Monday’s analyst calls: Home Depot and Lowe’s downgraded, Goldman upgrades this payments


(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.) Home improvement stocks were in focus Monday, and not in a positive way. Oppenheimer downgraded Home Depot and Lowe’s to perform from outperform, cutting its price targets on both names. On a more upbeat note, Goldman Sachs upgraded Brazilian payments stock StoneCo, calling for more gains ahead after a strong 2023. Check out the latest calls and chatter below. All times ET. 8:39 a.m.: Citi opens 90-day ‘catalyst watch’ on Merck, with 18% upside London-based Citigroup analysts led by Andrew Baum opened a 90-day “catalyst watch” on Merck Monday, saying the drugmaker may climb 18% to $140. Citi’s call is based on data Merck plans to present at the March 17-20 meeting of the International Society of Pneumonia and Pneumococcal Diseases (ISPDD) in Cape Town, South Africa. “We anticipate STRIDE-6 data to be presented” at the meeting, and Merck “has previously announced that V116 led to high mean OPA responses at 30 days post vaccination for all serotypes contained in V116 in previously vaccinated patients,” the analyst wrote, referring to in vitro opsonophagocytosis assays. Merck mainly competes with Pfizer, which makes Prevnar, in the market for pneumococcal disease vaccines. “We anticipate V116 approval for high risk children/teens in early 2026. Our forecasts exclude potential upside for V116 and/or V117 to ultimately erode PFE’s Prevnar franchise in children,” Citi said. — Scott Schnipper 8:38 a.m.: Mike Mayo names Citigroup his top pick, sees stock double in 3 years Widely followed bank analyst Mike Mayo named Citigroup his top pick after the bank’s restructuring moves. Earlier this month, Citigroup cut 10% of its workforce in a bid to help boost the embattled bank’s results and stock price. Reuters reported Friday that Warren Buffett, whose conglomerate Berkshire Hathaway owns Citigroup as a top holding, told CEO Jane Fraser over a recent lunch to keep going with her reorganizing efforts. Wells Fargo’s Mayo said Buffett seems to support his belief that Citigroup’s overhaul could make a significant difference. “Warren Buffett supports the CEO’s restructuring. If so, this is one more person who thinks this time is different,” Mayo wrote in a note. “Indeed, Citi’s new 2024 guide is the best by far on operating leverage (est 2%). Expect stock double over 3 yrs.” Mayo set his 12-month price target at $70, which represents a 35% upside from the stock’s Friday close of $51.52. — Yun Li 8:37 a.m.: Barclays downgrades Array Technologies, expects soft bookings Barclays isn’t expecting bookings to pick up for Array Technologies anytime soon. The firm downgraded the solar tracking company to overweight from equal weight on Monday. Array has said there were about $330 million of bookings on the sidelines waiting for clarification around domestic adders in the Inflation Reduction Act, analyst Christine Cho wrote in a note to clients. “While we got an update from the Treasury around this topic in October, we think the document answered some questions but introduced new questions. From the standpoint of customers, we didn’t think it provided enough information for them to proceed with bookings,” she said. As a result, we are inclined to think 4Q bookings will come in soft, which will only continue to pressure 2024 revenues and contributes to our below consensus number,” she added. Cho lowered her revenue estimate for 2024 to $1.59 billion, about 15% below consensus estimates, she said. — Michelle Fox 8:35 a.m.: Morgan Stanley names Tencent Music Entertainment a tactical buy idea Tencent Music Entertainment could be due for a quick rebound after a sluggish start to the new year, according to Morgan Stanley. Analyst Alex Poon said in a note to clients that the company was a research tactical idea and should get an upside catalyst from its upcoming earnings report. “The stock has traded off recently, making short term valuation much more compelling. We expect an all-round beat in the upcoming 4Q23 results (due on March 19), mainly driven by the music segment (subscriptions 43% YoY and advertising 30% YoY),” the note said. The stock has fallen more than 5% year to date, struggling along with Chinese tech names. Morgan Stanley has an overweight rating and a price target of $11 per share on Tencent Music Entertainment, which is 29% above where the stock closed Friday. — Jesse Pound 8:03 a.m.: William Blair steps to the sidelines on Vita Coco Coconut water company Vita Coco could see some bottom-line headwinds this year, says William Blair. The firm thinks Vita Coco’s “branded measured-channel consumption growth” could moderate due to more challenging comparisons, as well as slightly weaker additions from commercial initiatives. Problems with ocean freights and rates, notably the conflicts in the Red Sea and the Suez Canal, also could lead to headwinds to Vita Coco’s bottom line, William