Wall Street Buzz: Chipmaker Broadcom, Chinese EV Maker Nio In Focus
The stock market is on the move, and Wall Street analysts are busy dissecting the latest earnings reports and company updates. From artificial intelligence (AI) to electric vehicles (EVs), investors are looking for clues about the direction of major industries and where they should invest their money.
Here are some key takeaways from Friday’s analyst calls and Wall Street chatter.
- Chewy could beat expectations for earnings before interest, taxes, depreciation, and amortization (EBITDA) next year, according to Morgan Stanley.
- Super Micro Computer is facing regulatory concerns, prompting JPMorgan to downgrade its rating.
- MicroStrategy is being praised by Barclays, who believes the company’s strategy of accumulating bitcoin is unique and appealing to investors.
- Mizuho upgraded Fortive after the company announced plans to split into two independent public companies.
- Barclays is more optimistic about Coinbase and Robinhood, upgrading both companies to equal weight after a period of underperformance.
- Nio, the Chinese EV maker, is getting a boost from JPMorgan, which believes the company is set for a rebound.
- Broadcom, a leading chipmaker, saw its shares drop after its latest quarterly earnings report.
A Closer Look at Friday’s Analyst Calls and Wall Street Chatter
Chewy: A Tailwind for Pet Ecommerce
Morgan Stanley analyst Nathan Feather is optimistic about Chewy’s future, reiterating his overweight rating and raising his price target to $33 per share, representing a potential 26.1% upside. Feather believes the company’s forward margin trajectory is "compelling and underestimated," with a realistic path to exceeding $750 million in EBITDA next year. While this is about 12% higher than Wall Street’s consensus forecast, Feather sees a potential bull case scenario where Chewy reaches $53 per share, which would require even stronger EBITDA performance in the coming years. Feather believes Chewy’s strong online presence and potential for growth make it a standout in the small-mid cap ecommerce space.
Super Micro Computer: Regulatory Concerns Cause Downgrade
JPMorgan analyst Samik Chatterjee downgraded Super Micro Computer to neutral from overweight, citing regulatory uncertainty surrounding the company’s delayed annual 10-K filing. While Chatterjee believes Super Micro will eventually regain compliance, he sees this as a potential headwind for the company and a reason for caution among new investors. Chatterjee’s downgrade coincides with the recent report from Hindenburg Research, which has taken a short position on the stock. The analyst attributed the drastic price target reduction to a lower earnings multiple, reflecting the increased uncertainty surrounding the company.
MicroStrategy: A Bitcoin-Fueled Strategy
Barclays initiated coverage of MicroStrategy with an overweight rating, calling the company "spinning software into digital gold." Analyst Ramsey El-Assal believes the company’s strategy of utilizing its software business to accumulate a large bitcoin holding, currently valued at around $13 billion, is a compelling and unique approach for investors seeking bitcoin exposure. El-Assal sees the company as essentially a bitcoin index fund that can generate its own investment capital and weather future "crypto winters." This positive outlook comes amidst a strong year for MicroStrategy’s stock, which has surged more than 89% in 2024.
Fortive: Splitting for Growth
Mizuho analyst Brett Linzey upgraded Fortive to outperform following the company’s announcement to split into two publicly traded companies. The spin-off will create a new company focusing on precision technology and a remaining company focused on high-quality recurring growth. Linzey believes the new structure will allow both companies to more effectively pursue their respective growth strategies. He is also encouraged by Fortive’s commitment to share buybacks, which he believes can mitigate any risks associated with the spin-off.
Coinbase and Robinhood: Rebound in Sight?
Barclays analyst Benjamin Budish upgraded Coinbase and Robinhood to equal weight from underweight, citing improved business models and potential top-line catalysts. He sees a more favorable regulatory environment for cryptocurrencies, with two major presidential candidates showing support for the industry and the approval of spot ETFs tied to digital currencies increasing investor interest. For Robinhood, Budish expects growth driven by new products, geographic expansion, and fresh investing channels. Despite the upgrades, both stocks remain volatile, reflecting the continued uncertainty in the cryptocurrency market.
Nio: Rebound Expectations
JPMorgan analyst Nick Lai upgraded Nio, the Chinese EV maker, to overweight from neutral, believing the company is poised for a rebound after a challenging 2024. Lai anticipates higher visibility on new models and a strong product pipeline in 2025, driving increased volume and potentially aiding in a financial and operational turnaround. He also noted Nio’s improving cash position, which should mitigate concerns regarding fund raises or equity dilution. Overall, Lai sees a potential for relief rebound in Nio’s stock price driven by positive financial and operational developments.
Broadcom: AI Growth and Concerns
Broadcom shares dropped after the company’s fiscal third-quarter earnings report, which fell short of some analysts’ expectations and a somewhat muted guidance. While AI revenue was revised upwards for the full year, investors were looking for more substantial growth in this sector. UBS analyst Timothy Arcuri maintained a buy rating but lowered his price target, while JPMorgan analyst Harlan Sur maintained an overweight rating and increased his price target. Deutsche Bank analyst Ross Seymore remained more cautious, highlighting the lack of "meaningful upside" in AI revenue as a potential disappointment for investors.
Looking Ahead
The stock market is constantly evolving, with new developments and trends emerging daily. Investors rely on analysts for insights, guidance, and predictions. As we move into the latter half of the year, it will be interesting to see how these companies perform and whether analysts’ interpretations of their individual outlooks hold true. The analysts cited in this article will be watching closely, looking for signs of success and setbacks.
