Wednesday's analyst calls: Alphabet, Tesla earnings reaction, Goldman upgrades Spotify

Published Wed, Jul 24 20245:54 AM EDTUpdated Wed, Jul 24 20248:19 AM EDT

(This is CNBC Pro's live coverage of Wednesday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) Two tech stocks were among the names being talked about by analysts on Wednesday. The Street reacted to Alphabet's latest quarterly report, with many keeping a bullish outlook despite a premarket slide for the stock. Elsewhere, Goldman Sachs raised its rating on Spotify to buy. Check out the latest calls and chatter below. All times ET. 8:18 a.m.: More Tesla: Stock cut by Cantor Fitzgerald and New Street Tesla's second-quarter report appears to have underwhelmed some of the stock's bulls on Wall Street. Cantor Fitzgerald analyst Andres Sheppard downgraded Tesla to neutral from overweight, saying that the stock looks expensive even with the company's long-term growth opportunities. "TSLA's shares are up > 70% in the last 3 months, and thus we are becoming a bit more conservative on valuation in the near-term," Sheppard said. Sheppard estimated that Tesla's long-awaited Robotaxi business is not on track to start until 2027. New Street Research also downgraded the stock to neutral from buy. "We see limited (and unreliable) valuation upside, and limited risks of material positive revisions. ... Next inflection in the stock unlikely in the next 12 months," analyst Pierre Ferragu said in a note to clients. —Jesse Pound 7:47 a.m.: TD Cowen upgrades Lockheed Martin Defense contractor Lockheed Martin should not be out of favor for long due to its improving fundamentals, according to TD Cowen. Analyst Cai von Rumohr upgraded the defense stock from buy to hold, saying in a note to clients that Lockheed's aircraft business is in an upswing. "We see L/MSD F-35 sales growth in 2025-27 as sustainment grows with the fleet and delivery payments catch up. In addition, the F-16 has a backlog of 125 planes and is ramping from 2/mo. to 4/mo. by H2:26. Both programs should see uptrending profitability, and they're a combined 28% of sales," von Rumohr said. TD Cowen hiked its price target on the stock for $560 per share, up from $480. The new target is about 12% above where the stock closed Tuesday. Shares of Lockheed are up less than 11% this year, underperforming the broader market. —Jesse Pound 7:25 a.m.: Goldman upgrades Madison Square Garden Entertainment, sees 15% upside Investors may want to consider scooping up shares of Madison Square Garden Entertainment on the heels of its 5% drop since reporting fiscal third-quarter results, Goldman Sachs says. This sell-off has "created an opportunity for investors to gain pure-play exposure to a high-quality live entertainment venues business at a point in time when the market might be under-estimating the durability of the company's future growth as well as the favorable secular tailwinds that we expect will power it," according to analyst Stephen Laszczyk. Shares of the owner of Madison Square Garden and Radio City Music Hall added about 3% before the bell and looked poised to build on a nearly 23% rally since the start of the year. Laszczyk upped his price target to $45 from $41 a share, reflecting more than 15% upside from Tuesday's close. He views the market as underappreciating the company's execution opportunities and growth potential, and also sees upside to consensus expectations for the fiscal 2025 year. "MSG Entertainment has best-in-class assets … in the leading entertainment market in the world," he wrote. "Given these characteristics, we see MSG Entertainment's premium venue footprint as relatively insulated from broader weakness in industry supply/demand." –Samantha Subin 7:03 a.m.: Barclays lifts its price target on Apple Barclays analyst Tim Long boosted his price target on Apple as he looks for better iPhone, Mac and services growth in the September quarter. "After an almost two-year period with little to no upward estimate revisions, we finally see a better outlook coming for the September quarter," he wrote, citing expectations for a stronger replacement rate in the 2025 fiscal year. "We move iPhones, Macs, and Services slightly higher." Long moved his price target to $187 from $164 a share, still reflecting about 17% downside from Tuesday's close. Shares are up about 17% since the start of 2024. AAPL YTD line Apple stock moves Despite this stronger outlook, Long retained his underweight rating on shares. He views the stock as already having rallied in anticipation of a trough in iPhones and new artificial intelligence features. "While an upward EPS revision may help shares in the near-term, at a multiple of over 30x 2025 EPS, we see less scope for upside at these levels," he said. "We do not think the iPhone16/AI features will be enough to drive a meaningful enough upgrade cycle to justify the valuation." –Samantha Subin 6:54 a.m.: RBC upgrades Estee Lauder, says shares can rally more than 30% RBC Capital Markets is turning more bullish on Estee Lauder after a rocky start to the year took shares down nearly 32%. "At this point, we believe EPS and investor sentiment have troughed and believe the risk-to-reward profile skews favorable," wrote analyst Nik Modi. Modi acknowledged that the company's sales will grow slower than previously expected as China growth eases. However, he views Estee Lauder's margin opportunity as "very tangible" with growth potential. The analyst also attributed the recent stock weakness to investors potentially "double counting" gloomy news coming out of China. Given this outlook, Modi maintained the firm's $131 price target. The price objective implies 31% upside from Tuesday's close. Shares added about 1% before the bell. "With these factors in mind, we ultimately believe that EL shares are trading below fair value," he said. –Samantha Subin 6:39 a.m.: Morgan Stanley downgrades GM, cites 'challenging' industry fundamentals Morgan Stanley downgraded General Motors to equal weight from overweight, citing industry pressures and ongoing China and electric vehicle risks. "Shares are up ~90% from November and GM has been one of the strongest performing auto [original equipment manufacturer] stocks globally YTD," wrote analyst Adam Jonas. "However, with minimal upside to our revised $47 price target and a relatively 'balanced' risk-reward