GMT EIGHT - Research

NVIDIA Corporation (NVDA.US) received support from investment bank KeyBanc ahead of its performance report: The bottleneck of GB200 production capacity cannot hide its growth potential, and the target price is raised to $190.

Investment bank KeyBanc stated that despite facing production constraints for the GB200 NVLink servers, NVIDIA Corporation (NVDA.US) may still show "strong" performance and guidance when it announces its quarterly earnings next week. The bank reiterated its "overweight" rating for NVIDIA Corporation and raised its target price from $180 to $190. KeyBanc analyst John Vinh noted in a client report, "Despite previous concerns about production constraints for the GB200 NVLink servers, we expect NVIDIA Corporation to deliver strong fourth quarter results, surpassing expectations, and provide conservative but above-market consensus guidance for the first quarter." Vinh stated, "Although production constraints for the GB200 NVLink server racks have impacted shipments, the following factors will offset this impact: due to lower initial yields for the GB200 NVLink, we believe customers have been able to delay GB200 orders and substitute with HGX-based B200 servers with x86 head nodes; Chinese cloud service providers are purchasing a large quantity of H20 GPUs due to increased demand for DeepSeek and limited supply of Huawei Ascend AI chips; we have observed NVIDIA Corporation customers (especially cloud service providers) financing and hoarding inventory through EMS contract manufacturers, so NVIDIA Corporation's supply to EMS can be confirmed as actual revenue." NVIDIA Corporation is scheduled to announce its earnings after the market closes on February 26th. The market generally expects revenue of $26.04 billion and earnings per share of $0.61.

21/02/2025

Simulated chip market "about to" recover Citigroup upgrades NXP Semiconductors NV (NXPI.US) rating to "buy"

Citi released a research report, upgrading NXP Semiconductors NV (NXPI.US) from "neutral" to "buy" and raising the target price from $210 to $290. Competitor Analog Devices, Inc. (ADI.US) recent financial report indicates that the analog chip market is "about to" recover. Citigroup analyst Christopher Danely stated, "Analog Devices, Inc. mentioned that the analog end market will rebound, and as a result, we upgraded NXP Semiconductors NV from neutral to buy because we believe that the recovery of the analog chip market is imminent. Each analog chip company will feel this, as their sales have dropped by about 30% from the peak." The analyst added, "While we believe there is still downside potential in the automotive end market, the recovery in the industrial end market should partially offset this impact. Considering that expectations have generally dropped by about 30% in the past 6 months, most of the downside potential has already been absorbed. Therefore, we expect that NXP Semiconductors NV's P/E ratio will increase as expectations rise." As of press time, NXP Semiconductors NV is up 3.88% in pre-market trading, trading at $255.10.

20/02/2025

CICC: Increased computing power demand may drive further growth in performance, raising the target price of VNET Group, Inc. Sponsored ADR (VNET.US) to $15.6.

On February 20, Zhongjin released a research report stating that the continuous progress of large models at home and abroad is driving the increasing demand for computing power. This is expected to further boost the performance of VNET Group, Inc. Sponsored ADR (VNET.US), with the bank maintaining an outperform rating for VNET Group, Inc. Sponsored ADR. Considering the upward trend in industry valuation, the target price has been raised to $15.6, with a 29% upside potential. Zhongjin maintains that the revenue/adjusted EBITDA of VNET Group, Inc. Sponsored ADR in 2024 will remain basically unchanged, but expects continuous growth in company orders and improved on-shelf ratio in 2025/2026. Consequently, the revenue/adjusted EBITDA for 2025 has been raised by 3.2%/2.6% to 90.4/26.0 billion yuan. The introduction of revenue/adjusted EBITDA for 2026 is 103.1/30.1 billion yuan. It is believed that with the majority of company orders being realized in 2026, the valuation should be based on 2026, with a value of 15x 2026 EV/EBITDA. Zhongjin believes that the continuous progress of large models at home and abroad will lead to an increase in the penetration rate of AI, and the demand for computing power is expected to spiral upwards. The company benefits from the pull of AI-related demand, with rapid growth in base-type business revenue in the second half of 2024 and the continued improvement in downstream customer capital expenditure expectations, looking positive towards the potential increase in order volume in 2025. Furthermore, Zhongjin states that with the increase in AI inference applications, the business's requirements for latency will increase, potentially driving demand towards first-tier and near-first-tier cities. This will lead to an increase in the on-shelf rate of company retail business cabinets in core areas, and the improvement in supply-demand dynamics is also expected to promote stable price recovery.

