(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.) A retailer and a beauty company were among the stocks being talked about by analysts on Thursday. Baird upgraded elf Beauty to outperform, calling for nearly 35% upside. Meanwhile, Morgan Stanley raised its rating on Gap to overweight. Check out the latest calls and chatter below. All times ET. 7:53 a.m.: Benchmark initiates coverage of Winnebago at buy A series of timely deals is turning Winnebago into a big winner in the recreational vehicle space, according to Benchmark. Analyst Michael Albanese initiated coverage of Winnebago with a buy rating, saying in a note to clients that the RV maker is using acquisition to grow its market share with healthy margins. “WGO has done an excellent job capitalizing on its Grand Design RV acquisition and pivoting into the towable segment, which has seen tremendous growth through the last cycle. This has been WGO’s main driver of increasing market share which has almost 3x’d to 11.4% in FY24 from 3.3% in FY16,” the note said. More recently, Winnebago has acquired the pontoon boatmaker Barletta, and the early signs from that deal are also positive, Benchmark said. That growth in market share hasn’t resulted in much success for investors. The stock is down nearly 20% year to date. The investment firm set a price target of $75 per share for Winnebago, which is 28% above where Winnebago’s stock closed Wednesday. — Jesse Pound 7:28 a.m.: VF Corp could gain more than 20% after Supreme sale cleans up balance sheet Citi Research upgraded apparel and footwear company VF Corp to buy from neutral, saying the stock’s risk/reward ratio now skews positive. Analyst Paul Lejuez upped his price target by $9 to $20, implying the stock can gain 23.8% over the next 12 months. Shares are down 14.1% this year, but have climbed back roughly 17.5% this week on news of the company’s sale of its Supreme streetwear brand for $1.5 billion. VFC YTD mountain VFC year to date According to Lejuez, the sale, which was worth more than he expected, has “cleared the way for [VF Corp] to repay both of their upcoming debt maturities.” With this overhang out of the picture, he believes VF Corp CEO Bracken Darrel can now improve the rest of the business and help the company’s sales and margins, rather than focus primarily on cleaning up its balance sheet. Lejuez added that VF Corp’s “depressed margins provide opportunity for significant improvement” over the next several years, driven by an increased focus on the company’s individual brands. He noted that footwear subsidiary Vans’ sales could be closer to a bottom after struggling for several years. — Pia Singh 6:56 a.m.: Bank of America maintains buy rating on ASML after Wednesday slide Bank of America is standing by ASML , naming the semiconductor stock a top pick despite its massive decline this week. Analyst Didier Scemama reiterated his buy rating and kept his $1,406 12-month price target on the stock, which implies shares can jump 50.8%. ASML shares are up more than 23% this year, but plunged 14.1% on Wednesday as part of a sell-off in chip stocks driven by concerns about potentially tighter export restrictions from the U.S. “Keep your eye on the prize,” Scemama said in a Wednesday note. “We see the near-term pullback in the stock as an opportunity ahead of the CMD [Capital Markets Day] on November 14, where we expect ASML to raise its 2030 revenue targets towards the upper end of the guide.” The analyst expects potential upside to ASML’s 2025 targets from its upcoming Capital Markets Day event driven by reshoring and stronger industry demand, and also expects to see a 17% revenue compound annual growth rate, or CAGR, and 20% EBITDA CAGR over the next four years. — Pia Singh 6:36 a.m.: Mizuho upgrades Toast to outperform, thinks shares can jump more than 20% on potential cost cuts Mizuho Securities thinks Toast could become an even bigger retailer by lowering its interchange costs. Analyst Dan Dolev upgraded the restaurant management software company from neutral to outperform and hiked his price target by $12 to $33, which implies nearly 24% potential upside for the stock. Shares are up 45.8% this year. TOST YTD mountain TOST year to date “We believe the premium is warranted given TOST’s improved profitability and gross profit growth prospects on the potential for lower processing costs in the medium term,” Dolev said, adding that he is valuing shares at a premium to the overall fintech peer trading group multiple. According to Dolev, Toast would be the de facto fourth-largest retailer in the U.S. following retail giants like Walmart, with its volumes approaching $200 billion by 2025. Toast may be overpaying on its credit card interchange fees compared to large retailers, however, and the company’s potential to renegotiate these fees could “dramatically” lower its costs of credit processing over the medium term and “significantly improve” the company’s profitability, he said. — Pia Singh 6:01 a.m.: Redburn Atlantic downgrades Palo Alto Networks on expected AI slowdown Palo Alto Networks could see a growth slowdown as its artificial intelligence-boost appears to be just a short-term reaction rather than a sustainable boost, according to Redburn Atlantic. Analyst Nina Marques downgraded Palo Alto to neutral and kept her $325 price target, which implies that shares of the cybersecurity services provider could slide 2.1% from Wednesday’s close. Marques cut her revenue forecast for Palo Alto to reflect her view that generative AI will not result in another “investment super-cycle,” given early indicators of a spending slowdown and deflationary impacts from generative AI and higher competition that will put pressure on future growth in cybersecurity companies. She noted that Palo Alto, which is up 12.5% year to date, continued to soar even as growth in cybersecurity-tied AI winners slowed. “Near-term expectations have been reset after the announcement of Palo Alto’s ‘platformisation’ strategy,” Marques said. This strategy has helped the company land several deals this year to shift customers to their cybersecurity platform. “However, consensus expects a sharp reacceleration in dollar growth from FY26 onwards, which we view as unlikely,” the analyst added. “We view Palo Alto more defensive as it is skewed to a stickier customer base and a wider moat.” — Pia Singh 5:45 a.m.: Morgan Stanley’s names Gap among its most preferred retail picks Gap’s earnings momentum is not going away soon, according to Morgan Stanley. Analyst Alex Straton upgraded Gap to overweight from equal weight and said the stock appears among the most favorable opportunities in his firm’s retail coverage. His $29 price target implies 26.4% potential upside for the stock, which has added 9.8% this year. GPS YTD mountain GPS in 2024 “GPS is one of few Retailers where we see a long runway for positive rate of change under new mgmt,” Straton said in a note. According to Straton, Gap’s business continues to offer “among the greatest fundamental recapture opportunities” on both a topline growth and profitability basis. The stock is also trading at an attractive entry point and has an attractive valuation, he said. Straton added that he sees room for a temporary valuation re-rating to a high-teens level, where the retailer is delivering earnings per share beats and raises in the short term. Gap has already been outperforming quarterly EPS estimates for the past 5 consecutive quarters, he said. — Pia Singh 5:45 a.m.: Baird upgrades elf Beauty There’s a big buying opportunity in elf shares, according to Baird. Analyst Mark Altschwager upgraded the beauty stock to outperform from neutral. He also raised his price target to $230 from $210, implying upside of 34.7% from Wednesday’s close. “With healthy brand momentum (including positive FQ1 checks), ongoing distribution expansion, and significant international whitespace, ELF appears poised to sustain market share gains and premium earnings growth even in a choppier consumer backdrop,” Altschwager wrote. Shares are up more than 18% year to date. However, they are down 19% this week. ELF 5D mountain ELF 5-day chart “Incremental China tariffs in a potential Trump administration represent a manageable risk, in our view, given demonstrated pricing power and still-attractive price positioning vs. peers,” Altschwager said. — Fred Imbert
Thursday’s analyst calls: Gap gets an upgrade, beauty stock to pop nearly 35%
Jul 18, 2024
