Wednesday's analyst calls: Nvidia price target increases and an alternative trade for the '2nd wave of AI'
(This is CNBC Pro's live coverage of Wednesday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Analyst chatter on Wednesday featured Nvidia and another possible way to capitalize on the artificial intelligence craze. Several analysts raised their price targets on Nvidia after the company's GTC Conference, in which the chipmaker unveiled a new graphics processing unit. Elsewhere, Barclays reinstated coverage of Broadcom, noting the stock could be an alternative AI play. Check out the latest calls and chatter below. All times ET. 8:23 a.m.: Citi upgrades International Paper after new CEO named A new CEO could bring improvements to International Paper , according to Citi. The bank upgraded the packaging and paper products company on Tuesday to buy from neutral and raised its price target to $46 from $36, suggesting nearly 19% upside from Tuesday's close. International Paper on Tuesday named Andy Silvernail its new CEO, effective May 1. The stock popped 11% on the news.The company has been long burdened with an overly complex portfolio and has chronically underperformed, Citi analyst Anthony Pettinari said in a note to clients. "While outgoing CEO Mark Sutton made major strides in simplifying IP's portfolio (White Paper spin, China/India/Russia exit, asset sales), we view the job as partly done. Mr. Silvernail is an outsider and a potential change agent," he wrote. Pettinari believes priorities include divesting underperforming assets and fixing its box business. He also expects Silvernail to address the performance gap with competitor Packaging Corp of America. — Michelle Fox 8:08 a.m.: Telsey Advisory Group upgrades Best Buy, sees more than 20% upside ahead Telsey Advisory Group upgraded Best Buy to outperform from market perform on Wednesday, a day after meeting with the retailer's management, including CEO Corrie Barry. The firm also hiked its price target to $95 per share from $85, suggesting nearly 23% upside from Tuesday's close. "Our meetings with Best Buy increased our confidence in the business showing signs of stabilization and improvement after nine consecutive quarters of negative comps, as the replacement cycle kicks in," analyst Joseph Feldman wrote in a note to clients. In fact, Best Buy is already seeing positive comparables in select categories like laptops, he said. Product innovation is also on the rise, which should help attract consumers and fuel growth, he added. In addition, the company is being cautious on capital spending, he said. Shares of Best Buy added more than 2% in premarket trading. — Michelle Fox 7:57 a.m.: Citi upgrades Tencent Music to buy after fourth-quarter report Tencent Music Entertainment may have found a path to steady growth and a higher stock price, according to Citi Analyst. Alicia Yap upgraded the Chinese entertainment stock to buy from neutral after Tencent released its fourth-quarter results. Tencent's total revenue for the fourth quarter was down year over year, but its subscription business grew. "We believe TME's steady/resilient subscription music business with expanding capabilities of music value chain and ramp-up of long-form audio and diversified use case scenarios across multi-channels/devices would support sustained growth outlook," Yap said in a note to clients. Those subscriptions are expected to continue to be the key driver for the business moving forward. "For 2024, management is confident that the online music business will maintain solid growth with subscription services serving as a primary driving force while continuing to explore new opportunities in advertising and artist merchandise to grow the business," the note said. Citi hiked its price target on Tencent Music to $13 per share from $9. The stock closed at $11.04 per share on Tuesday. — Jesse Pound 7:43 a.m.: Mizuho names Chevron a top pick, highlights delayed acquisition of Hess as catalyst A delayed acquisition has opened up a good entry point for shares of Chevron , according to Mizuho. The bank maintained its buy rating on the multinational energy giant and called Chevron a top pick. Analyst Nitin Kumar also raised his price target to $200 from $195, implying a 28% increase from the stock's Tuesday closing price. Chevron stock has added 5% so far this year. Kumar noted that the stock began the year outperforming its peers due to strong fourth-quarter earnings, until the company filed its proposed acquisition of Hess. "Since then the stock has underperformed peers by ~6% as investors are concerned whether the deal will be completed since XOM and its partners are moving to," he wrote. Kumar's base case assumption still shows the deal going through, just with a Sep 30 close date versus June 30. Additionally, the analyst expects total production for Chevron to grow at a compound