Jim Cramer’s top 10 things to watch in the stock market Thursday

My top 10 things to watch Thursday, Dec. 14

1. U.S. stocks are higher in premarket trading Thursday, with S&P 500 futures up 0.46%. Equities rallied Wednesday after the Federal Reserve held interest rates steady, while indicating it would cut rates three times in 2024 — a decision more dovish than I expected. Meanwhile, bond prices are also strengthening, with the yield on the 10-year Treasury falling below 4%.

2. Toll Brothers announces a new $20 million share-buyback program — and there are only 100 million shares. But CEO Doug Yearley thinks it’s ridiculous that his stock sells at eight-times earnings when it’s more of a secular grower, despite changes in the housing industry.

3. UBS upgrades Club holding Coterra Energy to buy from neutral, citing its strong balance sheet strength and oil diversification. But the firm lowered its price target to $31 a share, down from $33.

4. Piper Sandler raises its price target on Club name Amazon to $185 a share, up from $170, while maintaining an overweight rating on the stock. The firm cites improving retail margins and an expected acceleration at cloud unit Amazon Web Services. Amazon is Piper’s top large cap pick.

5. Stifel raises its price target on Lululemon Athletica to $596 a share, up from $529, while reiterating a buy rating on the stock. The firm argues that “still sound” U.S. consumer balance sheets and wage growth should support margin expansion for companies like Lululemon with “brand specific drivers.”

6. Nike is back. Baird raises its price target on the sneaker company to $140 a share, up from $125, while keeping an outperform rating on the stock. Nike’s “quality growth profile plus margin recovery potential support a continued favorable outlook,” the firm contends.

7. Mid-stage trial data shows that Merck and Moderna‘s experimental cancer vaccine, used in conjunction with Merck’s Keytruda therapy, reduces the risk of death or relapse in patients with melanoma skin cancer after three years.

8. JPMorgan raises its price target on L3Harris Technologies to $240 a share, up from $213, while maintaining a neutral rating on the stock. The firm has “high confidence” in the aerospace-and-defense-technology company’s targets for sales and cash flow.

9. Piper Sandler upgrades Club holding Foot Locker to overweight from neutral, while raising its price target to $33 a share, up from $24. The firm cites Foot Locker’s margin expansion opportunity in 2024, arguing the company is best positioned among the athletic-and-footwear group over the next year.

10. Bernstein raises its price target on FedEx to $340 a share, up from $305, while reiterating an outperform rating on the stock. FedEx, which Bernstein expects to benefit from cost cuts and improved international market conditions, is set to report quarterly results on Dec. 19.

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Top Wall Street analysts pick these five stocks for compelling returns

Shantanu Narayen, CEO, Adobe.

Mark Neuling | CNBC

Investors are grappling with uncertainty after a difficult September left the major averages reeling.

However, the current scenario also offers an opportunity to pick stocks that could generate attractive returns despite short-term pressures.

To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

Adobe

Software giant Adobe (ADBE) recently reported fiscal third-quarter earnings. The company is experiencing strength in subscriptions to its cloud-based software offerings.

Impressed with the quarter’s print, Deutsche Bank analyst Brad Zelnick boosted his price target for ADBE stock to $610 from $550 and reaffirmed a buy rating. The analyst said the results reinforce his view of Adobe as a winner in an emerging generative artificial intelligence world.  

Ahead of the results, Adobe announced the commercial availability of its Firefly generative AI offering and increased the pricing of its Creative Cloud product to reflect the integration of the new AI features. The analyst said that this pricing strategy could drive the adoption of the core Creative Cloud product with the embedded generative AI tools, which is better than selling the new features separately.

“This strategy should enable creatives to better appreciate the productivity benefits of generative AI more quickly, and make Firefly-powered generative AI offerings a critical part of their workflows, creating competitive differentiation as well as increasing the overall value of Creative Cloud,” said Zelnick.

The analyst also sees additional monetization opportunities through new standalone offerings like GenStudio. 

