Street Calls of the Week: An Apple a Day…
Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Futu, Apple, and IBM; downgrades for Boeing.
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InvestingPro subscribers always get first dibs on market-moving rating changes.
Monday – US Market Closed for Holiday
Boeing downgraded
What happened? On Tuesday, Wells Fargo (NYSE:) downgraded Boeing Co (NYSE:) to Equal-weight with a $225 price target.
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What’s the full story? Wells Fargo is optimistic about BA’s long-term prospects, as it sees strong demand for its aircraft in the mid-2020s. However, analysts warn that BA faces regulatory challenges in the near term, which could affect its deliveries, certifications, and China market.
Wells Fargo also noted that BA’s valuation is very high, even after the recent selloff, and that it depends on its cash flow resilience amid regulatory pressures.
Equal-weight at Wells Fargo means “Total return on stock expected to be -10% to +10% over the next 12 months. HOLD.”
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How did the stock react? Boeing’s equity traded down on the premarket headlines from $217 to $212, a loss of 2.66%. Boeing opened the regular session at $210.23 and closed at $200.52, a loss of 7.89% since Friday’s close.
Futu Holdings
What happened? On Wednesday, JPMorgan (NYSE:) upgraded Futu Holdings Ltd (NASDAQ:) to Overweight with a $64 price target.
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What’s the full story? JPMorgan notes Futu’s share price has fallen by 25% in the past two months, underperforming the . The analysts attribute the share price weakness to a moderate miss on 3Q23 results and downside risk on net interest income (NII, ~55% of revenue in 9M23) on the back of rate cut expectations. However, they believe the concerns are overdone, as only half of NII is rate sensitive, and downside on NII will be compensated by higher trading volume.
Additionally, JPMorgan sees Futu poised to benefit from overseas expansion (especially in Japan) and the potential launch of a crypto business in mid-2024; both may bring in upside risks to Futu’s clients & AUM growth. The valuation looks attractive at 10x P/E, versus an average of 14.4x post regulatory tightening in 4Q21.
The analysts expect Futu to achieve growth in the number of paying clients by penetrating existing users and expanding into new markets (e.g., Japan). JPMorgan believes that fast expansion into the wealth management business may drive future business growth and increase user stickiness.
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Overweight at JPMorgan means “[Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] “
How did the stock react? Futu shares spiked on the premarket headlines from $44.63 to $45.47. I should note shares were under pressure early in the premarket session, having declined from a $46 handle to a $44 handle ahead of the note. Futu opened the regular session at $44.86 and closed at $46.50, a gain of 0.22% since Tuesday’s close.
Apple upgraded
What happened? On Thursday, BofA upgraded Apple Inc (NASDAQ:) to Buy with a $225 price target.
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What’s the full story? BofA upgraded Apple citing eight reasons for their positive outlook on the tech giant. The analysts highlight the stronger iPhone upgrade cycle driven by the need for the latest hardware to enable Generative AI features that are expected to launch in 2024/2025. They also project higher growth in Services as Apple leverages its large and loyal installed base.
BofA’s analysts also point out Apple’s silicon roadmap that will expand from PC to Servers to Autonomous, boosting its margins and competitive edge. They note that Apple’s capital returns are robust even after reaching net cash neutral, and that its gross margin is stable to higher over time due to its mix, price, and vertical integration.
Moreover, they argued that Apple is underweighted compared to the S&P 500, and that the anticipation of AI features could attract more institutional investors. Finally, BofA downplayed the risk of legal issues and suggested that the recent relative underperformance of the stock implies that many risks are already priced in.
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Buy at BofA means “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.”
How did the stock react? Apple shares jumped on the premarket headlines from $182.52 to $185.63., a gain of roughly 1.70%. Apple opened the regular session at $186.29 and closed at $188.63, a gain of 3.26% since Wednesday’s close.
IBM upgraded
What happened? On Friday, International Business Machines (NYSE:) was upgraded to Outperform at Evercore with a $200 price target.
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What’s the full story? Evercore upgraded IBM to Buy, arguing that the company is an overlooked beneficiary of rising AI adoption. The analysts see AI boosting IBM’s Software, Consulting, and Internal Operations segments, as well as its overall Data & AI business. They estimate that AI could generate hundreds of millions of revenue for IBM in the near term, and potentially $1B in Consulting alone in the long term.
Evercore analysts also identified other growth levers for IBM, such as the recovery of RHT, the company transformation, the M&A activity (Apptio and Software AG assets), and the TP growth. Evercore projected a bull case EPS of more than $10.50, with the stock re-rating higher to $220.
The analysts downplayed the risk of AI complexity and competition, and suggest that IBM has a strong ROI case for its AI solutions.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst’s coverage sector.”
How did the stock react? IBM shares surged on the premarket headlines from $166.72 to $169.48, a gain of roughly 1.50%. Shares of IBM hit the $171 handle in the premarket. IBM opened the regular session at $170.22 and closed at $171.49, a gain of 2.79% since Thursday’s close.
