Tuesday's analyst calls: Netflix downgraded by Citi, Deutsche sees more upside for JPMorgan Chase
(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.) Netflix was in focus Tuesday after the streaming giant got a big downgrade. Citi lowered its rating on the stock to neutral from buy, noting expectations for the company have become too lofty. Shares fell slightly in the premarket. Elsewhere, Deutsche Bank upgraded JPMorgan Chase to buy from hold. Check out the latest calls and chatter below. 8:44 a.m. ET: Bank of America downgrades JetBlue to underperform JetBlue has rallied since November, but a tough backdrop for domestic airlines and engine issues could weigh on the New York air carrier, according to Bank of America. The firm on Tuesday downgraded JetBlue to underweight from neutral and cut its price target in half to $3, saying issues with Geared TurboFan (GTF) engines could pressure growth and costs in 2024. The stock traded lower by 5% premarket. "We forecast -1.4% capacity growth in 2024 … as the number of aircraft out of service due to GTF maintenance nearly doubles from 6 in 4Q23 to over 10 by year end 2024," accounting for about 3% of its fleet, Bank of America analyst Andrew Didora said in a note Tuesday. "Historically, JBLU has needed to grow nearly mid- to high-single digits to get flattish [costs per available seat mile], so our new capacity forecast results in CASM +6%." The downgrade comes after the company also announced late Monday that CEO Robin Hayes will step down Feb. 12 and be replaced by President and Chief Operating Officer Joanna Geraghty. Additionally, Didora mentioned execution risk as the market awaits a ruling in the Department of Justice's lawsuit against JetBlue to block its acquisition of Spirit Airlines. — Tanaya Macheel 8:31 a.m. ET: Bernstein lays out top restaurant stocks for 2024 With 2024 set to be the first "normal" year for restaurants since 2019, Bernstein has some stocks worth watching. Analyst Danilo Gargiulo listed Chipotle and Restaurant Brands International , the parent of chains including Tim Hortons and Burger King, as his top picks. He has outperform ratings on both. Gargiulo said the former should show topline resilience as consumer sentiment cools. Margin expansion should continue as productivity improves, while accelerated unit growth in the back half of 2023 can buoy investor interest. And he said Restaurant Brands' international business to show hidden strength, bringing investors to what the analyst called a "rekindled growth story." Outperformance in Tim Hortons and improvements at Burger King should also help, he added. In addition, Gargiulo raised Chipotle's price target by $100 to $2,400 per share, now implying an upside of 7.3%. His $85 target for Restaurant Brands International reflects a gain of 8.8%. While not a top pick, he upgraded Domino's Pizza to market perform from underperform and increased his target price by $40 to $370. Still, this new level requires shares to slide 8.1% from Monday's close. While there's reasons for optimistic in the short term, he emphasized caution when looking at the longer-term story. "Despite continued skepticism on pizza category outlook, we believe the near-term setup for 2024 has turned attractive and there are no immediate catalysts that could materially pressure DPZ," he said. "However, we believe that valuation has run ahead of growth expectations and will eventually re-rate downward as the dynamics of a hyper competitive, mature category ... translates to moderating growth beyond the ST growth catalysts." — Alex Harring 8:29 a.m. ET: HSBC upgrades Nu Holdings to buy Latin American bank Nu Holdings should have another big year ahead, according to HSBC. Analyst Neha Agarwala upgraded the Brazil-based financial firm to buy from hold, saying in a note to clients that Nu appears to have earnings momentum after its stock surged in 2023. "With the key risk of regulatory changes in credit cards pushed further out to the horizon and asset quality trends stabilizing, we believe the coast is clear for Nu to accelerate personal loan origination which should drive up profitability in 2024; growth in payroll loans should help further. Showing success in Mexico will likely be a concern for 2025," the note said. Shares of Nu more than doubled in 2023, and the stock is already up more than 6% this year. HSBC hiked its price target on Nu to $10 per share from $8.70. The new target is 12.5% above where shares of Nu closed on Monday. — Jesse Pound 8:11 a.m. ET: Piper Sandler upgrades GoDaddy, cites reversal in multiple compression Piper Sandler upgraded shares of GoDaddy to overweight as the website domain company situates itself to bounce back from a five-year trend of multiple compression. "Looking ahead to 2024; we see an opportunity for positive growth revisions in our higher quality names without losing progress on profitability," wrote Clarke Jeffries in a Tuesday note. The analyst downgraded shares last year as growth compressed to the mid-single digits. But a quicker-than-expected bounce in margins is situating GoDaddy for a 29% net debt-to-EBITDA margin exit rate for 2023 and 8% domain bookings