Monday's analyst calls: Nvidia named a top pick, upgrade of cheap retail stock
(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.) Analysts kicked off the week with an upgrade to a major electronics retailer. Jefferies raised its rating on Best Buy to buy from hold, and its new price target implies about 20% upside. TD Cowen, meanwhile, named Nvidia a top pick, with the firm expecting the chipmaker to build on its monster 2023 performance in the new year. Check out the latest calls and chatter below. 9:19 a.m. ET: Morgan Stanley upgrades Occidental as company slashes debt Occidental will return to its full historical premium over the long term as the company pays down debt that has caused it to underperform, according to Morgan Stanley. Analyst Devin McDermott upgraded Occidental to overweight from equal weight and maintained a price target of $68, which implies 20% upside from the last closing price of $56.47. Occidental was loaded with debt after purchasing Anadarko Petroleum but has repaid $18 billion in obligations since 2020, according to McDermott. This has allowed the company to repurchase $4.8 billion in shares and redeem $1.5 billion in preferred stock since 2022. McDermott sees Occidental reclaiming its premium value long term through stock redemptions and a more meaningful base dividend. Successful execution on its low carbon business could drive further upside, the analyst said. — Spencer Kimball 8:48 a.m. ET: BMO upgrades J.B. Hunt to outperform BMO upgraded transportation company J.B. Hunt to outperform from market perform, seeing its biggest growth in almost a decade. "With rail service improving, rail earnings growth becoming increasingly volume dependent, and with meaningful market share recapture opportunity, we believe that intermodal could be entering a period of growth not seen since the mid-2010s," the Wall Street firm said in a note to client. Shares of J.B. Hunt rose about 1% in premarket trading Monday. BMO hiked its price target to $220 from $200 previously, forecasting a 17% upside. "We believe intermodal marketing companies (IMCs) are most leveraged to this opportunity and view JBHT as being best positioned among them," BMO said. — Yun Li 8:16 a.m. ET: Rosenblatt upgrades Spotify after cost cuts, sees 50% upside Spotify's latest round of layoffs and costs cuts may finally get the company to a sustainable level, according to investment firm Rosenblatt. Analyst Barton Crockett upgraded the streaming music stock to buy from neutral, saying a note to clients that the recent round of cuts will unleash profitability. "The scary scenario is that the cuts foretell a surprising slowdown in sales growth currently guided to be up close to 20% ex currency in 4Q23, with subscriber growth for 2023E in the 30 million range. The promising scenario is that sales and subs remain strong, and cost controls will cause margins to explode. After probing, we favor explosion," Crockett said. Rosenblatt now projects that Spotify will generate $4.04 in earnings per share in 2024, up from a previous estimate of $1.20. The company is on track to generate a net loss for the 2023 full year. Crockett also doubled his price target on Spotify to $300 per share, which is more than 50% above where the stock closed Friday. — Jesse Pound 8:13 a.m. ET: Adobe and Microsoft named top 2024 picks by BMO Generative artificial intelligence should help propel both Adobe and Microsoft higher next year, according to BMO Capital Markets. The firm named Adobe its top pick for 2024, followed by Microsoft. "We think Adobe has the opportunity to significantly expand the creative TAM over time, since generative AI makes creative products both easier to use and more effective," analyst Keith Bachman wrote in a note Monday. The software company has fewer than 30 million creative users, compared to Microsoft's 380 million, and can expand its user base by more efficiently targeting a broad set of users, he said. Adobe also has an opportunity to embed generative AI in its document cloud. Meanwhile, Microsoft's Office will benefit from generative AI in its Office franchise due to its Copilot chatbot. For instance, if 50% of Office 365's commercial installed base adopted Copilot at a net price of $10 per month, per user, it would mean 50% lift in revenue compared to 2023's commercial revenue base, Bachman said. — Michelle Fox 7:59 a.m. ET: Bank of America