Thursday's analyst calls: Apple gets another downgrade, Nike named a top pick
(This is CNBC Pro's live coverage of Thursday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Apple seemingly can't catch a break from analysts. On Thursday, Piper Sandler lowered its rating on the tech giant, marking the second major downgrade for the company. Shares are down more than 4% to start the year. On a more positive note, Barclays and Bernstein named Nike a top pick, noting the stock could see a sharp rebound after back-to-back down years. Check out the latest calls and chatter below. 9 a.m. ET: UBS downgrades Pultegroup after big 2023 Investors would be smart to take some of their winnings off the table from one high flying homebuilder, according to UBS. Analyst John Lovallo downgraded Pultegroup to neutral from buy, saying that the stock could struggle relative to its peers. "Although we remain favorable on the homebuilders in general, we expect PHM's margins/returns to normalize more than peers in '24-'26E which should limit upside to current valuation," the note said. Shares of Pulte have gained more than 100% over the past 12 months, but is down about 4% over the past three weeks. Lovallo is still generally positive on homebuilder stocks overall, with D.R. Horton as the UBS top pick in the sector. — Jesse Pound 8:36 a.m. ET: Citi, UBS name FedEx a top pick Analysts at Citi and UBS named FedEx a top pick for 2024 as the freight industry heads for a recovery. "In the context of earnings power implied by current valuations, we view the parcel space as best positioned near-term," wrote Citi's Christian Wetherbee. "Both FedEx and UPS are trading below average multiples, and both have the potential to see upside to consensus expectations, particularly by C25." The analyst favors FedEx over UPS , viewing an attractive setup for the company despite the recent ugly quarterly print. The company's "Tri-Color" fleet program is likely to lower costs and reduce volatility while opening up an opportunity for $700 million in annual savings by reducing airlift capacity, he wrote. "Despite disappointing Express results in the 2Q/ Nov. quarter, we continue to believe FDX's large, $4 bn DRIVE cost reduction program supports attractive EPS and upside," said UBS analyst Thomas Wadewitz, noting that valuations for the rail and parcel industries look in line with their five-year averages. The cost improvement measures for the company should also situate FedEx for margin improvement, he added. — Samantha Subin 8:34 a.m. ET: UBS names T-Mobile a 2024 top pick T-Mobile is once again UBS's top pick in telecom/cable. Overall, the bank believes the U.S. wireless sector is healthy and that competitive issues are manageable. T-Mobile stands out with its industry-leading financial growth, analyst John Hodulik said. The wireless carrier should also see continued momentum in subscriber trends and its significant buyback capacity should fuel free-cash-flow per share growth, Hodulik said. — Michelle Fox 8:07 a.m. ET: Comerica upgraded to buy at Goldman Sachs on regional bank optimism Goldman Sachs upgraded Comerica to buy from neutral, with the firm looking ahead to a more constructive year for regional bank stocks after their 2023 crisis. "We believe we are now on a path of "reverting to normal" where EPS should bottom near-term and earnings power should begin to improve," in regional bank stocks, analyst Ryan Nash wrote in a Thursday note. Improvement should start in the second half of 2024, he said, as the Federal Reserve eases interest rates and banks should see "meaningful" growth in their tangible book value. Nash expects Comerica's shares to be worth $70 over time. If shares reach that number, it would indicate about 28% potential upside from Wednesday's close. The stock was trading 1.8% higher in premarket trading Thursday. According to the firm, catalysts for Comerica over 2024 include: Net interest income should start to inflect as deposit pressure eases and Comerica benefits from interest rate cuts. Loan growth should return as middle market clients start to "borrow incrementally," Nash said. Expenses should be less of a headwind given the move in long-term rates. Tangle book value, which is down 43% from the peak according to Nash, could grow 27% in the fourth quarter of 2023 and another roughly 18% over the course of 2023. — Pia Singh 8 a.m. ET: Wolfe Research upgrades GM, backs away from Rivian 2024 could be a year where a legacy automaker flexes its financial muscle, at least compared to the less proven electric vehicle companies, according to Wolfe Research. Analyst Rod Lache upgraded GM to outperform on Thursday, while downgrading Rivian to peer perform. The bullishness on GM is due to the company's ability to cut costs and its stock buyback program. "We believe that investors underestimate the earnings and cash flow power that GM will generate over the near- to medium-term, and the competitive cost advantages that they are bringing to bear over the medium- to longer-term. Based on GM's cash deployment strategy (GM is buying back 25% of their outstanding shares over the next 12-months, and they could potentially buy an additional 20% over the subsequent 12 months), we see it as relatively less likely that shares remain at current levels," Lache said in a note to clients. For Rivian , however, the company's true breakthrough is still a few years away, according to Lache. "We continue to believe in RIVN's long-term strategy. And we've been