annual growth rate of between 10% to 11%, assuming that the Hess acquisition closes at the end of the third quarter. He also sees the company's current net asset value as looking attractive. "Although the HES acquisition is ~7% accretive to NAV in our opinion, we still see value in standalone CVX especially given the recent underperformance compared to peers," Kumar wrote. — Lisa Kailai Han 7:38 a.m.: Needham upgrades Carmax to buy Carmax could soon be the upswing once again as the used car market begins to look more like it did before the Covid pandemic, according to Needham. Analyst Chris Pierce upgraded the stock to buy from hold, saying in a note to clients that the used car market could be on the road to recovery after a rocky few years. "We see potential for a multi-year recovery, with interest rate relief and rising used vehicle supply pushing down [average selling prices] and monthly payments. We are confident in our above-consensus FY25 and FY26 retail unit estimates, which assume KMX's share gains resume and its omni-channel investments pay off as units grow," the note said. And even with concerns about the U.S. consumer weakening, the Carmax loan book appears to be in good shape, Pierce said. "KMX's December loan default commentary was a positive surprise, with higher value loans on higher ASP vehicles seeing elevated early defaults, but subsequently reverting toward expectations as the loans season," the note said. Needham set a price target of $99 per share for Carmax, which is about 22% above where the stock closed Tuesday. — Jesse Pound 7:34 a.m.: Chipotle shares can continue rising amid strong growth, Deutsche Bank says Deutsche Bank sees more room to run for Chipotle shares as the fast-casual Mexican chain continues growing. Analyst Lauren Silberman raised her price target by $200 to $3,300 per share, which now implies an upside of 18% over Tuesday's close. Silberman also reiterated her buy rating. In a note titled "Guac Costs Extra and So Does Growth," Silberman said she has high conviction in the near-term and long-term growth outlooks for the stock. The analyst said a premium multiple is deserved, given that there's few high-quality U.S. companies with clean balance sheets, strong fundamentals and the potential to see upside to performance metrics. "CMG has been among the best-performing restaurant stocks and we expect fundamental strength to continue to drive outperformance," she wrote to clients. Silberman also praised Chipotle for its visibility into the path to 30% on margins. Its "best-in-class" unit economics offer another quality to like, she said. On Tuesday, Chipotle said its board approved a 50-to-1 stock split . The change is expected to go into effect in June if approved by shareholders earlier that month. Shares of Chipotle rose more than 6% in Wednesday premarket trading. The stock has climbed more than 22% this year. CMG YTD mountain CMG year to date — Alex Harring 7:31 a.m.: Spotify shares could still gain nearly 25%, according to Bank of America Bank of America is increasingly confident in Spotify's long-term potential. The firm maintained its buy rating on the streaming company and also raised its price target by $50 to $315, which suggests shares could climb 24.6%. The stock has already jumped more than 35% this year. "The company is now at an inflection point which is driving share price performance over the last ~18 months and we are confident in the sustainability of this momentum driven by: 1) subscriber growth, 2) monetization opportunities (e.g. price increases), 3) scaling of advertising driven in large part by podcasting, 4) continued operating leverage," analyst Jessica Ehrlich wrote in a Wednesday note, adding that first-quarter earnings should come out at least in line with guidance. Spotify is on track to see positive gross margins, operating income and free cash flow, according to Ehrlich. The company's free cash flow trajectory and strong balance sheet pave the way for it to initiate a share repurchase program, which could boost shares higher in the second half of this year, the analyst added. — Pia Singh 6:48 a.m.: JPMorgan upgrades bitcoin mining firm Riot Platforms, forecasts more than 35% upside Investors should look to bitcoin mining company Riot Platforms after the recent increase in bitcoin prices, according to JPMorgan. Although shares on Tuesday declined to their lowest level, $11.09, since the Securities and Exchange Commission's bitcoin ETF approval, analyst Reginald Smith remains optimistic and upgraded the stock to overweight from neutral. His $15 price target assumes a $60,000 bitcoin price and suggests 35.2% potential upside for the stock. Smith cited the Riot's decline as a result of the stagnant hashrate growth, equity dilution and broader industry profit taking. "We like Riot's unique combination of industry-leading power contracts, scale and liquidity (Riot last reported ~$600M in cash and $470M worth of bitcoin), and think shares offer the best relative upside among the three largest and most liquid U.S.