Daily Update - March 17, 2023

Selected highlights of the day

By: Matthew Otto

First Republic Bank rescue

A consortium of banks including Bank of America, Citigroup, JPMorgan Chase, and others will make uninsured deposits totaling $30 billion in First Republic Bank, according to a joint statement. Other banks participating in the program include Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Financial Services Group, State Street, Truist Financial, and U.S. Bancorp. The cash infusion was championed by regulators, including the Federal Reserve, Federal Deposit Insurance Corporation, Treasury Department, and Office of the Comptroller of the Currency.

  • Atlantic Equities’ John Heagerty downgraded the bank from Overweight to Neutral.
  • Wedbush’s David Chiaverini downgraded it from Outperform to Neutral.

Oppenheimer likes GPT prospects

According to Oppenheimer analyst Timothy Horan, Microsoft’s close relationship with OpenAI and its access to data from around 1.5 billion users gives it an advantage over other technology companies, including Google and Salesforce, in developing and integrating AI tools into its office-productivity suite. Microsoft’s latest AI technology, 365 Copilot, which uses the latest version of the technology behind ChatGPT, is expected to solidify its lead in AI-enabled services. However, Microsoft’s integration of AI tools into its productivity suite is also seen as a potential risk compared to its use in Bing, where it has relatively little to lose against Google. Other companies, such as Baidu, are also working on their own AI offerings, but they may take several years to catch up to the level of Microsoft’s technology. Mizuho Securities analyst Gregg Moskowitz believes that Microsoft will significantly monetize its AI initiatives over time, including Microsoft 365 Copilot.

  • Moskowitz maintained a Buy rating and raised his price target from $300 to $315.
  • Rishi Jaluria, an analyst at RBC Capital, has reiterated an Outperform rating for Microsoft and maintained a price target of $285.

FedEx

Has reported earnings of $3.41 per share from $22.2 billion in sales for its fiscal third quarter, beating Wall Street expectations of $2.71 per share from sales of $22.7 billion. Despite a year-over-year decline in earnings and express package volumes, FedEx CEO Raj Subramaniam noted the company’s continued efforts to improve efficiency and control costs, which led to an improved outlook for the current fiscal year. FedEx plans to cut $3.7 billion in costs for fiscal year 2023 and recently announced plans to reduce management headcount by 10%. The company now expects to earn around $14.10 per share, an increase from its December guidance of around $13.50 per share.

FedEx has updated its earnings forecast for the fiscal year and now expects earnings per diluted share of $13.80 to $14.40 before the mark-to-market (MTM) retirement plans accounting adjustments, up from the prior forecast of $12.50 to $13.50 per diluted share. The company also expects an effective tax rate of 25% to 26% before the MTM retirement plans accounting adjustments. The improved earnings outlook is due to the company’s continued cost and efficiency initiatives. However, FedEx is unable to provide a fiscal 2023 earnings per share or effective tax rate outlook on a GAAP basis due to its inability to forecast the fiscal 2023 MTM retirement plans accounting adjustments.

  • Barclays analyst Brandon Oglenski affirms an Overweight rating and increases the price target from $240 to $280.
  • Goldman Sachs analyst Jordan Alliger retains a Buy rating and revises the price target upward from $218 to $250.
  • Stephens & Co. analyst Jack Atkins sustains an Overweight rating and boosts the price target from $200 to $295.
  • Citigroup analyst Christian Wetherbee maintains a Buy rating and elevates the price target from $250 to $275.

Sarepta Therapeutics

Has announced that an advisory committee meeting will be held for SRP-9001 in advance of the May 29, 2023 regulatory action date. SRP-9001 is Sarepta’s investigational gene therapy for the treatment of Duchenne muscular dystrophy. The advisory committee meeting primarily relates to the totality of evidence supporting the conclusion that the SRP 9001 dystrophin is reasonably likely to predict clinical benefit, the standard for accelerated approval. The company is prepared to present evidence supporting the transformative potential of SRP-9001. SRP-9001 is an investigational gene transfer therapy intended to deliver SRP-9001 to muscle tissue for the targeted production of functional components of dystrophin, a protein that is essential for the proper functioning of muscles

  • Gil Blum from Needham retained a Buy rating, but decreased the price target to $160.
  • Brian Abrahams from RBC Capital sustained an Outperform rating, but reduced the price target to $200.
  • Uy Ear from Mizuho reaffirmed a Buy rating and sustained a $160 price target.
  • Judah Frommer from Credit Suisse retained a Neutral rating while decreasing the price target from $144 to $139.

WBD

  • Steven Cahall from Wells Fargo has raised Warner Bros. Discovery’s rating from Equal-Weight to Overweight and set a new price target of $20.
  • Peter Supino from Wolfe Research has upgraded the company’s rating from Peer Perform to Outperform and established a $20 price target.

NVIDIA

Announced an expanded game roster and new developer plug-ins for its AI-powered Deep Learning Super Sampling (DLSS) technology ahead of the Game Developers Conference (GDC). The latest version, DLSS 3, is now supported in an assortment of blockbuster games and franchises, including Diablo IV, Forza Horizon 5, and Redfall. NVIDIA is also integrating DLSS 3 into Unreal Engine, one of the world’s most popular game engines, and is publicly releasing the DLSS Frame Generation plug-in to ease developer adoption.

DLSS

Since its launch in 2018, NVIDIA DLSS has driven a neural graphics revolution in PC gaming, allowing games to render 1/8th of the pixels then using AI and GeForce RTX Tensor Cores to reconstruct the rest of the pixels, dramatically multiplying frame rates, while delivering crisp, high-quality images that rival native resolution.

  • NVIDIA has been upgraded by Morgan Stanley’s Joseph Moore from Equal-Weight to Overweight and the price target has been raised from $255 to $304.

Academy Sports and Outdoors

Has released its financial results for Q4 and the fiscal year ended January 28, 2023. For Q4, the company’s net sales decreased 3.4% to $1.75 billion, while comparable sales declined 5.1%. However, e-commerce sales increased by 1.4% compared to the prior year quarter and by 100% compared to the Q4 of 2019. Gross margin was $572.5 million, or 32.8% of net sales, while pre-tax income increased 9.4% to $206.1 million. For the fiscal year 2022, net sales decreased 5.6% to $6.40 billion, while comparable sales decreased 6.4%. However, e-commerce sales increased by 9.1% compared to 2021 and by over 175% compared to 2019.

The company has announced guidance for fiscal 2023, including a projected net sales of between $6.5 billion to $6.7 billion and the opening of 13 to 15 new stores.

  • Kate Fitzsimons, an analyst from Wells Fargo, maintained her Overweight rating and raised the price target from $70 to $75.
  • Seth Basham, an analyst from Wedbush, also maintained an Outperform rating and increased the price target from $68 to $73.
  • Brian Nagel, an analyst from Oppenheimer, kept an Outperform rating and raised the price target from $75 to $85.
  • Simeon Gutman, an analyst from Morgan Stanley, maintained an Equal-Weight rating and raised the price target from $58 to $70.

PFE

Wells Fargo analyst Mohit Bansal maintained his Equal-Weight rating on Pfizer and reduced the price target from $50 to $44