Netflix stock price target raised to $1,000 at KeyBanc

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Investing.com -- KeyBanc Capital Markets raised its price target for Netflix (NASDAQ:NFLX) to $1,000 from $785 a share on Tuesday, citing a combination of historical...

Investing.com -- KeyBanc Capital Markets raised its price target for Netflix (NASDAQ:NFLX) to $1,000 from $785 a share on Tuesday, citing a combination of historical outperformance, moderating competition, and a promising outlook for revenue and free cash flow (FCF) growth.

The firm maintained its Overweight rating on the stock, expressing confidence in Netflix’s ability to outperform the S&P 500 into 2025.

Analysts highlighted that Netflix’s shares are trading at approximately 9x next-twelve-month (NTM) enterprise value-to-sales (EV/S), a level historically signaling peak valuation.

However, they argued, "this time may be different," citing the company’s pivot from paid net subscriber additions to an emphasis on engagement and viewership.

KeyBanc analysts noted, "Live events and returning originals are expected to attract users and advertisers.”

“Netflix's profit advantage over peers should sustain viewership gains," they added.

These factors, along with the platform’s strong monetization potential and FCF generation, underpin the analysts’ optimistic outlook.

Netflix’s historical narrative as a “share winner” has played a significant role in its performance, according to the bank.

KeyBanc states: "During these periods, the median return above the S&P 500 has exceeded 90% and the NTM EV/S multiple typically peaks between 9-10x."

While the firm acknowledges risks of valuation vulnerability at this level, they see unique catalysts this time around, including Netflix's ability to monetize its significant viewership advantage.

Despite lowering EPS estimates for 2024 and 2025 slightly due to foreign exchange (FX) impacts, KeyBanc reaffirmed its confidence in Netflix's medium-term growth.

“Netflix's consistent 10%+ revenue growth and 20%+ EPS growth profile over the medium-term should garner a premium to the Company's three-year median P/E of 30.4x,” the analysts wrote, justifying the $1,000 price target based on 32.5x 2026 estimated EPS of $30.80.

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Santa Claus Is a Reality for Markets. How History Points to a Rally. — Barrons.com

Dow Jones Newswires

You don't have to believe in Father Christmas to know that the Santa Claus rally is real.

Gains in this period can be seen as more than a nice year-end bonus. It also sets up the market for the rest of the following year.

First observed in the 1970s by Yale Hirsch in his seminal Stock Trader's Almanac, the Santa Claus rally is usually defined as what happens to the S&P 500 in the last five trading days of December and the first two of January. This year, that means the period from now until Friday, Jan. 3.

Just look at the data, which are compelling. Since 1950, the market has risen approximately 80% of the time in the seven-day window. And even though the S&P has already gained more than 25% this year, there's no reason to think it can't edge up a little higher now.

There are plenty of theories for why this happens. Maybe it's just good cheer. Maybe it has to do with thin volumes and the fact that institutional investors are taking time off, leaving the trading to retail investors who are more likely to buy than sell. It's impossible to rule out that there might be a little holiday magic involved, too.

Another possibility is the stock market, when left alone, tends to go up. There are very few scheduled events over the next few weeks--weekly jobless figures on both Thursdays and Case-Shiller house prices on New Year's Eve are the highlights. The Santa rally could just be a reminder of why the stock market isn't like a casino--when you invest, you're more likely to win than to lose.

There are, of course, still risks. Surprises always have the potential to steal Christmas gains, and an unguarded post from President-elect Donald Trump, or signs of retail gloom in the shopping malls would be all it takes. But as the market settles down for a "long winter's nap," investors should have visions of sugar plums dancing in their heads, at least until everyone returns to their desks.

Brian Swint

*** The Barron's Daily will be taking a holiday break. It will next publish Friday, Dec. 27, 2024.

***

Netflix Faces Christmas Day Test of Live Event Streaming

Netflix's push into live sports is about to get serious as it prepares to show two NFL games live on Christmas Day, complete with appearances from pop superstars Mariah Carey and Beyoncé. This comes after a glitch-ridden attempt at streaming last month's boxing match between Jake Paul and Mike Tyson.

