Monday's analyst calls: Micron a top pick, big gains ahead for steel stock after sell-off

Published Mon, May 6 20245:45 AM EDTUpdated Tue, May 7 20245:28 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 chipmaker and a steel giant were part of Monday's biggest analyst calls. Morgan Stanley raised its rating on U.S. Steel to overweight, calling for more than 30% upside. Baird, meanwhile, upgraded Micron Technology to outperform, noting that a recent pullback has opened up a buying opportunity. Check out the latest calls and chatter below. All times ET. 8:33 a.m.: Bank of America upgrades Santander Brasil on earnings momentum Bank of America upgraded Santander Brasil to buy from neutral on Monday, anticipating the Brazil-based bank's earnings will rise "sharply" in 2024. Santander Brasil reported first-quarter financial results last week, which "provided further evidence of the significant earnings recovery underway," Mario Pierry wrote in a note to clients. Its first-quarter net income increased 41% year over year and its pre-tax earnings rose 72%, thanks to loan growth acceleration, continued and graduation normalization of market net investment income and consistent improvement in asset quality, he pointed out. Pierry expects the bank to deliver the fastest earnings growth of the sector this year. U.S.-listed shares of Santander Brasil are down 11% year to date. — Michelle Fox 8:32 a.m.: Morgan Stanley upgrades Melco Resorts to overweight Melco Resorts is emerging as one of the winners in the rebound for the tourism business in Macao, according to Morgan Stanley. Analyst Praveen Choudhary upgraded the stock to overweight from equal weight, saying in a note to clients that Melco is pulling ahead of some of its rivals in the region. "MLCO gained market share consecutively in March and April, which we attribute to recent changes in management and promotion initiatives," Choudhary said in a note to clients Sunday evening. Choudhary hiked the price target on Melco to $9.60 per share from $8.30. The new target is more than 30% above where the stock closed Friday. Morgan Stanley projects Melco's free cash flow to jump significantly in 2025, which could help drive the stock higher. "We think upside to the current share price could be meaningful as the market moves to price the stock on 2025 [estimates]," the note said. — Jesse Pound 8:08 a.m.: Flutter has upside of more than 20%, MoffettNathanson says Investors should embrace the idea that Ireland-based Flutter is going to be one of the long-term winners of the U.S. sports gambling boom, according to MoffettNathanson. Analyst Roberth Fishman iniated coverage of the Fanduel-parent with a buy rating and a price target of $240 per share, which is more than 20% above where the stock closed Friday. Fishman said in a note to clients Monday that Fanduel is one of two entranced leaders in U.S. betting. "Despite threats from new and existing competition, we think the largely duopolistic U.S. market structure that has developed over time will persist with FanDuel and DraftKings commanding vastly better economics due to their relative scale," the note said. Investors also appear to be undervaluing Flutter's business outside of the U.S., according to Fishman. "Even if you ascribe no value to the international business, we estimate the value of Flutter's U.S. business at around $39 billion, equal to FLUT's total enterprise value today. Thus, in our opinion, any value for the ex-U.S. business is pure upside to current stock levels," the note said. Flutter listed on the New York Stock Exchange on Jan. 29, and shares have lost ground since then. The company's primary listing is still in London. — Jesse Pound 7:32 a.m.: Citi downgrades Peloton after management changes Peloton's recent round of layoffs and management changes could lead to a lack of clarity on next steps, Citi warned. The firm downgraded Peloton to neutral from buy and lowered its price target to $4 per share from $8. Citi's forecast implies about 17% upside from Friday's $3.43 close. "While we are encouraged with FY3Q24 results and believe that EBITDA and [free cash flow] can now be sustainably positive post its reorganization on no growth, we believe top-line visibility is now more limited, and we await details around Peloton's strategic direction once new management is announced," analyst Ronald Josey said. "We acknowledge Peloton's best-in-class content offerings, its strong engagement trends, and relatively low churn, which create a differentiated offering as efficiencies in operating expenses could lead to improved overall profitability," the analyst added. Peloton stock has slipped nearly 44% in 2024. — Brian Evans 7:08 a.m.: Barclays increases Coinbase price target Coinbase's outlook remains murky even after the company's recent quarterly report. The firm reiterated an underweight rating on Coinbase stock, and raised its price target to $204 from $179 per share. Barclays' forecast implies about 9% downside from Friday's close. "1Q24 results were quite strong, and while transaction