Blair said. Analyst Jon Andersen reduced his rate to market perform from outperform. “To be fair, over the past six months Vita Coco’s branded measured-channel consumption growth (in dollar terms) has been strong— averaging 18% year-over-year and 26% on a two-year stacked basis—and importantly largely volume driven,” Andersen wrote in a Monday note. However, the environment has become more challenging starting this month, he added. “Absent a meaningful acceleration in consumption growth on a two- year stacked basis, headline year-over-year consumption (dollars and volume) is likely to moderate,” the analyst continued. — Hakyung Kim 7:57 a.m.: Morgan Stanley names Western Digital top pick Morgan Stanley said Western Digital is poised take advantage of a “valuation disparity” compared to peers. The firm listed the data storage stock as a top pick and raised its price target to $73 per share from $52. Morgan Stanley’s forecast implies more than 33% upside from Friday’s $54.77 close. Western Digital stock has climbed 5% from the start of the year. “We see the valuation disparity between WDC and peers as extremely compelling, particularly in light of the 2h separation of the memory business that should unlock sum of the parts values,” analyst Joseph Moore said. — Brian Evans 7:56 a.m.: Northland downgrades AMD on concerns of valuation, ‘double ordering’ The excitement around artificial intelligence may be getting out of hand for one chipmaker, according to Northland Capital Markets. Analyst Gus Richard downgraded Advanced Micro Devices to market perform from buy, saying the stock’s valuation has gotten too high. Shares of AMD are already up 18% in January after a big rally in 2023. “AMD’s shares are $6 above our PT rolled out on 1/3/24 and significantly above our upgrade from 7/5/23 before NVDA’s blowout quarter. We downgrade on valuation to ‘a heck if we know’ rating or [market perform],” the note said. Northland does not have a current price target on the stock. Richard said in the note that the short-term demand for chips powerful enough for AI may not be indicative of the long-term market. “We would expect as supply increases and more viable alternatives become available, pricing will moderate, slowing overall revenue growth. While chip prices are cyclically driven by supply and demand, they are flat over the long term. We also believe that AI demand in CY23 was overstated due to double ordering,” the note said. So-called “double ordering” could be caused by companies who want to stockpile chips now to avoid the potential of not having them in the future when overall demand for AI will potentially be higher. — Jesse Pound 7:40 a.m.: Raymond James downgrades Comerica on a difficult earnings outlook Comerica could be faced with a difficult near-term outlook, according to Raymond James. The financial services firm downgraded shares of the regional bank to a market perform rating from outperform, with analyst Michael Rose citing a “more challenged earnings outlook” as the reason for the change. “Our less sanguine view reflects nearer-term earnings challenges that push its ability to generate positive operating leverage into 2025 and where its interest rate positioning is a formidable challenge to return to NIM [net interest margin]/NII [net interest income] levels achieved in 2022/2023,” he wrote. In the same note, Rose removed his $62 price target for the stock. Meanwhile, Comerica’s mounting expense mean that its stock price now appears to be trading at fair value, Rose added. On the other hand, the analyst underscored the company’s share repurchase program as a positive. “Additionally, we see its attractive footprint and highly-commercial business model/ mix as attractive attributes in the coming M & A cycle which in our view should help to support relative valuation even if it decides to remain independent,” he wrote. Shares of Comerica are down nearly 6% on the year. CMA YTD mountain CMA this year — Lisa Kailai Han 7:28 a.m.: UBS initiates Enovis with buy rating Medical technology company Enovis has “significant upside potential,” according to UBS. Analyst Danielle Antalffy initiated coverage with a buy rating on shares. Her price target of $75 suggests shares could rally 25.3% from Friday’s close. According to Antalffy, Enovis could lead the orthopedics market, its specialty area, with around 8% organic sales compound annual growth rate through 2027. Enovis also has a “significant margin expansion opportunity potentially underappreciated,” said the analyst. Further upside drivers include Enovis’ acquisition of LimaCorporate, international cross-selling opportunities and improved execution on new product launches, the analyst added. “We see upside to both UBS/Street estimates both through the ongoing portfolio transformation and further OpEx leverage through accelerated sales growth, acquisition synergies, and disciplined price/cost management,” Antalffy said. — Hakyung Kim 7:21 a.m.: Morgan Stanley’s Adam Jonas cuts