20/02/2025

Salesforce, Inc. (CRM.US) performance expected to hit "acceleration key" as Morgan Stanley joins the ranks of bullish investors ahead of earnings.

Before Salesforce, Inc. (CRM.US) releases its fourth-quarter financial performance on February 26, Morgan Stanley has issued a research report, reaffirming its "overweight" rating for Salesforce, Inc. and raising its target price from $390 to $429. Morgan Stanley's research shows that Salesforce, Inc. has recovered faster than expected after last year's global pandemic event in July. With positive adjustments and the potential for the annual recurring revenue (ARR) growth rate to accelerate to around 25% in the next 1-2 years, Morgan Stanley believes that Salesforce, Inc.'s stock price could rise to $550 in a bullish scenario. Based on channel surveys conducted until the end of January, Morgan Stanley is optimistic about Salesforce, Inc.'s fourth-quarter performance. Morgan Stanley expects Salesforce, Inc.'s fourth-quarter Net New Annual Recurring Revenue (NNARR) to decrease by 34% year-on-year, but still better than market expectations and with room for upward revision, as order volumes have shown signs of improvement in recent months after reaching a low point at the end of last year. Morgan Stanley expects initial revenue/ARR guidance for fiscal year 2026 to increase by 20% year-on-year, in line with market consensus, with free cash flow (FCF) profit margins above 25%, and is prepared for performance to exceed market expectations and for upward revisions in the new fiscal year. Overall, as the security market consolidates and reduces market participants, Morgan Stanley still believes that Salesforce, Inc. will be a long-term winner. Morgan Stanley states that as the next-generation SaaS security platform, Salesforce, Inc. has quickly become a market leader. Continued growth in core endpoint market share, along with the growing base of emerging modules (identity protection, cloud workload protection), and favorable positioning in artificial intelligence, will help Salesforce, Inc. maintain a revenue growth rate of over 20% in the long term. It is worth noting that Goldman Sachs Group, Inc. is also positive about Salesforce, Inc. ahead of earnings, reiterating its "buy" rating and giving a target price of $400. Goldman Sachs Group, Inc. considers Salesforce, Inc. to be one of the most strategically significant application software companies it tracks. Salesforce, Inc. is in a favorable position to benefit from cyclical improvements, and as it increasingly shifts towards the application layer, AI could be a multiplier of long-term sustained growth.

20/02/2025

Walmart Inc. (WMT.US) pre-performance by Morgan Stanley: optimistic target price raised, potential still "more than adequate"

Walmart Inc. (WMT.US) will announce its fourth-quarter financial report before the US stock market opens today. The market generally expects the company's fourth-quarter revenue to reach $179.25 billion, a year-on-year increase of about 3.4%; at the same time, earnings per share (EPS) are expected to be $0.64, a year-on-year increase of 6.7%. Analysts at Morgan Stanley predict that Walmart Inc. will benefit from its strong retail media and membership businesses, while the growth momentum of e-commerce and third-party markets cannot be ignored. In its latest research report, Morgan Stanley pointed out that the company's incremental profit margin is higher than expected, leaving room for reinvestment or faster growth. Based on confidence in Walmart Inc.'s growth engine, the bank raised its optimistic target price by 15% (to a 47% increase) to $153. The bank stated that although the market is eagerly awaiting various driving factors for Walmart Inc.'s alternative revenue and profit models, it has not fully realized the strong momentum inherent in it, as well as the operational leverage it contains. After studying Walmart Inc.'s alternative revenue sources, the bank estimated that Walmart Inc.'s incremental profit margin could exceed 10%, 60% higher than the average level of about 6.4% from 2003 to 2010. These additional profit margins are expected to drive an annual revenue growth of about 12% and expand profitability by about 30 basis points. Market expectations for profit margin expansion in fiscal years 2026 and 2027 are approximately 25 basis points and 20 basis points, respectively. Walmart Inc.'s P/E multiple has been rising, with a forward P/E ratio of about 37.5 times. In an optimistic scenario, the bank predicts that Walmart Inc.'s incremental profit margin will be around 12.5%. Business Segments: Looking at the business segments, the retail media business is the largest alternative source of revenue and profit, with global advertising revenue estimated to be about $4.4 billion in 2024, expected to grow at a compound annual growth rate of 30% from 2024 to 2027, reaching about $9.7 billion in 2027, with US regional revenue at $7.1 billion. This business is one of the most profitable business segments, with an EBIT profit margin of about 70%, accounting for 16.2% of total EBIT in 2027. In terms of membership business, Walmart Inc.'s membership fee revenue is estimated to be about $3.6 billion in 2024. Morgan Stanley expects a compound annual growth rate of about 14.5% from 2024 to 2027, reaching about $5.4 billion in 2027. Sam's Club contributes more to membership revenue, but Walmart Inc. + has faster growth. Morgan Stanley expects the EBIT profit margin for membership business to be around 95%, accounting for 12.4% of total global EBIT, and an important source of profits for the company. The third-party market (3P) business is one of the fastest-growing alternative revenue streams and a key area for reinvestment. In 2024, US e-commerce GMV is estimated to be about $92 billion, growing by about 22% year-on-year, with 3P market GMV at about $15 billion and own-brand (1P) GMV at about $77 billion, with growth rates of 30% and 21% in 2024, respectively. It is estimated that 3P market revenue will reach $2.3 billion in 2024 and about $5.4 billion in 2027. The current EBIT profit margin is negative, expected to turn positive in 2-3 years, with an expected EBIT profit margin of 6% in 2027. In the long term, given the continuous growth in the number of sellers and stockkeeping units (SKUs), third-party platforms have a "long tail effect", and the bank believes that the proportion of third-party GMV in total GMV will continue to rise. The core e-commerce business (1P) accounted for about 93% of total e-commerce sales in 2024 and is expected to still account for about 91% in 2027. GMV is expected to grow at a compound annual growth rate of about 19.5% from 2019 to 2027, reaching about $125 billion. Although the 1P business currently has a negative EBIT, economies of scale and automation are expected to improve profit margins, with a profit margin of -3% expected in 2027. Morgan Stanley states that the market may be most surprised by the key role of e-commerce in Walmart Inc.'s future growth. The bank estimates that this business segment will contribute about half of the company's sales growth and almost all of the profit margin expansion.

