Here are the biggest calls on Wall Street on Wednesday:
HSBC initiates McDonald’s and Domino’s at buy
HSBC said in its initiation of several fast food chains that it likes stocks with “scale and brand to drive sustainable cash generation.”
“Initiate on four U.S. restaurant stocks – McDonald’s and Domino’s at Buy, Starbucks and Shake Shack at Hold; favor those that leverage scale and brand to drive sustainable cash generation.”
Mizuho initiates Utz as buy
Mizuho said Utz is “poised for market share expansion.”
“We believe UTZ offers investors favorable exposure to the structural growth of U.S. snacking through a pure-play portfolio in salty snacks; the variety most preferred by consumers.”
Cantor initiates Biogen as buy
Cantor said in its initiation of Biogen that it sees “value creation” through the Alzheimer’s drug, Leqembi.
“We are initiating coverage of Biogen with an Overweight rating. After a tumultuous past few years we see value creation being unlocked through gradual but significant adoption of Leqembi in Alzheimer’s.”
Morgan Stanley names Howmet Aerospace a top pick
Morgan Stanley said the aerospace company has “pricing power.”
“Our top aerospace pick is OW-Howmet as it has both OE [original equipment] and aftermarket exposure, room for multiple expansion, an underlevered balance sheet poised for capital return, and strong pricing power.”
Northcoast downgrades Costco to neutral from buy
Northcoast downgraded Costco, mainly citing valuation.
“We think the current share price adequately reflects these factors, as well as the next membership fee increase. We move to a Neutral rating solely on the basis of valuation.”
Bank of America names AT&T a top idea
Bank of America said AT&T is a “show me story that’s showing up.”
“There was a time for skepticism when AT&T revamped its wireless go-to-market strategy, refocused the company on connectivity, divested non-core assets, cut the dividend, and restored subscriber growth.”
Citi upgrades Discover Financial to buy from neutral
Citi said it sees numerous positive catalysts ahead for the stock in 2024.
“We are upgrading Discover Financial to Buy from Neutral as we see several potential catalysts for the shares over the next year.”
Wells Fargo upgrades Clear Channel Holdings to overweight from equal weight
Wells said in its upgrade of the advertising company that it sees growth at a turning point.
“We upgrade CCO to Overweight on the back of inflecting growth and a clearer path towards streamlining into America + Airports.”
Wells Fargo upgrades Paramount to equal weight from underweight
Wells said in its upgrade of the media company that M&A will bring a “value-unlocking” strategy.
“We upgrade PARA to Equal Weight as we increase our probability of a 2024 M&A event that brings in a value-unlocking strategy/mgmt.”
Wells Fargo downgrades Cinemark to underweight from equal weight
Wells downgraded the theater chain company and said earnings estimates are too high.
“We’re downgrading CNK to U/W, as we revised our CY24 DBO [D-BOX] lower by -10% and believe Street est. for FY24 remain too high.”
Deutsche Bank reiterates Walmart as buy
Deutsche said shares of Walmart remain “compelling.”
“Bottom line: WMT’s algorithm is compelling and should translate to a consistent HSD/LDD [high single digits/low double digits] EPS CAGR [compound annual growth rate], in our view.”
Wells Fargo names CrowdStrike and ZScaler top picks
Wells said in its software infrastructure outlook that it likes stocks with free-cash flow.
“We recommend investors focus on vendors that 1) can maintain the trifecta of revenue growth, profitability, and free cash flow and 2) are skewed toward the highest spending priorities. Therefore, our Top Picks for 2024 are CRWD and ZS.”
Roth MKM initiates Forian as buy
Roth said the software publishing company is seeing attractive growth.
“We initiate coverage of Forian with a Buy rating and $5.00 PT as we believe FORA’s healthcare data-centric platform represents a uniquely valuable Cloud Data Services franchise.”
Raymond James initiates Pacera Biosciences as outperform
Raymond James says it sees an attractive entry point for the pharmaceutical company.
“We’re initiating coverage of Pacira BioSciences with an Outperform rating and $42 price target.”
Loop reiterates Netflix as buy
Loop says Netflix is well positioned for 2024.
“In our coverage universe Buy-rated NFLX ... arguably benefits from the studios’ willingness to resume licensing shows to Netflix, and competitively having a larger backlog of content and a stronger balance sheet.”
Raymond James resumes Amazon at outperform
Raymond James resumed coverage of the e-commerce giant and said it has “sustained advertising momentum on and off platform.”
“We resume coverage of AMZN at Strong Buy on fading cloud optimization headwinds (supported by checks at re:Invent), growing GenAI stack ARR [annual recurring revenue] contribution, and sustained advertising momentum on and off platform.”