There are risks. It's nearly four times as expensive to air an NFL matchup as it is to make a hit series like Netflix' "Squid Game." And Netflix will find itself competing in livestreaming against cash flush Big Tech giants. Some 60 million households tuned into the Paul-Tyson bout.
Adding live sports could also help Netflix bring in more money from advertisers at the expense of rivals such as Walt Disney and Comcast. Oppenheimer & Co. analyst Jason Helfstein sees a $2.2 billion advertising opportunity for the company from live events. But Netflix will need deep pockets.
It is paying $150 million to broadcast the Christmas NFL games and it will also air at least one festive game in 2025 and 2026, The Wall Street Journal reported. Amazon paid $11 billion to air Thursday Night Football for 11 years and $1.8 billion annually to air NBA games.
Netflix has to livestream without the glitches it had last month, when many people couldn't access the boxing fight. Typically, Netflix makes up 11% of North American internet traffic, the Journal reported, citing web use tracker Sandvine. During the fight it was 39% for one internet provider.

What's Next: Netflix's early internal estimates project that the football games could draw as many as 35 million concurrent streams globally but it is prepared for more, the Journal reported. Christmas is usually one of the top days of the year for internet usage, the report said.

George Glover and Liz Moyer

***

Nordstrom Family Strikes Take-Private Deal for Department Store Chain

Members of the Nordstrom family are getting their take-private after several attempts, teaming up with Mexican department store operator El Puerto de Liverpool to buyout shareholders at $24.25 in cash for each share. The family will retain just over half the ownership.

The $4 billion deal comes after previous attempts by the family, including talks that started in June 2017 but were suspended that October and an $8.4 billion take-private proposal by the family the following year that a special committee rejected.
The Nordstrom family proposed an acquisition in June 2017, but the transaction was suspended the following October. The family then attempted to take the company private in 2018, though the $8.4 billion offer was swiftly rejected by a special committee formed to review the bid.
Nordstrom's market value peaked around $15 billion a decade ago, but since then the stock has floundered as department stores lose customers to online sellers and discounters. Activist investors have pushed other retailers to separate their real estate holdings.
Separately, the Consumer Financial Protection Bureau sued Walmart and fintech firm Branch Messenger, accusing the retailer of forcing delivery drivers to use costly deposit accounts to get paid and deceiving the drivers about how to access their pay. Walmart and Branch denied the allegations and said they would defend themselves in court.

What's Next: The Nordstrom deal is expected to be completed in the first half of 2025, and will represent an enterprise value of $6.25 billion including debt. Regulators and two-thirds of Nordstrom shareholders have to approve it.

Mackenzie Tatananni and Liz Moyer

***

MicroStrategy Bought More Bitcoin and the Stock Dropped

MicroStrategy, the world's largest corporate holder of Bitcoin, bought another $561 million of the cryptocurrency in the past week, continuing a string of weekly purchases that began in early November. It was the smallest weekly purchase over the span.

According to a securities filing Monday morning, the company funded the latest purchase with equity sales of $561 million under an "at-the-market" program of sales.
The latest buys were far below the $1.5 billion announced on Dec. 16 and the $2.1 billion disclosed on Dec. 9. MicroStrategy paid an average of over $106,000 per coin for the latest purchase, made between Dec. 16 and Sunday. It now holds 444,262 Bitcoin worth about $43 billion.
The company has sold more than $14 billion of stock since then and another $3 billion of convertible debt to fund Bitcoin purchases.
Shares fell 8.8% on Monday, which was also the first day it traded as a constituent in the Nasdaq 100 index.

What's Next: The relatively small recent equity sales could indicate that it is getting harder for MicroStrategy to find new investors after completing large stock sales over the past two months. The company didn't immediately respond to a request for comment.

Andrew Bary

***

Newsletter edited by Liz Moyer, Brian Swint, and Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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3 Streaming Service Stocks Changing Entertainment

StockNews

Streaming service stocks are at the forefront of the entertainment industry's transformation, offering viewers unprecedented access to content across genres and languages. The shift from traditional cable to on-demand streaming has driven significant growth for companies in this space, making them key players in the digital economy.

Given this landscape, it might be wise to consider investing in three fundamentally strong streaming service stocks, Netflix, Inc. , Amazon.com, Inc. , and Alphabet Inc. , which have revolutionized access to content, shifting audiences away from traditional cable TV.

