2024-01-09 12:50:00 ET
Summary
- UAL, Alaska find quality-control issues with their Boeing 737 Max 9 planes during inspections prompted by a midair emergency.
- Juniper Networks attracts offer from Hewlett Packard Enterprise for about $13B - WSJ report.
- Citi comes out with Thematic Equity Strategy report for 2024.
Listen below or on the go on Apple Podcasts and Spotify
The discovery on 737 Max 9s indicates Boeing issues aren’t confined to the Alaska plane. (0:15) Nintendo gets an upgrade ahead of Switch 2 . (3:01) Analysts adjust bank ratings ahead of earnings. (3:55)
This is an abridged transcript of the podcast.
Our top story today so far
United Airlines ( UAL ) and Alaska Airlines ( ALK ) say they found loose parts on some Boeing ( BA ) 737 Max 9 planes that they inspected in response to a midair emergency.
The discovery indicates quality-control issues at Boeing aren’t confined to the Alaska Airlines plane that was forced to make an emergency landing.
The airlines disclosed their findings before the NTSB provided more details about the incident. A door plug covering an unused emergency exit blew out of the plane at an altitude of 16,000 feet after moving from stops that are supposed to keep it in place.
Four bolts were missing, investigators said. They’re looking into whether the bolts had been installed when the cabin was being built.
United said in a statement that inspections “had found instances that appear to relate to installation issues in the door plug—for example, bolts that needed additional tightening.” The airline said maintenance staff would fix the plug to receive approval to operate the planes again.
Alaska Airlines said initial reports from technicians accessed the plug area and saw loose hardware on some planes. The carrier said it will make necessary repairs to satisfy its safety standards and compliance with the FAA.
In today’s trading
Stocks are giving back some of the gains seen on Monday, The major averages are in the red, but trading has been fairly choppy. Healthcare (XLV) is the only sector in the green, while Energy (XLE) is again the weakest.
Oil’s decline helped equities yesterday, but it’s moving back up today.
WTI crude ( CL1:COM ) is gaining more than +2%.
Analysts said geopolitical tensions in the Middle East and an ongoing supply outage in Libya helped support prices.
According to ING, if oil weakness persists, “it is difficult to see how OPEC+ would be able to make more meaningful output reductions, given the scale of their cuts already. What we are more likely to see is a rollover of current voluntary cuts into 2Q24 in order to erode the surplus expected next quarter."
Among active stocks
Canadian cannabis company Tilray Brands ( TLRY ) indicated a more-than-twofold rise in its alcoholic beverage net revenue in Q2 compared to the year-ago period, even as its top line fell short of expectations. Tilray consolidated its beverage portfolio through buyouts and new products. In October, the company acquired eight beverage brands from Anheuser-Busch ( BUD ) to boost its position in the U.S. craft beer market.
Citi cut its rating on Netflix ( NFLX ) to Neutral from Buy, but kept the price target at $500 per share. Analyst Jason Bazinet says he sees three risks to the lofty expectations of the Street: lower revenues, higher cash content costs, potential M&A use for its cash, absent a buyback, with the most likely target being a “video game publisher with a robust portfolio of IP.”
Nintendo ( NTDOY ) caught an upgrade from Bernstein to Outperform from Market Perform on excitement surrounding the next-gen console and better-than-expected software sales.
Analyst Robin Zhu says: "Past console launch cycles have mostly been rewarding periods for investors (+33% median return holding 6 months before launch to 6 months after; one negative outcome out of eight), and the feedback we heard makes us think the Switch 2 will be more like the Switch and PS4 than weaker past cycles like the Wii U or 3DS."
Juniper Networks ( JNPR ) surged following a WSJ report that Hewlett Packard Enterprise ( HPE ) was in advanced talks to buy the networking name for about $13 billion . HPE shares slumped. A deal for the cloud provider to take over the equipment maker could come as soon as this week. HPE is worth about $23 billion, while Juniper is worth a little under $10 billion.
In other news of note
Analysts are adjusting their views on banks before financial results kick off earnings season.
HSBC upgraded Citigroup ( C ) to Buy from Hold and downgraded Morgan Stanley to Hold from Buy.
Analyst Saul Martinez says at Citi, he sees an expanding return on equity enhancing management credibility, and cost optimization opportunities that should allow for more buybacks. For Morgan Stanley (MS), he sees a less rosy outlook for the firm's wealth management revenue.
At the same time, Deutsche Bank upgraded JPMorgan Chase ( JPM ) to Buy and downgraded Wells Fargo (WF C ) to Hold.
While analyst Matt O'Connor admits that he's late to the party in upgrading JPMorgan (JPM), he sees the stock benefiting from an upside to net interest income guidance while its peers face downside risk. He expects management will increase its expectation for a reasonable medium-term net interest income run rate from $80 billion to potentially $84 billion.
For Wells Fargo, though, he expects weak guidance for 2024 net interest income due to likely lower interest rates and sluggish loan growth.
And in the Wall Street Research Corner
Citi issued its Thematic Equity Strategy report and, along with that, screened for the 30 top Buy-rated stocks for each of its top themes for 2024.
Those themes are:
AI, where Meta ( META ) is among the picks.
Infrastructure and Fossil Fuels, where Martin Marietta ( MLM ) and Edison International ( EIX ) are among those that stand out.
In Experiential Commerce, they like DoorDash (DASH).
For Digital Leisure, DraftKings ( DKNG ) and Wix.com ( WIX ) are a couple of the picks.
Fin-Tech sees such names as PayPal ( PYPL ) and Mastercard (MA).
And in Internet-Driven Business Models, Citi highlights Squarespace (SQSP), DocuSign (DOCU), and Wayfair (W), among others.
For further details see:
Wall Street Lunch: Unraveling Boeing's Bolt Issue