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Equities

Analyst Calls: Amazon Soars, Starbucks Downgrade, 3M Upgraded

Wall Street reacts positively to Amazon's earnings, Starbucks downgraded by Deutsche Bank, JPMorgan upgrades 3M with potential rallies ahead.

By Alex P. Chase

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5/1, 08:43 EDT
Apple Inc.
Advanced Micro Devices, Inc.
Amazon.com, Inc.
Bank of America Corporation
Dollar Tree, Inc.
Fifth Third Bancorp
Logitech International S.A. - Registered Shares
3M Company
NVIDIA Corporation
Pinterest, Inc.
Sirius XM Holdings Inc.
Seagate Technology Holdings PLC
Skyworks Solutions, Inc.
Tesla, Inc.
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Key Takeaway

  • Amazon's Q1 earnings beat expectations with a 200% increase in operating income and a stock rise of over 2%, JPMorgan sets a $240 target.
  • Starbucks downgraded by Deutsche Bank to hold from buy, with price target adjusted to $89 due to missed earnings and revised forecasts.
  • JPMorgan upgrades 3M from neutral to overweight, seeing a potential 15% rally, citing improvements in fundamentals and balance sheet strength.

Amazon's Earnings Triumph

Amazon's recent first-quarter earnings report has been met with positive reactions from Wall Street, as the company exceeded expectations in both earnings and revenue. The e-commerce behemoth reported a more than 200% increase in operating income, with profits tripling to 98 cents per share from 31 cents a year ago. This impressive financial performance led to a surge in Amazon's stock price, which rose more than 2% in premarket trading, marking a 15% increase for the year. Analysts from major banks such as Barclays, Bank of America, JPMorgan, and Morgan Stanley have reaffirmed their positive outlook on Amazon, with JPMorgan analyst Doug Anmuth setting a high price target of $240, indicating a potential 37% rally from current levels. The success of Amazon Web Services (AWS) and the company's strategic focus on artificial intelligence (AI) were highlighted as significant contributors to this achievement. "AMZN's greater capital intensity — which is coming mostly in AWS — is driven by increased demand for cloud services and GenAI. We believe this is positive as AMZN has a very clear path to monetization of infrastructure investments through AWS, & has a track record of favorable returns," stated JPMorgan analyst Anmuth.

Starbucks Faces Downgrade

Starbucks experienced a setback following its fiscal second-quarter earnings report, leading Deutsche Bank to downgrade the coffee giant from buy to hold. Analyst Lauren Silberman adjusted the price target to $89 from $108, suggesting a minimal potential increase in share value. The downgrade was prompted by Starbucks missing both earnings and revenue consensus estimates and revising its earnings and revenue forecast for the 2024 fiscal year downward. Silberman cited persistent headwinds, limited visibility into recovery, and challenges such as declining foot traffic and heightened competition as reasons for the downgrade. Concerns were also raised about the company's performance in China and the impact of a reduced unit growth guide on growth outlook expectations.

JPMorgan's Contrarian Call on 3M

In a move against the consensus, JPMorgan upgraded 3M from neutral to overweight, with analyst C. Stephen Tusa increasing the price target to $111 from $110. This upgrade suggests a potential 15% rally for 3M shares, which have already risen nearly 6% in 2024. Tusa pointed to modest improvements in underlying fundamentals, exposure to recovering electronics markets, and a stronger-than-expected balance sheet as key factors for the upgrade. Despite 3M cutting its dividend for the first time in 64 years, Tusa sees potential for upside, especially given the stock's current lack of favor among Wall Street analysts. "We acknowledge the unknowns, but think our estimate of a doubling in the current liability burden, the timing around which is unclear, leaves plenty of leeway for upside near term," Tusa remarked.

Street Views

  • Bank of America (Bullish on Amazon):

    "In our view, a major positive from the call was CEO commentary that margins can continue to expand while Amazon invests."

  • Barclays (Bullish on Advanced Micro Devices):

    "In all, AMD remains one of the best positioned names in AI coupled with an improving core business."

  • Morgan Stanley (Bullish on Tesla):

    "Tesla leadership has a history of upping up the intensity when its back is against the wall. Investors should expect a volatile tape as the company enters an ‘unfamiliar’ phase in its strategic lifecycle."

  • JPMorgan (Bullish on Apple):

    "The sentiment has improved despite tough data points as the focus has shifted to owning the potential AI upgrade cycle; however, the upcoming earnings print will still matter for investors in offering insights into the magnitude of the cyclical challenges on account of pressured consumer spending as well as the headwinds in relation to market share moderation in China."

  • Evercore ISI (Bullish on Nvidia):

    "A Tectonic Ecosystem Play in the AI Computing Era."

  • Wedbush (Bullish on Seagate):

    "Finally, with differentiated enterprise drives traditionally having seen margins of 40%+, we see room for STX to significantly lift its profitability in out years as suggested by our new FY2026 earnings estimates."

  • HSBC (Bullish on Endava):

    "Upgrade Endava to Buy (from Hold) with new target price of USD45 (from USD44): we see EPS bottoming out in 3QFY24 as cost optimization measures should start impacting net income positively."

  • TD Cowen (Neutral/Bearish on Skyworks):

    "Furthermore, while gross margin will take time to recover as utilization and Broad Markets pick back up, we believe risk/reward skews negative until there is greater visibility into a Mobile content catalyst. We downgrade SWKS shares to Hold and accordingly adjust our estimates lower to account for this dynamic."

  • Deutsche Bank (Neutral/Bearishon Starbucks): > "We are downgrading SBUX to Hold following a challenging F2Q print that showed signs that headwinds are more pervasive and persistent than we expected, and we have limited visibility into pace and magnitude of recovery."

    • KeyBank(** Bulllish **on Dollar Tree)> "We believe 'Breaking The Buck' still has multiyear runway for Tree banner"

  • JPMorgan(** Bulllish **on Fifth Third)> "Among our regionals ,we expect Fifth Third's earning benefit relatively more near term from higher long term rates"

  • JPMorgan(** Bulllish **on 3M)> "We are upgrading 3Mto OW combination attractive valuation increasingly cleaned balance sheet"

  • Bank Of America(** Bulllish **on Pinterest)> "We rate Pinterest Buy.It offers differentiated user experience "

  • JPmorgan( Neutral/Bearsih) On Logitech> We are downgrading shares Logitech even quarter showed continued signs robust execution

  • Goldman Sachs(Neutral)On SiriusXM> We upgrade shares SiriusXM Neutral(from Sell)following recent underperformance