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Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for Futu, Apple, and IBM; downgrades for Boeing.
InvestingPro subscribers always get first dibs on market-moving rating changes.
Monday – US Market Closed for Holiday
Boeing downgraded
What happened? On Tuesday, Wells Fargo (NYSE:) downgraded Boeing Co (NYSE:) to Equal-weight with a $225 price target.
What’s the full story? Wells Fargo is optimistic about BA’s long-term prospects, as it sees strong demand for its aircraft in the mid-2020s. However, analysts warn that BA faces regulatory challenges in the near term, which could affect its deliveries, certifications, and China market.
Wells Fargo also noted that BA’s valuation is very high, even after the recent selloff, and that it depends on its cash flow resilience amid regulatory pressures.
Equal-weight at Wells Fargo means “Total return on stock expected to be -10% to +10% over the next 12 months. HOLD.”
How did the stock react? Boeing’s equity traded down on the premarket headlines from $217 to $212, a loss of 2.66%. Boeing opened the regular session at $210.23 and closed at $200.52, a loss of 7.89% since Friday’s close.
Futu Holdings
What happened? On Wednesday, JPMorgan (NYSE:) upgraded Futu Holdings Ltd (NASDAQ:) to Overweight with a $64 price target.
What’s the full story? JPMorgan notes Futu’s share price has fallen by 25% in the past two months, underperforming the . The analysts attribute the share price weakness to a moderate miss on 3Q23 results and downside risk on net interest income (NII, ~55% of revenue in 9M23) on the back of rate cut expectations. However, they believe the concerns are overdone, as only half of NII is rate sensitive, and downside on NII will be compensated by higher trading volume.
Additionally, JPMorgan sees Futu poised to benefit from overseas expansion (especially in Japan) and the potential launch of a crypto business in mid-2024; both may bring in upside risks to Futu’s clients & AUM growth. The valuation looks attractive at 10x P/E, versus an average of 14.4x post regulatory tightening in 4Q21.
The analysts expect Futu to achieve growth in the number of paying clients by penetrating existing users and expanding into new markets (e.g., Japan). JPMorgan believes that fast expansion into the wealth management business may drive future business growth and increase user stickiness.
Overweight at JPMorgan means “[Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] “
How did the stock react? Futu shares spiked on the premarket headlines from $44.63 to $45.47. I should note shares were under pressure early in the premarket session, having declined from a $46 handle to a $44 handle ahead of the note. Futu opened the regular session at $44.86 and closed at $46.50, a gain of 0.22% since Tuesday’s close.
Apple upgraded
What happened? On Thursday, BofA upgraded Apple Inc (NASDAQ:) to Buy with a $225 price target.
What’s the full story? BofA upgraded Apple citing eight reasons for their positive outlook on the tech giant. The analysts highlight the stronger iPhone upgrade cycle driven by the need for the latest hardware to enable Generative AI features that are expected to launch in 2024/2025. They also project higher growth in Services as Apple leverages its large and loyal installed base.
BofA’s analysts also point out Apple’s silicon roadmap that will expand from PC to Servers to Autonomous, boosting its margins and competitive edge. They note that Apple’s capital returns are robust even after reaching net cash neutral, and that its gross margin is stable to higher over time due to its mix, price, and vertical integration.
Moreover, they argued that Apple is underweighted compared to the S&P 500, and that the anticipation of AI features could attract more institutional investors. Finally, BofA downplayed the risk of legal issues and suggested that the recent relative underperformance of the stock implies that many risks are already priced in.
Buy at BofA means “Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster.”
How did the stock react? Apple shares jumped on the premarket headlines from $182.52 to $185.63., a gain of roughly 1.70%. Apple opened the regular session at $186.29 and closed at $188.63, a gain of 3.26% since Wednesday’s close.
IBM upgraded
What happened? On Friday, International Business Machines (NYSE:) was upgraded to Outperform at Evercore with a $200 price target.
What’s the full story? Evercore upgraded IBM to Buy, arguing that the company is an overlooked beneficiary of rising AI adoption. The analysts see AI boosting IBM’s Software, Consulting, and Internal Operations segments, as well as its overall Data & AI business. They estimate that AI could generate hundreds of millions of revenue for IBM in the near term, and potentially $1B in Consulting alone in the long term.
Evercore analysts also identified other growth levers for IBM, such as the recovery of RHT, the company transformation, the M&A activity (Apptio and Software AG assets), and the TP growth. Evercore projected a bull case EPS of more than $10.50, with the stock re-rating higher to $220.
The analysts downplayed the risk of AI complexity and competition, and suggest that IBM has a strong ROI case for its AI solutions.
Outperform at Evercore means “the total forecasted return is expected to be greater than the expected total return of the analyst’s coverage sector.”
How did the stock react? IBM shares surged on the premarket headlines from $166.72 to $169.48, a gain of roughly 1.50%. Shares of IBM hit the $171 handle in the premarket. IBM opened the regular session at $170.22 and closed at $171.49, a gain of 2.79% since Thursday’s close.
