Friday's analyst calls: Nike gets a downgrade, Nvidia price target increase

Published Fri, Mar 22 20245:41 AM EDTUpdated Fri, Mar 22 20248:49 AM EDT

(This is CNBC Pro's live coverage of Friday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Analyst chatter Friday included another price target increase for Nvidia and a downgrade for a major apparel maker. UBS raised its price objective on Nvidia to $1,100, which implies 20% upside from Thursday's close. RBC, meanwhile, lowered its rating on Nike following a mixed quarterly report that included weaker-than-expected guidance. Check out the latest calls and chatter below. All times ET. 8:04 a.m.: JPMorgan downgrades Vulcan Materials, Martin Marietta Materials It's hard to see further upside in Vulcan Materials and Martin Marietta Materials , according to JPMorgan. Analyst Adrian Huerta downgraded both construction materials companies to neutral from overweight, saying valuations are looking stretched after their recent rally. Both stocks have advanced more than 20% this year. "We see good reasons to pause from our our bullish view last December where we called for a strong year ahead," Huerta wrote this month. "The sector is +21% YTD, outperforming the SPX by 11pp, and +29% since December 2023 and now leaving valuations stretched trading above their 5Y + 1SD average, particularly for aggregates pure-plays." "Hence, we are downgrading VMC & MLM to N (from OW)," Huerta added. To be sure, the analyst said the downgrade is based on elevated valuations, rather than fundamentals, which remain strong for both companies. He added the companies could post better-than-expected results this year, citing potentially stronger pricing and volumes. Huerta raised his price target for both stocks. For Martin Marietta Materials, his $600 price target, raised from $530, implies 2% downside from Thursday's close for the stock. For Vulcan Materials, the $270 price target, increased from $245 previously, is about 2% below Thursday's close of $275.59. "All in, the sector has done justifiably well and still looks defensive on potential downside to US equities, but upside is limited at current prices," Huerta wrote. Both stocks were down slightly in premarket trading. — Sarah Min 8:02 a.m.: Goldman downgrades Pentair after recent runup Goldman Sachs downgraded Pentair to neutral from buy Thursday, citing the stock's recent outperformance. Shares of the company, which manufactures and sells water treatment and pump products, are up nearly 9% since the beginning of March. Goldman sees solid tailwinds for Pentair's industrial and flow technologies segment, as well as its water solutions segment. However, its residential business could see a pullback if consumer spending tapers off this year. "We see the Pool market likely experiencing the largest headwind, despite most products being aftermarket, since distributors could begin decreasing their days' inventory on hand with increasing use of analytics in the supply chain," analyst Brian Lee wrote in a note Thursday. "We also view that higher for longer rates could shift consumer spending away from pools, delaying new pool construction recovery into 2025," he added. Lee remains positive on the stock for the long term due to aging infrastructure and new product launches. — Michelle Fox 8 a.m.: Mizuho downgrades Valero, sees weakening outlook for refiners Oil refiner stocks may have outrun their fundamentals, which limits the upside for even top names like Valero , according to Mizuho. Analyst Nitin Kumar downgraded Valero to neutral from buy, saying in a note to clients that the refinery business is not at its peak. "Refining crack spread futures between 2024 and 2026 are in line with the long-term historical average and well below the strong levels seen over the past three years given a weaker macro outlook," Kumar wrote. Shares of Valero have already jumped more than 31% this year, but Mizuho's updated price target of $173 per share is less than 2% above where the stock closed Thursday. VLO YTD mountain VLO year to date "Refining stocks have significantly outperformed crack spreads over the past six months, which could be an overhang. We estimate the sector is pricing in a long-term blended U.S. crack spread of ~$23/bbl or ~15% above the LT average of $20/bbl," Kumar wrote. — Jesse Pound 7:58 a.m.: TD Cowen upgraded Charles Schwab to outperform TD Cowen said it's seeing "several idiosyncratic" net interest margin improvements can help boost the stock. TD Cowen upgraded shares of Charles Schwab to outperform from market perform on Friday, and increased its price target to $87 per share from $70. Cowen's forecast implies about 21% upside ahead from Thursday's $71.85 close. "[W]e foresee more favorable NIM backdrop for SCHW, with favorable gearing into '26 – and potentially '27," analyst Bill Katz said. "Amongst our coverage universe, we see the best NIM improvement." The analyst posits that Schwab stock could experience "further 'catch-up' trade versus both the market and key peers, the latter up 10%+ since YE23." Charles Schwab stock has ticked up more than 4% in 2024. — Brian Evans 7:25 a.m.: Oscar Health can rally another 45%, Raymond James says Even after