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5 big analyst AI moves: Palantir downgraded, Micron PT hiked ahead of earnings

Published 2024/06/23, 10:12
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Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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Microsoft is ‘best way to play AI in our coverage,’ Truist says

Microsoft (NASDAQ:MSFT) remains “the best way to play AI in our coverage,” Truist Securities analysts said in a note released this week.

“We believe that many of the key themes that are driving the business under the hood at Microsoft are indicative of the major currents in both our infrastructure and security coverage,” the firm states.

“In particular, we see the company’s evolving AI strategy driving a leadership position in the software industry.”

While there will ultimately be multiple winners in the generative AI model space, OpenAI is the clear leader in the LLM space, analysts said.

They assert that the first-mover advantage with enterprise AI applications will be durable due to the significant consideration being given to architecture and governance decisions.

The analysts continue to believe that the partnership between Microsoft and OpenAI will drive incremental benefits for MSFT compared to other cloud providers.

Palantir downgraded to Sell at Monnes, Crespi and Hardt

Monness, Crespi, and Hardt analysts have downgraded Palantir Technologies Inc (NYSE:PLTR) shares from Neutral to Sell, setting a target price of $20.

PLTR shares fell nearly 5% following the market open Friday.

This decision follows a disappointing earnings season for enterprise software and the failure of the 18-month generative AI hype cycle to yield substantial revenue for most industry players. Analysts noted that the market is likely to steer clear of software stocks with excessive valuations.

“After surging 167% in 2023, Palantir’s stock was already rich upon entering 2024 and, with a 49% rally YTD, we believe valuation has now reached a gluttonous extreme,” they wrote.

While Monnes believes that Palantir remains well-positioned to benefit from the AI trend and volatile geopolitics in the long term, the firm notes that the stock’s current valuation has reached extreme levels.

Combined with the pressured software industry and irregular revenue from government contracts, “the darkest days of this economic quagmire are ahead of us,” analysts said.

Bernstein hikes AAPL price target: Apple ‘can be leader in AI, not a laggard’

Investment firm Bernstein raised its target price on Apple Inc (NASDAQ:AAPL), voicing confidence that investors now see the iPhone maker “can be a leader in AI, not a laggard.”

The 12-month price target was increased from $195 to $240, suggesting almost 15% upside from the current levels.

With over 1 billion customers compared to ChatGPT's 100 million, Apple has significant potential to bring AI to a vast audience, improving everyday utility, Bernstein analysts noted. Remarkably, Apple does not pay ChatGPT, “highlighting the power that it holds.”

Bernstein also said that investors are growing more optimistic about the upcoming iPhone 16, anticipating a robust product cycle, partly because AI features will only be available on the iPhone 15 Pro and higher models.

“While we are increasingly convinced that Apple will be an AI beneficiary, we see risk that the benefits could take longer to materialize than some bulls appear to believe,” the analysts cautioned.

“Many features for Apple Intelligence will roll out over the next year, and will only work in English, potentially pushing out some upgrades to the iPhone 17 cycle,” they added.

Wedbush raises Micron PT to $170 ahead of earnings report

Earlier in the week, Wedbush Securities analysts reiterated a Buy rating on memory chipmaker Micron Technology Inc (NASDAQ:MU) and hiked their price target from $130 to $170, ahead of the company’s earnings report next week.

“In our view, the primary question with MU is history suggests the stock is expensive vs. asset levels,” the firm’s analysts noted.

Analysts acknowledge that while memory remains a cyclical industry, they believe it will stay in undersupply through this year and likely much of 2025. This is due to a lack of new investment in NAND and DDR5, partly driven by increased capacity requirements for High Bandwidth Memory (HBM).

“As such, we believe Average Selling Prices (ASPs), revenues, margins, and EPS are all destined to cycle higher, with book also set to lift as FCF flows on to MU's balance sheet,” they noted.

“Net, we expect only positive news for MU's financials for some time to come, and expect the stock will continue to lift until we see a change in industry investment plans.”

Rosenblatt: Adeia is ‘the most undervalued AI play in the market’

Rosenblatt Securities said intellectual property (IP) licensing company Adeia Inc (NASDAQ:ADEA) is “the most undervalued AI play in the market,” reiterating a Buy rating on its stock.

Following discussions with Adeia's CEO, CFO, and VP of Investor Relations, Rosenblatt emphasized the company's "under the radar" status despite its leadership in key AI growth sectors.

The firm’s analysts highlighted the significant opportunity in semiconductors, noting that transistor limitations are bringing Moore's Law to its end. "Adeia's hybrid bonding and chiplet IP offer a solution" to these challenges, they remarked.

In the media sector, Rosenblatt recognized Adeia as "the leader in digital entertainment IP," positioning it well for the ongoing rise of video across various devices.

On the financial front, Rosenblatt praised Adeia's "60+% operating margin" and its valuation.

"We view Adeia as the most undervalued AI play in the market," they stressed. "We recommend investors take a deeper look at the company."

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