between our $28 bear case …. and our $62 bull case, coupled with industry headwinds … we believe GM is more appropriately rated as EW," he added. The downgrade from Morgan Stanley comes a day after the automobile company topped Wall Street's second-quarter estimates. However, shares fell 6.4% as General Motors pushed out plans for its electric and autonomous vehicles and Wall Street raised concerns over its China business and a potential peak in earnings power. Shares looked poised to add to Tuesday's losses, slipping about 2% in the premarket. The stock is up about 29% since the start of 2024. Among the headwinds General Motors faces, Jonas cited industry-related inventory issues, difficulties in China and a tough electric-vehicle market. –Samantha Subin 6:32 a.m.: Wall Street weighs in on Tesla's earnings, gross margin miss Some top Wall Street firms are bracing for downward pressure on Tesla shares following a disappointing second-quarter earnings report. "While the focus for Tesla currently is on its future growth endeavors, we believe the 2Q miss brings the focus back on fundamentals, at least for a brief moment," wrote Barclays analyst Dan Levy, who has a $225 price target on the stock. Shares of the electric vehicle maker tanked nearly 8% premarket after second-quarter earnings fell short of estimates. Revenue topped expectations, but the company reported adjusted earnings of 52 cents per share, versus an LSEG estimate of 62 cents. Tesla also reported a year-over-year decline in automotive revenue and adjusted operating margins. TSLA YTD line Tesla shares this year "We expect modest pressure on the shares as the Q2 auto margin & [near-term] outlook commentary offset some of the momentum gained from the Q2 delivery beat," Citi's Itay Michaeli wrote. Michaeli retained his neutral rating but trimmed his price target to $258 from $274 a share, viewing new EV models and an upcoming Robotaxi event as critical catalysts for near-term sentiments. Bernstein's Toni Sacconaghi, a long-time Tesla bear, maintained an underperform rating following the results – which suggested ongoing competition pressures and demand issues within Tesla's auto business. His $120 price target reflects nearly 28% downside. "Tesla's auto business does not appear to have found a bottom in terms of margins, we continue to expect little to no growth in 2024 and 2025, and believe that in general growth stocks only work when they grow," he wrote, viewing the risk-reward over the long run as "unfavorable." Goldman Sachs analyst Mark Delaney trimmed his price target to $230 from $248 a share on the heels of the results, reflecting about 7% downside from Tuesday's close. He also lowered EPS estimates for this year, 2025 and 2026. "Until Tesla is able to begin production of new lower cost models, which the company expects in 1H25, we believe pricing/incentives could remain a key demand lever and weigh on margins," he said. "We believe a key debate from here will be around the extent that new models are differentiated enough on price and/or features compared to current offerings to drive improved volume growth." –Samantha Subin 5:54 a.m.: Wall Street stands by Alphabet, AI potential post-earnings Wall Street analysts remain bullish on the outlook for Alphabet , even after the stock fell on the back of its second-quarter results. "GOOGL believes AI Overviews are driving higher usage & engagement, & monetization is building," wrote JPMorgan's Doug Anmuth. "Importantly, we believe GOOGL's strong 2Q Search results, combined w/ further positive commentary on AI Overviews, will allay near-term fears around market share & competition, though it will take time to work through long-term debates." The commentary from Wall Street comes after the search giant beat quarterly estimates on the top and bottom lines, posting earnings of $1.89 per share and $84.74 billion in revenue. Shares, however, slipped about 3% as the company fell short on advertising revenue estimates for YouTube. Bank of America analyst Justin Post reiterated his buy rating and $206 price target in the wake of the print, saying that another solid quarter "reinforces [the firm's] thesis that Google is a net AI beneficiary." Goldman Sachs' Eric Sheridan, meanwhile, noted that "away from any short-term debates (which might persist about the macroeconomic environment and/or nuances of this specific earnings report), we continue to view Alphabet as well-positioned against both the current … and potential future … computing landscapes." The analyst retained his buy rating and upped his price target to $217 a share, reflecting about 19% upside. He expects discussions surrounding the future of search and long-term investments in data centers and other capital expenditures to drive investor discussions going forward. Despite the positive long-term outlook on shares, some analysts are bracing for some potential uncertainty and pressure in the second half as Alphabet faces difficult advertising comparisons. Jefferies analyst Brent Thill expects a deceleration in search, offset partially by Olympics and election content. "Despite the tougher comps, we expect GOOGL can grind higher in 2H thanks to continued strength in core Search, potential for Google Cloud to further accelerate on AI, and additional margin surprises," he wrote. – Samantha Subin 5:54 a.m.: Goldman Sachs upgrades Spotify The sky's the limit for Spotify after its latest quarterly report, according to Goldman Sachs. Analyst Eric Sheridan upgraded the audio streaming platform to buy from neutral. His price target of $425, up from $320, implies upside of more than 28% from Tuesday's close. "SPOT is the clear global audio platform leader, which we expect to translate into elements of scaled compounded user growth, rising engagement across multiple format structure & pricing power for our operating forecast period," Sheridan wrote. He added that, "coming out of its late 2023 operating costs restructuring, SPOT (in our view) is beginning to show much of the gross and operating margin trajectory that the company has discussed as medium/long term goals dating back over the last 3-5 years." The upgrade follows Spotify reporting record quarterly earnings, sending shares up nearly 12%. That marked the stock's biggest one-day gain since January 2023. SPOT 5D mountain SPOT 5-day chart — Fred Imbert