Friday's analyst calls: Nvidia the winner from Meta's AI push, chip stock upgrade
(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.) Chipmakers were in focus among analyst chatter early Friday. UBS raised its rating on Texas Instruments, noting it expects a better for the stock going forward. Meanwhile, Wells Fargo called Nvidia the winner from Meta Platforms’ AI spending push. Check out the latest calls and chatter below. All times ET. 6:06 a.m.: HSBC becomes less bullish on Discover as earnings forecast sours HSBC moved to the sidelines on Discover as the earnings outlook became less optimistic. Saul Martinez, the firm’s head of U.S. financials research, downgraded the bank to hold from buy and cut his price target by $14 to $107. Martinez’s new target reflects the potential for upside of 10.3%, down from 24.7% with the previously expected level. His downgrade came Thursday, when Discover posted $1.54 in GAAP EPS, down from $3.74 a year prior. Discover’s stock finished the session down more than 10%. Following the report, Martinez reduced his 2024 and 2024 forecasts for EPS by 9% and 15%, respectively. He anticipates deterioration in the loan growth outlook that should weigh on net interest income, while also noting that credit losses should peak in the first half of 2024 at a high rate. “The reductions largely reflect a softer outlook for loan growth, driving a sharp reduction to our net interest income (NII) estimates,” he said. “We also expect much higher net charge offs (NCOs) and some uncertainty persists about the extent to which compliance and risk costs pressure total expenses.” Ultimately, he said the new rating reflects a challenging environment with slower loan growth, higher credit losses and increasing expense levels. But he noted the sale of Discover’s student loan portfolio, a return to share buybacks and the eventual easing of credit pressures can all help the stock. — Alex Harring 5:42 a.m.: Buy DraftKings amid correction, Stifel says Stifel doesn’t want investors to miss an ongoing opportunity to buy into DraftKings . Analyst Jeffrey Stantial upgrade the sports betting stock to buy from hold and raised his price target by $5 to $45. Stantial’s new price target implies shares can jump 19.9% over the next year from Thursday’s close. While admitting others may not agree, Stantial said to take advantage of a slight pullback from the late 2023 highs. With near-term headwinds such as seasonality as ESPNBet promotions fading, he said investors can now focus attention on fundamentals such as healthy same-state growth rates, marketing and promotional discipline and efficiencies in fixed costs. Taken together, he said these fundaments can drive up what he deemed an “already impressive” path for guided EBITDA. “Our timing here is not without controversy, as we approach a potential hold-driven Q4 miss & Flutter U.S. listing,” he wrote to clients. “However, we prefer to own into forthcoming market share stabilization/inflection vs. waiting to de-risk these catalysts, while valuation appears attractive on our fine-tuned estimates.” Shares popped 1.6% in Friday premarket trading following Stantial’s Thursday upgrade. Despite the recent correction, the stock has gained about 6.5% since the start of 2024. That builds on 2023’s rally of more than 200%. DKNG 1Y mountain DKNG in past year — Alex Harring 5:37 a.m.: Wells Fargo calls Nvidia ‘clear beneficiary’ of Meta’s AI push Artificial intelligence darling Nvidia got another feather in its cap after Wells Fargo donned it a winner of Meta’s push into the technology. Analyst Aaron Rakers called Nvidia “the clear beneficiary” following a Thursday video update from Meta CEO Mark Zuckerberg about the Facebook parent’s use of AI. During the call, Zuckerberg shared plans to have about 350,000 H100 graphics processing units, which Nvidia makes, by the end of 2024. Alternatively, he said the fellow Big Tech company could seek around 600,000 equivalent processors to the H100. Zuckerberg’s update comes as Nvidia, a member of the “Magnificent 7,” continues to rally. Shares have climbed more than 15% so far in January, extending gains after surging almost 239% in 2023. More broadly, he called the Meta chief’s update a sign of “continued positive validation that the AI infrastructure buildout remains in its early innings.” — Alex Harring 5:37 a.m.: UBS upgrades Texas Instruments Texas Instruments investors should see a better performance from the stock this year after a lackluster 2023, according to UBS. UBS raised its rating on Texas Instruments to buy and increased its price target to $195 from $170. The new forecast implies upside of nearly 17% from Thursday’s close. “We believe it should be among the first to see orders inflect higher given less reliance on distribution (i.e. for TXN there is very little lag time between orders and revenue turning higher) and TXN also has cleaner comps and fundamentals as it was one of the few companies not to employ supply agreements during the peak,” wrote analyst Timothy Arcuri. “The stock trades on orders and FCF – both of which look set to inflect positively,” he added. The analyst also raised its revenue forecast for 2024 and 2025. Shares were up nearly 2% after the upgrade. Texas Instruments rose just 3.2% in 2023, lagging the semiconductor sector and the S & P 500. — Fred Imbert
