Friday's analyst calls: Solar stock with big upside, top retail plays for 2024
(This is CNBC Pro's live coverage of Friday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Friday's analyst calls included a big solar call along with retail plays for the new year. Jefferies initiated First Solar with a buy rating and a price target that implies major upside going forward. Shares have have been on a tear this week, up more than 8%. KeyBanc, meanwhile, highlighted Walmart and Ollie's Bargain Outlet as its top retail plays for 2024. Check out the latest calls and chatter below. 9:47 a.m. ET: Stay away from Tractor Supply amid post-pandemic reversion, Bank of America warns Tractor Supply is finally seeing its post-pandemic correction, with demand and pricing challenges that can weigh on earnings and investor sentiment, according to Bank of America. Analyst Jason Haas downgraded the farm and outdoor-focused retailer to underperform from neutral. He also slashed the price target by $36 to $171, which now implies a 23.7% downside from Thursday's close. "During the pandemic, TSCO gained new customers and wallet share with existing customers as people pursued more rural activities," he told clients. "Although it took longer than other categories, we believe the farm and ranch industry is now seeing a post-pandemic reversion given sales declines are spreading across discretionary, seasonal, and C.U.E (consumable, usable, edible) products." Haas said Tractor Supply, along with the broader industry, appears to be leaning on promotions as pandemic-induced interest wanes. The company is also looking to carry more staples like cleaning supplies, which he said can help traffic but are worse for margins. In 2024, he said deflation in feed prices should hurt earnings and make it difficult to meet comparable sales figures. Accounting policy changes can also "muddy" the company's earnings quality, the analyst added. The stock is about 0.4% below its flatline for 2023, meaning it has underperformed the broader market. — Alex Harring 9 a.m. ET: JPMorgan downgrades BlackRock, sees pressure in equity ETF business Asset management giant BlackRock's grip on the ETF business is not tight enough for the stock to keep climbing, according to JPMorgan. Analyst Kenneth Worthington downgraded BlackRock to neutral from overweight, saying that competition in the equity ETF industry has made the growth trajectory for BlackRock less clear. "We see a more challenged iShares US Equity ETF outlook with iShares losing market share to passive and active ETF managers. In addition, we see Equity iShares sales increasingly influenced by more cyclical trends as seen in the rising correlations between iShares equity net sales and market returns," the note said. The fixed income ETF universe has been growing, but expecting a big acceleration in that space is going to far, according to Worthington. "We acknowledge that extending (and locking in) duration makes sense and we expect an easier environment for fixed income sales growth in 2024. However, we do not believe in a pending surge in net fixed income flows," the note said. — Jesse Pound 8:44 a.m. ET: Colgate-Palmolive upgraded by Bank of America Bank of America upgraded Colgate-Palmolive to buy from neutral Friday and hiked its price target on the stock to$90 from $75, suggesting 18% upside from Thursday's close. The bank sees a number of key drivers to push sales and earnings per share higher next year, including U.S. volume and market share turning positive. "At just over 20% of CL sales and EBIT, the North America segment's performance, and by extension the semi-weekly US Nielsen data releases, have had an outsized influence on investor sentiment," Bryan Spillane wrote in a note to clients. He also expects above-average emerging markets growth, as well as margin expansion as price continues to keep up with costs. Shares are down about 3% year to date. CL YTD mountain CL in 2023 — Michelle Fox 8:14 a.m. ET: Deutsche steps to the sidelines on Northrop Grumman Deutsche is finding it difficult to come to the defense of Northrop Grumman as the company's intercontinental ballistic missile program, Sentinel, faces incremental cost challenges. Analyst Scott Deuschle downgraded shares to hold from buy. He also lowered his price target to $473 from $571, implying shares can gain just 2% from Thursday's close. The Sentinel program is risking a cost breach above a legal threshold. A cost breach would trigger evaluation by Congress, resulting in increased scrutiny and, worst case, a potential cancellation