Investing.com — Western European governments face a complex balancing act between addressing security threats and managing fiscal constraints, according to Citi analysts.

As President Trump renews calls for NATO allies to increase defense spending, questions are arising about how Western Europe will respond.

Citi highlights that Trump’s pressure could push European nations to allocate 3% of GDP to defense spending, but this goal may not be realized until the 2030s.

If countries resist these demands, there could be “real ambiguity around US security guarantees,” which would likely force Europe to unilaterally bolster its defense capabilities.

In Eastern Europe and Scandinavia, countries like Poland are already spending 4-5% of GDP on defense in response to heightened security concerns.

However, Western European nations, including the UK and France, have been slower to act, according to the bank. Fiscal constraints, especially in the UK, are said to be significant barriers. 

“[The] UK Strategic Defense Review in 2025 may prove a clear example of the pressure the UK Chancellor of the Exchequer is under,” said Citi.

“In the mid-term, we think Europe spending is likely to move higher (though 3% of GDP may be optimistic), in order to satisfy US demands,” they added. “If European Defense spending does move to 3% of GDP in the mid-term, we would expect this to add an additional ~30% to valuations across the sector.”

Ultimately, Citi suggests that Western Europe’s slow action reflects a tension between addressing long-term security risks posed by Russia and the immediate fiscal discipline demanded by bond markets. 

As Citi puts it, “Given the current fiscal constraints…we would not expect to hear significant near-term increases in defense spending.” 

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

InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!

Nvidia concerns “overblown” according to UBS

UBS analysts remain optimistic about Nvidia’s (NASDAQ:NVDA) prospects in 2025, downplaying recent market concerns as “overblown.” While Nvidia stock has remained relatively flat since its last earnings report, UBS is confident the company will “rise above the noise” with strong results ahead.

Investor worries have largely centered on supply chain challenges and the rollout of Blackwell server racks, but UBS analysts dismiss these concerns.

“First, we believe Blackwell chipset/compute board yields have inflected higher, and mix in both FQ4 (Jan) and FQ1 (Apr) is shifting very rapidly to Blackwell and away from Hopper,” they said in a note.

The analysts also highlighted Nvidia’s revenue recognition approach. “NVDA recognizes revenue when ODMs/OEMs take title of compute boards.”

This is particularly relevant as major hyperscalers are leveraging the working capital of ODMs and, in some cases, providing bridge financing for inventory. UBS believes this dynamic is aiding Nvidia in navigating supply chain complexities.

On the hardware side, UBS acknowledged some issues but pointed to improvements, particularly with connector cartridges from primary supplier Amphenol (NYSE APH). While additional enhancements are still needed in other components, UBS’s Asia team reported that the overall situation is steadily improving.

Shipments of Blackwell rack systems are also on track.

“We believe rack shipments are already underway with Hon Hai (TW:2317) confirming volume shipments of GB200 rack systems commencing in 2H of January,” analysts continued.

Apple stock down this week after analyst downgrades

Apple Inc (NASDAQ:AAPL) stock fell more than 4% this week after Wall Street analysts issued downgrades for the tech giant, signaling a bearish outlook ahead of the company’s fiscal Q1 2025 earnings report.

Jefferies cut its Apple stock rating to Underperform from Hold on Monday, lowering its price target to $200.75 from $211.84.

The revision stems from expectations that Apple will miss both earnings and guidance targets, driven by weak iPhone sales and slower-than-expected adoption of AI in its upcoming iPhone models.

The analysts forecast Apple to fall short of its 5% revenue growth guidance for the first quarter, with projections of only low single-digit revenue growth in the second quarter—below consensus estimates.

Jefferies also revised its iPhone shipment forecast for Q1 FY25, shifting from a 1% growth projection to a 2% decline, citing IDC data that indicates a 4% year-over-year drop in shipments. Weak iPhone sell-through in China and muted demand for iPads and MacBooks globally further weigh on the outlook.

The downgrade also reflects concerns about Apple’s March quarter guidance, which analysts believe could disappoint investors. Jefferies noted that near-term AI prospects in smartphones remain limited, with a survey indicating that US consumers see little value in smartphone AI features.

Separately, Loop Capital also downgraded Apple, cutting its rating to Hold from Buy. Loop analysts expect “material iPhone demand reduction” starting in the March quarter and worsening in subsequent quarters.