stands by Roku, sees growth opportunities for the stock Roku stands to benefit from fundamental improvements and a lifting macro backdrop, according to Bank of America. The bank reiterated its buy rating on the streaming device manufacturer, also raising its price objective to $114 from $95. Shares of Roku have soared nearly 154% so far this year, but this forecast still implies a potential 10% upside from the stock's Friday close. Analyst Ruplu Bhattacharya listed several growth opportunities as catalysts. For one, the stock is continuing to expand in international markets with strong potential such as Canada, Mexico, UK, Germany, Brazil and Australia. He also focused on the company's commitment to diversify towards other verticals. Bhattacharya also believes that Roku's advertising revenues should continue to grow as the macroeconomic backdrop improves. Additionally, he said that the platform's partnerships with third-party demand side platforms could "can drive higher fill rates and meaningful platform revenue upside." Roku is already integrated with more than 30 programmatic partners at this time. — Lisa Kailai Han 7:57 a.m. ET: Jefferies becomes bullish on Cigna Health insurance company Cigna's "halting pursuit" of acquiring rival Humana creates a compelling entry point for investors, according to Jefferies. On Sunday, Cigna called off its attempt to buy Humana due to disagreements on price. The company also announced a $10 billion share buy back plan. Analyst David Windley upgraded shares to buy from hold in a note. He also increased his price target to $341 from $335, suggesting 32% upside from Friday's close. "Walking away from [the] HUM deal is a short-term win for CI investors," Windley said. "Before reports of CI shopping its MA book, shares stood at ~$310. Since then, the stock is down (16.5%) with no fundamental change." Cigna shares surged more than 13% Monday morning, in the first trading session after abandoning the Humana acquisition. To be sure, the stock remains down by nearly 22% year to date. — Hakyung Kim 7:46 a.m. ET: Evercore ISI upgrades Kraft Heinz, sees fundamental turnaroud in 2024 Struggling Kraft Heinz appears to be gearing up for a turnaround, according to Evercore ISI. Shares of Kraft Heinz have dropped 11% year to date as sales have struggled. However, analyst David Palmer upgraded the stock to outperform from in line and said the sales trend is close to bottoming out. "Our base case remains that volume will approach flat YoY by 2Q24 (versus -6% now) with disciplined levels of promotion. While we estimate that the company has lost category weighted market share over the last year ... we would expect trends to firm in 2024 supported by increased investments," Palmer said in a note to clients. The company has also trimmed its portfolio in recent years by selling off underperforming brands, which has put it on stronger financial footing. "This has helped the company reach its target debt leverage (3x) and should foreshadow accelerating share repurchase ahead (recently announced $3B authorization)," the note said. Evercore also raised its price target for Kraft Heinz by $2 per share to $42. The new target is 16% above where the stock closed Friday. — Jesse Pound 7:25 a.m. ET: Goldman Sachs upgrades AbbVie to buy Pharmaceutical group AbbVie is currently going underappreciated by investors, according to Goldman Sachs. Analyst Chris Shibutani upgraded shares to buy from neutral. He raised his price target to $173, implying 17% return from where shares closed on Friday. The firm cited rheumatoid arthritis treatment Humira's more resilient-than-expected revenue even as similar products entered the market. AbbVie's other franchises including Skyrizi and Botox can also fuel the company's growth profile through the end of the decade, Shibutani said. "The precision by which ABBV has been able to map out their commercialization (emphasis on payor contracting) strategies — not just during 2023 as the barrage of biosimilar challenges entered — but over the better part of the past decade as the durability of Humira's opportunity set as a leader repeatedly came into question by investors, bolsters our confidence in the probability of success with the company's strategies with Humira, on the forward," Shibutani wrote. The stock rose by 1.2% Monday before the bell. Nonetheless, shares remain down by more than 