All the market-moving chatter from Wall Street Tuesday morning
(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.) Early analyst calls on Tuesday included upgrades to two solar names and a pet stock getting a buy rating from Jefferies. Piper Sandler raised its rating on Sunnova and Sunrun to overweight from equal weight, citing in part the potential for Federal Reserve rate cuts. Meanwhile, Jefferies initiated coverage of Elanco on a positive note , saying key catalyst can lift the stock. Check out the latest calls and chatter below. 8:44 a.m. ET: Coinbase stock can jump another 30%, Compass Point says Investors buying in to the recent rally for Coinbase should be rewarded with fundamental improvements at the crypto company, according to investment firm Compass Point. Analyst Chase White reiterated a buy rating on Coinbase and hiked his price target on the stock to $200 per share from $145, saying in a note to clients that the rise in crypto prices should create real benefits for the crypto exchange. “The rise in crypto asset prices should benefit COIN’s staking-as-a-service business given that COIN collects a portion of the staking yield, paid in native tokens (such as ETH or SOL), as a fee for providing the service. Looking ahead, we expect crypto trading volumes in general to continue to increase into 2024 as both retail and institutional investors begin to anticipate lower interest rates and increased liquidity,” the note said. The crypto industry is still stuck in limbo on several regulatory fronts, but one recent development at a rival exchange could help Coinbase, according to Compass Point. “We also expect COIN to be able to take both spot and derivatives market share from Binance given the latter’s reputational troubles in the wake of its $4.3B settlement with various US govt agencies, though the full magnitude of this uplift has yet to be see,” the note said. The stock price of Coinbase has nearly doubled since the end of October. Compass Point’s new price target is about 30% above where Coinbase shares closed on Monday. — Jesse Pound 8:42 a.m. ET: MoffettNathanson names Charter a top 2024 pick MoffettNathanson named Charter Communications a top pick for 2024, citing expected growth in Charter’s wireless business and its valuation, the firm said Tuesday. While big telecoms may be facing capacity challenges, cable’s wireless busines is not capacity constrained, analyst Craig Moffett said in a note. Meanwhile, Charter’s broadband average revenue per user is the industry lowest, leaving them more room to grow, he wrote. “Their current broadband growth rate is restrained by their first-year-free wireless Spectrum One offer (for which GAAP accounting requires the discount be allocated between broadband and wireless proportionately). That headwind will be reduced sharply in Q4, and turn into a tailwind by the end of 2024,” Moffett said. Shares of Charter are up about 13% year to date. — Michelle Fox 8:40 a.m. ET: Snack maker Utz could gain 17%, says Barclays Barclays is bullish on salty snack producer Utz . The company’s analyst day on Friday showed its sustainable productivity and ahead-of-the curve growth, according to analyst Andrew Lazar. Lazar raised his price target on shares by $2 to $18, implying 17.2% upside potential from Monday’s close. He reiterated his overweight rating on the stock. Shares were last up by more than 5% Tuesday before the bell. “Since its de-SPAC/IPO, we have viewed UTZ as an idiosyncratic growth story within our packaged food universe based on differentiated growth underpinned by category exposure, white space opportunity and a sizable gap in margins to other major snacking players,” Lazar wrote in a Monday note. Lazar also believes Utz —a 100-year old family-operated company that only recently went public — has a significant margin opportunity ahead. “UTZ has not yet invested as much behind its productivity and asset optimization efforts as many other companies in the packaged food space have, and, as a result, currently yields [an] EBITDA margin of just under 13%, well below the current peer median of ~19%,” said the analyst. He is confident in the company’s supply chain plan, which he says could reduce its overall costs. “We think the company is making great progress and would emphasize that even once the company reaches its 16% EBITDA margin in 2026, we still see ample room for further margin improvement thereafter given where close in peers currently operate,” said Lazard. 8:28 a.m. ET: Loop Capital increases Snap price target on AI opportunity, rebound in advertising Snap could emerge as a premier artificial intelligence play among social media companies, according to Loop Capital. The firm reiterated a buy rating on Snap and increased its price target to $21 from $15, or about 23% above Monday’s close. Shares have surged more than 90% from the start of the year. “We are more confident in the turnaround in Snap’s advertising business and increasingly view the company as a gen-AI winner,” managing director Rob Sanderson said. “Last week Snap introduced several new gen-AI features to Snapchat+ member base and disclosed that paid members now exceed 7M, a notable acceleration in adoption.” Sanderson added that the company could see as much as 14% ad revenue growth in 2024 and 20% in 2025 while Snapchat+ paid subscribers grows to 16.5 million over the next two years. — Brian Evans 8:13 a.m. ET: Bank of America sticks with buy rating on Citi despite investor skepticism Citigroup CEO Jane Fraser’s turnaround plan is showing signs of process, but