“While the foundation of our 7/15/24 structural Buy call could still materialize, it now remains unclear on timing, and it certainly won’t be for the next nine months given we’re on the front end of 2.5 quarters of materially softening iPhone demand,” analyst Ananda Baruah remarked.

Wedbush lifts Tesla stock price target to new Street high

Meanwhile, Wedbush analysts have raised their price target on Tesla Inc (NASDAQ:TSLA) shares to $550, the highest on Wall Street, from $515. The upgrade reflects “growing confidence” in Tesla’s delivery demand outlook for 2025 and the anticipated acceleration of autonomous and AI initiatives under the Trump Administration.

“Our time spent speaking to many in the Beltway the last few weeks give us a growing confidence the Trump White House the next 4 years will be a ‘total game changer’ for the autonomous and AI story for Tesla and Musk over the coming years,” Wedbush analysts, led by Daniel Ives, stated.

The firm’s bull case target of $650 remains unchanged.

Wedbush estimates Tesla’s AI and autonomous technology opportunities could represent a $1 trillion market, with the potential for the company’s valuation to reach $2 trillion by the end of 2025. These projections are bolstered by strong delivery demand from China and expected positive commentary during Tesla’s upcoming earnings call.

The analysts said that their price target does not include any value for Tesla’s humanoid robot, Optimus, which they believe could become “a major upside catalyst for the Tesla story.”

They also emphasized that Tesla’s Full-Self Driving (FSD) solution could achieve over 50% penetration, transforming the company’s financial model and boosting margins significantly.

“We believe Tesla remains the most undervalued AI play in the market today,” the analysts said, highlighting the growing recognition of Tesla’s AI technology as a key contributor to its valuation.

A key factor driving Wedbush’s bullish view is Tesla’s strategic positioning under the Trump Administration. The analysts believe the company is poised to benefit from a regulatory environment that is more favorable to autonomous and AI developments.

AI Agentforce could drive upside in Salesforce stock: BofA

Bank of America analysts see further upside for Salesforce Inc (NYSE:CRM) shares this year, supported by its new AI offering, Agentforce, and an improving spending environment.

While the stock posted strong gains of 98.5% in 2023 and 27.1% in 2024, analysts note it still trades at a discount to peers.

Salesforce is valued at 19 times its calendar year 2026 (CY26) estimated free cash flow, compared to 27 times for the Growth at a Reasonable Price (GARP) group, according to BofA.

Despite concerns over slowing growth—revenue increased 8% in the third quarter of fiscal year 2025 (FY25) versus 18% in FY23—BofA expects acceleration to 12-13% year-over-year by the second half of FY26, driven by “1) a better spending environment and 2) Agentforce,” analysts Brad Sills and Carly Liu said.

The software spending slowdown that began in mid-2022 is easing, with improved sentiment from System Integrators (SI) and software firms exceeding revenue expectations. BofA draws comparisons to post-recession trends, projecting a 1 percentage point increase to Salesforce’s committed remaining performance obligations (cRPO) growth forecast of 10% in early 2025.

Agentforce is also expected to make a meaningful impact, potentially boosting year-over-year subscription revenue growth by 2 percentage points in the latter half of FY26 under optimistic projections.

S&P 500 ‘will thrive in 2025’ on AI boost, market research firm says

Earlier this week, economic research firm Capital Economics reaffirmed its optimistic outlook for the S&P 500 in 2025 following Donald Trump’s announcement of the Stargate joint venture (JV), a $500 billion initiative over four years to build AI infrastructure in the United States.

The JV’s key equity investors include SoftBank (TYO:9984), which will provide funding, OpenAI, overseeing operations, as well as Oracle (NYSE:ORCL) and MGX, Abu Dhabi’s AI-focused investment arm.

Trump described the venture as the “largest AI infrastructure project in history,” with plans to channel investments into data centers, chip production, and power plants to strengthen the US AI ecosystem.

Capital Economics highlighted the involvement of Japan-based SoftBank as a sign of Trump’s willingness to engage foreign allies in advancing America’s AI goals.

“The new president seems much less keen than his predecessor on imposing checks and balances on the spread of Al,” the firm noted.

Trump has also rolled back Biden-era executive orders, including regulations on AI development and clean energy initiatives, signaling a more relaxed approach to fostering AI growth—even at the cost of increased reliance on less environmentally friendly energy sources.

