Wednesday’s analyst calls: Super Micro Computer gets a downgrade, aluminum products stock to pop 20%
(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.) An artificial intelligence play and an aluminum products maker were among the stocks being talked about Wednesday. Barclays downgraded Super Micro Computer to equal weight from overweight. Meanwhile, Morgan Stanley upgraded Ball Corp., calling for more than 20% upside. Check out the latest calls and chatter below. All times ET. 8:12 a.m.: Booking Holdings has ‘capped’ upside, according to Jefferies Jefferies has a lower outlook on Booking Holdings as online travel demand moderates. Analyst John Colantuoni downgraded Booking to hold from buy and reduced his price target by $1,350 to $4,200, saying that his new target now reflects a 7% premium to the Internet batch of stocks “to account for consistent execution and a track record of delivering upside.” It implies roughly 10.1% potential upside for the online travel stock, which has gained 7.5% this year. “While BKNG offers peer-leading execution and FCF, we see stock upside capped by risk of downside to Room Nights,” Colantuoni said in a Wednesday note. “We are also concerned that a currently elevated booking window could reverse in ’25, creating a near-term headwind to Room Night growth.” The analyst added that slower room night growth amid and increasing competition in alternative kinds of accommodations could pressure the company’s margins. Worldwide, room nights are seeing a slowdown mostly driven by demand normalizing to pre-pandemic levels, he noted. — Pia Singh 7:38 a.m.: Buy the dip in Alcoa, Wolfe Research says Shares of aluminum producer Alcoa have been sliding even as prices of the metal have climbed, creating an opportunity for investors, according to Wolfe Research. Analyst Timna Tanners upgraded Alcoa to outperform from peer perform. Tanners said in a note to clients that Alcoa’s exposure to a key input for aluminum is another point in the company’s favor. “Its added Alumina Ltd stake boost benefits from being long alumina, the strongest commodity we follow ytd, up 48%. A higher alumina input cost can support aluminum prices, steepening the global cost curve, and discouraging restarts of > 1.2Mt of idled European smelters in recent yrs. As such we see limited downside to aluminum prices,” the note said. Tanners said that Alcoa is now Wolfe’s top pick among miners and set a price target of $36 per share, or about 19% above where the stock closed Tuesday. “AA has a more compelling entry point, lighter risks, and more catalyst than peers,” the note said. — Jesse Pound 7:28 a.m.: TD Cowen upgrades Sweetgreen to buy, forecasts 47% upside There’s a positive growth story ahead for shares of Sweetgreen , according to TD Cowen. The bank upgraded shares of the fast-casual restaurant chain to buy rating from hold. Analyst Andrew Charles also raised his price target to $43 from $31. Shares of Sweetgreen have soared 159% this year. Charles’ updated price forecast corresponds to 47% upside for the stock. One major catalyst for the stock is the introduction of Sweetgreen’s Infinite Kitchens, or its automated robotic kitchens. “We expect Infinite Kitchens to begin meaningfully contributing to margin expansion in 2025 while we expect it could lead to a 70%+ increase in 2030 adj. EBITDA,” Charles wrote. “We also argue Infinite Kitchen’s have the ability to expand the TAM given lower pricing from superior margins.” In addition, the analyst highlighted Sweetgreen’s commitment to improving both its food sourcing and guest facing technology. The company has also placed an emphasis on growing its 2024 traffic through menu innovation and marketing efforts. — Lisa Kailai Han 7:03 a.m.: UBS upgrades Freeport-McMoRan to buy on better copper outlook There’s a rosy outlook ahead for shares of Freeport-McMoRan , according to UBS. The bank upgraded the mining stock to a buy rating from neutral, simultaneously raising its 12-month price target to $55 from $54. This new price target is approximately 33% above where shares closed on Tuesday. As a catalyst, analyst Daniel Major pointed to the company’s exposure to copper. “We believe the fundamental outlook for copper remains compelling & positioning is cleaner after the 3Q price correction. FCX is the most liquid copper pure play with high correlation and offers beta to copper upside,” he wrote. Key secular demand drivers such as renewable energy sources, power grids and electric vehicles continue to make both the medium- and long-term outlook for copper look attractive. Meanwhile, Freeport-McMoRan’s key asset, Grasberg, has largely de-risked at this point, Major pointed out. The analyst also expects sulphide leaching to continue driving modest volume growth for the company. Shares of Freeport-McMoRan are down nearly 3% this year. — Lisa Kailai Han 6:33 a.m.: Bernstein names Ross Stores as its top pick in off-price retail Ross Stores is set up to perform nicely going forward, according to Bernstein. Analyst Aneesha Sherman listed Ross as her top pick in the off-price retail segment. The analyst’s $178 price target is approximately 17% higher than where the stock closed on Tuesday. Shares of Ross are 10% higher this year, meaning they have underperformed against peers such as TJX Companies and Burlington Stores — which are respectively up 25% and 36%. “The multiple has actually compressed because of concerns around Ross’s exposure to low-income cohorts,” she wrote. “We agree that Ross will be more impacted than TJX in a scenario where the bottom falls out of the economy and the low-income consumer