Thursday’s analyst calls: Bold airline stock upgrade, pet play with 50% upside
(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.) Tech and e-commerce were in focus Thursday with upgrades to Salesforce and Chewy. Baird raised its rating on Salesforce, citing the company's strong margins. Barclays, meanwhile, moved to an overweight rating on Chewy, noting the stock is primed for a recovery. Elsewhere, Jefferies upgraded American Airlines to buy, calling for major gains ahead for the stock. Check out the latest calls and chatter below. All times ET. 8:55 a.m.: Wells Fargo sees trouble at the grocery store "Don't Be Fooled by ACI's Beat," Wells Fargo analyst Edward Kelly said, in a research note. Albertson's fiscal third-quarter results on Tuesday topped analysts views, helped by disinflation, but Kelly sees signs in the print that grocery trends are deteriorating. He said that makes for an "increasingly uncertain 2024." With the caution signs flashing, Kelly favors overweight-rated Walmart, which he said is "Set-up for a Solid Q4." "We believe share gains in grocery, health & wellness strength, and a reasonable holiday could drive a 3-4% comp in WMT U.S. in Q4 (vs. consensus of 2%), despite deteriorating grocery industry momentum," he said. Kelly also expects some upside to consensus EPS estimates, but warns that the discount retailer could provide a "below consensus" 2024 forecast given the headwinds in the industry. — Christina Cheddar Berk 8:44 a.m. ET: DoubleVerify advertising technology provider rated new buy at BofA with 32% upside DoubleVerify was initiated as a buy with $47 price target at Bank of America, implying 32% upside. DV is 2.1% higher premarket Thursday. "Think of DoubleVerify (DV) as the Moody's of digital advertising," wrote analyst Omar Dessouky. "In the same way ratings agencies grade corporate debt, DV analyzes the quality of online media -- measuring the rate of unviewable, fraudulent, and brand-objectionable content bought during a digital campaign, thereby helping brands understand the true effectiveness of their ad budgets, and by extension, the reliability of their numerous intermediaries." DV went public at $27 a share in April 2021 in an IPO led by Goldman Sachs and JPMorgan. — Scott Schnipper 8:42 a.m.: Wedbush sees stronger demand head for Williams-Sonoma, upgrades to outperform Wedbush upgraded Williams-Sonoma to outperform from neutral on Thursday, saying it expects the home furnishing retailer to benefit from improving demand. Last year, demand was worse than expected thanks in part to plummeting existing home sales and the shift of consumer spending to services, but the key drivers that weighed on the sector are bottoming or reversing, analyst Seth Bashman wrote in a note to clients. He expects Williams-Sonoma's margins to continue to march higher. "WSM is our top pick in the space as we see the company poised to benefit from modest top-line growth and several margin tailwinds that should drive y/y $1.00+ in EPS improvement," he said. Wedbush also upped its price target to $230 from $175, suggesting 16% upside from Wednesday's close. — Michelle Fox 8:05 a.m. ET: Morgan Stanley lifts Eli Lilly price target, says shares can rally more than 21% Morgan Stanley sees more upside in store for shares of Eli Lilly . The Wall Street firm adjusted its price target to $763 from $727 a share, citing the drugmaker's growth profile and "pipeline optionality." The new price target implies 21% upside from Wednesday's close. "We reiterate our OW rating on LLY as we expect Mounjaro/Zepbound launch to drive upward revisions to revenue estimates and drive margin expansion, albeit at a more measured pace in 2024, and the company has the strongest growth profile within our coverage universe," wrote analyst Terence Flynn. When it offers 2024 guidance next month, Morgan Stanley anticipates 6% upside to consensus estimates for Eli Lilly. That said, the firm's earnings per share estimates remain 3% below consensus in anticipation of greater operating expenditures. "We see the set up for the stock similar to the company's 2023 guidance outlook - where revenue was slightly ahead of consensus and EPS was below … but investors generally focused on the top-line growth outlook nearer-term," Flynn wrote. Eli Lilly's stock is up more than 8% in 2024. The stock surged more than 59% last year as investors boosted their bets on the company's weight loss drugs. — Samantha Subin 7:40 a.m.: Jefferies upgrades American Airlines to buy Investors looking to navigate a macroeconomic downturn may want to consider placing their bets on American Airlines , according to Jefferies. Shares rose 1% in the premarket after