growth in the last quarter. This is also positioning GoDaddy for a reacceleration to high-single-digit growth in the new year and a NEBITDA margin exceeding 30%. Along with the upgrade, Jeffries lifted the firm's price target to $121 from $100 a share, reflecting about 19% upside from Monday's close. — Samantha Subin 8:08 a.m. ET: BofA recommends buying United Airlines stock for first time since 2020 Analyst Andrew Didora upgraded United Airlines to buy from underperform and raised his price target by $16 to $56. Didora's new target reflects the potential for shares to rally 30.5% in the next year from Monday's close. "Today, we see a valuation disconnect vs UAL's execution and its more favorable leverage outlook than expected," he said. "While industry risks remain ... and capex is above historical norms, UAL has outperformed the industry on revenues, can maintain about 2.5x leverage through this capex cycle, and trades at just 4.5x our 2024E EBITDAR, towards the low end of historical valuations." It marks the first time Bank of America has had a buy rating on United since March 2020. Between then and now, he said a relatively high valuation and capital expenditures, as well as leverage concerns, had made the firm cautious. The upgrade comes as recent events have created challenges for the air travel sector. United was among airlines that found loose hardware on Boeing planes. Those discoveries came during a grounding that was prompted by a door plug blowing out during an Alaska Airlines flight last week. United shares advanced 1.6% before the bell. — Alex Harring 8:07 a.m. ET: Jefferies turns bullish on KeyCorp, Regions Financial Jefferies turned bullish on two regional banks. Analyst Ken Usdin upgraded KeyCorp and Regions Financial to buy from hold. He also raised the price targets for both, with the new anticipated levels implying upsides of 15.6% for KeyBanc and 12.8% for Regions from Monday's close. Specifically, he increased his price target on KeyCorp to $17 from $10. His Regions target went up to $22 from $15. "Bank valuations have expanded as the market adjusts for peak/lower rates. ... P/Es remain below historical avgs., with potential for more expansion in a benign soft landing, plus help from growing book values and capital ratios," Usdin wrote to clients, using shorthand for the price-to-earnings ratio and earnings per share. "The timing bridge between '24 EPS softness and '25 improvement will be important." Usdin said KeyCorp's forward price-to-earnings remains the lowest among large-cap regional banks, even after the stock bounced from its fall 2023 low. The bank should also see some of the biggest benefits to forward net interest income as low-yield securities and low rate receive-fixed swaps mature. Fee performance should also improve as near-flat costs boost positive operating leverage in 2024 and 2025, the analyst added. Regions is also still at a price-to-earnings discount compared with peers, despite resetting many expectations in its October guidance, Usdin said. The market better understands challenges on net interest income, while consensus still needs to adjust 2024 costs to the right basis. Meanwhile, he said capital is strong as buybacks have resumed. KeyCorp added 0.6% in Tuesday's premarket trading, while Regions climbed 0.4%. — Alex Harring 7:48 a.m. ET: Morgan Stanley downgrades CyberArk, cites lack of near-term catalysts CyberArk is a promising long-term contender but falls short in the near term, according to Morgan Stanley. The bank downgraded shares of the identity management software company to equal weight from overweight, although it lifted its price target to $240 from $195. This implies a 10.1% potential upside from the stock's Monday closing price of $217.99. Analyst Hamza Fodderwala noted that while he is bullish on the name in the long term, he sees limited room for upside in the near term. "We think the company has improved its position with a higher mix of recurring SaaS revenue in recent years. However, nearer term, we think the setup is more difficult and outperformance in CYBR shares is unlikely," he wrote. The analyst attributed this to two factors. First, he thinks that annual recurring revenue is likely to slow. The stock already seems to have priced in investor expectations for 30% growth in 2024, above consensus estimates of 26% — which could lead investors disappointed. "While migration from the existing maintenance base to SaaS should provide a multi-year tailwind, we think the shift will be more gradual and the ASP uplift may be less than expected due to CyberArk's premium pricing vs competitors," Fodderwala noted. The analyst added that there's limited upside to the company's free cash flow margins as cloud hosting costs rise and new product investments increase. "Net, with the stock up +70% over the last year vs Nasdaq +48% and lack of upside catalysts nearer term, we're moving to the sidelines and would look for a more attractive entry point," he wrote. CyberArk shares are down 0.5% to start the year. However, they are coming off a 69% gain in 2023. CYBR 1Y mountain CYBR in past year — Lisa Kailai Han 7:20 a.m. ET: BofA calls