many investors still aren’t buying in, according to Bank of America. Analyst Ebrahim Poonawala said in a note to clients that recent conversations with investors revealed a wait-and-see approach with Citi. “Justified or not, we sense a lack of investor conviction in top leadership (CEO/CFO) as investors remains skeptical on the prospects of mgmt. landing on its medium-term (2026) 11-12% return on tangible common equity (ROTCE) target. Part of the skepticism stems from the failures of prior leadership, ‘burnt too many times,'” the note said. “While mgmt. messaging has room to improve, in our view, CEO Fraser moving in the right direction with regards to de-risking and simplifying the franchise.” Poonawala has a buy rating on Citi, and said that the stock is currently priced like the turnaround will come up short of expectations. “At current valuation we don’t believe that the stock is discounting much in terms of the potential for Citi to deliver 10%+ ROTCE on a sustainable basis,” the note said. — Jesse Pound 7:52 a.m. ET: Buy these two consumer stocks for the new year, Baird suggests Baird likes Yeti and Mister Car Wash for 2024. Analyst Peter Benedict listed the two consumer product and service stocks as top picks heading into the new year. He has outperform ratings on both. Benedict’s price targets imply Yeti shares can climb 15.4%, while Mister Car Wash can jump 22.7%. “Much like the one just ending, 2024 looks to be a year where shifting macro narratives will compete with company-specific fundamentals for control over retail/consumer stock performance,” Benedict told clients. “Net, our 2024 top ideas … lean heavily on idiosyncratic P & L drivers which we believe can cut through the macro noise and drive attractive upside for investors,” he added, using an acronym for profit and loss. Benedict said the sector’s recent rally feels “somewhat extended.” But he said the group can see positive performance amid investor optimism that the Federal Reserve will cut interest rates. Yeti has multiple growth opportunities and a profit-and-loss inflection point on the horizon, the analyst said. He added that the company has a “robust” financial profile while trading at a valuation discount to similar growth stocks. Mister Car Wash has “best-in-class” performance indicators, Benedict said. He noted that the company’s “Titanium” wash is a multiyear profit-and-loss catalyst. — Alex Harring 7:27 a.m. ET: Chewy has ‘compelling’ risk-reward profile, says Jefferies Pet e-commerce company Chewy is “a tail-wagging opportunity,” according to Jefferies. The firm initiated coverage with a buy rating and $27 price target, implying nearly 25% upside potential from Monday’s close. Analyst Kaumil Gajrawala believes the company will benefit from increasing pet e-commerce penetration, as well as premiumization of pet food, treats, and supplies. To be sure, he is somewhat cautious due to the pressures of high inflation on consumers — but notes that Chewy currently appears insulated. “Pet ecommerce pure-play with several growth & margin levers at its disposal. Pet health, ads biz, and automation are near-term drivers, but wide goalposts and ongoing cost pressures create a fluid timeline,” Gajrawala wrote in a Monday note. “Reset expectations (shares 50x FY2 EBITDA 1YA to 21x today) offer a compelling risk-reward.” Shares jumped more than 2% on Tuesday during premarket trading. Nonetheless, the stock has significantly underperformed in 2023 and is down by more than 41% year to date. — Hakyung Kim 7:12 a.m. ET: Barclays upgrades Adobe to overweight after canceled Figma deal Barclays is more bullish on Adobe shares after the company called off its acquisition of Figma. Adobe and Figma terminated their $20 billion merger due to regulatory issues on Monday. Analyst Saket Kalia upgraded shares to overweight from equal weight in a Monday note following the cancellation of the deal. Kalia increased his price target to $700 from $680, suggesting shares could rally nearly 17% from where they closed on Monday. “Implied dilution has kept us on the sideline since deal announcement – now that this overhang is lifted, we think upside to estimates and more optionality in Firefly could support this multiple,” Kalia said. This was his primary “sticking point,” he added. With the Figma acquisition now out of the picture, Kalia believes Adobe is on pace for continued outperformance. The analyst also reiterated that the company is a “best-in-class software franchise,” with more benefits ahead through its generative AII story. “We think it is still early innings on Gen AI, with optionality around Adobe Express, improving retention rates as Gen AI drives more engagement, and we have not seen Gen AI impact Document Cloud yet where there could be more opportunity to monetize,” said Kalia. — Hakyung Kim 6:54 a.m. ET: Morgan Stanley raises Macy’s price target The bank raised its price target on Macy’s to $21 per share from $15, calling it a likely floor for the stock. Morgan Stanley also kept its equal weight rating on shares. The increase come after reports earlier this month said Arkhouse Management and Brigade Capital had offered to buy out the retailer for $5.8 billion. “While the reported bid overhang is outstanding, & with a likely better-than-feared Softlines Retail 4Q/holiday ahead (more here), we think M stock is unlikely to return to its $17 pre-rumored offer level near term,” Morgan Stanley analyst Alex Straton wrote. ” Macy’s shares have surged 26% in December. M YTD mountain M in 2023 — Hakyung Kim 6:33 a.m. ET: Deutsche