analyst Sheila Kahyaoglu upgraded the airline to buy from hold, with the firm's $20 price target implying nearly 40% upside from Wednesday's close. "AAL owns the biggest lever in the group in 2024 to offset cost growth: utilization," she wrote. "Mgmt said as of May there was 2-5pts of mainline oppty in 2024, with the pull-through of efficiencies from pre-2019 investments in its fleet/systems … as AAL finally fully restores 2019 capacity in Q1:24." Kahyaoglu also views the company's history of cost management as a reason for heightened confidence in its ability to weather a macroeconomic downturn. Over the long run, the firm also views American Airlines as one of the best-situated network carriers given its newer fleet and strong competitive positioning. "These benefits materialize as the network fully restores in 2024, with utilization of its fleets and pilots helping to offset cost pressures including impending FA and agents labor deals," Kahyaoglu wrote. "With AAL more than 70% complete its $15BB deleveraging goal by 2025, there will be incremental opportunity to deploy cash given minimal capex needs." American Airlines shares have risen more than 4% this year following an 8% gain in 2023. – Samantha Subin 7:25 a.m. ET: JPMorgan upgrades L3Harris Technologies to overweight Shares of L3Harris Technologies rose more than 1% before the bell after JPMorgan upgraded the aerospace and defense company to overweight. "We see a relatively attractive valuation, cash flow that should be inflecting higher, and an increased focus on shareholder value," wrote analyst Seth Seifman. L3Harris shares offer the best upside within the defense space, according to Seifman, with the firm's $240 price target implying 18% upside from Wednesday's close. Despite past execution issues, L3Harris looks better positioned in 2024 and situated to stabilize margins, he added. "Valuation is a key part of the investment case for LHX and while this argument has not panned out in the past,we think progress on margin and especially cash flow can help," Seifman said. The stock has slipped a little over 3% since the start of the year after lagging the broader market with a 1.2% gain in 2023. — Samantha Subin 6:59 a.m. ET: Wells Fargo downgrades Yum Brands as catalysts slow in 2024 Wells Fargo is taking a breather on shares of Yum Brands , downgrading the Pizza Hunt and Taco Bell parent to equal weight as it faces slowing comps. "Despite YUM's impressive arsenal of LT growth drivers, '24 likely features slowing traffic, moderating price gains & less like upside to YUM 8% profit algo," wrote analyst Zachary Fadem. "We model '24E EPS as slightly sub-Street, owing in part toY UM's decision to pause buybacks (for debt paydown)." While Fadem views Yum as a solid business with high free cash flows, strong brands and a global footprint, he noted that the company's largely accomplished the firm's bullish 2023 thesis bracing for unit growth and accelerating operating margins. "As we look to '24, we see a year where investors will look to play a little more offense, and considering YUM's decelerating comp profile yet premium valuation, we simply see better places to deploy incremental capital today," he wrote. Fadem also trimmed the firm's price target to $135 from $150 a share, implying 4% upside from Wednesday's close. Yum shares rose just 2% in 2023, lagging the broader market. — Samantha Subin 6:36 a.m.: Bank of America hikes Amazon price target, says shares could rally another 20% Upside to retail margins, logistics efficiencies, and a ramp in Prime video should continue boosting Amazon's share price in 2024, according to Bank of America. Given this outlook and higher 2025 estimates, analyst Justin Post hiked his price target on the e-commerce giant to $185 from $168 a share, reflecting 20% upside from Wednesday's close. "With retail margins still having room for upside and AWS poised to accelerate, we think the stock is attractively positioned into 2024 and, given higher expected exposure to interest rates moves (higher P/E stock with consumer spending exposure), potentially more of a 'risk on' stock than large cap peers Alphabet and Meta," he wrote. Along with retail margin upside and a reacceleration in AWS growth as workloads grow and prices normalize, Post expects Amazon to benefit from its artificial intelligence initiatives, including its Trainium chip technology and large language model reportedly under wraps. "A.I. driven demand should be an increasing tailwind as 2024 progresses, with potential for "tens of billions of revenues" longer term," he said. Shares have added about 1% this year jumping nearly 81% in 2023. – Samantha Subin 6:09 a.m.: