Monday's analyst calls: Chip stock gets big price target increase, airline to rally 75%?

Published Mon, Apr 1 20245:50 AM EDTUpdated Mon, Apr 1 20248:23 AM EDT

(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.) A major airline and a semiconductor stock were among the biggest calls to start the week. Morgan Stanley named Delta Air Lines a top pick, calling for more than 75% upside going forward. Meanwhile, Micron got a price target increase from Bank of America, which sees the chipmaker surging more than 20%. Check out the latest calls and chatter below. All times ET. 8:13 a.m.: Jefferies designates Microsoft a 'top AI winner,' sees 31% upside ahead Microsoft is emerging as a clear leader in the artificial intelligence space, according to Jefferies. The investment firm named the tech titan its top AI winner, lifting its price target to $550 from $465. This implies that shares of Microsoft could rise 31% from their Thursday close. The Magnificent 7 stock has risen 12% this year. "MSFT is leading the charge and is the key beneficiary of AI," wrote analyst Brent Thill. As a key catalyst, Thrill listed Microsoft's partnerships with Azure OpenAI, which have already become the dominant model servicing most business' AI needs, he wrote. "We suspect Azure's AI contribution will grow tangibly in CY24 as companies put more models & tools into production, continuing to support Azure's growth and market share gains," he said. "We believe AI products, due to their strong pricing power, will be accretive to margins overtime." Microsoft also stands to benefit from opportunities relating to Copilot, its chatbot based on a large language model, the analyst said. Thill thinks that enterprise interest in Copilot will continue to rise, and believes that the chatbot could drive revenue uplift in the current year and beyond. — Lisa Kailai Han 7:59 a.m.: Wells Fargo downgrades Bill.com to underweight Financial software stock Bill.com looks to be out of gas, according to Wells Fargo. Analyst Andrew Bauch downgraded Bill.com to underweight from equal weight, saying in a note to clients that the stock was a "bull case on borrowed time." "While near-term trends have stabilized, we believe the Street is complacent around future expectations, and see estimates more likely to move lower than higher in the months ahead," the note said. Those growth projections aren't helped by weak customer growth, Bauch said. "New customer growth has been subdued and is expected to persist. Part of this dynamic has been driven by actions to improve BILL's overall credit profile. ... That said, we can't rule out heightened competition as a factor," the note said. Wells Fargo lowered its price target on Bill.com to $60 per share from $70. The new target is more than 12% below where the stock closed Thursday. — Jesse Pound 7:24 a.m.: Fifth Third shares fairly valued after outperformance, says Baird Baird is stepping to the sidelines on regional bank Fifth Third Bancorp . The firm downgraded shares to neutral from outperform. Fifth Third has gained 45% since the regional banking crisis in March 2023, outperforming the SPDR S & P Bank ETF (KBE). While the company continues to have a "good story" and management, the stock now appears fairly valued, per Baird. "We remain comfortable owning the stock but would prefer to be opportunistic on weakness," analyst David George wrote in a note on Monday. Year to date, the stock is up 7.9%, slightly underperforming the S & P 500's 10.1% rise. The KBE has gained just 2.3% in 2024. — Hakyung Kim 7:08 a.m.: Jefferies raises forecast on Target Jefferies thinks improving consumer discretionary trends should boost Target shares. The firm increased its price target on the stock to $205 from $195, implying shares gaining 16% from where they closed on Thursday. This comes on the back of investor meetings with Target's senior management, which stated healthy consumer spending and re-innovation across different categories. "Given discretionary is ~47% of TGT's business, we believe this could yield upside to numbers ahead, particularly if discretionary improves further," analyst Corey Tarlowe wrote in a note. Target's private label brands, which already generate $1 billion in sales, should also continue to boost the company's growth, per Jefferies. More private label brands in the food and beverage segment could also generate billions of dollars in net sales, Tarlowe added. To be sure, shrink and theft losses continue to pressure profits, according to Target's management. "Overall, we remain bullish on TGT's go-forward plans and believe the company is well-positioned to drive top-line growth, along with continued strong execution," Tarlowe said. Shares are up 24.4% in 2024. — Hakyung Kim 6:42 a.m.: Wells Fargo upgrades Devon Energy Now is the time for investors to enter Devon Energy , says Wells Fargo. Shares are trading at an attractive valuation ahead of a potential inflection point, according to analyst Roger Read. He upgraded shares to overweight from equal weight and increased his price target by $13 to $59. This suggests 17.6% upside potential from Thursday's close. Last year, the company struggled with well productivity