is sharply impacted, but the current valuation gap feels too extreme, given Ross’s proven performance so far in this macro environment.” Going forward, Sherman expects Ross to overdeliver against its modest guidance for the year’s second half. Management expects improvements in the company’s largest department, ladies apparel, and believes that their cost-savings efforts will continue to lower operating leverage. “Mgmt’s strategy of leaning into sharper price points to drive market share growth is working amidst a broader wave of trade-down, and their investments into labor-saving initiatives are creating margin expansion despite investing in more attractive prices,” the analyst added. — Lisa Kailai Han 6:09 a.m.: Morgan Stanley upgrades Boyd Gaming to overweight Morgan Stanley thinks shares of Boyd Gaming are attractive at current levels. The bank upgraded shares of the casino and hospitality stock to overweight from equal weight. Its updated price target of $74 implies that Boyd Gaming could rally around 25%. Shares of Boyd Gaming are down 5% this year, presenting a good opportunity for investors to buy in, per Morgan Stanley. Its current valuation makes it the cheapest stock within the bank’s coverage universe. “We see an attractive risk-reward with valuation near lows, fundamentals stabilizing, and optionality around capital allocation,” wrote analyst Stephen Grambling. “Moreover, BYD offers a way to gain exposure to the industry leader in the rapidly growing US digital gaming sector through its 5% ownership interest in FanDuel.” Meanwhile, foot traffic to the company’s casinos has begun to reaccelerate. Grambling also applauded Boyd Gaming as “one of the best operators in terms of return of capital” post-pandemic, a trend he expects to continue for at least the next two years. — Lisa Kailai Han 5:45 a.m.: Jefferies initiates GE Vernova as top pick within clean energy sector GE Vernova’s conservative guidance and potential earnings upside could give the stock a leg up versus its peers, according to Jefferies. The company initiated its coverage of the sustainable energy company with a buy rating. Analyst Julien Dumoulin-Smith’s $261 price target implies a 36% upside from Tuesday’s close. Dumoulin-Smith said Vernova was his top pick in the clean energy sector, “ironically due to the non-renewable gas biz.” The analyst also expects the company’s estimates to increase as the outlook for all segments across the board improves. “The combination of conservative targets set with the General Electric spin-off met the good fortune of baseload power demand surging to meet data center load. GEV is set to benefit from higher volumes and higher margins, a rare combination but visible due to the oligopoly nature of many of its U.S. markets,” he wrote. Specifically, Dumoulin-Smith anticipates Vernova’s EBITDA to triple from 2024 to 2028. In an effort to preserve capital discipline, the company could also initiate a “modest dividend” and share buybacks going forward. — Lisa Kailai Han 5:41 a.m.: Barclays downgrades Super Micro Computer Super Micro Computer’s competitors are catching up fast, according to Barclays. The bank downgraded shares of the data storage company to equal weight from overweight. Analyst George Wang also lowered his price target to $438 from $693. This updated forecast is now less than 1% below where the stock closed on Tuesday. Wang cited an overall more “cautious view” as a catalyst for the change. For instance, he pointed to weak AI server margins and a lack of visibility in forward gross margins. “Lower GM should compress P/E multiples,” he wrote. “Shares are likely in the penalty box until there are more proof points of rising GMs.” Meanwhile, Super Micro has been losing market share to its competitors such as Dell, resulting in the company lowering its pricing and subsequently putting even more pressure on margins going forward, according to the analyst. The company also has a history of a lack of transparency with its investors, which could result in further pushback. “The 10-k filing delay SMCI issued in late August also raises some red flags – investors may choose to derisk until we get clarity and definitive findings from the internal control review, particularly given SMCI’s past history of getting delisted from Nasdaq in 2018 and the SEC charges in 2020,” Wang said. “In the interim, Dell could take share from SMCI, or NVDA could give more allocation to competitors, risking the long-standing relationship between the two companies (SMCI and NVDA).” Super Micro Computer shares are up more than 55% year to date. However, they are more than 64% below their 52-week high. SMCI YTD mountain SMCI year to date — Lisa Kailai Han 5:41 a.m.: Morgan Stanley upgrades Ball Corp. The future is bright for Ball Corp. , according to Morgan Stanley. Analyst Stefan Diaz upgraded the aluminum products maker to overweight from equal weight. His price target of $78, up from $69, implies upside of 22% from Tuesday’s close. Shares are up more than 11% year to date. However, they’re 10.4% below their 52-week high reached in April. BALL YTD mountain BALL year to date “We see an attractive buying opportunity,” the analyst said. “We believe investors are overly focused on near-term North American volume underperformance vs. peers and are under-appreciating the company’s ability to grow earnings into the medium term.” “BALL’s low leverage supports its industry leading shareholder return outlook. … Given this backdrop, we see an attractive bull-to-bear skew,” Diaz added. — Fred Imbert
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