20/02/2025

Goldman Sachs Group, Inc. reiterates "buy" rating on PepsiCo, Inc. soda (PEP.US): transformation strategy and dividend advantages are key drivers.

Goldman Sachs Group, Inc. reiterated its "buy" rating on PepsiCo, Inc. stock and maintained a target price of $175. This rating was announced after PepsiCo, Inc. management gave a speech at a consumer analyst conference in New York, expressing optimism about the company's long-term growth prospects. During the speech, PepsiCo, Inc. management emphasized the company's transition to a more agile and robust business model, while focusing on double-digit revenue and profit growth. Goldman Sachs Group, Inc. analyst Bonnie Herzog pointed out that this transformation has positioned PepsiCo, Inc. favorably in the competitive convenience snack and beverage market. The company's financial strength is evident in its record of increasing dividends for 52 consecutive years, with a current dividend yield of 3.76%. Herzog expressed confidence in PepsiCo, Inc.'s ability to achieve sustainable long-term growth and noted the significant investments the company has made in its business operations. She believes that these investments align with PepsiCo, Inc.'s long-term growth strategy and are expected to drive continued expansion. Goldman Sachs Group, Inc.'s analysis also highlighted that PepsiCo, Inc. current valuation presents an attractive investment opportunity. Herzog mentioned that PepsiCo, Inc.'s stock is trading at a 2026 expected P/E ratio of 16.3 times, a 16% discount to the consumer staples sector. This valuation is lower than PepsiCo, Inc.'s historical premium of around 11% to 14% over the past three to five years. The data suggests that the stock is currently undervalued. In summary, Goldman Sachs Group, Inc. believes that the risk/reward ratio for PepsiCo, Inc. stock is attractive, and therefore maintains its "buy" rating and a target price of $175. PepsiCo, Inc. reported fourth-quarter earnings of $1.96 per share, slightly above the expected $1.95, but revenue at $27.78 billion fell short of the expected $27.95 billion. The company announced an increase in quarterly dividends to $1.355 per share, a 7% increase from the previous year, and plans to further increase dividends in 2025. The company continues to focus on strategic restructuring and innovation, particularly in its international business, which remains a key driver of growth. PepsiCo, Inc. management emphasized the importance of international markets and innovation in healthy products as part of their ongoing strategy. Other Wall Street firms' viewpoints Although revenue fell short of expectations, Jefferies Financial Group Inc. analysts expressed confidence in PepsiCo, Inc.'s international business and strategic transformation. The firm adjusted PepsiCo, Inc.'s target price to $171 and maintained a "buy" rating. TD Cowen revised their target price to $150 and maintained a "hold" rating, noting PepsiCo, Inc.'s guidance for low single-digit organic sales growth in 2025.

20/02/2025

Citigroup is actively bullish on AppLovin (APP.US): may face pressure from competition with Unity (U.US), but long-term growth potential is still promising.

