Tuesday's analyst calls: Rivian gets an upgrade, chip stock set to rally more than 35%

Published Tue, Apr 16 20245:39 AM EDTUpdated Tue, Apr 16 20247:50 AM EDT

(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.) An electric vehicle maker and a chip stock were among the biggest calls by analysts Tuesday. Rivian Automotive was upgraded to neutral by UBS. Meanwhile, HSBC upgraded AMD to buy, calling for more than 35% upside in the stock. Check out the latest calls and chatter below. All times ET. 7:50 a.m.: Northrop Grumman is Morgan Stanley's top defense pick Morgan Stanley says sentiment toward the defense sector is improving — and Northrop Grumman is its favorite pick. The "defense primes," or the top defense contractors of the U.S. government including Northrop Grumman, Boeing and Lockheed Martin, are currently trading at around a 15% discount to the S & P 500, according to analyst Kristine Liwag. Investors may be "over-discounting the 'velocity' of geopolitics," she said. As first-quarter earnings season picks up, the firm reiterated Northrop Grumman as its top pick in defense, citing its portfolio alignment and earnings visibility. Northrop Grumman has "a winning portfolio of priority programs," and a strong nuclear program," Liwag wrote in a Tuesday note. Investor interest is also starting to rise around the overall defense sector, with defense viewed as a potential election hedge, Liwag added. The escalation in Middle East tensions could also result in accelerated defense spending, the analyst noted. Year to date, Northrop Grumman shares are down 3.6%. — Hakyung Kim 7:40 a.m.: Barclays double upgrades Tyson Barclays sees a favorable outlook ahead for Tyson . The bank double upgraded the meat processing stock to an overweight rating from underweight. Analyst Benjamin Theurer accompanied this move by raising his price target to $69 from $53, implying a 19% upside from the stock's Monday close. Shares of Tyson have rallied 8% this year. Theurer still sees the stock as undervalued, believing that there's further upside to be realized in its chicken and prepared food segments. Additionally, "a slew of efficiency gains" should also come to fruition soon, further boosting Tyson stock. "The largest benefit TSN should see stems from its own strategic overhauls and efficiencies implemented over the last few quarters," the analyst wrote. For instance, he pointed to the closing of eight chicken plants and one pork plant in the past few months. These facilities were on the older side and not as efficient as the company's newer plants, as evidenced by the fact that there was no significant capacity loss as Tyson closed these production lines down. A favorable macroeconomic backdrop also contributed to Theurer's double upgrade. "Tyson is set to see margin support stemming from shifting input costs as well as recent strategic overhauls and actions. Like other protein peers, the company is set to see the benefits of lowering grain costs in the coming quarters — setting up a boost to both chicken and pork primarily," the analyst added. — Lisa Kailai Han 7:28 a.m.: Bank of America initiates Reddit as neutral Although Reddit has several big opportunities ahead, its volatile past has Bank of America staying on the sidelines. The firm initiated coverage on Reddit with a neutral rating. Its price target of $46 implies 15% upside from Monday's close. Reddit, which was founded in 2005, is notably a "senior" social company, according to analyst Justin Post. However, the company only began publicly trading on March 21. Post believes Reddit has promising monetization potential and new data deals that could power revenue and EBITDA higher. The company's content and search relevance efforts have also improved execution over the last 12 months, he added. "However, we expect historically volatile user and revenue trends to continue, and with current macro/rate uncertainty we prefer larger cap stocks in [the] sector," Post wrote in a Monday note. The stock has fallen nearly 15% from when it began trading last month. — Hakyung Kim 7:24 a.m.: Loop Capital initiates Street-high price target on Super Micro Computer Super Micro Computer's long-term revenue potential remains underappreciated, according to Loop Capital — which initiated coverage with the highest price target on Wall Street. The firm's $1,500 price target suggests surging around 70% from Monday's close. Year to date, shares have rallied 210.5%, even amidst a sell-off in recent weeks amid wider market volatility. "We continue to gain confidence in both our net-bullish Gen AI server industry posture (L-T) and SMCI as an increasing leader in the need for both complexity and scale," analyst Ananda Baruah wrote in a Tuesday note. Baruah is forecasting strong upcoming earnings results and above-estimated guidance for the upcoming quarter. The company could pre-announce its March quarter results in the coming week, she noted. — Hakyung Kim 6:47 a.m.: Goldman is bullish on online sports betting company DraftKings has a promising growth outlook as more states continue to legalize online sports betting and iGaming, according to Goldman Sachs. The firm initiated coverage on the stock with a buy rating and $60 price target, implying 37.2% upside from where shares closed on Monday. Per analyst Ben Miller, DraftKings can compound revenue at more than 20%. He added that even though the stock has rallied around 65% over the last nine months, it is still trading at a lower adjusted revenue multiple compared to historic levels, as well as its peers. "With the US Online Gaming industry (Online Sports Betting & iGaming) still scaling against its adoption curve with further state legalizations likely to come over the forecast period of our model, we see secular growth potential for Draftkings," said Miller. DKNG 1Y mountain