-listed mining stocks," Smith wrote in a Wednesday note. Riot shares are down more than 28% year to date. RIOT YTD mountain RIOT in 2024 — Pia Singh 6:23 a.m.: Citi downgrades Wells Fargo Citi downgraded Wells Fargo to neutral from buy, saying the bank's valuation has already priced in the potential for earnings per share revisions. Analyst Keith Horowitz raised his target price by $6 to $63, however, which implies the stock could gain 10.5% from Tuesday's close. Shares are up 15.8% year to date. "We continue to see tailwinds from fixed asset repricing, growth across fee categories and improved efficiency, but our estimates are not too far above the Street. With WFC trading at a premium relative to peers on our implied cost of equity metric, we believe the risk/reward is fairly balanced," analyst Horowitz wrote in a Tuesday note, saying Wells Fargo has been one of his top picks among the G-SIBs, or global systemically important banks. — Pia Singh 6:03 a.m.: Netflix shares should 'trade at a premium,' according to KeyBanc KeyBanc Capital Markets thinks Netflix can grow consistently going forward. Analyst Justin Patterson maintained his overweight rating and upped his price target by $125 to $705, suggesting shares of the streaming giant could gain 13.6% over the next year. He also increased his earnings per share estimates for this year and 2024. "We continue to see signs that: 1) Netflix's content quality is improving; and 2) in our view, this creates a clear catalyst path as engagement should drive a monetization ramp (both in price increases and ad revenue)," Patterson wrote in a Tuesday, anticipating Netflix to have a more balanced growth between subscribers and monetization over the medium term. "Given more recurring revenue, an emerging ad revenue stream, and consistent 20%+ EPS growth, we believe NFLX should trade at a premium to peers." Netflix shares are up 27.5% so far this year. — Pia Singh 5:55 a.m.: Analysts think Nvidia is still a buy after GTC conference Several analysts remain bullish on Nvidia after the darling chipmaker's artificial intelligence GTC conference this week, during which CEO Jensen Huang gave a two-hour keynote speech about Nvidia's growing lineup of software and hardware products. Here's what some of them had to say: Oppenheimer analyst Rick Schafer raised his price target on the stock to $1,100, implying upside of 23%. "Nvidia has transformed from a graphics company to a premier leading AI computing platform company. GPUs were initially used for graphics in video games and film. Given its parallel processing capabilities and thousands of computing cores, GPU are now optimized for deep learning AI algorithms in datacenters." Piper Sandler hiked its price target to $1,050 from $850, noting: "We view the new architecture as an expansion of the already dominant market positioning of NVDA's hardware offering. We maintain that NVDA is the leading company in offering the full hardware and software stack to address the decade long transition to accelerated computing and generative AI." The new price target implies upside of 17.5%. Bank of America reiterated its buy rating and $1,100 price target, naming Nvidia a "top compute pick" following the conference. Blackwell's pricing should allow Nvidia to sustain mid-70% gross margins, and adoption of the new chips could be among the fastest in company history given its affordability across various customer bases, analyst Vivek Arya said. Nvidia shares closed at $893.98 on Tuesday. The stock — which is up 80.5% for the year — traded 0.2% lower in premarket trading. — Pia Singh 5:55 a.m.: Broadcom a strong play for '2nd wave of AI', Barclays says Looking for another way to capitalize on the artificial intelligence craze? Barclays thinks investors should look no further than Broadcom . The bank reinstated coverage of the semiconductor stock at an overweight rating. Its price target of $1,405 implies upside of nearly 14%. "The company joins our preferred names this year as another way to play the 2nd Wave of AI via a best-in-class data center silicon portfolio," analyst Tom O'Malley wrote. "In the near term, AI is all that matters and the custom silicon/switching businesses are driving a significant portion of near-term growth (we forecast a mid/high-20% range next year and for it to accelerate longer term)." "Outside of AI, the company is seeing many of the same cyclical downturns as Semi peers but a growing software business helps boost profitability and [free cash flow] generation," he said. Broadcom shares are up 10% year to date, lagging Nvidia — which has soared 80%. That said, Broadcom is outperforming the S & P 500's 8.6% gain. AVGO YTD mountain AVGO year to date — Fred Imbert