Monday's analyst calls: Salesforce upgrade, Morgan Stanley sees more gains ahead for streaming giant
(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.) Tech stocks were in focus Monday, as analysts rolled out their first calls of the week. Morgan Stanley raised its price target on Netflix , calling for more than 16% upside for the stock. Meanwhile, Seaport Research downgraded Roku shares, citing advertising growth headwinds for the company. Elsewhere, Wolfe Research upgraded shares of Salesforce to outperform. Check out the latest calls and chatter below. 8:30 a.m. ET: Morgan Stanley downgrades Affirm after stock's monster run higher Morgan Stanley downgraded Affirm to underweight from equal weight Monday, saying the buy-now-pay-later stock's valuation is difficult to justify at these levels. Shares have rallied nearly 80% over the last month and a whopping 355% year to date. "Risk-reward appears skewed to the downside at current levels even with pending strength through a seasonally strong holiday period," analyst James Faucette wrote in a note Monday. He is also wary of potential customer quality deterioration due to declining levels of 0% promotions and declining credit scores on asset-backed securities deals. Faucette upped his price target to $20 from $15, suggesting 55% downside from Friday's close. — Michelle Fox 8:28 a.m. ET: M & T Bank's relative outperformance may be nearing its end, Deutsche Bank says Deutsche Bank thinks shares of M & T Bank may be due for disappointment ahead. Analyst Matt O-Connor downgraded the regional bank stock to hold from buy, citing strong relative stock performance. While shares of M & T Bank are down 1.6% this year, the analyst clarified that the stock has outperformed relative to its peers. O-Connor also said further meaningful outperformance appears unlikely, at least in the near- to medium-term. "We expect weakening earnings trends driven by lower revenue, modestly higher costs, higher credit costs and fewer (if any) buybacks," he wrote. Specifically, the regional bank could face weaker revenue trends, as it remains asset sensitive and has fewer fee revenue categories that could recover in 2024 such as capital markets. O-Connor's price target of $145, down from $160, means that he sees the stock adding just 1.6% from here. — Lisa Kailai Han 8:26 a.m. ET: Goldman upgrades Sunnova on residential solar recovery Goldman Sachs sees the case growing for a potential residential solar recovery in 2024 after a brutal year in which high interest rates thrashed stocks. Analyst Brian Lee has upgraded Sunnova to buy from neutral with a price target of $17, implying about 23% upside from the last closing price of $13.84. Lee sees Sunnova growing the fastest of the residential solar stocks. The company is in a unique competitive position to gain market share as its smaller peers face challenges, Lee wrote. Lee has downgraded SunPower to sell with a price target of $4, implying 34% downside from its last close of $6.14, as the company faces supply chain uncertain and operational challenges. And SolarEdge is also now a sell with a price target of $77, suggesting 21% downside from its last close of $97.12, as the company faces challenges in the European market. — Spencer Kimball 8:19 a.m. ET: Deutsche Bank hikes Boeing price target, sees path to $400 Boeing's stock has rallied more than 50% since late October, but an improving cash flow outlook could justify even more upside, according to Deutsche Bank Analyst Scott Deuschle raised his price target on the aerospace stock to $320 per share from $270, saying in a note to clients that the recent rally for Boeing appears to have staying power. "While its possible that BA could take a breather in the near-term given the overbought RSI levels, we think its equally possible that it continues to grind higher as industrial investors position for good 2024 stories, and also chase the largest constituent of their benchmark into year-end," the note said. While Boeing has been hit with repeated setbacks over the last few years, the company is on track to dramatically expand its free cash flow over the next few years, possibly surpassing $10 billion in 2026, according to Deutsche Bank. "The last time BA was anchoring on these types of FCF/sh numbers, BA was a $350 stock and on the way to $400," the note said. Shares of Boeing closed at about $264 per share on Friday. — Jesse Pound 8:18 a.m. ET: Wells Fargo upgrades Progressive to overweight Wells Fargo upgraded Progressive to overweight from equal weight, saying the insurer should return to growth in policies next year. "PGR saw PIF (Policies-in-Force) continue to decline sequentially in November as PGR is set on meeting its 96% combined ratio target for the year," Wells