in the Delaware Basin. However, this will likely "turn the corner" in the second quarter of 2024, according to Read. "We expect high-grading efforts in the Delaware Basin will begin to bear fruit in Q2'24, leading to a significant improvement in capital efficiency and a positive re-rating of the stock," the analyst wrote in a Sunday note. The stock is currently trading at 5.2 times its forward earnings compared to Diamondback Energy and EOG Resources at 5.8 and 8.9. Meanwhile, Devon is "pulling ahead" of its oil peers on forward free cash flow yields, per Read. Shares are up more than 10% year to date. They were also up 2% in the premarket. DVN YTD mountain DVN year to date — Hakyung Kim 6:27 a.m.: Barclays downgrades trucking names A weak bidding season will pose headwinds for some trucking names, according to Barclays. The bank said spot rates for bids are low following a brief uptick in January. Analyst Brandon Oglenski cited volume challenges for J.B. Hunt , as well as growth headwinds for C.H. Robinson and weaker margins for Werner Enterprises . He downgraded J.B. Hunt and Werner Enterprises to equal weight from overweight. C.H. Robinson's rating also went down to underweight from equal weight. "We understand some investors will question our SMID cap freight downgrades, especially as it appears transport demand fundamentals are improving in 2024," Oglenski wrote in a Monday note. However, "while it appears the global supply chain has entered a period of expansion following a prolonged freight recession since 2022, over-supplied North American truckload capacity is keeping rates down and profitability low for many carriers." Shares of all three companies are lower year to date. — Hakyung Kim 5:55 a.m.: Alphabet, Spotify among BofA's top picks for Q2 Big tech laggard Alphabet is one of Bank of America's top 10 picks for the new quarter. The stock added just 8% in the first quarter of 2024 as a series of AI-related blunders bruised investor sentiment. By comparison, Microsoft and Meta Platforms gained 12% and 37%, respectively, during the quarter. Alphabet's upcoming Cloud Next Conference and I/O event are potential near-term catalysts for the stock, per strategist Anthony Cassamassino. A relaunch of its controversial Gemini image generation program would also improve sentiment, he added. "While not necessarily expected in 2Q, there is also opportunity for "self-help" which could include announcements of a new CFO, more cost cutting actions, or a dividend," said the strategist. Other names on the list include Spotify and Citigroup, which are both jumped more than 40% and 20% during the first quarter. — Hakyung Kim 5:50 a.m.: Bank of America raises Micron price target The "rising tide" for the semiconductor accelerator market could mean more upside ahead for Micron , according to Bank of America. Analyst Vivek Arya raised his price target on Micron to $144 from $120. The new forecast suggests shares could gain around 22% from Thursday's close. Arya kept his buy rating on the stock. Demand for high-bandwidth memory technology is expected to grow to more than $20 billion by 2027 — and Micron will increase its market share to the mid 20% range from its level under 5%, per Arya. "The adoption of accelerated/AI servers is a generational shift with NVDA and AVGO the leaders. … However, we believe the rising tide – accelerator market ~2xing to $200bn over next 3 years – could create volatile but fruitful opportunities among the #2 vendors," Arya wrote in a Sunday note, referring to Micron, Marvell and Advanced Micro Devices. He referred to the three stocks as "junior samurAI." "Each 'junior samurAI' trades interestingly at a valuation premium to its respective leader, so greater stock volatility is to be expected. However, as the leader expands the market TAM, the junior can likely continue to carve a profitable niche," said Arya. — Hakyung Kim 5:50 a.m.: Morgan Stanley names Delta Air Lines a top pick Delta Air Lines kicked off 2024 with a bang, and Morgan Stanley thinks those gain will grow from here. The bank named the airline at top pick, reiterating its overweight rating on the stock. Morgan Stanley's price target of $85, up from $77, implies upside of 77.5% from Thursday's close. "We believe DAL's push into Premium will not just allow them to outperform the rising tide of Airlines demand growth, but will also be rewarded by investors in much the same way that Abercrombie & Fitch's (ANF) recent reinvention as a more premium and relevant specialty retailer has been rewarded by investors," Morgan Stanley wrote. The bank also revised its bull case price target to $110 from $90, implying upside of nearly 130%. DAL YTD mountain DAL year to date "We believe Delta (and most of the industry) exited the pandemic as a stronger business given both structural industry changes as well as internal business changes/execution," Morgan Stanley analysts wrote. "However, the stock is still trading well below its 2014 peak P/E of ~12x, even as revenues are well above pre-pandemic levels and EBIT is effectively back to pre-pandemic." Shares were up more than 1% in the premarket. Year to date, they have popped 19%. — Fred Imbert