Zelnick ranks No.50 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, with each delivering a return of 15.5%, on average. (See Adobe’s Technical Analysis on TipRanks)   

Salesforce

Zelnick is also bullish on another cloud software vendor: Salesforce (CRM). The analyst reiterated a buy rating on the stock with a price target of $260 following the company’s Dreamforce annual conference and investor meetings with the CEO of a Salesforce consulting partner and a global consulting firm executive.

He said that the Dreamforce event emphasized Salesforce’s leadership in AI customer relationship management (CRM), supported by a combination of “trust, data and interoperability.” (See Salesforce Hedge Fund Trading Activity on TipRanks).

The analyst noted that data cloud commentary from partners was optimistic, based on real demand and ongoing implementations.             

“With strong pricing power, unparalleled access to enormous trusted data, an eventual rotation back to front office spending, as well as management’s laser-focus on margins and cash flow growth, we believe Salesforce shares are poised to outperform,” said Zelnick.

Pinterest

Image-sharing platform Pinterest (PINS) held its investor day on Sept.19. At the event, the company said that it expects a compound annual growth rate in the mid to high teens for its revenue and an earnings before interest, taxes, depreciation and amortization margin that is in the low 30% range over the next three to five years.

Baird analyst Colin Sebastian noted that management expects an upside to its long-term targets if the underlying trends improve. The analyst highlighted that the shopping experience remains vital in the company’s overall strategy. Specifically, 96% of searches on Pinterest are unbranded, providing advertisers a huge opportunity to target users, with more than 50% of them using the platform to shop.

“Importantly, the Amazon ads integration seems to be going well, exceeding management’s initial expectations, with Pinterest using its recommendation engine to target Amazon ads at its own users,” added Sebastian.

The analyst reaffirmed a buy rating on PINS stock and a price target of $34, with a valuation that reflects rapid growth rate, an early stage of market share gains, as well as significant cash flow generation over the long term.

Sebastian ranks 328th out of more than 8,500 analysts tracked on TipRanks. Also, 54% of his ratings have been profitable, with an average return of 11.7%. (See Pinterest Blogger Opinions & Sentiment on TipRanks) 

Microsoft

Tech giant Microsoft (MSFT) recently made several announcements spanning its Microsoft 365 Copilot, Bing, Windows and Surface products.

Goldman Sachs analyst Kash Rangan thinks that the developments announced by the company reflect solid execution against its Copilot product roadmap and the strength of its OpenAI partnership.

“Microsoft’s speed to market, strong presence across the tech stack and well-established footprint within the enterprise give us confidence that Microsoft is well positioned to drive growth on the back of these announcements and be a key leader in the Gen-AI era,” said Rangan.

The analyst thinks that the company should be able to capture a solid part of its more-than-$135 billion total addressable market within Microsoft 365, with additional opportunities across its Azure, Windows, Dynamics and Bing/Edge offerings. He reiterated a buy rating on MSFT with a price target of $400.

Rangan holds the 509th position among more than 8,500 analysts on TipRanks. His ratings have been profitable 58% of the time, with each delivering an average return of 8.5%. (See Microsoft Financial Statements on TipRanks)

FedEx

We end this week’s list with logistics giant FedEx (FDX). The company recently reported fiscal first-quarter earnings that beat expectations, but a decline in revenue due to macro pressures. The bottom line benefited from the company’s cost-reduction initiatives.

Evercore analyst Jonathan Chappell, who holds the 156th position out of more than 8,500 analysts on TipRanks, noted the improvement in the company’s full-year earnings guidance range, despite the lower revenue outlook. The earnings outlook was fueled by the cost reductions under FedEx’s DRIVE program that is targeting savings of $1.8 billion in fiscal 2024.

Chappell said that FedEx grabbed about 400,000 packages of volume from its closest peer (UPS), with a lower possibility of these share gains reversing immediately. Further, FedEx gained almost 5,000 shipments per day from the liquidation of a key competitor (Yellow).

The analyst said, “FDX continues to build a track record of execution on its ambitious cost-cutting and efficiency targets, rendering the equity as a unique investment opportunity for when demand returns.”