7% in 2023. — Hakyung Kim 7:13 a.m. ET: Citi upgrades Fortrea Holdings to buy Clinical pharmacology company Fortrea Holdings is Citi's top pick among labs and contract research organizations. Analyst Patrick Donnelly upgraded shares to buy from neutral, citing improving margin potential. He also raised his price target to $40 from $34, suggesting shares could gain around 30.5% from Friday's close. Fortrea Holdings has shown "evidence of healthy bookings, a compelling margin turnaround story underway, and attractive valuation relative to peers when applying our revised FY25 EBITDA target," Donnelly wrote in a Monday note. "We think this margin improvement will largely be cost driven (exiting TSA and, internal investments paying off)," the analyst added. Shares added more than 2% Monday during premarket trading. Fortrea was spun off from Labcorp earlier this year. — Hakyung Kim 6:49 a.m. ET: Citi upgrades Nike to buy Nike is a promising recovery opportunity amid an unfavorable macro backdrop, says Citi. Analyst Paul Lejuez raised his rating on shares to buy from neutral. His new price target of $135, up from $100, suggests shares gaining 16.5% from Friday's close. "Top-line challenges remain, but we are more optimistic about NKE's ability to protect EPS in F24/F25 despite a choppy macro," said Lejuez. "A one-of-a-kind brand with visible margin recovery creates a favorable risk/reward in our view," Lejuez said in a note on Dec. 11. Meanwhile, Barclays is similarly bullish on Nike. The firm believes the second quarter of 2024 will be the "inflection moment for Nike" as wholesale bottoms out and direct to consumer growth accelerates. Furthermore, "with the 2024 Olympics and 2024 UEFA Euro Championships, we believe NKE is fast tracking newness and innovation in advance of these global sporting events," Barclays analyst Adrienne Yih wrote in a Monday note. — Hakyung Kim 6:41 a.m. ET: Wells Fargo upgrades Snap, says stock is on track for a 'positive inflection' Snap's ads platform rebuilding efforts will lead to outperformance, according to Wells Fargo. The firm upgraded shares to overweight from equal weight. It also raised its price target to $22 from $8, implying shares could rally nearly 46% from Friday's close. Analyst Ken Gawrelski sees "advertising positively inflecting at Snap for the first time since Apple's privacy initiatives in April '21." "We view Snap's recent product and ads leadership makeover as key to faster product innovation and revenue reacceleration," Gawrelski wrote in a Sunday client note. Shares jumped more than 5% Monday before the bell. The stock has rallied 68.6% year to date. — Hakyung Kim 6:30 a.m. ET: Wells Fargo is underweight on Stellantis Big structural changes ahead for the auto industry have Wells Fargo staying bearish on Stellantis . The bank initiated an underweight rating and price target of €18. The price target suggests shares will fall more than 14% from Friday's close. Analyst Colin Langan cited price deterioration, excess global capacity and higher regulatory targets for battery electric vehicle sales. "Sometimes it's better to be late for the party," Langan said in a Monday note. "Investors have criticized STLA for lagging its US peers in introducing BEVs in the US. This late arrival is now relatively positive given the moderation in BEV demand, enabling STLA to more easily scale back BEV capex," said Langan. "All OEMs likely need some BEV to hit 2026 EPA targets. Lower profit BEV launches & investment should significantly impact N. American profitability." Langan is skeptical the auto industry can maintain its price discipline and forecasts discounts ahead to fill unused capacity. Stellantis' U.S.-traded shares have surged 59.1% year to date. STLA YTD mountain STLA year to date — Hakyung Kim 6:06 a.m. ET: Piper Sandler downgrades on Domino's Pizza Domino's Pizza shares may be approaching a ceiling after a period of outperformance, according to Piper Sandler. The firm downgraded shares to neutral from overweight. This comes on the back of the pizza chain's Investor Day event. His price target of $400 is just 1.3% higher than Friday's close. "While it is likely true that DPZ is one of the only (if not the only) restaurant concepts that is likely to have accelerating domestic SSS and unit growth next year (and kudos to management), we believe that this dynamic is very well understood at this