Citi actively sings the praises of AppLovin (APP.US): May face pressure from Unity (U.US) competition, but long-term growth potential still outstanding According to research from Citi, mobile marketing company AppLovin (APP.US) may face competition pressure from Unity Software (U.US) in the coming quarters, but the long-term growth prospects remain strong. Citi reiterated its "buy" rating on AppLovin stock and raised its target price from $460 to $600. Analysts led by Jason Bazinet at Citi stated in an investor report, "As we step into the first quarter of 2025, we see a potential risk: Unity introducing new advertising technology solutions in its Grow segment. However, our analysis suggests that if Unity's Grow segment performs better, the potential headwinds may be smaller, around $40 million per quarter." Last week, after announcing its fourth-quarter financial performance, AppLovin's stock price soared by over 25%. Bazinet pointed out, "Perhaps the most exciting aspect of AppLovin's growth prospects is its long-term opportunities. To evaluate this, we conducted two sets of analyses. First, we compared AppLovin with various social media platforms' average revenue per daily active user (ARPDAU). The analysis suggests that AppLovin's revenue could increase by 2 to 14 times from current levels." He added, "Secondly, we evaluated how AppLovin's revenue would increase if the conversion rate of purchased impressions increased from 1% to 5%. This analysis also indicates that AppLovin's revenue could increase by 14 times from current levels." Unity is expected to announce its fourth-quarter financial performance for 2024 before the U.S. stock market opens on Thursday. The market consensus forecasts an adjusted earnings per share of $0.16 and revenue of $4.3347 billion.

20/02/2025

Wells Fargo & Company: Short-term decline in profit margin does not change long-term potential, maintains "hold" rating on Micron Technology, Inc. (MU.US)

Wells Fargo & Company recently released a research report stating that despite an expected decline in gross margin for Micron Technology, Inc. (MU.US) in the third quarter, the analysts at the bank remain optimistic about the long-term growth potential of this storage chip giant. They maintain a "hold" rating on the stock with a target price of $140. According to Wells Fargo & Company, Micron recently updated its performance guidance, expecting a slight decrease in gross margin for the third quarter of the 2025 fiscal year compared to the previous quarter (the bank predicts a decline of 20 basis points to 38.6%, while the market generally expects 38.5%). However, Micron remains optimistic about the market outlook, expecting an increase in shipments this quarter and maintaining revenue growth expectations. The report points out that the main factors contributing to the decline in Micron's gross margin in the third quarter are an increase in the proportion of consumer products, price declines for consumer products in the first quarter of 2025, and a generally weak NAND industry environment. Nevertheless, the company expects the NAND industry situation to gradually improve after the third fiscal quarter as industry supply adjusts and smartphone and PC inventory is optimized. Micron expects low to mid single-digit growth in the PC and smartphone markets and reiterates the strong demand for DRAM in data centers. In the High Bandwidth Memory (HBM) field, Micron is making progress both commercially and technologically. The company plans to start mass production of 12-layer stacked HBM products in the second half of 2025, with most of the HBM shipments expected to be based on 12-layer stacking technology. Micron has stated that its HBM market share target is in line with the overall DRAM market share and expects revenue growth from HBM in this quarter and the next. Wells Fargo & Company's "hold" rating on Micron reflects the company's improved competitiveness in the DRAM and NAND markets, demand growth from next-generation technologies, and the company's ability to continually optimize its product portfolio. Despite the risks of DRAM and NAND price fluctuations, Micron's strong demand in data centers, 5G smartphones, and PCs make the future market outlook promising. The target price of $140 reflects the long-term support of the expected earnings per share for the 2026 fiscal year (approximately 13 times earnings per share).

20/02/2025

The valuation of Siasun Robot & Automation has opened up Morgan Stanley's "overweight" rating on Tesla, Inc. (TSLA.US).