Chappell maintained a buy rating on FDX and raised his price target to $291 from $276, saying that FDX remains his top pick. His ratings have been successful 65% of the time, with each rating delivering an average return of 19.7%. (See FedEx Insider Trading Activity on TipRanks).  

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AI is policing the package theft beat for UPS as ‘porch piracy’ surge continues across U.S.

A doorbell camera in Chesterfield, Virginia, recently caught a man snatching a box containing a $1,600 new iPad from the arms of a FedEx delivery driver. Barely a day goes by without a similar report. Package theft, often referred to as “porch piracy,” is a big crime business.

While the price tag of any single stolen package isn’t extreme — a study by Security.org found that the median value of stolen merchandise was $50 in 2022 — the absolute level of package theft is high and rising. In 2022, 260 million delivered packages were stolen, according to home security consultant SafeWise, up from 210 million packages the year before. All in all, it estimated that 79% of Americans were victims of porch pirates last year.

In response, some of the big logistics companies have introduced technologies and programs designed to stop the crime wave. One of the most recent examples set to soon go into wider deployment came in June from UPS, with its API for DeliveryDefense, an AI-powered approach to reducing the risk of delivery theft. The UPS tech uses historic data and machine learning algorithms to assign each location a “delivery confidence score,” which is rated on a one to 1,000 scale.

“If we have a score of 1,000 to an address that means that we’re highly confident that that package is going to get delivered,” said Mark Robinson, president of UPS Capital. “At the other end of the scale, like 100 … would be one of those addresses where it would be most likely to happen, some sort of loss at the delivery point,” Robinson said.

Powered by artificial intelligence, UPS Capital’s DeliveryDefense analyzes address characteristics and generates a ‘Delivery Confidence Score’ for each address. If the address produced a low score, then a package recipient can then recommend in-store collection or a UPS pick-up point. 

The initial version was designed to integrate with the existing software of major retailers through the API —a beta test has been run with Costco Wholesale in Colorado. The company declined to provide information related to the Costco collaboration. Costco did not return a request for comment.

DeliveryDefense, said Robinson, is “a decent way for merchants to help make better decisions about how to ship packages to their recipients.”

To meet the needs of more merchants, a web-based version is being launched for small- and medium-sized businesses on Oct. 18, just in time for peak holiday shipping season.

UPS says the decision about delivery options made to mitigate potential issues and enhance the customer experience will ultimately rest with the individual merchant, who will decide whether and how to address any delivery risk, including, for example, insuring the shipment or shipping to a store location for pickup.

UPS already offers its Access Points program, which lets consumers have packages shipped to Michaels and CVS locations to ensure safe deliveries.

How Amazon, Fedex, DHL attempt to prevent theft

UPS isn’t alone in fighting porch piracy.

Among logistics competitors, DHL relies on one of the oldest methods of all — a “signature first” approach to deliveries in which delivery personnel are required to knock on the recipient’s door or ring the doorbell to obtain a signature to deliver a package. DHL customers can opt to have shipments left at their door without a signature, and in such cases, the deliverer takes a photo of the shipment to provide proof for delivery. A FedEx rep said that the company offers its own picture proof of delivery and FedEx Delivery Manager, which lets customers customize their delivery preferences, manage delivery times and locations, redirect packages to a retail location and place holds on packages.

Amazon has several features to help ensure that packages arrive safely, such as its two- to four-hour estimated delivery window “to help customers plan their day,” said an Amazon spokesperson. Amazon also offers photo-on delivery, which offers visual delivery confirmation and key-in-garage Delivery, which lets eligible Amazon Prime members receive deliveries in their garage.

Debate over doorbell cameras

Amazon has also been known for its attempts to use new technology to help prevent piracy, including its Ring doorbell cameras — the gadget maker’s parent company was acquired by the retail giant in 2018 for a reported $1 billion.

Camera images can be important when filing police reports, according to Courtney Klosterman, director of communications for insurer Hippo. But the technology has done little to slow porch piracy, according to some experts who have studied its usage.

“I don’t personally think it really prevents a lot of porch piracy,” said Ben Stickle, a professor at Middle Tennessee State University and an expert on package theft.