activity appears slower in April vs. Q1, it was trending ahead of our expectations," analyst Benjamin Budish wrote in a May 3 note. "We revise our model to reflect management guidance as well as trends in transactions and USDC market cap through April." "With April KPIs generally decelerating vs. March (though better than Jan/Feb), however, the outlook is less clear," the analyst added. Coinbase stock has climbed more than 28% in 2024. — Brian Evans 6:41 a.m.: Morgan Stanley raises Carvana price target Morgan Stanley likes what it sees from Carvana after its "operational turnaround." The stock, however, is likely to face pressure. The bank reiterated an underweight rating on the used car retailer but raised its price target to $75 per share from $45. Morgan Stanley's forecast implies more than 38% downside from Friday's close. "Throughout 2023, CVNA transitioned from a distressed equity into an operational turnaround with a restructured interest burden," Morgan Stanley analyst Adam Jonas said. "In 2024, the company marked its official return to growth, reporting in 1Q a 16% y/y growth in retail units sold after six consecutive quarters of declines as well as positive free cash flow," he added. "The return to profitable growth with FCF [free cash flow] has triggered a narrative shift in the stock, reducing the risks of equity dilution and making the name relevant again to growth investors." Carvana stock has soared more than 129% in 2024. — Brian Evans 6:21 a.m.: Wells Fargo labels Citi as 'dominant' top pick After meeting with Citigroup's CEO, Wells Fargo analyst Mike Mayo thinks the banking giant can successfully modernize its operations and expand earnings over the long term. "We feel more confident that Citi will show higher revenues and lower expenses in '24, and that buybacks accelerate later 2024," Mayo wrote in a Friday note. The analyst reiterated an overweight rating on Citi stock alongside a $80 per share price target and labeled the firm as a "dominant" top pick. Mayo's forecast implies 30% upside ahead from Friday's $61.52 close. Citi stock has climbed nearly 20% in 2024. C YTD mountain C in 2024 — Brian Evans 6:13 a.m.: UBS downgrades Johnson Controls International over lack of 'positive catalysts ahead' UBS thinks Johnson Controls will face trouble trying to meet its full-year 2024 guidance. The firm downgraded the HVAC stock to neutral from buy and lowered its price target to $68 per share from $74. UBS' forecast implies 9% upside from Friday's close. "We see operational challenges, including difficulty in exceeding quarterly growth expectations, as continuing to weigh on sentiment and see a balanced risk/reward with the stock at 16x P/E in our base case," analyst Damian Karas said. "While we see continued overhang from negative EPS revisions (we are ~4% below FY26 Cons), JCI is trading at historical lows vs peers," Karas added. Johnson Controls stock has added more than 8% in 2024. In the premarket, however, it fell 1%. — Brian Evans 5:45 a.m.: Baird upgrades Micron Technology, names it a top semiconductor pick Baird may have been late to jump on the Micron Technology bandwagon, according to analyst Tristan Gerra, but the firm still thinks there's plenty of room for upside ahead. The firm upgraded the semiconductor stock to outperform and listed Micron as a top pick within its coverage universe of chip firms. Baird also increased its price target to $150 per share from $115, implying about 31% upside from Friday's close. "While catching the train a bit late, we see meaningful upside opportunities ahead for Micron notably given the stock's recent pullback, in discrepancy with incrementally positive trends unfolding in DRAM [dynamic random access memory] per our recent channel checks, yielding to a somewhat unprecedented outlook for memory over the next 12-18 months," Gerra wrote on Monday. Shares are up more than 34% for the year. However, they have fallen 7% over the past month. In premarket trading, the stock advanced 2.6%. MU YTD mountain MU year to date — Brian Evans 5:45 a.m.: Morgan Stanley upgrades U.S. Steel There's a big buying opportunity in U.S. Steel after a recent pullback this year, according to Morgan Stanley. Analyst Carlos De Alba upgraded the steel producer to overweight from equal weight. His price target of $48, albeit down from $51, still implies upside of 31.6% over the next 12 months. Shares have been under pressure this year, losing more than 25%, as regulators scrutinize Japan's Nippon Steel acquisition of U.S. Steel. De Alba, however, thinks a transformation at U.S. Steel is still taking place — making it attractive regardless of a possible takeover. X YTD mountain X in 2024 "U.S. Steel, historically an integrated blast furnace steelmaker, is nearing the end of its transformation into a more flexible steelmaker," De Alba said. "Our call is supported by the competitive nature of US Steel's strategic review process, which highlights the value of X's growth initiatives." The stock rose 2% in the premarket following the upgrade. — Fred Imbert