Capital Economics’ bullish stance on the S&P 500 is anchored in the expectation that the benefits of AI will quickly materialize within the index, even if they take longer to permeate the broader US economy.

The firm maintains its forecast for the index to hit 7,000 by the end of 2025, supported by Trump’s pro-AI policies.

“We can’t see much sign of demand for Al faltering, which is perhaps the biggest risk to our view. Indeed, plans to ramp up Al investment suggest the opposite,” the firm added.

Investing.com — Amazon stock staged a strong performance in 2024, outpacing both the Nasdaq and the eCommerce sector with a 44% gain, compared to 25% for the Nasdaq. This surge was supported by an expansion in the price-to-sales ratio, which increased from 2.3x at the beginning of 2024 to 3.1x.

Analysts at Bank of America pointed to Amazon Web Services (AWS) and retail margin growth as two fundamental drivers of Amazon’s (NASDAQ:AMZN) success. They anticipate that AI-driven cloud growth will remain a significant opportunity within the sector in 2025.

Moreover, retail margin expansion is expected to continue propelling profit growth that surpasses that of Amazon’s peers. The analysts also noted that Amazon is positioned to handle the impact of the US dollar appreciation, which could benefit cloud margins.

Looking ahead to 2025, BofA identified several investment positives for Amazon stock. These include a strong AI-demand cycle for AWS, further retail margin efficiencies, a multi-year productivity cycle driven by robotics, an increase in Prime Video advertising revenue, cost savings from reductions in mid-level management, and a normalization of online retail that meets or exceeds expectations for the fourth quarter and holiday season.

At the same time, the investment bank also outlined potential risks. These are the impact of new tariffs on volumes and margins, investments in new areas like Project Kuiper that could stifle margin progress, and elevated expectations and possible margin pressure for AWS.

Rising competition from Walmart (NYSE:WMT), and a relatively high valuation compared to Amazon’s historical price-to-sales and price-to-earnings ratios, were also highlighted. Moreover, with 79 Buy ratings, Amazon appears to be a consensus favorite stock, which may present its own set of challenges.

Regarding tariffs, media reports indicate that no new tariffs would be signed on President Trump’s first day in office. Instead, the administration plans to issue a broad trade memo to study potential overhauls with China, Mexico, and Canada.

In light of these positives and negatives, BofA slightly lowered its 2025 estimates for Amazon due to the recent US dollar appreciation, reducing the International Revenue forecast by approximately $7 billion. This adjustment is partially offset by slightly higher AWS margins.

For 2025, BofA estimates revenue/profit/GAAP EPS at $700 billion/$79.5 billion/$6.10, slightly down from the previous $707 billion/$79.9 billion/$6.13. Even with these adjustments, BofA still expects Amazon to show more stable year-over-year revenue growth in the first half of 2025 and better margin expansion relative to large-cap peers.

The firm continues to “see Amazon as a relatively strong play on AI,” analysts led by Justin Post said in a note.

Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week.

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Monday- US Markets Closed for Martin Luther King Jr. Day

Apple

What happened? On Tuesday, Jefferies downgraded Apple Inc (NASDAQ:AAPL) to Underperform with a $200.75 price target.

*TLDR: Jefferies downgrades Apple on weak iPhone sales. AI outlook and growth targets missed.

What’s the full story? Jefferies lowers forecasts due to weak iPhone sales and the general consumer electronics market, citing a reduced outlook for iPhone 17/18 due to slower AI uptake and commercialization.

Jefferies expects Apple to miss its revenue growth guidance of 5% for the first quarter of fiscal year 2025 and to guide to only low single-digit revenue growth in the second quarter, also below consensus.

The AI outlook remains subdued, with industry checks suggesting delays in Apple’s advanced packaging roadmap for iPhone as another negative sign. Jefferies’ new price target implies a 13% downside, leading to this downgrade.

Ford

What happened? On Wednesday, Barclays (LON:BARC) downgraded Ford Motor Company (NYSE:F) to Equal-weight with an $11 price target.

*TLDR: Barclays downgrades Ford due to 2025 headwinds. Uncertain cost improvement paths expected.

What’s the full story? Barclays analysts acknowledge Ford’s ongoing transformation efforts, but anticipate significant volume headwinds in 2025, driven by inventory destocking and modest price normalization, which may negatively impact earnings estimates.