Ferrari a top auto pick, noting 'intangible brand value' and 'true luxury status' Bank of America named Ferrari a top auto stock for the new year. Analyst John Murphy said the Italian sports car maker also has a buy rating. He called the company a "unique asset with significant intangible brand value and a true luxury status." "We believe the company's balanced strategy of restrained volume growth, strong price increases, and new model introductions over our forecast period should drive strong consistent revenue and earnings growth," he told clients. "In our view, the stock should outperform in 2024 given the resiliency of its financial performance in periods of macro uncertainty." Ferrari's outlook should remain conservative, while the majority of benefits should come from mix and price, he said. Any easing of material costs or supply chain snafus can also help. Ferrari shares are coming off their best year since 2019, surging 58% in 2023. To start 2024, the stock is up 1.7%. Murphy also listed retailers Asbury Automotive Group and AutoNation as best ideas, citing strong free cash flow. That can allow for capital allocation to buybacks and acquisitions, among other initiatives. 7:06 a.m. ET: Morgan Stanley downgrades PayPal, citing glacial strategic initiative cycles There's reason for pause on PayPal as the digital payment platform shows slower-than-expected progress on strategic initiatives, according to Morgan Stanley. Analyst James Faucette downgraded the financial technology stock to equal weight from overweight and slashed his price target to $66 from $118. Faucette's new target implies shares can advance just 6.9% from Monday's close over the next year. "Product evolution and progress on key strategic imperatives, ... which are key to supporting faster-than-eComm growth, are taking longer than we initially thought," Faucette wrote to clients. PayPal is moving "too slowly" on key strategic initiatives like improving branded checkout and expanding Venmo, Faucette said. Any acceleration is difficult given the company's relationships, the analyst added. He's also less optimistic that PayPal can monetize Venmo as a checkout tool for younger shoppers. A larger share of these consumers would help the company grow at above-average rates, he said. More broadly, Faucette said he's losing confidence that the company can investment enough to make meaningful improvements to its business in the near future. Still, he said the company should be able to grow revenue in line with other e-commerce peers, excluding Amazon. Shares slipped 2.4% in premarket trading on Tuesday. PayPal has fallen for three straight years. In 2023, the stock lost 13.8%. — Alex Harring 6:42 a.m. ET: HSBC says buy Citigroup, hold Morgan Stanley HSBC replaced Morgan Stanley with Citigroup on its list of buy-worthy bank stocks. Analyst Saul Martinez upgraded Citigroup to buy from hold, while giving Morgan Stanley the reverse treatment. His price targets of $61 and $96 suggest upside of 12.9% for the former and 2.7% for the latter. Despite noting that the revenue outlook still has challenges, Martinez said the fundamental backdrop for U.S. banks has improved in recent months. Namely, he said that moderating deposit cost pressure should help net interest income hit a bottom and earnings expectations are positive. Investors can add exposure to banks through Citigroup as management credibility increases and there's more opportunity for buybacks, Martinez said. Still, he said Goldman Sachs is the "preferred way" to play a recovery in capital markets specifically. Elsewhere, he noted Morgan Stanley has seen cuts to earnings estimates even as the share price has risen. That's created an increase to the price-to-earnings multiple while expectations for wealth management revenue soften. Citigroup advanced around 0.4% in Tuesday premarket trading, while Morgan Stanley slipped 1.6%. — Alex Harring 6:23 a.m. ET: Oppenheimer names Nvidia a top pick entering semi earnings Nvidia is one of Oppenheimer's favorite names heading into semiconductor earnings. Artificial intelligence remains the top theme for semis in 2024, analyst Rick Schafer said, after it led growth in the prior year. A focus will be on how companies monetize their strategies in the space, the analyst added. Looking to 2024, he said picking the right names in the space is increasingly important after 2023's "correction year." In addition to Nvidia, he pointed to Marvell Technology, Monolithic Power Systems and Broadcom as top picks. Schafer said the best growth stories in the sector outperformed in 2023, with the top picks group surging 125% on average. By comparison, the iShares Semiconductor ETF (SOXX) gained a relatively modest 65.6%. Following an initial inflection, he said history shows that the group of best ideas should gain another 11% in 2024. Semiconductor earnings kick off the week beginning on Jan. 22, according to the analyst. — Alex Harring 6:07 a.m. ET: Goldman says Interactive Brokers is a buy that investors have overlooked due to interest rate concerns Investors should snap up Interactive Brokers as oversensitivity to potential interest rate cuts unnecessarily