seasonality, weather and macro weakness pressure remain headwinds," she wrote to clients, while pulling down her expectations of per-share earnings in the third fiscal quarter. Poliniak-Cusic said that pausing the implementation of the Drive business for peak season hampered FedEx's ability to offset any drags. Meanwhile, she said the outlook on the express business is a "point of debate," while noting that any deterioration beyond seasonality could push shares down. FedEx reports earnings in around three weeks. Shares are down more than 4% this year, reversing course after jumping more than 46% in 2023. — Alex Harring 6:55 a.m.: Buy Revolve post-earnings, Raymond James says Raymond James wants investors to snap up Revolve shares after the latest earnings report. Analyst Rick Patel upgraded the fashion stock to outperform from market perform. His $21 price target reflects the potential for upside of 20.6% from Tuesday's close. "We have greater confidence that revenue should inflect positively in '24 while self-help initiatives enable improving profitability ... creating more attractive risk/reward after a difficult 2023," Patel said. Revolve posted adjusted EBITDA, revenue and GAAP earnings per share that exceeded expectations of analysts polled by FactSet. Shares popped 7% in Wednesday's premarket as investors responded to the report released a day earlier. Despite some challenges with revenue, Patel said there's multiple reasons to see "underlying improvement." These include an increase of full-price sales from the same period a year ago; momentum in underpenetrated categories and the international market; and the likelihood of EBITDA expanding this year. Revolve shares has advanced more than 5% this year, making up some ground after sliding 25.5% in 2023 and 60.3% in 2022. — Alex Harring 6:41 a.m.: Apollo has strong management, insurance strategy Investors shouldn't overlook Apollo Global Management given its insurance model and leadership, JPMorgan said. Analyst Kenneth Worthington gave an overweight rating to the finance stock after having none. Worthington's $122 price target implies shares can rise 10.1% from Tuesday's finishing level. "We see Apollo as among the better positioned publicly traded alternative asset managers to capitalize on secular trends such as the proliferation of private credit and an aging population needing reliable income for retirement," he told clients. Worthington called Apollo's insurance strategy unique among peers, given it uses strong investment returns to provide better annuity prices and yields. It's funding this growth in a way that is capital-efficient, he noted. But Worthington warned that Apollo has a balance sheet that's skewed to business and has a capital-heavy model. If the economic backdrop or state of the consumer worsens, he said investors may grow less confident in Apollo's earnings power. Still, Worthington said the company has leadership that is "particularly innovative and creative." And the business model, he said, "gives investors more of what they want: cheaper fee-related earnings funded by a more creative third party capital structure." Apollo shares have climbed more than 19% this year, adding to last year's gain of more than 49%. APO'A YTD mountain APO in 2024 — Alex Harring 6:23 a.m.: DraftKings can rally, Morgan Stanley says Morgan Stanley sees more room for DraftKings shares to run on the back of the sports betting stock's latest earnings report. Analyst Stephen Grambling hiked his price target by $9 to $49, while keeping his rating at overweight. Now, Grambling's target suggests DraftKings' stock has an upside of 18.1% over where it finished Tuesday's trading session. "Bottom line, DKNG's continued operational execution, inflection to positive FCF/EPS, and optimization of the balance sheet should continue to drive the stock higher," Grambling wrote to clients Wednesday. Grambling said he raised estimates after DraftKings posted earnings per share in the fourth quarter. While revenue for the quarter came in slightly below analyst forecasts, the company raised its full-year outlook on the measure. Morgan Stanley also now incorporates discounted cash flow into valuation after DraftKings began generating positive free cash flow, the analyst said. DraftKings' acquisition of Jackpocket also pushed Grambling to update his estimates, he said. The deal to purchase of the lottery app is valued at around $750 million. Looking ahead, Grambling said Morgan Stanley's conference focused on technology, media and telecommunications in early March can be a positive catalyst for the stock. DraftKings shares pulled back about 1% in Wednesday's premarket despite the upgrade. Still, the stock is up more than 17% in 2024. — Alex Harring 6:05 a.m.: Goldman reaffirms buy rating on Salesforce entering earnings Guidance for 2024 earnings performance can bolster investor confidence in Salesforce , Goldman Sachs said. Analyst Kash Rangan reiterated his buy rating and $345 price target ahead of the software giant's earnings report due after the bell Wednesday. Rangan's target shows the potential for shares to add 15.2% from Tuesday's close. Beyond the classic quarterly print, Rangan said investors can expect a full-year outlook. "We see conviction in the stock building after management provides