a strong start to the year, Raymond James sees more upside ahead for Oscar Health . Analyst John Ransom initiated coverage of the health insurance technology stock at an outperform rating. Ransom's $20 price target implies shares can rally 45.3% from where the stock finished Thursday. "As the first health insurance company built on a full stack technology platform, OSCR prioritizes consumer engagement to steer utilization and suppress medical costs," Ransom wrote to clients. "With a 9x higher app download rate than the average insurer, the company outpaces its peers in engagement and member satisfaction." Oscar is focused on individual and small-group health insurance markets and mainly sells plans through the Health Insurance Exchange, an online marketplace. It has more than 1.3 million members in 18 states on insurance plans. Ransom noted membership has grown at a compound annual growth rate of about 35%. Beyond insurance, the company offers a technology platform to payers and providers called +Oscar. CEO Mark Bertolini coming to Oscar from Atena last year has also helped the company unlock earnings potential, Ransom said. Bertolini should be able to help Oscar navigate a blow if enhanced subsidies that have helped drive membership growth expire, though Ransom said the risk is already largely priced in. "All told, we are undoubtedly aware of what should be a nagging subsidy overhang," he said. But "current levels offer an attractive risk/reward, with a seasoned management team and hardened model that should be able to weather the 'subsidy storm' if the bear case materializes." Ransom's upgrade comes amid a strong year for the stock, with shares up more than 50%. That builds on 2023's rally of more than 270%. — Alex Harring 6:50 a.m.: BTIG moves to sidelines on Papa John's as CEO exits Papa John's can struggle with CEO Rob Lynch leaving for Shake Shack, according to BTIG. Analyst Peter Saleh downgraded the pizza chain to neutral from buy. He also removed his price target on the stock. There's a "sudden nature of this announcement and lack of seasoned leadership at Papa John's amid recent turnover and departures," Saleh told clients. "We think the company could struggle for the next year, until a new leader and game plan are announced." Thursday's announcement that Lynch was trading pizza for burgers marks the latest in what Saleh called "a long and deep string of executive turnover" at Papa John's in recent years. He said it could take at least several months to find a new CEO, followed by at least another six months to create and implement a growth strategy. Saleh also said the announcement was somewhat "surprising," given mixed results from Papa John's and what the analyst described as some "notable missteps" from Lynch. There's still reason to be optimistic on the increase in national advertising for Papa John's about to begin, Saleh said. But he said to remain cautious due to a rise in development costs, mistakes in international markets, the challenged environment in the United Kingdom and dull development trends. Papa John's shares finished Thursday's session down nearly 5% following the news. The stock has dropped more than 10% in 2024. — Alex Harring 6:32 a.m.: Arista Networks can outperform Street's earnings predictions, Goldman says Goldman Sachs has more confidence in its better-than-consensus expectations for Arista Networks , as the artificial intelligence networking business grows. Analyst Michael Ng has a buy rating on the stock and $356 price target. Ng's price target reflects the potential for shares to advance 16.9% over Thursday's close. "We gain confidence in our above consensus ANET revised estimates in 2024/2025," he told clients. Specifically, Ng expects the network equipment company to record earnings per share of $7.61 and $8.91 in 2024 and 2025, respectively. Both are above consensus forecasts of analysts on Wall Street, he noted. There's four main reasons for that optimism: Growing capital expenditures from customers of the Cloud Titan business, including Meta, Microsoft and Oracle. It's important because this business can support Arista's revenue guidance. Arista's participation in the large-scale AI Research SuperCluster by Meta, which Ng said defines a role for the company in generative AI infrastructure. The increasing use of ethernet in AI networking, as well as new data on its performance during Broadcom's AI Infrastructure Investment Meeting. Continued increases in the shipment forecasts for AI servers. Arista Networks added about 0.5% in Friday's premarket trading. The stock has rallied almost 30% in 2024 after nearly doubling in share value during the prior year. — Alex Harring 6:13 a.m.: Buy overlooked Banc of California, KBW says Traders should buy into Banc of California shares "before it becomes obvious," KBW said. Analyst Christopher McGratty upgraded the regional bank to outperform from market perform. McGratty also upped his price target to $18 from $16, reflecting the potential for a 20.4% upside over Thursday's closing level. McGratty said the bank is focused on rebuilding its share holder base following its merger agreement with PacWest. He said the stock is following a similar pattern