cheapens the stock, according to Goldman Sachs. Analyst James Yaro upgraded the brokerage to buy from neutral. His $102 price target, up from $88, shows a potential gain of 16.4% in the next year from Monday's close. "We see current valuation as offering an attractive entry point, with risk skewed to the upside," he told clients. Interactive Brokers has underperformed rate-sensitive peers since six month before the first cut to the Federal Reserve funds rate, Yaro said. But the analyst warned that the market may have over-extrapolated the company's connection to interest rates. Indeed, he said the company should be able to offset a hit from interest rate cuts by the Fed. That's because it has balance sheet growth, a shift in mix and increasing commissions. The analyst also found that the company can likely keep earnings per share growth flat in a down environment. Yaro said upside can stem from a focus on capital priorities, which can drive dividend growth or acquisitions. A bank license in the European Union can also help unlock capital, he added. Interactive Brokers Group rose just over 14.5% in 2023, underperforming the broader market. — Alex Harring 5:47 a.m. ET: Morgan Stanley upgrades CrowdStrike, says cybersecurity tech provider is 'firing on all cylinders' Morgan Stanley said traders should flock to CrowdStrike shares. Analyst Hamza Fodderwala upgraded the cybersecurity software stock to overweight from equal weight and raised his price target by $101 to $304. His new target reflects the potential for shares to climb 16.4% from Monday's closing level. "We are upgrading CRWD ... based on improving demand, broader platform traction and multiple product cycles still ramping up, including the recently launched Charlotte AI," Fodderwala said, adding that the company is "firing on all cylinders." "We think these factors should result in more meaningful upside to ARR and FCF forecasts throughout the year," he added, using acronyms for annual recurring revenue and free cash flow. That allows for "driving the stock higher despite significant outperformance over the last year." CrowdStrike is the "leading beneficiary" as ransomware becomes more common given the company's s incident response and endpoint security services, Fodderwala said. In fact, attacks grew by a clip of more than 70% last year, leading to growth in professional services revenue, according to the analyst. Elsewhere, Fodderwala pointed to multiple product cycles still ramping up. In particular, he pointed to the company's "strong position" for leveraging and monetizing generative artificial intelligence. CrowdStrike's Charlotte AI can add $100 million in annual recurring revenue by 2025 if there's 10% penetration in the installation base, he said. To be sure, Fodderwala knows his upgrade comes after a strong year for the stock, with shares outperforming security peers and the Nasdaq Composite in 2023. While he admitted to being late to the party, he said investors aren't too late to buy in given the reasons for optimism. CRWD .IXIC 1Y mountain CRWD vs Nasdaq in past year Shares rose 2% before the bell on Tuesday. — Alex Harring 5:32 a.m. ET: Citi downgrades Netflix, says streaming giant could underperform on some Street projections Investors should move to the sidelines on Netflix as Wall Street's expectations have gotten too grandiose, Citi warned. Analyst Jason Bazinet downgraded the streaming giant to neutral from buy. His $500 price target implies an upside of 3.1% from Monday's close. "Across 2024 and 2025, the Street has lofty expectations for Netflix. We see three potential risks," Bazinet wrote to clients. "At prevailing levels, we find the risk-reward relatively balanced." Bazinet said the first of those three reasons is that 2024 revenue expectations may be too high. Next, 2025 content investments should be higher than analysts anticipate. And finally, he said potential acquisitions can't be ruled out. Given these risks, he said the risk-reward ratio is no longer compelling. Bazinet's downgrade comes on the heels of a strong year for Netflix, making Bazinet's upside expectations relatively muted. Shares rallied more than 65% in 2023, regaining some ground after dropping more than 50% in the prior year. Netflix stock slipped 2.1% before the bell Tuesday. — Alex Harring 5:32 a.m. ET: Deutsche Bank upgrades JPMorgan Chase JPMorgan Chase shares have more upside left in them after a stellar 2023, according to Deutsche Bank. Analyst Matt O'Connor raised his rating on the bank to buy from hold and raised his price target to $190 from $140 per share. The new forecast indicates a potential gain of 10.5% from Monday's close. "Shares should benefit from upside to net interest income guidance (vs. downside risk at peers), good leverage to a pick up in capital markets revenues, and strong capital and loan loss reserve levels," O'Connor wrote. "And while we wouldn't argue JPM shares are cheap, they also aren't expensive at 11.5x our 2024e or just a slight premium to the broader group multiple of 11.0x." JPMorgan Chase rallied 24.6% in 2023. The stock hit a record high last week. JPM 1Y mountain JPM in past year — Fred Imbert