5 big analyst AI moves: Apple upgraded, QCOM cut to Hold amid lack of catalysts

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

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Loop Capital upgrades Apple, issues Street high price target

Apple Inc (NASDAQ:AAPL) shares climbed higher on Monday after analysts at Loop Capital upgraded the stock to Buy and set a new price target of $300, the highest on Wall Street.

Analysts expressed confidence in Apple’s potential to become the leading platform for next-generation AI, akin to its historical success with the iPhone and iPod.

"Our $300 PT is 33x our $9.00 CY2026 EPS (what the stock will be valuing in 12 months). 33x P/E is the higher-end of AAPL’s 20x – 35x post-Covid P/E range," Loop Capital explained in their note to clients.

The latest upgrade is based on the latest findings that suggest a significant increase in iPhone 16 production driven by the excitement surrounding AI.

"AAPL has an opportunity the next few years to solidify itself as consumer’s Gen AI 'base camp' of choice, just as it did for social media 15 years ago (with iPhone) and digital content consumption 20 years ago (with iPod),” analysts wrote.

Wolfe Research starts Google stock coverage

Sell-side research firm Wolfe Research on Monday initiated coverage on Alphabet (NASDAQ:GOOG) stock, assigning it an Outperform rating and a price target of $240.00.

The analysts said the bullish rating is based on a long-term perspective that Alphabet's scale, investments in AI, leadership position in the market, and product innovations will enable the company to outpace the digital advertising market, gain share in Cloud computing, develop new revenue streams, and maintain a strong position in the Gen AI race.

Moreover, the current valuation is seen as “reasonable on a growth-adjusted basis.” Wolfe said its $240 price target is derived from a 25x FY25E price-to-earnings (P/E) ratio.

"This multiple is above similar digital ads comp group median multiples but below Mega cap comp group median multiples and reasonable in our view, given GOOGL’s ability to outgrow the digital advertising market and expand margins in the process," analysts noted.

HSBC cuts Qualcomm to Hold on ‘less bullish AI PC narrative’

Later in the week, HSBC downgraded Qualcomm (NASDAQ:QCOM) stock to Hold on Wednesday, citing a lack of catalysts and "a less bullish AI PC narrative." Despite raising the target price slightly to $200 from $190, analysts remain cautious about Qualcomm's near-term performance.

In their note, HSBC forecasts Qualcomm's Q3 FY24 results to align with consensus, projecting revenue of $9.3 billion, close to the consensus estimate of $9.2 billion. The gross margin (GM) for Q3 FY24 is expected to be 55.9%, slightly below the consensus of 56.1%.

However, concerns arise for Q4 FY24, as HSBC predicts flat quarter-over-quarter revenue at $9.3 billion, missing the consensus estimate of $9.8 billion due to lower handset revenue projections. The gross margin for Q4 is also expected to decline to 55.6% from the consensus of 55.9%.

HSBC pointed out the ongoing uncertainties in the smartphone market, particularly with China’s Android handset market anticipated to decline by 15% quarter-over-quarter.

As for the AI PC narrative, HSBC has adjusted its expectations downward following mixed reviews post-Computex. Initially optimistic about QCOM’s early mover advantage with its Snapdragon X Elite/X Plus processors, HSBC now expects Qualcomm to ship only 600,000 AI CPUs in FY24, significantly lower than earlier market expectations of 1-1.5 million. This revision resulted in a substantial reduction in projected AI CPU revenue.

Accenture upgraded to Buy at UBS on GenAI-driven growth expectations

Meanwhile, UBS has raised its rating on Accenture (NYSE:ACN) stock to Buy from Neutral, citing the potential for a multiple expansion as the market anticipates accelerated revenue growth amid AI optionality.

"While we appreciate concerns about the pace of IT spending, we believe the change in business mix [towards cloud, digital transformation, cybersecurity, and now Gen AI should drive higher and more durable growth," UBS analysts stated.

Further, UBS's analysis of the revenue from Accenture's top 10 alliance partners relative to Accenture's own revenue suggests a top-line acceleration over the next 12 months. As such, UBS believes the stock is not currently pricing in the full extent of GenAI potential.

The bank’s analysts also expect Gen AI adoption to accelerate as clients begin to realize value at scale from their experiments, potentially scaling even faster than Accenture's cloud business, which grew from $1 billion in FY12 to $32 billion in FY23, representing approximately 50% of total revenue.

TD Cowen ups Fortinet to Buy

During the week, cybersecurity firm Fortinet (NASDAQ:FTNT) received an upgrade from TD Cowen analysts, who now hold a Buy rating on the stock.

The investment bank cited several factors behind the move, including solid channel checks indicating a bottoming cycle for security appliances, expectations of an improved outlook for the second half of 2024 due to easier year-over-year comparisons, an operational technology (OT) upgrade cycle, and increased SASE (Secure Access Service Edge) adoption.

In addition, analysts view Fortinet “as a beneficiary of on-premise Gen-AI ramp-up.”

TD Cowen also said the valuation of Fortinet at 27x its projected fiscal year 2025 free cash flow (FY25E FCF) is viewed as offering potential upside to the newly established $75 price target.