of the program. "The challenges on both of NOC's principal growth pillars—Sentinel and B-21—are making it increasingly clear that the industry-leading sales growth that our investment thesis was predicated on may be substantially driven by profitless growth," Deuschle said. "This calls into question not only the opportunity for margin expansion and positive revisions, but also the opportunity for multiple expansion." While Deuschle doesn't believe an outright cancellation is likely, the cost growth from the danger of the breach indicates the margin pressure of the program, he said. "If we can't convincingly articulate a thesis for positive revisions or multiple expansion, then the intellectually honest result is that we can't argue for outperformance, driving our downgrade," Deuschle added. — Hakyung Kim 8 a.m. ET: Bank of America downgrades Hershey There's at least one area where inflation is still a major problem, and it will keep Hershey from rebounding in 2024, according to Bank of America. Analyst Bryan Spillane downgraded shares of the chocolate and snack food company to neutral from buy, saying in a note to clients that high commodity prices would eat into Hershey's margins. "Cocoa and Sugar prices remain stubbornly high causing HSY (and its competitors) to be caught between hedges and thus exposed to inflation in '24 (we estimate high single digit for HSY in aggregate). The confection category historically can 'margin up' during inflation episodes. Several years of price increases could cause this time to be different," the note said. Hershey's was a stalwart stock in 2022, appearing to shake off the rising interest rates that hurt the rest of the market. However, the candy stock has dropped more than 19% in 2023. Bank of America cut its price target on the stock to $200 per share, down from $250. The new target is about 7% above where shares of Hershey closed on Thursday. — Jesse Pound 7:43 a.m. ET: Boeing could still rally 30% after rising 23% in the past month, UBS says UBS still sees further upside potential ahead for Boeing , despite the stock rallying more than 23% in the past month. The bank stood by its buy rating for the aerospace and defense stock. Analyst Gavin Parsons lifted his 12-month price target to $315 from $275, indicating that the stock could rally another 30% from here. "We are raising our price target to reflect an improving supply chain as evidenced by strong November deliveries, and the record new aircraft demand environment," the analyst wrote. Additionally, Parsons sees upside to Boeing's $10 billion free cash flow guidance "with multiple years of growth beyond." As supply chain bottlenecks ease up, he believes that the stock will increasingly trade on these normalized free cash flow numbers. — Lisa Kailai Han 7:41 a.m. ET: Bank of America is overweight on Elanco Veterinary products company Elanco could benefit in 2024 as trends across the animal health sector continue to normalize, according to Bank of America. The firm thinks Elanco has a promising pipeline visibility for next year with various pending product approvals. Elanco's three over-the-counter products launched in 2023 still remain strong, Morgan Stanley said. "All in [all], we view its pipeline progress is enough to continue to lift sentiment for the stock. We estimate +2.4% organic growth in 2024," analyst Erin Wright wrote in a Friday note. She upgraded Elanco shares to overweight from equal weight. Wright also named UnitedHealthcare as its top pick in the managed care sector. She also raised her price target on the stock to $618 from $579, implying nearly 16% upside potential. Heading into 2024, the analyst expects elevated utilization levels and noted that the healthcare company is expected its medical loss ratio to increase as it expands in government programs. — Hakyung Kim 7:20 a.m. ET: Bank of America upgrades Clorox to neutral Bank of America says its conviction in Clorox's recovery is building, as the company seeks to turn around the corner from its cybersecurity attack in August. The company previously reported that the cyberattack weighed upon its sales and profits, and struggled with production fallout into the fall. "​​We see a recovery in volume and shelf space taking shape following impacts from the cyberattack, which we expect will allow Clorox to return to its annual growth rate of +3-5% from its Ignite strategy in F25/F26," said analyst Anna Lizzul in a Friday note. Lizzul upgraded shares to neutral from underperform. She also raised her price target by $30 to $150, which suggests