said in a note. "The clock resets in January, and they typically bring on a fair amount of their policies to start the year." Shares of Progressive rose 1% in premarket trading Monday. The stock has gained more than 18% this year. Wells Fargo raised its 12-month price target to $176 from $144 previously. The new forecast represents a 13.5% upside from Friday's close of $155. "With severity trends for the industry getting better, we believe PGR will pivot to policy growth at the start of next year. Additionally, they are positioned to take share as some competitors deal with capital shortfalls," the bank said. — Yun Li 8:17 a.m. ET: Goldman Sachs downgrades Nokia to neutral The near-term future might be grim for Nokia , according to Goldman Sachs. The bank downgraded shares of Nokia to neutral from buy on Monday. The telecommunications stock has plunged 30% this year, but analyst Alexander Duval's $3.40 12-month price target suggests there could be 4% upside ahead. As a reason for the downgrade, Duval specifically pointed to AT & T's multi-year deal with Ericsson and its plans to transition its wireless network traffic to the new Open RAN technology. "We are now less confident on their ability to win back as much share based on product improvement given the AT & T loss," Duval wrote. The analyst also underscored signs of continued weakness in fixed line demand, as customers still continue to use up their existing inventories. "Given low levels of penetration today, we are less confident on the revenue opportunities in the near term on the back of an extended inventory digestion cycle and lower visibility on a rebound," he said. — Lisa Kailai Han 8:15 a.m. ET: Deutsche Bank downgrades Arm Holdings, says current share price reflects fair value After a strong 2023, Arm isn't likely to find more meaningful growth in the short term, according to Deutsche Bank. The firm downgraded shares of the semiconductor stock to hold from buy in a Monday note, albeit with a higher target price of $70 per share from $60. Deutsche's forecast implies about 1.5% downside from Friday's close. "While we acknowledge the favorable interest rate environment makes ARM look attractive on a DCF [discounted cash flow] basis (a valuation framework many investors apply to ARM), we believe this is fully appreciated at current valuation levels," analyst Ross Seymore said. "Therefore, while our outlook for ARM to deliver solid growth remains unchanged, after the recent rally we now view the shares as fully valued." Arm stock has ticked up about 22% in 2023. — Brian Evans 7:45 a.m. ET: Guggenheim upgrades Snap, sees rebound in digital advertising The recent rebound for Snap's stock will be backed up by fundamental improvement in 2024, according to Guggenheim. Analyst Michael Morris upgraded the social media stock to buy from neutral, saying in a note to clients that the company's business should be a big beneficiary from a rebound in the advertising market. "We expect overall digital advertising demand will accelerate in 2024, with this incremental strength supporting above consensus revenue growth for the industry. We forecast SNAP revenue growth to outperform, as this demand drives industry-wide ad price increases and improved relative return for SNAP ad units," the note said. The note also referenced a report from The Information about a new ad deal between Amazon and Snap, which could lead to "above market average growth" for Snap, according to Guggenheim. Shares of Snap have been hot recently, gaining 90% over the past three months and closing just below $17 per share on Friday. Morris hiked the price target on Snap to $23 per share from $9 previously. — Jesse Pound 7:40 a.m. ET: Equifax gets upgraded by Jefferies Jefferies upgraded shares of Equifax to buy from hold, citing "underappreciated long-term dynamics." Analyst Surinder Thind believes that "sustainable double-digit growth" could lie ahead as the credit reporting agency's headwinds dissipate. For instance, while mortgage volumes are still currently more than 50% below the average levels in 2015-2019, the analyst sees little risk of volumes declining more from their current levels. In fact, if volumes were to normalize even halfway back to their prior averages, Thind believes that Equifax's mortgage-related revenues could increase by $625 million on the conservative side. Meanwhile, the company's talent also stands to benefit from an improvement in white-collar job hiring, the analyst added. Thind sees an additional tailwind as the company prepares to transition its business to the cloud. "In addition to helping lower costs, this should free up resources to focus on product innovation, which has recently been less of a priority. Ultimately, this should lead to