Citi upgrades MacroGenics to buy from hold
Citi said in its upgrade of the biotech company that it’s well positioned over the next twelve months.
“More broadly, we believe MGNX is positioned to continue benefiting from accelerating momentum in the ADC [antibody-drug conjugate] space, especially as the company begins to share more details on its wave of next-gen ADC programs over the next ~12 months.”
Mizuho reiterates Affirm at buy
Mizuho said it’s standing by its positive recommendation on the fintech company.
“We expect the debate around Affirm to increasingly shift from BNPL [buy now pay later] & partnerships like Walmart, to AFRM becoming a full-fledged financial services firm with direct deposits, savings, etc.”
Wells Fargo names Disney, Spotify and Netflix as top ideas
Wells named several media and entertainment companies like Disney, Spotify and Netflix as top ideas for 2024.
“Our favorite names to own are DIS (EPS upside on [direct to consumer business] + clarity on ESPN), SPOT (still a margin/[free cash flow] story) and NFLX + UMG (overall quality despite high valuations).”
Stifel downgrades Lowe’s to hold from buy
Stifel said in its downgrade of Lowe’s that it’s cautious on home improvement heading into 2024.
“We are taking a more cautious view of our home improvement names balancing healthy long-term category dynamics against tepid near-term trends with valuations now sporting limited room for error given the outperformance following the October CPI release.”
Morgan Stanley reiterates Apple as overweight
Morgan Stanley said its survey checks show that Apple’s App Store growth remains “steady.”
“App Store revenue growth remains steady at 12% Y/Y in December MTD, trending ahead of our C4Q forecast.”
Barclays initiates Nuvei Corp. as overweight
Barclays initiated coverage of the payment processor company and said it will “reward investors.”
“We initiate coverage of NVEI with an OW rating and PT of $34. Despite price volatility and vocal bears, NVEI’s high-teens gross profit growth, mid-30s EBITDA margins and runway for growth will reward investors over the long term.”
Raymond James reiterates Nvidia as strong buy
Raymond James said Nvidia is a leader in AI.
“Tech titan/startups are engaged in a once-in-a-multi-decade modern space race to develop and commercialize the GenAI tech stack. Key takeaway: MSFT/NVDA leading.”
UBS initiates Revolution Medicines as buy
UBS said the biotech company has underappreciated potential.
“We think RVMD has a powerful platform that enables inhibition of targets that historically have been ‘undruggable.’”
Guggenheim initiates WW as buy
Guggenheim initiated the company formerly known as Weight Watchers with a buy and said it’s a “levered play on GLP-1.”
“In our view, WW represents a high-risk, high-reward opportunity to play the GLP-1 theme at a time when the stock appears to price in most of the downside risk.”
Wells Fargo downgrades Zoom to underweight from equal weight and Salesforce to equal weight from overweight
The bank said in its downgrade of Salesforce that it’s “taking profits on value stories that have outperformed through ’23.” The firm also downgraded Zoom and said it sees “challenged renewals and growth.”
“While the value trade was a lucrative one in ’23 — with many investors pivoting towards larger-cap platforms with more-tangible valuation backstops — we’re expecting to see signs of a gradual rotation back towards growth in ’24.”
Citi names Amazon, Uber and Meta as top 2024 picks
Citi said momentum “can continue” for stocks like Amazon, Uber and Meta in 2024.
“As we head into 2024, we believe the momentum in 2H23 across the broader Internet sector, and particularly across Online Advertising, eCommerce, Marketplaces, and Online Travel sub-sectors, can continue.”
Jefferies names Caterpillar and Deere top picks
The firm named several ag and machinery companies as its top ideas for 2024.
“We see the most upside for machinery as multiples re-rate toward mid cycle. CAT, DE and AGCO are our top machinery picks (the latter two where numbers have already come down).”
Piper Sandler upgrades Newmark to overweight from neutral
Piper said the real estate company will benefit from lower interest rates.
“NMRK should benefit from further loan portfolio sales as lenders reposition their outstanding exposure to recycle capital into more profitable areas.”
Wells Fargo names Microsoft a top pick
The firm said Microsoft is a top idea heading into 2024.
“We view the stable-to-improving budget environment for software as broadly positive for the space next year, and expect highest quality cos continue to outperform.”
Stifel initiates Natural Gas Services as buy
Stifel said the nat gas company has “appealing attributes.”
“We are initiating coverage of Natural Gas Services Group, Inc. (NGS) with a Buy rating and $18.00 target price.”
Bank of America reiterates FedEx as buy
Bank of America said it’s standing by its buy rating on FedEx after the company’s earnings report on Tuesday.
“FedEx benefits from cross-border trade growth and is generally a concurrent economic indicator.”