encouraged by their (recently) strong production and cost execution. But for the Street to look further out to the launch of their R2 platform (in 2026), we believe that Investors will need more insight into demand for the company's R1 platform (which has to carry them through 2024 and 2025)," the note said. — Jesse Pound 7:49 a.m. ET: There are three reasons to buy Truist, Bank of America says in upgrade Bank of America thinks it's time to get into Truist Financial , upgrading the stock to buy from neutral on Thursday. Analyst Ebrahim Poonawala pointed to three reasons for the call, including Truist's balance sheet positioning heading into the Federal Reserve's rate cut cycle. Truist has also sharpened its focus on franchise efficiency, he wrote in a note to clients. "We see potential for management to outperform on cost save targets on the back of the recently announced organizational simplification (= enhanced productivity) and as management synergizes its merger-of -equals (MOE) between SunTrust/BB & T," he said. Lastly, he sees superior growth potential thanks to its footprint in the Southeast and capital optionality stemming from the possible sale of its remaining stake in its insurance business. — Michelle Fox 7:06 a.m. ET: Roth MKM downgrades Mattel, cites cautious 2024 outlook Roth MKM downgraded shares of Mattel to neutral, citing a cautious outlook for 2024. "In our view, Mattel finished 2023 with excess inventory on retail shelves which will once again weigh on 1H results (although to a lesser extent than 2023)," wrote analyst Eric Handler, adding that expectations look too high. While the company may have gained shelf space in retail stores, many inventories for certain brands – including Barbie and Hot Wheels – appeared elevated at the end of the quarter, meaning the company will need time to work down the excess. To be sure, the firm views Mattel as a solid company with a "valuable brand portfolio." However, expectations for lower growth create an unfavorable risk-reward for the stock at present. "Given the likely prospects of lower than expected reorder rates in 1H, challenging comparisons arising from economic participation associated with the Barbie movie, and a lack of major product introductions or consequential movie tie-ins, we are now anticipating a low growth year for the business," he said. Handler trimmed his price target to $20 from $24 a share, implying about 9% upside from Wednesday's close. The stock lost 1% during premarket trading. — Samantha Subin 6:49 a.m. ET: Morgan Stanley upgrades Allstate, calls insurance stock an 'underappreciated story' Morgan Stanley is turning more bullish on shares of Allstate in the new year, calling the insurance company an "underappreciated story in a favorable market environment." Analyst Bob Jian Huang upgraded the company to overweight from equal weight, citing higher personal auto-growth and lower underwriting losses, which he expects to power better earnings growth in 2024. "As we head into 2024, lower inflationary pressure and continued strong pricing lead us to believe that the overall environment should turn more positive for Allstate," he said. The stock rose less than 1% before the bell, with the firm's adjusted $171 price target suggesting another 18% upside from Wednesday's close. ALL 1Y mountain ALL in past year The analyst also views the company's valuation as attractive relative to peer Progressive and offers a favorable risk-reward trading at 8. 8 times 2025 earnings. Favorable cyclical factors including higher pricing and policy-in-force growth, coupled with a better underwriting margin setup as inflationary pressures ease, should also benefit Allstate, he added. "Among the personal auto carriers, we believe Allstate and Progressive are both well positioned for growth (albeit from different levels)," Huang said. "As such, we expect the ~3% PIF growth will position Allstate to take market share at the expense of more stagnant carriers." — Samantha Subin 6:35 a.m. ET: Oppenheimer downgrades PayPal, cites 'profitability pressure' Oppenheimer downgraded PayPal to perform from outperform as the payments company faces "persistent profitability pressure." "A mix from branded to unbranded volumes is impacting their ability to stabilize [gross profit] margins and thus operating margins outside of expense cuts," wrote Dominick Gabriele. "As expenses continue to get cut, PYPL could fall behind peers in innovation. It will likely take multiple years for PYPL's profitability to stabilize." The mix between branded and unbranded volumes also seems to suggest that PayPal's transaction margin is headed lower and likely to weigh on profitability and the company's ability to expand its price-to-earnings multiple in the near term, Gabriele wrote. "We see better opportunity in medium-term value creation with limited transition headaches and better downside EPS protection at peers," he said. — Samantha Subin 6:16 a.m. ET: JPMorgan upgrades American Express JPMorgan upgraded shares of American Express to overweight from neutral, viewing the credit card issuer as a "safe haven" from weak household balance sheets. "We believe lower/middle income borrowers are facing pressure from depleted pandemic savings and the lingering effects of high inflation, and expect AXP to offer investors shelter from these forces," said Richard Shane in a Thursday note to clients. "Following a year end rally, price appreciation is likely to follow EPS growth (10-12%) rather than be driven