organic growth in the segment accelerating to above mid single digits," he wrote. Shares of Equifax have rallied nearly 26% so far this year. Thind's price target of $315, up from $200, suggests that the stock could jump an additional 29% from here. — Lisa Kailai Han 7:25 a.m. ET: Morgan Stanley downgrades Exelon to equal weight Morgan Stanley downgraded shares of utility company Exelon to equal weight from overweight, citing a "surprisingly negative" outcome to the company's rate case in Illinois. At 8.91%, Illinois's return on equity for the company is among the lowest in the industry, wrote analyst David Arcaro. This could "result in lower EPS, slower rate base growth, further regulatory overhang in 2024, and a lower multiple on IL earnings due to challenging regulatory treatment," he said. Shares of Exelon are down near 18% this year. Arcaro's price target of $38, down from $45, implies that the stock could still rise 7%. EXC YTD mountain EXC year to date Arcaro added the caveat that the company's remaining business has favorable characteristics, such as low earnings risk and attractive growth opportunities. However, "elevated concern around its largest utility will be an overhang on the stock well into 2024," he wrote. — Lisa Kailai Han 7:12 a.m. ET: Solaredge stock may have finally bottomed out, Morgan Stanley says Morgan Stanley is more confident on shares of Solaredge Technologies following a series of successful investor meetings with the company. The bank remains equal-weight but lifted its price target for the solar product manufacturer to $97 from $89 on Monday. Shares of Solaredge closed at $97.12 on Friday afternoon. Solaredge stock has fallen nearly 66% this year, plagued by high interest rates and waning demand in Europe . But analyst Andrew Percoco thinks things should improve from here. "We came away from our meetings with increased confidence that the company is taking action to increase visibility into its sales channels in Europe, which should help reduce the volatility in guidance seen throughout 2023," he wrote. "We also came away with more clarity (and confidence) around the company's ability to drive improved margins and FCF generation in 2024." Looking ahead to 2024, Solaredge expects overall growth in Europe on the back of a strong German market. While the firm views the U.S. as a "strong long-term market," the company is likely to face headwinds in 2024 and 2025 due to looming macro uncertainties and higher for longer interest rates. — Lisa Kailai Han 6:53 a.m. ET: Raymond James upgrades Check Point Software Technologies to outperform Raymond James sees shares of Check Point Software Technologies rising 20% from here. The firm upgraded the cybersecurity stock to outperform from market perform. Its price target of $175 implies 20% upside. The stock has risen more than 15% this year. Analyst Adam Tindle thinks Check Point's product cycle could refresh in 2024, driving acceleration back to revenue growth. In a previous cycle, a similar dynamic of negative growth in one year led to a "two-year period of acceleration ending in double-digit Billings growth during 2022," he wrote. "While no two product cycles are necessarily alike, this potential acceleration should occur as key competitors are decelerating, making the notion of Check Point as a 'share donor' more difficult to defend and should ultimately aid the valuation multiple," the analyst added. While Check Point's subscription revenue has consistently maintained double-digit growth, Tindle believes that 2023 will mark the first year where subscription revenue contributes the largest dollar amount. "This creates a multi-quarter catalyst to the Subscription revenue line throughout 2024 and beyond, and could aid in changing investor perception on CHKP," he said. — Lisa Kailai Han 6:40 a.m. ET: HSBC initiates Thermo Fisher and Teva as a buy There's upside ahead for pharmaceutical firms Thermo Fisher and Teva , according to HSBC. The bank initiated coverage of both firms at a buy rating. Thermo Fisher's target price of $610 implies a nearly 18% upside, while Teva's target price of $13 means that the stock could rally 30% from here. "We think that Thermo remains one of the best execution stories in the sector," wrote analyst Sidharth Sahoo. "Coming out of the de-stocking cycle and recovering from the impact of weaker Biotech funding, we think recovery is on the horizon." Shares of Thermo have fallen nearly 6% this year, but Sahoo said that the company is well-positioned for double-digit earnings growth by adding value to the firms it acquires. TMO YTD mountain TM in 2023 Teva, on the other hand, could see potential upside as the company's new management works to improve its business model. "A more focused approach