initial CY24 guidance with 4Q24 earnings ... and investors discern areas of upside," Rangan told clients in a Tuesday note. "Management is likely to set cautiously optimistic expectations for FY24 ..., potentially guiding for 10-11% growth." Salesforce should be able to "show a healthy cadence of profitable growth," creating a favorable risk-reward ratio, he said. That comes as traders look closely to discern which stocks will have strong execution this year. Rangan also listed three dynamics that can create upside which are likely not factored into management forecasts. These likely won't be factored into the steady margin expansion already expected, he said: Improvements in the economic backdrop, creating more discretionary spending and hiring. More small business spending. Better go-to-market motions. Salesforce has popped nearly 14% in 2024, extending gains after the stock price came close to doubling in 2023 alone. — Alex Harring 5:52 a.m.: Bernstein moves to sidelines on Stellantis Stellantis' improved margins and cash generation is now more adequately priced in after a recent rally, Bernstein warned. Analyst Daniel Roeska downgraded the automaker to market perform from outperform. Roseka's price target of $27.10 shows the potential for just 3.6% in upside compared with Tuesday's ending price. Stellantis has proven its ability to produce resilient cash flows and shareholder distributions following the autoworker strike last year, Roseka said. The stock has rallied about 43% over the past half year. Following that rally, Roseka said the stock is at a fair valuation with balanced risks and opportunities. And until the Netherlands-based company's capital markets day in June, he said there isn't much else to peg upside to. "Investors have caught on to Stellantis' improved margins and cash generation," he wrote. Roseka also said that the company will face rising inventory and discounts in the U.S. market, on top of the end of a supply shortage in Europe. Stellantis shares have advanced more than 12% in the new trading year, building on last year's gain of more than 64%. STLA YTD mountain STLA in 2024 — Alex Harring 5:38 a.m.: KeyBanc turns bullish on Constellation Energy following earnings KeyBanc sees a likeable growth story behind Constellation Energy following its latest earnings report. Analyst Sophie Karp upgraded shares of the electricity and gas provider to overweight from sector weight. Karp's $190 price target reflects the potential for shares to rally 22% over Tuesday's close. "CEG has laid out a convincing growth algorithm, underpinned by the existing policy framework and trends," she told clients. It's one "which we think offers much more clarity, and solidly positions CEG as one of the premium infrastructure names in our coverage." The company's fourth-quarter earnings report came in weaker than expected by analysts polled by FactSet. But investors appeared more focused more on strong full-year guidance and plans to grow its dividend per share by 25% in 2024. Constellation stock rallied nearly 17% in Tuesday's session following the report. Karp said the company has "crystallized" its growth strategy. She also pointed to expectations for earnings to increases at an annual rate of at least 10% through 2028, which the analyst said would make Constellation one of the best infrastructure stocks covered by the firm. Shares rose 0.8% in Wednesday premarket trading. Constellation has jumped more than 33% so far in 2024. — Alex Harring 5:34 a.m.: Stifel upgrades J.M. Smucker It's time to load up on J.M. Smucker shares, according to Stifel. Analyst Matthew Smith upgraded the snacks maker to buy from hold. He also set a price target of $135 per share, which implies upside of 10% from Tuesday's close. "Our outlook for the near-term reflects base business momentum supported by a stable of strong brands driving a balanced topline growth including volume/mix growth – a standout relative to the company's packaged foods peers," Smith wrote. Specifically, the analyst cited strength in the company's pet business and its Dunkin and Bustelo brands. He also noted Unscrutables could add 1 percentage point of organic growth in each of the next two years. Smucker shares have lagged this year, losing 3% in that time, while the S & P 500 is up 6%. — Fred Imbert 5:34 a.m.: Loop Capital says Dell is a buy, can rally more than 35% There are several reasons to be optimistic on Dell shares, according to Loop Capital. Analyst Ananda Baruah initiated coverage of the technology stock with a buy rating and a $125 price target. Baruah's target price implies shares can rally 36.5% from Tuesday's close. "DELL has an opportunity to alter the narrative around the stock such that a material valuation re-rating can occur," Baruah wrote to clients. "We believe that DELL is at the very front end of at least two material catalysts that provide structural upside to Street EPS." Baruah said the company can be helped by trends in general artificial intelligence servers and a personal computer refresh cycle. Elsewhere, he said Dell could win more of the information technology wallet share among fortune 1,000 companies. Dell shares have climbed more than 19% in 2024, adding to the rally of more than 90% seen last year. DELL YTD mountain DELL in 2024 — Alex Harring