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Right here is your Professional Recap of the highest takeaways from Wall Avenue analysts for the previous week: upgrades for Li Auto and Enphase Vitality, downgraded for GlobalFoundries, American Categorical, and Albemarle.
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GlobalFoundries downgraded
What occurred? On Monday, JPMorgan downgraded GlobalFoundries Inc (NASDAQ:) to Impartial with a $56 value goal
What’s the complete story? JPMorgan analysts have downgraded GlobalFoundries Inc. (GFS) from an Obese to a Impartial score, setting a value goal of $56.00 (revised down from $65.00). The rationale behind this choice, based on the be aware, lies within the declining specialty/mature node foundry manufacturing exercise throughout numerous markets, which can lag behind semiconductor business restoration traits by 1-2 quarters. Regardless of the corporate’s already adjusted CY24 income and EPS estimates (8% and 22% decrease, respectively, in comparison with consensus expectations), there are extra issues.
GlobalFoundries faces challenges as its FinFET clients (together with AMD (NASDAQ:), Qualcomm (NASDAQ:), and Marvell (NASDAQ:)) at 12nm-16nm nodes migrate to decrease geometry nodes not supported by GFS. Furthermore, the group’s slower response in backfilling these migrations exacerbates the scenario.
Roughly 20-25% of the corporate’s complete revenues nonetheless come from plain-vanilla 12nm and better FinFET capability combine. Moreover, sure RF clients could probably migrate away within the mid-to-long time period on account of misalignment with future expertise/product roadmaps.
Moreover, intensified competitors from US/Europe/Japan home specialty/mature foundry producers (resembling TSMC and UMC) outdoors of Taiwan provides to the complexity. Contemplating these dynamics, JPMorgan has revised its EPS estimates downward on account of decrease utilizations within the first half of the yr, leading to a 6% decline in CY24 revenues (versus consensus at +3%) and a 25% decline in EPS (versus consensus at +3%).
Impartial at JPMorgan means “(over the period of the value goal indicated on this report, we count on this inventory will carry out according to the common complete return of the shares within the Analysis Analyst’s, or the Analysis Analyst’s group’s, protection universe)”
How did the inventory react? GFS fairness traded decrease on the premarket headlines from $55.08 to $54.01, a decline of two.28 p.c. GFS opened the common session at $53.24 and closed at $51.67, a decline of 6.70 p.c.
Li Auto upgraded
What occurred? On Tuesday, Deutsche Financial institution upgraded Li Auto Inc (NASDAQ:) to Purchase with a $41 value goal.
What’s the complete story? The financial institution mentioned that it noticed a compelling set-up within the coming quarters pushed by a sturdy product pipeline, additional supported by a horny valuation for a prime tier EV participant. The financial institution mentioned that the inventory had declined by 32% since late November, versus a 18% drop for the KraneShares CSI China Web ETF (KWEB).
The financial institution relayed that administration has confirmed time and time once more to be best-in-class, being the primary unique gear producer (OEM) to embrace extended-range electrical automobile (EREV) powertrain expertise and one of many few upstarts to realize or beat bold targets on quantity and prices. The analysts wrote that whereas the primary quarter can be gentle, quantity and margin ought to bounce again beginning within the second quarter, boosted by new and refreshed fashions.
Deutsche analysts wrote that they largely maintained their 2024 estimated quantity outlook however diminished margin estimates, assuming extra aggressive pricing and promotional exercise. The analysts mentioned that their value goal got here down from $45 to $41, utilizing a decrease a number of in mild of the broader de-rating throughout China American depositary receipts (ADRs) and international EV shares, however nonetheless implying vital upside from present ranges.
Purchase at Deutsche Financial institution means “Based mostly on a present 12-month view of TSR, we suggest that traders purchase the inventory.”
How did the inventory react? Li Auto fairness spiked increased on the premarket headlines from $28.07 to $30.55, a acquire of 8 p.c. Li Auto opened the common session at $30.49 and closed at $30.92, a acquire of 10.43 p.c.
new yr
Enphase Vitality upgraded
What occurred? On Wednesday, Oppenheimer upgraded Enphase Vitality Inc (NASDAQ:) to Outperform with a $133 value goal
What’s the complete story? Enphase shares soared regardless of the corporate’s lower-than-expected steerage, sparking a debate on its market place and prospects. Oppenheimer lowered its estimates, but in addition upgraded the inventory, citing a extra sensible outlook on gross sales and margin.
The brokerage praised ENPH’s product improvements, which enhance system effectivity and decrease prices. The analysts additionally highlighted ENPH’s distinctive potential to create dynamic grids and handle them with AI, which may give it an edge over opponents.
Oppenheimer acknowledged the inventory’s volatility however expressed confidence that the worst-case situations are already priced in.
Outperform at Oppenheimer means “Inventory anticipated to outperform the S&P 500 throughout the subsequent 12-18 months.”
How did the inventory react? Enphase shares rose on the headlines and climbed all through the premarket session following Tuesday’s incomes report. Enphase opened the common session at $120.01 and closed at $117.59, a acquire of 16.99%.
American Categorical downgraded
What occurred? On Thursday, Morgan Stanley downgraded American Categorical Firm (NYSE:) to Equal-weight with a value goal of $22.
What’s the complete story? American Categorical shares rose 11% after earnings, as the corporate beat expectations on income and EPS progress, and elevated its dividend by 17%. Morgan Stanley attributed this to administration’s optimistic steerage for 2024, and its confidence in capital deployment regardless of new laws.
Nonetheless, the financial institution additionally warned that AXP faces challenges in boosting its low cost revenues, which account for greater than half of its complete revenues. The analysts famous that low cost revenues grew solely 5% in 2023, and that their very own forecast of 9.5% income progress for 2024 is on the decrease finish of administration’s vary. Morgan Stanley additionally identified that AXP’s credit score high quality, which is superior to its friends, may deteriorate as prime debtors normalize.
With the inventory buying and selling at a slight premium to its historic common, the financial institution downgraded AXP to a extra impartial stance.
Equal-weight at Morgan Stanley means “The inventory’s complete return is predicted to be according to the common complete return of the analyst’s business (or business group’s) protection universe, on a risk-adjusted foundation, over the subsequent 12-18 months.”
How did the inventory react? American Categorical opened the common session at $207.08 and closed at $209.07, a acquire of 1.68%.
Albemarle downgraded
What occurred? On Friday, Citi downgraded Albemarle Corp (NYSE:) to Impartial with a $120 value goal.
What’s the complete story? The financial institution wrote that they consider pricing near-term will stay beneath stress till it sees vital manufacturing cuts and capability delay. Citi suspects that whereas long-term sturdy secular EV demand should help increased long-term costs, they see Albemarle dialing again bold growth plans and danger to rising with the market.
The analysts state that as one of many largest and lowest-cost gamers within the lithium business, Albemarle may nonetheless make wholesome margins at these costs however would possibly want manufacturing cuts and capability growth delays to protect money. The analysts wrote that near-term, they believed costs had hit a backside and danger/reward skewed extra in direction of continued sluggish costs within the first half of 2024. The analysts mentioned that traditionally, Albemarle’s share value had been extremely correlated to lithium costs.
Impartial at Citi means “For shares rated Impartial (2), if an analyst believes that there are inadequate valuation drivers and/or funding catalysts to derive a constructive or detrimental funding view, they might elect with the approval of Citi Analysis administration to not assign a goal value and, thus, not derive an ETR.”
How did the inventory react? Shares slumped because the headlines circulated, dropping from $114 to $112.40 instantly. Albemarle opened the common session at $113.20 and closed at $115.78, a acquire of 1.27%.
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