in the generics business on higher value opportunities should stabilise revenue and a disciplined plan to pay down debt will lower leverage," wrote analyst Yifeng Liu. "In addition, the company now has a few promising assets in the innovative medicine business." Teva stock has risen 9% in 2023. — Lisa Kailai Han 6:10 a.m. ET: JMP downgrades Shopify JMP said that Shopify shares look too expensive after their massive year-to-date rally. Since the start of 2023, the e-commerce platform stock has surged 121%. Analyst Andrew Boone downgraded Shopify to market perform from market outperform, since shares have now neared his prior $80 price target. The stock closed at $76.82 on Friday. "We move to the sidelines and await a more attractive valuation," he wrote. "With gross merchandise volume growth now more weighted toward enterprise, gross profit margins face new headwinds given lower payment take rates and non-payment Merchant Solution attach rates." With that in mind, the analyst still believes the company has "tremendous momentum" ahead, citing its share gain with enterprise and offline merchants and dominant position with new merchants as evidence. — Lisa Kailai Han 5:58 a.m. ET: 2024 is the year to own Salesforce stock, Wolfe Research says The rally isn't over for Salesforce , according to Wolfe Research. The firm upgraded shares of the software company to outperform from peer perform. Analyst Allan Verkhovski's price target of $315 implies Salesforce can gain an additional 20% on top of this year's 97% rally. "We think CY24 is the year to own this value growth stock," the analyst wrote. "Our core thesis is that growth has bottomed and should stay double digits (upside from pricing, product cycles, AI), the commitment to margin leverage is real, leadership is stable while M & A if it happens will be responsible." The analyst also underscored Salesforce's position to benefit from the rising prevalence of generative artificial intelligence. — Lisa Kailai Han 5:42 a.m. ET: Seaport Research Partners downgrades Roku Several industry-wide and idiosyncratic headwinds make Roku a tough stock to own, according to Seaport Research Partners. The research firm downgraded the streaming platform name to sell from neutral. Analyst David Joyce's price target of $75 implies that the stock could fall 22% from its Friday close. Shares of Roku have soared more than 135% this year. As a reason for the downgrade, Joyce cited growth challenges from the broader media spending pullback due to the writers' and actors' strikes earlier this year. He thinks it could take a few quarters for the industry to revert back to normal, meaning that content release could still be stunted in 2024. Additional headwinds come from the newly-launched ad tiers of streaming rivals Netflix and Disney+. Joyce wrote that these could worsen over time, especially as Netflix begins introducing its ad tier to a global audience. The analyst also said Roku faces idiosyncratic challenges from lower digital ad growth. "Industry digital ad growth expectations recently marginally improved for 4Q23E and 2024E, but above our estimates for Roku, implying that the company could be losing share," he said. — Lisa Kailai Han 5:42 a.m. ET: Morgan Stanley raises Netflix price target, downgrades Formula One Morgan Stanley analyst Benjamin Swinburne upped his price target on Netflix to $550 from $475, citing "increasing confidence in the company's return on content spending, execution on growth initiatives including paid sharing and advertising, and the pull-back in competitive intensity in broader Media." "We base our growth outlook and investment thesis on three factors: 1) engagement and execution, 2) competition and cost of capital, and 3) a more measured expectation around advertising in particular in nearterm estimates," Swinburne added. Netflix shares have rallied 60% this year, and Swinburne's price target calls for upside of 16.5% from Friday's close. NFLX YTD mountain NFLX in 2023 Separately, Morgan Stanley downgraded Liberty Media Formula One Class C shares to equal weight from overweight. The bank also cut its target on the stock to $70 from $80, implying upside of just 8.7% from Friday's close. Swinburne called Formula One a "victim of its own success." The sport's popularity has exploded in recent years, especially in the U.S., thanks in part to Netflix's "Drive to Survive" docuseries. "The result of all this success is that earnings have to some extent been optimized," the analyst said. "While we still see continued strong growth ahead, that growth is going to invariable decelerate from what investors have seen in the past five years." Class C shares of Formula One are up 11% year to date. Since 2019, they have more than doubled. — Fred Imbert