Competition among streaming giants has fueled innovation, with companies investing heavily in original programming and exclusive content. This race for differentiation has not only elevated production standards but also broadened the appeal of streaming services to diverse demographics. As per the 2024 Preserve Viewer Choice Coalition survey, 64% of viewers prefer streaming video over cable or satellite services, redefining the next era of entertainment.

Moreover, the rise of ad-supported streaming tiers is reshaping the industry’s revenue model. Consumers are also opting for ad-supported alternatives as streaming services multiply and subscription costs rise. This hybrid approach balances subscriber growth with diversified income streams, further solidifying the financial health of streaming service providers.

Further, the global video streaming market is anticipated to reach $416.84 billion by 2030, exhibiting a CAGR of 21.5%. As consumer preferences continue to evolve, the adaptability and innovation of these companies position them well for sustained growth in the entertainment landscape.

Considering these conducive trends, let’s examine the Internet industry stocks in detail, beginning with the third choice:

Stock #3: Netflix, Inc. (NFLX)

NFLX provides entertainment services that acquire, license, and produce content, including original programming. The company offers TV series, documentaries, feature films, and games across various genres and languages, operating in approximately 190 countries.

On December 16, NFLX partnered with Domino’s Pizza to promote the upcoming season of Squid Game by offering free Emergency Pizza for a year to players with the lowest scores in Squid Game: The Experience.

On December 10, NFLX and Mastercard Incorporated teamed up to offer exclusive benefits such as presale tickets at Netflix House. This partnership will allow MA to be the preferred payment partner for Netflix Bites, Stranger Things: The First Shadow, and Netflix House in the upcoming year.

NFLX's trailing-12-month ROCE and ROTA of 34.71% and 14.88% are 635.2% and 704.8% higher than their respective industry averages of 4.72% and 1.85%. Likewise, its trailing-12-month asset turnover ratio of 0.74x is 49.8% above the industry average of 0.49x.

NFLX’s revenue for the third quarter (ended September 30, 2024) increased 15% year-over-year to $9.82 billion. The company reported an operating income of $2.91 billion, indicating a 51.8% growth from the prior-year quarter. NFLX’s net income came in at $2.36 billion and $5.40 per share, up 40.9% and 44.8% year-over-year, respectively.

Street expects NFLX’s revenue for the fiscal fourth quarter (ending December 2024) to increase 14.8% year-over-year to $10.14 billion. Its EPS for the same period is expected to register a 100.5% growth from the prior year, settling at $4.23. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is promising.

Shares of NFLX have surged 85.8% over the past year and 44.8% over the past nine months to close the last trading session at $909.05.

NFLX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

NFLX has a B grade for Quality. It is ranked #20 out of the 50 stocks in the A-rated Internet industry. Click here to see the additional ratings for NFLX (Growth, Value, Momentum, Stability, and Sentiment).

Stock #2: Amazon.com, Inc. (AMZN)

AMZN is a global giant in the retail sector, offering consumer products, advertising, and subscription services through online and physical stores across North America and international markets. The company operates through three segments: North America; International; and Amazon Web Services (AWS). The company owns Prime Video, one of the largest original content viewing platforms.

In terms of the trailing-12-month net income margin, AMZN’s 8.04% is 92.6% higher than the 4.18% industry average. Similarly, its 8.76% trailing-12-month levered FCF margin is 94.9% higher than the industry average of 4.49%. Also, its trailing-12-month ROTA of 8.53% compares to the industry average of 3.95%.

For the third quarter of 2024, which ended on September 30, AMZN's total net sales increased 11% year-over-year to $158.88 billion, while the operating income stood at $17.41 billion, up 55.6% year-over-year. Its net income amounted to $15.33 billion, representing an increase of 55.2% from the last year’s period. Also, the company’s EPS for the quarter increased 52.1% year-over-year to $1.43.

Analysts expect AMZN’s revenue for the fourth quarter (ending December 2024) to increase 10.2% year-over-year to $187.25 billion, while its EPS for the same quarter is expected to grow 47.8% from the prior year to $1.48. Moreover, the company has surpassed Street EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 47.9%, closing the last trading session at $224.92.