just 5.5% upside potential from Thursday's close. Although the analyst is more confident on Clorox's ability to recover, a difficult consumer environment in 2024 will potentially inhibit further growth, she said. "We believe initial signs are encouraging and see a balanced risk/reward ahead as Clorox continues to expect a mild recession in F2H24, or early calendar 2024, which may put pressure on consumers," Lizzul added. Shares gained more than 1% Friday before the bell. The stock is up just 1.3% in 2023. — Hakyung Kim 6:56 a.m. ET: Bank of America names Nvidia as one of its top chip picks for 2024 Bank of America says that it expects some rotation within the semiconductor sector in 2024, but continues to like Nvidia as its top AI compute pick. Even with Nvidia's 231% rally year to date, analyst Vivek Arya said shares are trading at a "depressed" price to earnings ratio, which suggests investors' skepticism in the sustainability of generative AI investments. "We believe it's early to predict a peak, as these trends take decades to play out. NVDA remains our top pick with a $700 [price target]," Arya wrote in a Friday note. His price target suggests 45% upside potential from the prior close. Arya has a buy rating on Nvidia shares. The analyst also upgraded shares of Advanced Micro Devices and Micron Technology, both to buy from neutral. "We believe the latest memory down cycle is now generally behind us, and MU should benefit from rising spot/contract prices of DRAM/NAND into CY24/25E," Arya said. He increased his price target on shares to $95 from $77, suggesting 16% upside potential for the stock. Arya also raised his price target on Advanced Micro Devices to $165 from $135, which implies shares could gain 20% from Thursday's close. Prior concerns surrounding the company's embedded systems and gaming corrections have now mostly materialized, he said. Opportunities in data center GPUs show growth potential in AMD's medium-term sales outlook, he added. "We view AMD as well-positioned to gain incremental share of the hugely profitable $100bn+ accelerator market while continuing to make progress in server CPUs against incumbent INTC," Arya said. Shares of Micron and AMD were up 1.8% and 0.9%, respectively, on Friday during premarket trading. — Hakyung Kim 6:38 a.m. ET: Bernstein stays bullish on Nvidia Bernstein continues to believe in Nvidia even with the stock's rapid climb in 2023. "We cannot say for sure that NVIDIA will never encounter some sort of air pocket. But we remain very bullish on the long term opportunity in front of them, and continue to believe that in 5 years or 10 years we will all be talking about an industry that is far larger than the numbers being bandied about today," analyst Stacy Rasgon wrote. Nvidia has been the stalwart of artificial intelligence in the U.S. public market this year, with shares up 231%. "That being said, there is plenty of reason to believe in the story here," Rasgon wrote. Nvidia is quickly updating its portfolio, according to the analyst. She cited the recent launch of its superchip Grace Hopper, and more GPU launches to come in 2024. — Hakyung Kim 6:30 a.m. ET: Mondelez, Kraft Heinz among Bernstein's top U.S. Food picks for 2024 After a difficult year for the U.S. food sector, Bernstein thinks 2024 could be a good time to buy into the space. Mondelez and Kraft Heinz are some of Bernstein's "favorite names on the long side" in the U.S. food company sphere. The firm has an outperform rating and $89 target price on Mondelez shares, which implies they could rally nearly 26% from Thursday's close. Analyst Alexia Howard said the company has "meaningful new distribution opportunities" in emerging markets, particularly China, India and Mexico. Howard also has an outperform rating and $40 price target on Kraft Heinz shares. She thinks the company's fundamentals have started to improve and is increasing its market share gains in the cold cuts category. Kraft Heinz could experience inflation in tomatoes and sugar next year — prompting price hikes for ketchup, Howard added. "Management has commented that the company's investment in data scientists in their revenue management group over the past couple of years is now starting to bear fruit, which should help top line performance next year, particularly with respect to the effectiveness of promotional spending," said Howard. Mondelez shares are up just 6%, lagging the S & P 500. Kraft Heinz, meanwhile, has dropped 9%. — Hakyung Kim 5:58 a.m. ET: Morgan Stanley remains overweight on Tesla Despite Tesla's Autopilot software