(This is CNBC Pro’s live coverage of Tuesday’s analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Some of the biggest U.S. banks got major upgrades Tuesday. Morgan Stanley raised its rating on Goldman Sachs, Bank of America and Citigroup to overweight, calling for roughly 20% upside for all three stocks. Elsewhere, UBS upgraded Spotify as it grows bullish on the streaming giant’s efforts to grow margins. Check out the latest calls and chatter below. All times ET. 5:42 a.m.: Spotify gets an upgrade from UBS as efficiency initiatives play out UBS thinks Spotify still has room to run as the streaming giant focuses on margin expansion, price increases as well as subscription and advertising growth. These initiatives, in turn, should lead to higher earnings and revenue, according to the firm. Analyst Batya Levi upgraded shares of Spotify to buy from neutral and increased his price target by $104 to $274, which implies 25.3% potential upside for the stock. “We think efficiency initiatives remain the focus and have increased conviction on sustainable margin expansion and stronger bottom line trends in the coming years,” Levi wrote in a Tuesday note. “While investors have struggled in the past with valuation given lack of profitability, we expect SPOT to gain valuation support with EBITDA now firmly in positive territory and growth pegged against peers.” The analyst said Spotify’s podcast business is on track to break-even in the first half of this year, and that its music segment should also benefit from new royalty deals with labels, which should support ad-supported margins. Revenue should grow 13% CAGR between 2023 and 2027, and gross margins should also expand during that period, Levi said. The stock is up more than 16% higher this year, and jumped more than 118% over the past year. Shares traded about 2% higher in premarket trading. — Pia Singh 5:42 a.m.: Raymond James downgrades AMD Artificial intelligence expectations for AMD are becoming too elevated, according to Raymond James. The firm lowered its rating on the chipmaker to outperform from strong buy. It also raised its price target to $195 per share from $190, but that only implies upside of 9.6%. “We project AMD’s base business to earn $3.5-4 in 2025, which means AI GPUs will need to contribute > $3 EPS. That is equivalent to $12B revenue or 800k units,” wrote analyst Srini Pajjuri. “In comparison, we estimate NVDA shipped 2M units in CY23 and are projecting 3.2M units for CY25. While ~20% unit share is not impossible, we think it’s a little premature to give the benefit of the doubt.” AMD shares dipped slightly in the premarket. The chipmaker’s stock is off to a roaring start for 2024, surging 20.6%. AMD YTD mountain AMD in 2024 — Fred Imbert 5:42 a.m.: Morgan Stanley upgrades Bank of America, Citigroup and Goldman Sachs Morgan Stanley is getting bullish on major banks. Analyst Betsy Graseck raised her rating on Bank of America and Goldman Sachs to overweight from equal weight. She also upgraded Citigroup to overweight from underweight. Broadly, she cited three reasons for her optimism on the major banks: Risks from upcoming “Basel Endgame” rules “coming into focus: “Reading the tea leaves, it looks like Basel Endgame will be significantly lightened up vs. the current proposal.” The possibility of greater buybacks, “especially given large banks have the highest excess capital levels ever in an environment where loan growth is tepid.” “Our conviction in a capital markets rebound is growing.” Specifically for BofA, Graseck said the stock is now trading at an attractive valuation, adding the banking giant benefits from a “strong consumer deposit franchise, with 92% of consumer checking accounts being primary accounts and 67% of deposit balances being with customers that have been at BAC for more than 10 years.” The analyst raised her price target on Bank of America to $41 from $32. The new forecast implies upside of nearly 22%. Graseck also called Citigroup “the biggest beneficiary among the money centers from potentially lighter Basel Endgame rules as their stock trades at only 0.5x [book value per share]. That means they have the ability to buy back stock below book, a very accretive financial transaction.” Morgan Stanley raised its price target on Citigroup to $65 from $46, implying upside of 20.1% over the next 12 months. As for Goldman, Graseck noted it’s the bank with the most exposure to a “capital markets rebound, with 64% of revenues coming from Global Banking & Markets in 2024 in our model.” She raised her price target on the stock to $449 from $333, implying 18% upside. Bank of America and Goldman shares are off to a sluggish start for 2024, losing 0.2% and 1.4%, respectively. Citigroup has outperformed early in the year, rising 5.2%. BAC C,GS YTD mountain BAC, C and GS in 2024 — Fred Imbert
Tuesday’s analyst calls: Big banks get major upgrades, UBS calls for 25% rally in Spotify