DraftKings in past year — Hakyung Kim 6:32 a.m.: GE Vernova is a buy, according to Goldman The newly spun-off GE Vernova will be a winner in the energy transition and decarbonization trend, says Goldman Sachs. GE Vernova split from General Electric and began separately trading earlier this month. Analyst Joe Ritchie initiated a buy rating on the stock. His price target of $154 implies almost 17% upside potential from where shares closed on Monday. "We believe GEV is uniquely positioned to benefit as the energy transition unfolds and the multiple in the shares should re-rate as underlying fundamentals improve," Ritchie said in a Monday note. GE Vernova's turbines and aeroderivatives currently power around 30% of the world's electricity. As the demand for electricity generation is forecasted to rise 55% by 2024, GE Vernova's generation capacity would have to double to meet the demand, he noted. "Additionally, we have been encouraged by the progress this management team has made over the last 2+ years to make GEV a structurally more profitable enterprise and think there is still meaningful under-earning potential in the coming years," said Ritchie. — Hakyung Kim 6:06 a.m.: Evercore ISI initiates Nvidia coverage Nvidia isn't just a semiconductor company — it's also an "ecosystem play," according to Evercore ISI. The firm initiated coverage on Nvidia with an outperform rating, as well as a broader sector launch on chips and chip making equipment. Analyst Mark Lipacis has a target price of $1,160 on shares, suggesting around 35% upside from where shares closed on Monday. In the recent "tectonic shift" to the current parallel processing computing era, Nvidia has emerged as the dominant play, according to Lipacis. Computing eras typically last 15 to 20 years, he added, meaning that Nvidia could generate strong earnings long-term. "We think investors underestimate 1) the importance of the chip+hardware+software ecosystem that NVDA has created, 2) that computing eras last 15-20 years and are typically dominated by a single vertically integrated ecosystem company, whose returns are measured in 100-to-1000 bagger range," Lipacis said in a note. The stock is up nearly 74% in 2024. However, shares have pulled back more than 4% in April. NVDA YTD mountain NVDA year to date — Hakyung Kim 5:53 a.m.: Deutsche steps to the sidelines on Honeywell Industrials stock Honeywell's lackluster growth is failing to create confidence in its stock performance, said Deutsche Bank. Honeywell shares are down 7.5% in 2024. By comparison, the multi-industry and electrical equipment group in the industrials sector has gained a median 13% year to date. The company hasn't been able to outperform the group since 2019, according to Deutsche. Analyst Nicole DeBlase downgraded shares to hold from buy in a note. She also lowered her price target by $8 to $225, suggesting just 10.8% upside from Monday's close. "We have already proven that organic growth has become the #1 driver of MI/EE industry valuation multiples, and so we think it is critical to believe HON can produce top-tier organic growth in order to justify share price outperformance from here. Unfortunately, our analysis fails to prove that this is a likely outcome," DeBlase said. Even if Honeywell managed to achieve a short-term cycle recovery, DeBlase noted that there are better stocks to choose in this scenario. "Historically, HON stock has underperformed other MI/EE names in the early stages of an industrial recovery, as there are a number of companies that we cover with much higher leverage to the earlier-cycle phases of an upturn," DeBlase added. — Hakyung Kim 5:39 a.m.: UBS upgrades Rivian Automotive to neutral Rivian's outlook is starting to improve, but don't expect shares to pop anytime soon, according to UBS. The bank upgraded the stock to neutral from sell. However, it kept its $9 price target, which implies upside of just 7.7% over the next 12 months. "We believe the near-term risk/reward is more balanced at current levels. ... The stock price now better considers some of our midterm concerns," worte analyst Joseph Spak. "That said, we'd expect the stock to remain volatile." "Nearterm upside catalysts could be if there is a positive update on R2 orders which would reinforce what Rivian can become, even if that growth is more likely in 2026/27," the analyst wrote. "Nearterm downside catalysts could be R1 price cuts and/or softer R1 demand (even though we believe this is better considered at current levels, we see headline risk) as well as higher interest rate concerns." Rivian shares have tumbled 64% in 2024. RIVN YTD mountain Rivian year to date — Fred Imbert 5:39 a.m.: HSBC upgrades AMD to buy The recent pullback in AMD shares has created a more attractive risk-reward backdrop, according to HSBC. The bank upgraded shares to buy from hold. Analyst Frank Lee also raised his price target to $225 from $180, implying shares rallying nearly 38% from Monday's close. AMD's share price has declined around 15% in the past month as the market reset its expectations for its MI300 AI accelerator's 2024 and 2025 revenue. The stock is now up slightly above 8% in 2024. However, Lee believes AMD could top its management's graphics processing unit revenue guidance this year. The company 's next generation AI chip solutions scheduled for release later this year could carve out greater market share against Nvidia, he added. "We believe there could be upside to earnings driven by the potential benefit to AI GPU sales because of Nvidia's product transition in 2024e, as well as the continuous strength of the overall AI GPU market which we expect to provide opportunity to AMD to gain up to 10% market share with the launch of its MI300 successor next year that could compete with Nvidia's GB200," Lee wrote in a Tuesday note. — Hakyung Kim