AMZN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Sentiment and a B for Growth, Momentum, and Quality. Within the same A-rated industry, it is ranked #15. Click here to see AMZN’s ratings for Value and Stability.

Stock #1: Alphabet Inc. (GOOGL)

GOOGL is the powerhouse behind a spectrum of tech innovations and various products and platforms worldwide. It operates through Google Services; Google Cloud; and Other Bets segments. The company is also the renowned owner of YouTube.

The stock’s trailing-12-month EBIT margin of 32.09% is 227.7% higher than the industry average of 9.79%. Similarly, its 32.10% trailing-12-month ROCE is 579.8% above the industry average of 4.72%. Also, its trailing-12-month asset turnover ratio of 0.82x compares favorably to the industry average of 0.49x.

In the fiscal third quarter, which ended on September 30, 2024, GOOGL’s revenues increased 15.1% year-over-year to $88.27 billion. Its income from operations rose 33.6% from the year-ago value to $28.52 billion. The company’s net income amounted to $26.30 billion and $2.12 per share, reflecting increases of 33.6% and 36.8% from the prior-year quarter, respectively.

The consensus revenue estimate of $96.67 billion for the fiscal fourth quarter (ending December 2024) represents a 12% increase year-over-year. The consensus EPS estimate of $2.12 for the ongoing quarter indicates a 29.1% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

The stock has gained 38.4% over the past year and 28.7% over the past nine months to close the last trading session at $191.41.

It’s no surprise that GOOGL has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Quality. Out of 50 stocks in the industry, GOOGL is ranked #14.

Beyond what is stated above, we’ve also rated GOOGL for Growth, Value, Momentum, and Stability. Get all GOOGL ratings here.

What To Do Next?

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AMZN shares were trading at $225.27 per share on Monday afternoon, up $0.35 (+0.16%). Year-to-date, AMZN has gained 48.26%, versus a 25.90% rise in the benchmark S&P 500 index during the same period.

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Compass Point initiates ‘buy’ on NCR Atleos

Investing.com

Investing.com -- Compass Point initiated coverage of NCR (NYSE:VYX) Atleos Corp (NYSE:NATL) with a "buy" rating and a price target of $57, citing strong free cash flow growth, market leadership in the ATM sector, and undervaluation relative to peers.

The firm forecasts FCF of $418 million for 2026, implying a market capitalization-to-cash flow multiple of 10 times and representing a potential 74% upside from current levels.

The company holds a 36% share of the ATM market and is well-positioned to benefit from increasing demand for managed and ATM-as-a-service products. Average revenue per unit in its Self-Service Banking (SSB) segment is expected to rise from $5.1 in 2024 to $5.9 in 2026.

Compass Point noted NCR Atleos ' return on invested capital is projected to improve from 6.3% in 2024 to 11.9% in 2026. The company also trades at a 10% discount to peers such as Euronet Worldwide (NASDAQ:EEFT) and Diebold Nixdorf (OTC:DBDQQ), with room for a premium valuation given its focus on free cash flow growth and profitability improvements.

Shares of NCR Atleos could also benefit from a potential share buyback plan as early as mid-2025, the note added.

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Street calls of the week

Investing.com

Investing.com -- Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.

InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!

Netflix

What happened? On Monday, Loop Capital downgraded Netflix (NASDAQ:NFLX) to Hold with a $950 price target.

*TLDR: Netflix is poised for growth; valuation concerns persist.

What’s the full story? Loop summarized that Netflix is exceptionally well-positioned, projecting over 30M new subscribers this year, second only to the 2020 pandemic surge. Revenue returned to mid-teen growth, and operating margins are expected to rise by 600bps in 2024, with management consistently upgrading guidance over the past four quarters. A significant Q4 subscriber increase was anticipated due to high-profile events like the Paul/Tyson match and NFL Christmas games featuring Beyoncé.

Co-CEO Ted Sarandos expressed strong optimism about the 2025 content lineup, calling it possibly their strongest since starting original programming. Despite not raising its most popular U.S. pricing tier in almost three years, Netflix remains competitively priced. However, due to historically high valuation multiples, Loop cut Netflix to Hold noting shares are near fair value.