While cost reduction has potential, with opportunities to narrow the cost gap compared to competitors, Barclays highlights the uncertainty surrounding the path to cost improvement. The Tier 1 desk’s 2025 EPS estimate of $1.44 falls below Bloomberg’s consensus of $1.63, reflecting their cautious outlook on Ford’s earnings profile.

Veeva Systems

What happened? On Thursday, Goldman Sachs double downgraded Veeva Systems Inc (NYSE:VEEV) (NYSE:VEEV) to Sell with a $261 price target.

*TLDR: Goldman views Veeva as entrenched but faces competition and slow recovery. Veeva’s underperformance expected relative to other coverage.

What’s the full story? Goldman continues to view Veeva as deeply entrenched in its core Life Sciences customer base, with significant cross-selling potential over the next decade. However, the global investment bank identifies several medium-term risks to Veeva’s 2030 targets. These include competition from Salesforce (NYSE:CRM) in the Commercial sector, which is expected to be a persistent headwind, and a slow fundamental recovery in the Life Sciences vertical, likely to impact customer expansion and renewal deals.

Additionally, Veeva’s maturing product portfolio may pose challenges for newer product cycles to drive substantial growth.

Goldman projects that Veeva will underperform relative to other coverage over the next 12 months, despite limited absolute downside risk given its free cash flow support and multiple quarters of underperformance. The bank is more cautious on medium-term fundamentals, and its revised price target implies a 13% downside risk compared to an average 11% upside for its Buy and Neutral-rated names.

Twilio

What happened? On Friday, Baird upgraded Twilio Inc (NYSE:TWLO) to Outperform with a $160 price target.

*TLDR: Baird bullish on TWLO’s revenue and valuation. Profitability, gains, and capital returns expected to rise.

What’s the full story? Thursday, Baird attended TWLO’s investor day, buoyed by a pre-released Q4 upside and broad-based strength. The brokerage emerged more confident in TWLO’s capacity to sustain double-digit revenue growth, anticipating further upside to guidance and estimates.

Acknowledging recent gains they had been cautious to chase, Baird now expects a potential beat-and-raise pattern to drive shares higher, especially with improving profitability, cash flow, and capital returns. Valuation is still deemed reasonable, particularly given possible upside scenarios.

Investing.com — President Donald Trump’s comments on potential 25% tariffs targeting imports from Canada and Mexico have sparked concerns among European companies that have supply chains in these two countries, but a larger revenue than asset exposure to the US.

In a Thursday note, Bank of America (BofA) highlighted dozens of European companies particularly vulnerable to these tariffs due to their supply chain and revenue dependencies.

Among these is Stellantis (NYSE:STLA), the Italian automotive manufacturer. According to BofA, the company has 16 supply chain links in Canada and earns 47% of its revenue from North America (NA), despite no reported tangible asset exposure in the US.

Similarly, BMW (ETR:BMWG), another automotive giant from Germany, has 18 supply chain links in Canada and derives 26% of its revenue from the US, while its asset exposure to the US sits ast 18%.

National Grid (LON:NG), a UK utilities firm with a €58 billion market cap, has a significant US footprint, with 50% of its assets and 54% of its revenue tied to the region. Although its tangible supply chain links in Mexico and Canada are minimal, its heavy US exposure makes it highly susceptible to tariff disruptions.

In the industrial sector, Switzerland’s Holcim (SIX:HOLN) relies on NA markets for 39% of its revenue, alongside 5 Canadian and 3 Mexican supply chain links.

Spain’s Ferrovial, which generates 50% of its revenue from the US, also appears on BofA’s radar, although its supply chain links in the two targeted countries are negligible.

Other notable mentions include Tenaris (BIT:TENR), an Italian energy firm, with 9 supply chain links in Canada and Mexico, and 52% of its revenue tied to North America. Moreover, Denmark’s Vestas Wind Systems (CSE:VWS) has 14 supply chain links in Canada and derives 37% of its revenue from the NA.

Even the healthcare sector shows exposure. Switzerland-based Lonza Group AG (SIX:LONN) maintains four Canadian supply chain connections while generating 32% of its revenue from the US.

German chemicals firm Brenntag AG (ETR:BNRGn) has both Canadian and Mexican supply chain links, alongside 36% US revenue exposure, while Switzerland’s food and beverage giant Nestle SA (SIX:NESN) operates 8 Canadian and 10 Mexican supply chain links and earns 35% of its revenue from the US.