Recent consumer experiences, including the iPad theft example in Virginia, suggest criminals may not fear the camera. Last month, Julie Litvin, a pregnant woman in Central Islip, N.Y., watched thieves make off with more than 10 packages, so she installed a doorbell camera. She quickly got footage of a woman stealing a package from her doorway after that. She filed a police report, but said her building’s management company didn’t seem interested in providing much help.

Stickle cited a study he conducted in 2018 that showed that only about 5% of thieves made an effort to hide their identity from the cameras. “A lot of thieves, when they walked up and saw the camera, would simply look at it, take the package and walk away anyway,” he said. 

SafeWise data shows that six in 10 people said they’d had packages stolen in 2022. Rebecca Edwards, security expert for SafeWise, said this reality reinforces the view that cameras don’t stop theft. “I don’t think that cameras in general are a deterrent anymore,” Edwards said.

The best delivery crime prevention methods

The increase in packages being delivered has made them more enticing to thieves. “I think it’s been on the rise since the pandemic, because we all got a lot more packages,” she said. “It’s a crime of opportunity, the opportunity has become so much bigger.”

Edwards said that the two most-effective measures consumers can take to thwart theft are requiring a signature to leave a package and dropping the package in a secure location, like a locker.

Large lockboxes start at around $70 and for the most sophisticated can run into the thousands of dollars.

Stickle recommends a lockbox to protect your packages. “Sometimes people will call and say ‘Well, could someone break in the box? Well, yeah, potentially,” Stickle said. “But if they don’t see the item, they’re probably not going to walk up to your house to try and steal it.”

There is always the option of leaning on your neighbors to watch your doorstep and occasionally sign for items. Even some local police departments are willing to hold packages.

The UPS AI comes at a time of concerns about rapid deployment of artificial intelligence, and potential bias in algorithms.

UPS says that DeliveryDefense relies on a dataset derived from two years’ worth of domestic UPS data, encompassing an extensive sample of billions of delivery data points. Data fairness, a UPS spokeswoman said, was built into the model, with a focus “exclusively on delivery characteristics,” rather than on any individual data. For example, in a given area, one apartment complex has a secure mailroom with a lockbox and chain of custody, while a neighboring complex lacks such safeguards, making it more prone to package loss.

But the UPS AI is not free. The API starts at $3,000 per month. For the broader universe of small businesses that are being offered the web version in October, a subscription service will be charged monthly starting at $99, with a variety of other pricing options for larger customers.

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Zipline unveils P2 delivery drones that dock and recharge autonomously

Logistics startup Zipline has flown more than 38 million miles with its autonomous electric delivery drones since the company was founded in 2014. Zipline put its first fleet to work in Rwanda, delivering blood and other health supplies to clinics and hospitals. Since then, the Silicon Valley startup has expanded its service in six other countries, with limited delivery service and distribution centers in three states.

On Wednesday, Zipline showed off its next-generation aircraft, which it hopes will make rapid aerial deliveries an everyday convenience for customers throughout the U.S., even in densely populated urban areas.

Zipline’s new drone, dubbed the Platform 2 or P2 Zip, is capable of carrying up to eight pounds worth of cargo within a ten-mile radius, and can land a package on a space as small as a table or doorstep.

“The reason that number is important,” says Zipline CEO and co-founder Keller Rinaudo Cliffton, “is that when you look at e-commerce in the US, a vast majority of packages weigh five pounds or less.”

Zipline cofounders, CEO Keller Rinaudo Cliffton and CTO Keenan Wryobek

Zipline

The P2 Zip can travel ten miles in ten minutes, and the company can make a delivery approximately seven times faster than any typical service you may order from today, the CEO said. Rapid deliveries by drone may put an end to “porch pirates,” Rinaudo Cliffton said, referring to the theft of packages left on a doorstep while the customer is away from home.

While Zipline’s original drone, the P1 Zip, features a fixed wing or glider-like design, the P2 employs both lift and cruise propellers and a fixed wing. These help it maneuver precisely and quietly, even in rainy or windy weather.