point, and is also arguably priced into the shares at current levels," analyst Brian Mullan wrote. Shares are up by 14% in 2023. To be sure, Mullan clarified that he is not negative on Domino's Pizza's business or strategy. He added that he may be stepping away from the stock too early, but doesn't have confidence Domino's valuation multiple premium compared to its peers will hold in 2024. "Hence, when we say the Risk-Reward is balanced at current levels, this dynamic is front and center in our minds; and with limited upside implied by our updated price target of $400, we move our rating on DPZ to Neutral with this note," Mullan said. — Hakyung Kim 5:49 a.m. ET: Evercore ISI upgrades HP shares, sees big gains ahead The PC market is poised to recover next year, and HP Inc. is well positioned to see tailwinds from this trend, according to Evercore ISI. Analyst Amit Daryanani upgraded the stock to outperform from in line. He also raised his price target to $40 from $33, suggesting shares could gain 36% from Friday's close. "We see a host of tailwinds in CY24 including a strong COVID-19 replacement cycle, windows 12 launch (expectation is June), and AI PC (AI PCs expected to ship in H2)," Daryanani wrote in a Sunday note. HP also could see buyback momentum if it returns to its repurchasing shares in 2024, the analyst added. Shares of the PC maker are up 9% this year, lagging the S & P 500's 19.9% advance. HPQ YTD mountain HPQ in 2023 — Hakyung Kim 5:45 a.m. ET: RBC upgrades Pinterest, calls it an 'attractive' investment story The lines between browsing and buying are blurring for Pinterest users, and RBC thinks this could mean big gains for the stock. RBC upgraded shares to outperform from sector perform and increased its price target by $14 to $46. The new price target implies shares rallying more than 31% from where they closed on Friday. "With investors thirsty for non-megacap ideas for '24, PINS stands out as a way to play the shift of intent-based ad platforms chasing impulse shopping's $241B ad spend," analyst Brad Erickson wrote in a note. To be sure, Erickson wrote the transition from a search to shopping platform will be a multi-year process. Nonetheless, he thinks the impact of this shift could be "seismic." "Through the combination of a) reducing conversion/purchase friction through direct links and b) adding significant new product supply with new ad partners, particularly Amazon, we believe PINS has an outsized opportunity to capitalize on this shift," said Erickson. Shares jumped 3.2% Monday during premarket trading. — Hakyung Kim 5:35 a.m. ET: TD Cowen names Nvidia a top pick Nvidia was the leader in AI this year, and TD Cowen doesn't see that changing in 2024. Analyst Matthew Ramsay named the chipmaker a best idea for the new year, reiterating an outperforming rating on the stock. His price target of $700 per share implies upside of 47.3% from Friday's close. Ramsay pointed to three factors driving his call: "The company is accelerating its hardware product roadmap cadence (with associated CUDA/other software) to a less-than-one-year cadence beginning with Blackwell in C2024." "We believe the market remains very early in the era(s) of accelerated computing and generative AI where NVIDIA has a clear leadership position." "We believe the current valuation near the low-end of its five-year range on most metrics already contemplates the potential for a 'digestion' year in C2025 despite our belief that year will be another strong growth year for the company across the franchise." Nvidia has been the clear winner of 2023, surging more than 200% to lead the S & P 500 higher. NVDA YTD mountain NVDA in 2023 — Fred Imbert 5:35 a.m. ET: Jefferies upgrades Best Buy Best Buy is a call that "doesn't take much to work," says Jefferies. The firm upgraded shares to buy from hold in a Monday note. Its new price target of $89 from $29 implied 20% upside from Friday's close. Analyst Jonathan Matuszewski cited conviction that a "replacement cycle" for pandemic buys is soon set to begin, as well as the company's strong market share. "Demand linked to rising consumer interest in A.I. will be a 'cherry on top', hitting the P & L in C4Q'24 with a stock 'halo' prior. Web traffic, search trends, and checks support our view," Matuszewski said. Shares jumped more than 2% on Monday before the bell. Year to date, it is down nearly 9%. — Hakyung Kim