Attention has been drawn to the fact that the field of humanoid Robotics & Automation is gradually becoming a new battlefield for major technology giants to compete in. Tesla, Inc. (TSLA.US), as a leading company in the electric vehicle industry, is garnering attention for its layout and development in the field of humanoid Robotics & Automation. Recently, a research report released by Morgan Stanley conducted an in-depth analysis of Tesla, Inc.'s competitive position and market dynamics in the field of humanoid Robotics & Automation. Competition and market potential in the humanoid Robotics & Automation industry The American humanoid Robotics & Automation startup company, Figure AI, is currently in talks for a new round of $1.5 billion in financing, which would bring its valuation to $39.5 billion. This valuation has not only increased more than 15 times from the $2.6 billion valuation after its Series B financing in February 2024 but also surpasses Ford (approximately $37 billion) and is on par with Stellantis ($39.7 billion), placing it among the top ten highest valued unlisted startups globally. The rapid increase in Figure AI's valuation reflects the market's strong confidence in the future prospects of general humanoid Robotics & Automation technology. Tesla, Inc.'s industry role and Optimus potential Morgan Stanley pointed out that humanoid Robotics & Automation, as an important carrier of "Embodied AI", has become a focus of capital due to its task versatility and autonomous learning ability (through human demonstration and simulation training). While the rise of Figure AI may pose competition for Tesla, Inc.'s Optimus project, the report believes that this field is not a "winner-takes-all" and is more likely to see the coexistence of multiple enterprises, similar to traditional automotive or mechanical manufacturing industries. The report emphasized that Tesla, Inc. remains a major driver of humanoid Robotics & Automation technology in Western markets. If Optimus is successfully commercialized, it could disrupt labor-intensive industries. Morgan Stanley estimates that for every 1% of the workforce in the United States (based on 2024 standards) replaced by Optimus, it could bring about a net present value (NPV) of approximately $100 per share for Tesla, Inc. Although the current valuation does not explicitly include the contribution of Optimus, the high valuation event of Figure AI is expected to increase investor recognition of the feasibility of the entire humanoid Robotics & Automation race, indirectly benefiting Tesla, Inc.'s stock price. Morgan Stanley has given Tesla, Inc. a "hold" rating with a target price of $430. This valuation is based on the weighted valuation of five major business segments: 1) Core automotive business ($86 per share): assuming sales of 5.2 million vehicles in 2030, an EBITDA profit margin of 16.1%, and using a 14 times forward EBITDA multiple; 2) Network services ($172 per share): projecting a service subscription penetration rate of 65% by 2040, with an average revenue per user (ARPU) of $200; 3) Mobility Services ($90 per share): based on discounted cash flow model, assuming operating 7.5 million autonomous taxi vehicles by 2040, with revenue per mile of $1.46; 4) Energy business ($65 per share): covering CECEP Solar Energy and energy storage product lines; 5) Third-party suppliers ($17 per share): including batteries, drive systems, and other external sales. Meta's entry and data advantage Meta recently announced the formation of a humanoid Robotics & Automation team within its Reality Labs division, initially focusing on household scenarios, with long-term plans to develop dedicated AI models and sensors. It is worth noting that Meta's Ray-Ban smart glasses can capture a large amount of visual data in real-time. Morgan Stanley cited computer vision experts who stated that such data is of significant value for training optical neural networks, especially in simulating human perspective in environmental interaction. However, data bandwidth limitations and privacy issues may constrain its application efficiency. Conclusion The field of humanoid Robotics & Automation is attracting more and more participation from technology giants and startups, leading to increasingly fierce market competition. The rapid rise of Figure AI and Meta's proactive layout both demonstrate the immense potential in this field. Morgan Stanley emphasizes that Tesla, Inc., as one of the leading companies in the industry, remains a key driver of humanoid Robotics & Automation technology in Western markets.

20/02/2025

Investment bank Wedbush: DeepSeek does not scare off AI investors. NVIDIA Corporation (NVDA.US) Blackwell GPU is still in high demand.

Investment bank Wedbush analysts have stated that despite recent rumors about DeepSeek, demand for NVIDIA Corporation's (NVDA.US) Blackwell GPU continues to far exceed supply. In a report following a quarter of visits to Asia and supply chain checks led by Daniel Ives, Wedbush analysts stated, "We believe that demand for Blackwell in the field far exceeds supply. After speaking with many enterprise AI customers, we found that no AI company has slowed down or changed deployment due to the DeepSeek incident. No customer wants to 'lose their place in line,' just as we describe for NVIDIA Corporation's next-generation chips." Wedbush estimates that by 2025, around 10% to 15% of IT budgets will be allocated to artificial intelligence. By 2025, the capital expenditure of the seven tech giants will also increase by approximately $100 billion, reaching $325 billion. "We see many IT departments focusing on large-scale AI deployments around Microsoft Corporation, Amazon.com, Inc., and Alphabet Inc. Class C, with a focus on current software-driven use cases," added Ives. "The ongoing tensions between the US and China remain a long-term concern for the market, but we do not believe that the GEO Group Inc political game will hinder the AI revolution. If anything, the DeepSeek incident has accelerated the demand for more companies to embark on the AI journey by 2025... despite many tech bears ending their hibernation mode due to the ongoing drama of the DeepSeek incident."

20/02/2025

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