Tesla price target Morgan Stanley head of global auto research Adam Jonas expects Tesla’s fourth-quarter results on Wednesday to be hurt by overall slower electric vehicle momentum. Jonas reiterated an overweight rating on the EV stock but lowered his price target to $345 per share from $380. Jonas’ forecast implies nearly 63% upside from Friday’s $212.19 close. Tesla stock has slipped about 15% from the start of 2024. “Global EV momentum is stalling,” Jonas said. “The market is over-supplied vs. demand. We anticipate Tesla’s 2024 outlook to be cautious on volume and profitability.” — Brian Evans 7:18 a.m.: Bernstein upgrades ASML Holding ahead of quarterly results Bernstein thinks ASML Holding is trading at an attractive entry point for investors. The firm upgraded the semiconductor stock to outperform from market perform on Monday, and increased its target price to $869 from $664. Bernstein’s forecast implies nearly 15% upside from Friday’s close. ASML is flat for 2024 thus far. The stock is also trading at a forward price-to-earnings ratio of 36.06. “[W]e believe that at this point the transition year for 2024 is well-understood by investors, and now looks mostly de-risked for ASML,” Analyst Sara Russo said. “We believe that the expected upcycle for WFE in 2025 (and beyond) combined with ASML’s performance as the lowest share price increase over the last twelve months vs. semicap peers make this a good entry point, hence our upgrade to outperform.” The company will report fourth-quarter results on Wednesday. — Brian Evans 6:56 a.m.: UBS upgrades J.B. Hunt, forecasts margin expansion moving forward UBS said shares of J.B. Hunt can find meaningful growth thanks to internal margins bottoming in the fourth-quarter of 2023 and a strengthening freight cycle. The firm upgraded the transport stock to buy from neutral and increases its price target to $234 per share from $205. UBS’ forecast implies nearly 18% upside from Friday’s close. J.B. Hunt stock has ticked down roughly 1% in 2024. “We believe that JBHT’s intermodal margin performance is likely at a bottom with potential for a modest move up in 2024 and a larger step up in 2025 supported by stronger contract pricing gains (we model 5%),” analyst Thomas Wadewitz said. “We expect JBHT to show strong participation in an improving freight cycle through its intermodal business and also through its cyclical truckload and brokerage businesses.” — Brian Evans 6:26 a.m.: Morgan Stanley upgrades International Flavors & Fragrances, notes attractive valuation Morgan Stanley thinks an end to International Flavors & Fragrances downgrade cycle as well as a bottoming of the consumer cycle presents a “compelling opportunity ahead” for the stock. The bank upgraded the stock to overweight from equal weight and increased its price target to $90 per share from $81. Morgan Stanley’s forecast implies more than 13% upside from Friday’s close. International Flavors & Fragrances has slipped roughly 2% so far in 2024. Shares are coming off a rough year, losing more than 22% in 2023. “Arguably, 2024 could still be partially a year of transition, yet we think investors will look through this with the shares looking compelling,” analyst Lisa De Neve said. She added that her forecast for adjusted earnings per share is about 12% above consensus estimates for 2024 driven by a forecast 14.8% EBITDA growth this year. — Brian Evans 6:05 a.m.: HSBC downgrades Lululemon as growth slows, peers close the gap Lululemon will have trouble replicating its exceptional 2023 performance into the new year, according to HSBC. The firm downgraded shares of the athleisure company to hold from buy in its 2024 global sporting goods outlook, and left its $500 per share price target unchanged. HSBC’s forecast implies more than 3% upside from Friday’s $484.02 close. Lululemon has slipped more than 5% this year. Shares also climbed more than 50% in 2023. LULU 1Y mountain LULU in past year “The near-term growth outlook for the overall sector is challenging, and we believe it is time to be slightly more selective while picking stocks,” HSBC analyst Anne-Laure Bismuth said. “While lululemon’s fundamentals are undoubtedly best-in-class, we do not see the valuation as compelling enough for us to recommend investors buy at current share price levels.” — Brian Evans 5:45 a.m.: Oppenheimer downgrades Home Depot, Lowe’s over forecast ‘unfavorable’ 2024 guidance Oppenheimer thinks the short-term picture for shares of Lowe’s and Home Depot will be complicated by “complacent” market positioning which will pressure both stocks. The firm downgraded both stocks to market perform from outperform in a Monday note and lowered its price target to $345 for Home Depot and $230 for Lowe’s. Oppenheimer’s forecast implies roughly 5% downside moving forward for Home Depot stock and 5% upside for Lowe’s. Shares of Home Depot have added 5% so far this year while Lowe’s stock has slipped…



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