is bullish on Yum China Despite a cautious view on China’s restaurant industry, Deutsche Bank believes Yum China is an overlooked name with potential to outperform. The firm initiated coverage on Yum China with a buy rating and $58 price target on shares. The price target suggests shares could rally 45% from Monday’s close. “We think the market has fully priced in near-term ticket-size pressure amid macroeconomic uncertainties and local Western fast food brands picking up, but has overlooked the company’s margin uptrend in the coming few years on the back of YUMC’s strong product portfolio, flexible store models, and lower-tier city penetration,” analyst Han Zhang wrote. Zhang said he is cautiously bullish on the company’s revenue over the next two years, as Yum China continues to expand stores nationwide. Shares are down nearly 27% in 2023. Zhang thinks the stock is trading at an “undemanding” valuation; Yum China is trading at 19 times its 2024 price-to-earnings ratio, versus its other global peers trading at 25 times price-to-earnings ratio. YUMC YTD mountain YUMC in 2023 — Hakyung Kim 6:07 a.m. ET: TD Cowen names its top solar energy picks First Solar and Shoals Technologies are TD Cowen’s top utility solar ideas for 2024. “We highlight residential solar fundamentals continue to deteriorate while U.S. utility scale remains more resilient,” analyst Jeffrey Osborne wrote in a Tuesday note. “U.S. utility fundamentals appear more encouraging based on our review of satellite imagery data and a healthy pipeline, which supports FSLR and SHLS.” TD Cowen has an outperform rating on both First Solar and Shoals Technologies. Osborne’s $250 price target on First Solar implies a 48% rally from where shares closed on Monday. Meanwhile, his price target of $30 on Shoals Technologies indicates shares could surge 90%. To be sure, Osborne expects volatility in the solar sector will continue next year despite the Federal Reserve’s indication of three rate cuts to come. Election cycles have also historically “soured” investor sentiment on the solar space, according to the analyst. First Solar shares are up 10.8% year to date, while Shoals is down 36%. — Hakyung Kim 5:57 a.m. ET: JPMorgan downgrades PepsiCo PepsiCo has had a strong record, but JPMorgan thinks some normalization may be ahead for the stock. Analyst Andrea Teixeira downgraded shares to neutral from overweight. Teixeira also reduced the price target on shares to $176 from $185, implying 9.5% upside from Monday’s close. “We don’t see anything fundamentally wrong with PEP and continue to have confidence that the company is well positioned to deliver on its 2024 outlook,” Teixeira said. “That said, we see the magnitude of upward estimate revisions as narrowing and see better opportunity within Beverages for OW-rated KO and KDP, which we expect to have a higher quality composition of top-line growth in CY24 and also don’t have the narrative overhang,” she added. The company has also faced earnings headwinds, in absolute terms, from a strong dollar in the past few years, the analyst noted. The stock dipped 0.6% Tuesday before the bell. Shares are down more than 6% year to date. — Hakyung Kim 5:37 a.m. ET: Piper Sandler upgrades Sunnova, Sunrun Renewable energy companies Sunrun and Sunnova could benefit from the Federal Reserve’s “pivot,” according to Piper Sandler. The firm upgraded shares of the two solar companies to overweight from neutral. Analyst Kashy Harrison thinks the three rate cuts the Fed indicated at its last policy meeting could be a key theme for the two solar companies. The renewable energy sector is highly sensitive to rates, meaning that Sunrun and Sunnova have struggled this year and are down 24.9% and 26.9%, respectively. RUN NOVA YTD mountain RUN and NOVA in 2023 “While the Fed pivot is undoubtedly positive, it is no ex-machina for all of our coverage’s 2023 challenges and some sub-sectors benefit more than others. We view the resi installers as the largest/immediate beneficiaries of lower rates,” Harrison wrote, referring to the two companies. Harrison raised her price target on Sunnova shares to $26 from $13, suggesting shares could essentially double from Monday’s close. She also increased her price target on Sunrun to $31 from $15, implying nearly 72% upside potential. “With lower rates, we expect equity appreciation given asset valuation sensitivity to rates,” Harrison added. — Hakyung Kim 5:37 a.m. ET: Jefferies says buy Elanco The firm initiated coverage of the pets pharmaceutical stock with a buy rating and a price target of $17, implying upside of 24% over the next 12 months. Elanco shares have lagged the broader market this year, rising just 11.9% in that time, while the S & P 500 is up 23.5%. However, analyst Glen Santangelo thinks potential “blockbuster launches, coupled w/improving execution, creates an attractive setup into ’24 against backdrop of a discounted valuation.” “We see ELAN entering 2024 w/ increased optimism given a multitude of impending product launches (Zenrelia, Credelio Quattro, Bovaer),” he said. Zenrelia is a product used in canine dermatology, while Credelio Quattro fights off ticks and kills fleas. Bovaer is a cow feed that looks to reduce methane emissions. “We expect this pipeline to bolster the recent inflection to growth and are encouraged by mgmt’s commitment to growth in 4Q and 2024,” Santangelo said. “[Long-term] we think these launches could improve the product mix … driving both rev growth and margin expansion.” — Fred Imbert
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