to many deal stocks, with underperformance from deal announcement to closing giving way to outperformance after the agreement finalizes. "In many ways, 2024 is a transitional year for BANC with the integration of the PACW acquisition likely dominating the near-term narrative, in our view," he wrote to clients. "However, we also believe investors are beginning to look to 2025 or when full synergies have been realized." Banc of California has said it has several avenues through which it can achieve profitability targets, creating a self-help nature that McGratty appreciated. While there is a large "profitability bridge" between the fourth quarters of 2023 and 2024 as the integration of PacWest plays out, the analyst said investors shouldn't be deterred. McGratty also noted the stock is cheap compared with peers. It also has a favorable risk-reward ratio with limited downside risk, he said. Shares have climbed more than 11% in 2024. That puts the stock on pace for its first positive year since 2021. BANC YTD mountain BANC year to date — Alex Harring 5:53 a.m.: Best Buy to rally 25%, JPMorgan says Investors should pick up shares of Best Buy as consumer trends become more constructive, JPMorgan said. Analyst Christopher Horvers upgraded his rating on the electronics retailer to overweight from neutral and raised his price target by $12 to $101. Horvers' new target implies a 25.6% upside. "We think it makes sense to potentially be one to two quarters early on BBY given margin control/upside given computing trends could kick in during back to school (July-Sept)," he said. And that's "with the relative valuation and margin flow-through indicating a spring-loaded stock." Horvers listed four main reasons for his improved outlook: The wallet pull-forward in computers, TVs and appliances should be at or near its end point. Pull-forward occurs when the price of goods with long shelf lives go on promotion and consumers capitalize on the discounted price. Deflationary headwinds are expected to begin moderating in the second half of 2024, which can aid unit growth dynamics. Computing innovation can bring in products at higher price points, also helping combat deflation. The company's margin outlook if conservative, with long-term margin expectations of 4.1% well below the levels of 4.9% pre-Covid and 6% at peak. Unlike other stocks that have experienced a pandemic pull forward, Best Buy still has a relatively cheap valuation. The price-to-earnings multiple is about 6% below historical valuations, while other cyclical names tend to be significantly higher. Best Buy shares rose nearly 2% in Friday premarket trading. But the stock has underperformed the broader market this year, adding less than 3%. — Alex Harring 5:40 a.m.: Nvidia on 'cusp of an entirely new wave of demand,' UBS says UBS sees more room for Nvidia to run after the artificial intelligence powerhouse's latest conference. Analyst Timothy Arcuri hiked his price target on the chipmaker by $300 to $1,100, which now implies the stock can rally another 20.3% over Thursday's close. He also maintained his buy rating on Nvidia, which he said has essentially created its own market and has client interest just getting started. "We believe NVDA sits on the cusp of an entirely new wave of demand from global enterprises and sovereigns - with each sovereign potentially as big as a large US cloud customer," Arcuri wrote to clients. Following the GTC conference and announce of its new generation of chips called Blackwell , Arcuri said he now expects another solid growth year in 2025 that should bring revenue near $150 billion. That would imply growth of around 30%. NIMs, or new pre-packaged and pre-trained modular AI models, also announced can help the "distribution flywheel" for Nvidia, the analyst added. To be sure, his concerns around topics such as supply and ability to beat consensus estimates have not totally disappeared following the updates. However, he said any near-term weakness from these would just create a buying opportunity "given what we think is still out in front of us." The upgrade comes amid a monster rally for the stock as investors play the AI craze. Shares have soared more than 80% in 2024 alone, adding to last year's gain of almost 240%. — Alex Harring 5:40 a.m.: RBC downgrades Nike after earnings RBC lowered its rating on Nike to sector perform and trimmed its price target on the stock to $100 from $110 — in line with Thursday's close. The downgrade comes after the apparel giant's fiscal third-quarter report included a lackluster outlook amid slowing sales in China . "Nike's unexpected first glance guide for 1H25E implies no revenue growth for cal 2024, which leaves little to play for in the near term," analyst Piral Dadhania wrote. "Organisational restructuring + product transition over the next few quarters add further uncertainty and guidance risk in our view." "We have no doubt Nike will emerge on the other side a better company in a better phase of its business cycle; however, for now we prefer to follow the momentum," Dadhania added. Nike shares were down more than 6% in the premarket. For the year, the stock is down 7.1%. NKE YTD mountain NKE year to date — Fred Imbert