Hold at Loop Capital means “The stock is expected to perform in line with the market or its peer stocks over the next 12 months.“

Tesla

What happened? On Tuesday, Mizuho (NYSE:MFG) upgraded Tesla Inc (NASDAQ:TSLA) to Outperform with a $515 price target.

*TLDR: Mizuho upgrades Tesla, sees significant valuation upside. Price target raised to $515.

What’s the full story? Mizuho’s upgrade comes on the wave of idiosyncratic tailwinds over the coming four years. The firm notes that loosening Autonomous Driving regulatory frameworks provide more FSD/Robotaxi valuation upside, the new Trump administration policies position Tesla better with a lower EV cost structure compared to peers, and TSLA is set to outgrow global light vehicle production with a more profitable EV roadmap featuring the low-cost Model Q/Cybercab in 2026-2027.

Mizuho's SOTP valuation implied approximately $1.8 trillion for Tesla, with core autos, energy, and other segments at around $711 billion, FSD and Robotaxi at $614 billion with upside to $896 billion, and humanoid robots at $472 billion with potential to reach $740 billion. Consequently, Mizuho raised its price target to $515 from $230, aligning with its valuation, driven by positive recalibration with the new administration and FSD/Robotaxi optimism, despite near-term challenges from EU tariffs and EV credit repeals.

Outperform at Mizuho means “The stock's total return is expected to outperform the unweighted, expected total return of the analyst's industry coverage universe over the next 12 months. “

Citizens Financial

What happened? On Wednesday, Raymond (NS:RYMD) James double upgraded Citizens Financial Group Inc (NYSE:CFG) to Strong Buy with a $55 price target.

*TLDR: Raymond James bullish on CFG, boosting NIM/NII. Profits expected to rise.

What’s the full story? Raymond James reports that headwinds from received-fixed swaps are expected to subside, boosting CFG's net interest margin (NIM) and net interest income (NII). The firm anticipates an increase in capital markets fees, outperforming current expectations as the environment becomes more favorable for mergers and acquisitions (M&A) and capital raising. The private banking initiative is projected to see accelerating profitability, while credit concerns appear benign with metrics likely to improve due to contracting rates and a declining contribution from the run-off portfolio.

As a result, the analysts are incrementally bullish on CFG shares, citing the discounted valuation as an attractive entry point for a bank well-positioned to improve its profitability and earnings per share (EPS) growth going forward.

Strong Buy at Raymond James means “The security is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six to 12 months. “

Oklo Inc.

What happened? On Thursday, Wedbush initiated Oklo Inc (NYSE:OKLO) at Outperform with a $26 price target.

*TLDR: Wedbush highlighted Oklo's strong position. AI-driven demand boosts Oklo’s prospects.

What’s the full story? Wedbush noted that Oklo, a Santa Clara-based SMR manufacturer founded in 2013, aimed to develop its first small modular reactor by 2027. Backed by Sam Altman, Oklo's Aurora microreactor, scalable to 100MW, will operate for over 10 years before refueling.

Oklo's project pipeline was 93% ahead of its 2027 deployment plan, with data centers accounting for a significant portion of its power under letters of intent.

The analysts highlighted Oklo's unique build, own, and operate business model, selling power directly to customers under long-term contracts for recurring revenues and regulatory streamlining. Despite being in the pre-revenue stage, Oklo planned to accelerate additional revenue streams, including recycling, following its acquisition of Atomic Alchemy.

The AI revolution and growing demand for clean energy put Oklo in a strong position to capitalize on this elevated demand.

Outperform at Wedbush means “Expect the total return of the stock to outperform relative to the median total return of the analyst's (or the analyst's team) coverage universe over the next 6-12 months.

PBF Energy

What happened? On Friday, TD Cowen downgraded PBF Energy Inc (NYSE:PBF) to Sell with a $20 price target.

*TLDR: TD Cowen noted PBF's weak refining performance. West Coast exposure viewed as a detriment.

What’s the full story? TD Cowen noted that PBF has shown peer-low refining results per barrel over the past 1.5 years, due to its high-cost refining system and weak light/heavy differentials. The analysts noted that PBF's significant West Coast exposure could be a detriment through 2025, given increasing renewable diesel imports and continued gasoline demand destruction. TDC is valuing PBF based on a 50/50 NPV of FCF to 2026 at a 10% yield and NPV of EBITDA at 6x, with 2026 as a terminal mid-cycle year.