To deliver cargo to a customer’s door, the P2 Zip hovers around 300 feet above ground level and dispatches a kind of mini-aircraft and container called the “droid.” The droid descends on a long thin tether, and maneuvers quietly into place with fan-like thrusters before setting down for package retrieval.

Zipline’s original P1 drones will remain in production and in wide use, says Rinaudo Cliffton. The P1 Zip can fly a longer distance, delivering up to five pounds of cargo within a 60-mile radius, but it requires a larger space for take off, landings and “the drop.”

The P1 Zip lets cargo down with a parachute attached, so its payload lands within a space about the size of two car parking spots. After a P1 Zip returns to base, an employee needs to disassemble it, then set up a new one, dropping in a freshly charged battery for the next flight.

Zipline’s new P2 Zip can dock and power up autonomously at a charging station that looks something like a street lamp with an arm and a large disc attached to that arm:

A rendering of P2 Zips charging at a docking station.

Zipline

Zipline docks can be installed in a single parking spot or alongside a building depending on zoning and permits. Zipline envisions the docks set up by restaurants in a downtown shopping district, or alongside the outer wall of a hospital, where the droid can be inserted into a window or dumbwaiter, retrieved, and reloaded by healthcare workers indoors.

Setting up one of these docks takes about as much work as installing an electric vehicle charger, Rinaudo Cliffton said.

Before developing the P2 Zip, Zipline had established logistics networks in Cote d’Ivoire, Ghana, Japan, Kenya, Nigeria and Rwanda already. It is operating some drone delivery networks in the US, in North Carolina, Arkansas and Utah — but the P2 will help it expand that network.

Partners who plan to test deliveries via P2 Zip include the healthy fast-casual restaurant Sweetgreen, Intermountain Health in Salt Lake City, Michigan Medicine, Multicare Healthcare System in Tacoma, Wash., and the government of Rwanda.

Zipline is not alone in its ambitions. Zipline is part of a program with other startups like DroneUp and Flytrex to make deliveries for Walmart. Amazon, meanwhile, has been working on making drone deliveries a reality here for nearly a decade, although that business has struggled to overcome a thicket of regulation and low demand from test customers.

Quiet and green is the goal

Zipline head of engineering Jo Mardall told CNBC the company focused much of its engineering on making sure the drones were not just safe and energy-efficient, but also quiet enough that residents would embrace their use. 

“People are worried about noise, rightly. I’m worried about noise. I don’t want to live in a world where there’s a bunch of loud aircraft flying above my house,” he said. “Success for us looks like being in the background, being barely audible.” That means something closer to rustling leaves than a car driving by. 

The droid component of the P2 Zip is designed to enter distribution centers through a small portal, where it’s loaded up with goods for delivery.

Zipline

The P2 Zips have a unique propeller design that makes this possible, Mardall explained, adding, “The fact that the Zip delivers from from 300 feet up really helps a lot.”

Mardall and Rinaudo Cliffton emphasized that Zipline aims to have a net-beneficial impact on the environment while giving business a better way to move everything from hot meals to refrigerated vaccines just in time to customers. 

Unmanned aerial vehicles, they explained, avoid worsening traffic congestion by going overhead. And since Zipline’s drones are electric, they can be powered with renewable or clean energy, without the emissions from burning jet fuel, gasoline, or diesel.

But most importantly, the CEO said, Zipline’s drone delivery allows companies to “centralize more inventory,” and “dramatically reduce waste.”

A study published by Lancet found that hospitals using Zipline services were able to reduce their total annual blood supply waste rate by 67%, the CEO boasted.

“That is a mind-blowing statistic, and a really big deal. It saves health systems millions of dollars, by reducing inventory at the last mile and only sending it when it’s needed.”

Zipline is aiming to bring that efficiency to every corner of commerce, the CEO said. It’s also aiming to keep the cost of drone delivery competitive with existing services, like FedEx and UPS, or food delivery apps like Uber Eats and Instacart.

But first, the startup plans to conduct more than 10,000 test flights using about 100 new P2 Zips this year. With its existing P1 drones, Zipline is already on track to complete about 1 million deliveries by the end of 2023, and by 2025 it expects to operate more flights annually than most commercial airlines.

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