issues that prompted a recall of over 2 million vehicles, Morgan Stanley analyst Adam Jonas is staying overweight on the stock. "Tesla is still leading on edge AI that 'moves,'" Jonas wrote in a Friday note. "In our opinion, Tesla is far more than an auto company," he added. In addition to his overweight rating, Jonas has a $380 price target and 'top pick' designation on shares. His price target suggests shares could rally by more than 51% from Thursday's close. "Our OW thesis is highly dependent upon these business lines becoming far greater drivers of earnings with clear milestones/proof-points backed by accompanying financial disclosure," Jonas said. Her also underscored the company's strong balance sheet and "self-funded business model." The company will likely gain more market share as other electric vehicle competitors reduce their investments, he added. Tesla shares have more than doubled in 2023. TSLA YTD mountain TSLA in 2023 — Hakyung Kim 5:48 a.m. ET: Wall Street remains constructive on Costco Costco's better-than-expected fiscal first-quarter results has analysts thinking it's still a good time to own the wholesale retailer. The company posted a beat on both top and bottom lines in the prior quarter. Costco reported first quarter earnings of $3.58 per share on revenue of $57.80 billion. Analysts had expected earnings of $3.42 on revenue of $57.72 billion, according to LSEG. The company also announced it would pay shareholders a dividend payment of $15 per share. The stock is up more than 38% year to date. COST YTD mountain COST in 2023 Costco is "the gift that keeps on giving," JPMorgan Christopher Horvers wrote in a Friday note. "We believe COST remains the most balanced way to play both offense and defense as its model particularly resonates as consumers seek value." Horvers has an overweight rating on the stock. He notched up his price target by $8 to $660, which represents just 4.6% upside from Thursday's close. "Santa brought a special Christmas gift," Deutsche analyst Krisztina Katai said of Costco's quarterly results — which she believes justifies its premium valuation. Katai has a buy rating and $695 price target on shares. UBS raised its price target to $725 from $640, representing nearly 15% upside potential. The firm also has a buy rating on shares. "At a high level, we believe COST's 1Q provided further evidence that the stock fits well with what the market is looking for right now, a high-quality business that will be more insulated from ongoing macro pressures than the rest of the pack, by and large," analyst Michael Lasser wrote in a Friday note. Shares were up 1.6% Friday during premarket trading. — Hakyung Kim 5:37 a.m. ET: KeyBanc names Walmart and Ollie's Bargain Outlet its top retail picks for 2024 KeyBanc analyst Bradley Thomas thinks Walmart and Ollie's could be big winners in the new year as the backdrop for consumers remains challenged. He named both stocks the firm's top retail picks. "The near-term outlook for consumer spending remains at risk, with elevated interest rates, a weaker labor market, and higher living expenses (including student loan repayments) remaining overhangs on ability and intent to spend," Thomas wrote. "We continue to watch consumer credit conditions closely, and softer housing activity will be a headwind for home-related spending in 1H. This backdrop favors WMT and OLLI." Walmart shares are up more than 7% in 2023, lagging the S & P 500's 22.9% gain. Ollie's, however, has surged more than 52% this year. OLLI YTD mountain OLLI in 2023 — Fred Imbert 5:37 a.m. ET: Jefferies is bullish on First Solar "All aboard the solar coaster," says Jefferies. The firm initiated a buy rating on First Solar , as well as a price target of $211. The price target suggests shares could jump by a third from Thursday's close. "Solar is here to stay," analyst Dushyant Ailani wrote in a Thursday note. "Within our coverage, our top pick is FSLR ($211 PT) as it meets our key criteria including strong backlog (sold out through '26), supportive pricing in a declining pricing environment, strong balance sheet, gross margins (ex-45X) ramping from 18% in '23 to 25% in '25." Shares jumped 2.3% Friday in the premarket after jumping nearly 8% during Thursday's session. The stock is now up 5.6% year to date. First Solar has struggled in what has been a difficult year for renewable energy companies due to high interest rates. However, the the stock has rallied after the Federal Reserve indicated that it would cut rates in 2024 during its latest policy meeting. — Hakyung Kim