Deutsche Bank downgrades Albemarle, cites pricing uncertainty Deutsche Bank downgraded shares of Albemarle to a hold rating as the firm takes a neutral approach toward the lithium industry. "We believe a more cautious view over the near-to-medium term is prudent given the uncertainty and volatility in lithium prices," wrote analyst Corinne Blanchard. "While most lithium producers are expecting a rebound in Q2 (post Chinese Lunar New Year), further details into the magnitude of the rebound remain meager, at best." Given this outlook, Blanchard trimmed the firm's price target by $20 to $135 a share. The new object implies less than 2% upside from Wednesday's close. At the same time, she views the lithium market for Albemarle as adequately supplied through 2026, with uncertainties lingering over the normalization in mid-cycle pricing. "Over the coming 3-4 years, we now forecast a structural surplus market, reversing the deficit trend we have observed the last couple of years," the analyst wrote. Albemarle shares are down nearly 8% in early 2024 after dropping 33.4% last year. — Samantha Subin 5:46 a.m.: Goldman Sachs downgrades Lyft, cites balanced risk-reward Goldman Sachs is moving to the sidelines on Lyft , with the stock up nearly 35% since its last quarterly earnings report in November. Analyst Eric Sheridan downgraded the ridesharing stock to neutral from a buy rating, citing a more balanced risk-reward. To be sure, the firm remains constructive on the company's operating trajectory, anticipating a reacceleration in revenue growth and ride-volume growth in the double digits. "That said, we see this inflection as already well reflected in Street estimates in 2024 and continue to see execution risks around this trajectory, namely via the potential for contribution margins to see further headwinds in Q4'24 from an increase in insurance costs (reflected at the time of LYFT's annual renewal cycle)," he wrote. Sheridan also sees threats from a slew of "topline outcomes" ahead as Lyft executes against a handful of "product initiatives aimed at broadening its portfolio and further repositioning its brand." He also lifted the firm's price target to $15 from $12 a share due to higher long-term profitability expectations, with the adjustment reflecting about 12% upside from Wednesday's close. – Samantha Subin 5:39 a.m.: Barclays upgrades Chewy, says 'dog days are over' The "dog days are over" for Chewy following a rough patch in 2023, according to Barclays. Analyst Trevor Young upgraded the e-commerce pet products company to overweight from equal weight, citing expectations for resilient demand and a growth trough in 2024. "We think growth inflects in F2H24, and we see upside to consensus in FY25, with incremental upside optionality from vet clinics, int'l and ads," he wrote in a Thursday note. Shares gained about 4% before the bell. The stock's already lost more than 15% in 2024 and dropped 36.3% in 2023. The bank's fresh price target — adjusted to $30 from $19 — implying more than 50% upside from Wednesday's close. The stock valuation also looks attractive at 15 times 2025 EBITDA, with Young projecting Chewy could post 30% EBITDA growth and upside to consensus over the next few years due to high-margin advertising and the scaling of its vet clinic and insurance segments. While Amazon does pose threats to Chewy as it gains shares in pet categories, Young views the company as relatively insulated from China-based Temu. "We see categories such as branded consumables, pharmacy, and specialty pet categories as being at low risk from Temu or other foreign e-commerce competitors, as brand loyalty, quality/distribution control requirements, or the niche nature of products make it unlikely for Temu or its merchants to be able to compete in a meaningful way," he said. — Samantha Subin 5:39 a.m.: Baird upgrades Salesforce Shares of Salesforce were upgraded to outperform from neutral by Baird, which also raised its price target on the cloud computing giant to $300 from $240. The new forecast implies upside of 13%. "We underestimated the company's willingness to deliver margins, which drove strong performance last year," analyst Rob Oliver wrote. Salesforce shares nearly doubled in 2023 after losing 47.8% in 2022. They were also the best performer in the Dow Jones Industrial Average. CRM 1Y mountain CRM in past year "With current valuation ... near historical lows, top-line growth and expectations muted ... we see upside from current levels," Oliver said. "Price increases, the potential return of front office spend, and crisper sales execution should drive upside." Salesforce were up 1% in the premarket Thursday. — Fred Imbert