Other companies listed by BofA are AstraZeneca (NASDAQ:AZN), ABB Ltd (SIX:ABBN), Mercedes Benz Group AG (ETR:MBGn), Volkswagen (ETR:VOWG_p), Epiroc (ST:EPIRa), and several more.

BEIJING (Reuters) – Profits at China’s state-owned enterprises rose 0.4% in 2024 from the previous year, the Ministry of Finance said in a statement on its website on Sunday.

That compares with a 7.4% rise in state firm profits in 2023.

Investing.com — Europe’s space sector is grappling with a turbulent period marked by project delays, cost overruns, and mounting competition from global players.

Airbus, a leading player in the industry, has absorbed €1.5 billion in charges in its satellite division over the last two years, while Thales (EPA:TCFP) Alenia Space is expected to post losses in 2024. Launch providers are also under pressure; Avio’s Vega C rocket remains grounded following a 2022 failure, and the Ariane 6, already delayed by four years, has managed only one flight since its July 2024 debut.

Europe’s satellite industry has been further strained by the rise of Low Earth Orbit constellations, which have disrupted traditional demand for Geostationary satellites.

“Space is clearly becoming more strategic, both in terms of commercial communications, but also in the sphere of defence,” BofA analyst said amid rapid advancements by SpaceX, Blue Origin, and emerging space programs in China, India, and Japan. SpaceX conducted 134 Falcon rocket launches in 2024, with a 96% success rate in booster landings.

BofA flagged concerns over Europe’s fragmented supply chain, inflation pressures, and execution risks that could derail the project ahead of its critical design review in 2028.

European space companies are increasingly considering consolidation to remain competitive. Airbus CEO Guillaume Faury recently hinted at potential partnerships, aligning with a year-long push for a unified approach. BofA analysts argue that Europe must adopt a global mindset, echoing the success of SpaceX’s vertically integrated model.

Investing.com — UBS warned of near-term downside risks to U.S. natural gas prices due to milder weather forecasts for February, but raised its price forecasts for the second half of the year on rising liquefied natural gas exports and tightening inventories.

Colder-than-average winter weather in the U.S. has driven natural gas demand to its highest levels since late 2022, lifting prices. Freeze-offs have disrupted supply, while the shutdown of the Freeport LNG export terminal has compounded volatility. UBS now expects natural gas inventories to end the withdrawal season in March at 1.7-1.8 trillion cubic feet, slightly below the five-year average.

Despite the potential for price pressure in the coming weeks, UBS revised its September and December price forecasts higher by $0.20 per million British thermal units, anticipating a boost from new export terminals, including Plaquemines and Corpus Christi Stage 3, alongside Mexican LNG facilities. UBS projects inventories at around 3.7 tcf by the end of October, down from a prior forecast of 3.9 tcf.

While UBS remains constructive on natural gas prices in the longer term, high roll costs and near-term risks are keeping the bank on the sidelines for now, with no immediate investment recommendations.

MILAN (Reuters) – Mediobanca (OTC:MDIBY)’s board will meet on Tuesday to discuss a bid for the Italian merchant bank by state-backed Monte dei Paschi di Siena (MPS), a person close to the situation said.

On Friday, MPS joined the consolidation wave sweeping Italian banking with a 13.3 billion euro ($13.96 billion) all-share offer to buy Mediobanca, which was welcomed by the Italian government, but puzzled analysts and investors. 

In a letter sent to staff on Saturday and seen by Reuters, Mediobanca’s Chief Executive Alberto Nagel said the MPS offer had not been agreed with the bank and that the board would express its views, with the aim of protecting the interests of all stakeholders, particularly employees.

On Friday, a person close to the situation told Reuters that MPS offer was not friendly, though not unexpected. 

MPS is offering 23 of its own shares for every 10 Mediobanca shares tendered, representing a 5% premium to Thursday’s closing price. However MPS shares lost 7% on Friday, meaning the offer now implies a 1.2 billion euro discount to the market price. 

($1 = 0.9530 euros)

(Reuters) – Bangladesh’s central bank has hired three “Big Four” accounting firms – EY, Deloitte and KPMG – to audit banks it says lost $17 billion to business people close to the regime of former leader Sheikh Hasina, the Financial Times reported on Sunday, citing bank governor Ahsan Mansur.