by multiple expansion." Within the past two calendar years American Express has also conveyed the "power of its business model" and showed resilient credit performance even as white-collar professions grappled with layoffs, he added. In the near future, Shane views uncertainty around the final Basel III ruling, and whether persistent higher-income spending can continue as key issues for American Express. JPMorgan also lifted its price target to $205 a share, which represents 10% upside from Wednesday's close. Elsewhere, Shane downgraded Capital One Financial to neutral from overweight, citing expectations for a limited multiple expansion and its recent rally on positive credit commentary. "COF has greater exposure to nonprime borrowers, and given our concerns about depleted pandemic savings and the lingering effects of inflation on low income households, we see better risk/reward elsewhere in our coverage," he wrote. – Samantha Subin 6:09 a.m. ET: Bernstein downgrades Analog Devices, says company needs to 'grow' into new multiple Bernstein is moving to the sidelines on shares of Analog Devices in the new year as the company grows into its heightened multiple. Analyst Stacy Rasgon downgraded the company to market perform from outperform, citing valuation concerns as the analog industry faces its reset. "We think the story gets a little murkier in analog-land," he said in a Thursday note to clients. "On the one hand numbers have been cut (in some cases substantially), but many of those cuts have already been aggressively bought, and some of the stocks may need time to grow into multiples." Within the analog and large-cap semiconductor space, the company's experienced one of the steepest estimate revisions, while consensus expectations sit down a third from their 2023 peak, Rasgon noted. At the same time, Analog's multiple has climbed nearly 50% and looks elevated in the high 20s – even for a "high-quality" company. "That being said, while a high-20's multiple isn't crazy to put on a trough earnings, it seems likely to us that those earnings will probably have to grow into the multiple, and the stock itself may trade sideways for a bit until then, and there may be better places to put new money to work in the space for now," he wrote. The firm's unchanged $200 price target suggests about 6% upside from Wednesday's close. — Samantha Subin 5:43 a.m. ET: Piper Sandler downgrades Apple, cites valuation and handset concerns Piper Sandler is turning more cautious on Apple in 2024. Analyst Harsh Kumar downgraded shares of the iPhone maker to neutral from overweight, citing valuation concerns, macro weakness and a strained handset outlook. "We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit Sales," he wrote. The setup for handset companies looks murky in the first half of 2024 following a slowdown in 2023, with a recovery unlikely until the back half of the year, Kumar wrote, adding that a weakening macro environment in China could also further weigh on this business. The difficult handset setup also led Kumar to downgrade both Qorvo and Skyworks Solutions. More negative news surrounding the company's Apple Watch, at the center of an intellectual property dispute with medical technology company Masimo, and other legal battles, could also pose headwinds in the new year, he added. "Difficult comps from 2023 paired with constant currency headwinds are expected to continue in 1H24 with interest rates remaining elevated," he added. Apple shares lagged behind megacap peers in 2023 but rallied 48%. According to Kumar, Apple's valuation already looks high, trading above a five-year historical price-to-earnings ratio of 24 times at 29 times earnings on a next twelve-month basis. Given this outlook, Kumar trimmed the firm's price target to $205 from $220 a share, representing 11% upside from Wednesday's close. Shares lost 0.7% before the bell. This is the second major downgrade Apple has received this week. On Tuesday, Barclays lowered its rating on the tech giant to underweight from equal weight. — Samantha Subin 5:42 a.m. ET: Barclays and Bernstein name Nike a top pick After back-to-back losing years, Barclays and Bernstein think it's time for Nike to turn around. Both firms named the apparel giant a top pick. Barclays analyst Adrienne Yih rates the stock as overweight with a price target of $142, which implies upside of 36.5%. Bernstein's Aneesha Sherman has an outperform rating on shares with a $134, pointing to a 29% gain. Barclays' Yih pointed to wholesale recover and improving margins as catalysts for the stock in 2024. "Our 2024 best idea recommendation is based on: 1) continued and accelerating positive sales-to-inventory growth; 2) improved product margins accelerating on lower costs; 3) expected wholesale 'bottom' in FY2Q24; and 4) new innovation cycle that will be more impactful in FY25 and beyond," the analyst said. Sherman from Bernstein, meanwhile, thinks Nike's fiscal 2025 estimates are down too much. "Consensus seems to have extrapolated the weak H2 guidance to underwrite demand weakness through the entire following fiscal year as well. This is an overreaction," Sherman said. "The H2 guidance cut was more indicative of current market conditions and retailer timidness in 2024 order books ... than of Nike's fundamental viability as a brand." Nike shares posted their second straight annual decline in 2023, losing 7.2%. This comes after a 29.8% drop in 2022. NKE mountain 2021-12-31 NIKE in past two years — Fred Imbert