Discount retailers upgraded, more good news for Carvana, tough outlook for CVS
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(This is CNBC Pro’s live coverage of Thursday’s analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Thursday’s analyst calls feature upgrades to discount retailers TJX and Burlington and used car outlet Carvana, while there was more bad news for CVS Health following a tough earnings report Wednesday. UBS said it likes the outlook for the off-price stores as consumers hunt for better value. With CVS, the company’s earnings miss and pullback in outlook mean trouble for a healthcare chain that needs a “reset,” according to UBS. On Carvana, JPMorgan upgraded shares following best-ever earnings results Wednesday and indicated the stock could be in for big things ahead. Check out the latest calls and chatter below. All times ET. 7:06 a.m.: JPMorgan, Morgan Stanley raise price targets on Qualcomm Despite a difficult smartphone market, Qualcomm has managed to post positive results, setting it apart from its peers, according to Wall Street analysts. Qualcomm’s fiscal second-quarter earnings announced Wednesday afternoon topped analysts’ expectations. The company also provided a strong guide for the current quarter. Shares gained around 5% Thursday premarket. “Qualcomm does face challenges in CY24, with long anticipated share loss within the Samsung platform (back to the normal historic split) and the loss of the Huawei 4G business as Huawei transitions to internal 5G, but the company continues to power through with solid content gains and strong share in the premium tier handsets,” Morgan Stanley analyst Joseph Moore wrote in a note on Thursday. He reiterated his equal weight rating on shares while lifting his price target to $172 from $158, suggesting 4.8% upside from Wednesday’s close. Moore also highlighted investor enthusiasm over the Edge AI theme driving shares higher. JPMorgan also lifted its price target to $185 from $170. Analyst Samik Chatterjee, who has an overweight rating on the stock, underscored Qualcomm’s diversification in markets beyond smartphones, such as autos and internet of things devices. “While Qualcomm’s diversification beyond Smartphones has received little attention while the Smartphone market was impacted by headwinds, the stabilization of market trends are now leading to a more positive set up with the growth in Autos and [Internet of Things],” Chatterjee said in a Wednesday note. The analyst said those factors are “enabling Qualcomm to budge typical smartphone seasonality, and also stand-out this earnings season relative to most Smartphone supplier peers including Skyworks, Qorvo, and Mediatek relative to expectations around seasonality into the June-quarter.” Bank of America analyst Tal Liani noted the stock “may have limited near-term catalysts,” but cited strength in long-term drivers. These include “continued recovery of the global handset market in 2024 and a positive impact of AI trends on handset demand and ASPs over the long-term. Compute is another driver, with Qualcomm benefiting from the expected 2025 launches of Qualcomm-powered Microsoft PCs,” Liani wrote in a note on Thursday. Liani reiterated his buy rating but raised his price target to $180 from $173, implying nearly 10% upside from Wednesday’s close. — Hakyung Kim 6:22 a.m.: Carvana shares could surge nearly 50%, says JPMorgan Carvana ‘s record first-quarter results has JPMorgan convinced of the company’s progress. Analyst Rajat Gupta upgraded shares to overweight from neutral following best-ever earnings posted after the bell Wednesday. He also raised his price target to $130 from $70, or 49.2% above Wednesday’s close price. The used car retailer was last up nearly 38% during premarket trading after the earnings results, which come on the back of major restructuring efforts over the last two years, during which the company shifted focus to profitability rather than growth. Bankruptcy concerns in 2022 had nearly wiped all value from the stock. “The rapid progress on margin expansion and overall EBITDA, combined with existing cash on the balance sheet, should put to rest any lingering concerns around optionality to reduce debt/interest burden over time,” Gupta wrote in a Thursday note. “At this point, we believe the thesis and debate squarely shifts towards CVNA’s ability to continue at this pace (or faster) of throughput expansion while expanding margins along the way,” he added. Year to date, the stock has rallied 64.5%. — Hakyung Kim 6:16 a.m.: UBS steps to the sidelines on CVS Health, slashes price target UBS says CVS’s path to achieving its current guidance won’t be simple – and that time is needed to know if the path is fully de-risked. CVS Health on Wednesday reported weaker-than-expected first-quarter revenue and adjusted earnings and reduced its full-year profit outlook. The company cited higher medical costs likely to persist throughout the year as more Medicare Advantage patients receive procedures they postponed during the pandemic. Analyst Kevin Caliendo downgraded shares to neutral from buy. He lowered his price target by $25 to $60, or just 5.6% higher from Wednesday’s close price. “Our lack of conviction is not due to a lack of confidence in [management’s] process. … Our issue is that there were more parts of the business that required a reset, and a fix is not as simple as ‘cut benefits and reprice’ and margins will improve,” Caliendo wrote in a Wednesday note. “Membership loss contributed to a mix issue that led to failures to guaranteed savings in the PBM, something we rarely see. That may all imply a kitchen sink approach to the guide, but it also means more things to worry about when recommending buying the stock,” the analyst added. Although the CVS valuation is at a trough, a re-rate will not come unless visibility on membership changes and competitive Medicare Advantage pricing for 2025 becomes clearer, Caliendo said. CVS shares are down nearly 29% year to date, losing more than 16% on Wednesday alone, though they were up more than 1% premarket Thursday. — Hakyung Kim 6:03 a.m.: UBS upgrades discount retailers TJX and Burlington Discount retailers could be a greater threat to traditional department stores than previously expected, according to UBS. The firm upgraded TJX Companies , parent company of T.J. Maxx and Marshalls, to buy from neutral. Analyst Jay Sole also lifted his price target to $132 from $104, indicating nearly 41% upside from Wednesday’s close. “Good value for money” has consistently been one of the top factors consumers opt for when deciding where to shop, which UBS believes will benefit TJX. “TJX’s value proposition is durable and likely leads to sustained market share gains,” Sole wrote in a Wednesday note. “Consumers associate ‘Good value for money’ with TJX’s banners more than other retailer’s banners.” Sole also raised his rating on off-price retail peer Burlington Stores to neutral from sell. He raised his price target to $212 from $126, suggesting shares could gain 19.1% from where they closed Wednesday. The analyst said he is still on the sidelines with Burlington due to weakening consumer spending for soft goods and long-term supply chain risks from its business efficiency efforts. “We rate TJX Buy and prefer it over BURL since we believe TJX offers a better combination of growth potential, less operational risk, and stock valuation,” Sole said. Shares of TJX are flat for 2024 while Burlington has lost more than 8%. TJX rose 1.6% in premarket trading Thursday., — Hakyung Kim — CNBC’s Michael Bloom contributed to this report.
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