The valuation incorporated $1/bbl lower cracks than the strip in 2025, $1/bbl higher in 2026, and normalized heavy/light differentials. TD Cowen also highlighted that PBF was currently trading at 5.5x EV/EBITDA in 2026, accounting for changes in capital structure, consistent with the historical trading range, despite limited FCF generation.

Sell at TD Cowen means “The stock is expected to achieve a total return of -10% or below over the next 12 months.”

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5 big analyst AI moves: Nvidia still top pick into 2025; MU, ORCL downgraded

Investing.com

Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!

Nvidia stock remains top pick for 2025: MS

Morgan Stanley (NYSE:MS) reaffirmed Nvidia (NASDAQ:NVDA) as a top stock pick for 2025, maintaining its Overweight rating and a price target of $166.

Despite some near-term headwinds, including a slowdown in Hopper builds and staggered Blackwell product readiness, Morgan Stanley views these challenges as temporary.

By the second half of 2025, the strength of Blackwell will be “the only topic,” the firm’s analysts stressed.

Addressing competitive pressures from ASIC solutions, particularly from Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO), Morgan Stanley believes purchasing trends will favor GPUs over time.

“While our forecasts for both AVGO/MRVL ASIC revenue are largely conservative, as are our forecasts for GPU, we believe that GPU will meaningfully outperform ASIC this year,” analysts noted.

The report also highlights Nvidia’s $12 billion annual R&D investments as critical for maintaining its leadership in AI hardware and system-level innovations.

Analysts also addressed the concerns over industry challenges, including scaling Artificial General Intelligence (AGI) clusters.

While technologists advocate for larger AGI systems, financial backers remain cautious about return on investment (ROI). Nvidia’s innovations, such as Mellanox (NASDAQ:MLNX) and NV-Link, are positioned to improve efficiency in this area.

Nvidia’s growth drivers—including inference, sovereign AI training, and enterprise applications—account for 70% of its data center revenue. Analysts believe these segments will continue driving growth even amid potential industry consolidation by 2026. “Even with some consolidation in the arms race, we should still see enduring growth potential,” they commented.

The upcoming Consumer Electronics Show (CES) in January 2025 is expected to boost sentiment for Nvidia. Analysts anticipate the messaging will emphasize strong Blackwell demand, albeit with supply constraints.

“But by mid year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in 2h, potentially unlocking more significant upside,” the note concluded.

Tesla stock remains the “narrative king”, Barclays says

Tesla (NASDAQ:TSLA) has experienced an extraordinary rally since the U.S. election, solidifying its status as the market's "narrative king," according to analysts at Barclays (LON:BARC).

The electric vehicle (EV) maker's shares have surged approximately 90%, adding about $730 billion to its market capitalization - a feat matched only by a few tech giants like Nvidia and Apple (NASDAQ:AAPL).

Barclays notes that this performance is particularly remarkable given the stock's apparent disconnect from underlying fundamentals. Tesla's price-to-earnings (P/E) ratio has soared from 80x before the election to an elevated 145x based on 2025 consensus EPS estimates.

“The decoupling from fundamentals in many ways mirrors the rally we saw from Tesla in 2020-21," analysts led by Dan Levy said in a note.

They attribute this rally to the "magnification of Tesla's narrative command," which centers around themes like autonomous vehicles (AV) and AI.

Another factor contributing to the surge is the "Tesla-financial complex," where options activity amplifies stock movements. Moreover, retail investor interest remains robust, with 30% of Tesla's outstanding shares held by individual investors, according to Barclays.

“Tesla remains the 'OG meme stock,'” the analysts emphasized.

Barclays also pointed out the growth of the "Elon premium" in Tesla's valuation. The increased prominence of CEO Elon Musk has elevated interest in the company, translating to heightened enthusiasm for Tesla's stock.

Micron downgraded at BofA after disappointing guidance

Bank of America (BofA) downgraded Micron Technology (NASDAQ:MU) to Neutral from Buy, citing a weaker-than-anticipated gross margin (GM) outlook for the second and third fiscal quarters.

Shares of the chipmaker fell sharply Thursday after delivering disappointing Q2 guidance. Micron projects second-quarter revenue of approximately $7.9 billion, missing both BofA's $8.3 billion estimate and the consensus forecast of $9 billion. The company also expects a Q2 GM of 38.5%, below BofA's 40% estimate and the consensus of 41%.

“Data center and HBM trends remain strong but weakness in PC and phone markets are putting downward pressure on memory pricing, especially in NAND,” BofA analysts led by Vivek Arya noted. Persistent pricing challenges in NAND are expected to extend into the third quarter.

Although BofA remains optimistic about Micron's position in high-bandwidth memory (HBM) and AI markets, it lowered its fiscal 2025 and 2026 pro forma earnings per share estimates by 5% and 11%, respectively, to $6.80 and $8.78. The stock's price target was also cut to $110 from $125.

“Historically the stock has struggled to outperform when GM expansion has remained muted, leading to our stock downgrade to Neutral from Buy, even though we still feel positive about MU’s position in the HBM/AI market where TAM was taken up +20% for CY25 to $30bn.”

While data center and HBM trends are highlighted as strong, the weakness in PC and phone markets continues to weigh on memory pricing, particularly NAND. BofA does, however, see potential for recovery in these markets in the latter half of 2025.

Oracle earns a downgrade on valuation, capex concerns

Monness, Crespi, and Hardt downgraded Oracle (NYSE:ORCL) stock to Sell from Neutral, setting a 12-month price target of $130, implying over 22% upside from the current levels.

The firm raised concerns about Oracle's valuation, rising competition, and aggressive capital expenditure (capex) plans.

Oracle shares have climbed 60% year-to-date, largely driven by generative AI enthusiasm, marking their best performance since 1999. However, Monness analysts warned that "valuation is stretched, competition fierce, software in transition, and the macro environment fragile."

Oracle's recent Q2 earnings highlighted growth challenges, the firm noted. Its FY25 EPS estimate of $6.17 remains unchanged, while its FY25 Cloud Services revenue projection has been revised to $24.9 billion, down from last year’s $25.4 billion forecast.

Monness expressed particular concern over Oracle’s “bold capex plans,” with spending expected to double in FY25.

"Our current FY:25 capex projection of $14.2 billion represents 24.6% of revenue, up from 13% in FY:24, and well above the 27-year average of 4%," the analysts wrote.

They argue this level of expenditure is unsustainable, dragging Oracle’s free cash flow (FCF) margin to an estimated 8% for FY25, far below its historical average of 28%.

The firm also pointed to Oracle’s heavily leveraged balance sheet, with $88.6 billion in debt and a debt-to-capital ratio of 86%. This restricts the company’s ability to boost shareholder returns through dividends or buybacks and limits its capacity for acquisitions or broader organic growth investments.

While Oracle has seen early success in generative AI, Monness cautioned that "an inevitable shakeout in the LLM industry" and intensifying competition from major cloud providers could pose significant risks.

‘In AI we trust:’ BofA says, highlights 6 chip stocks for 2025

Bank of America outlined its 2025 semiconductor outlook on Monday, spotlighting six chip stocks it recommends for investors in the coming year.

The bank forecasts a 15% increase in semiconductor industry sales to $725 billion in 2025. This growth, although robust, is projected to be slower compared to the 20% growth seen in the current year.

BofA anticipates memory sales to rise by 20% in 2025, following a 79% year-over-year increase in 2024, with core semiconductors, excluding memory, expected to grow by 13%.

“We see 2025 as a year of two different trends. In the first half, AI investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis,” analysts led by Vivek Arya said in a note.

“However, in the 2H (second half), interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery.”

BofA’s top picks include leaders in AI such as Nvidia, Broadcom, and Marvell Technology.

“In AI we continue to trust.. at least till 2H25,” analysts said.

Furthermore, the firm identified Lam Research (NASDAQ:LRCX) as a flash-memory tool leader poised for capital expenditure recovery and impact resolution in China.

Auto and EV leader ON Semiconductor (NASDAQ:ON) is highlighted for its potential cyclical recovery in the second half of 2025, and Cadence Design (NASDAQ:CDNS) Systems noted for its resilient double-digit growth, especially as the AI hardware cycle decelerates in the latter half of the year.

Risk Warnings and Disclaimers

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