Affirm downgrade, Microsoft price target, JetBlue-AAL alliance: Trending tickers

Affirm shares fall following a stock downgrade from Piper Sandler analysts. Morgan Stanley raises Microsoft's price target to $415. JetBlue ends its alliance with American Airlines as it pursues an acquisition of Spirit Airlines. Yahoo Finance Live's Seana Smith and Akiko Fujita check out several top trending stocks after Thursday's closing bell.

Video Transcript

SEANA SMITH: That closes out today's trading action. All three of the major averages under pressure following that very strong ADP report before the bell. The Dow closing off its lows of the day, off just around 365 points. S&P off about 8/10 of percent as well as the NASDAQ.

Let's take a look at some of the trending tickers. The top one on Yahoo Finance today, Affirm, the stock sliding roughly 10% after a downgrade to underweight from neutral. Piper Sandler, the analyst there citing higher rates. Also the restart of student loan payments as a couple of headwinds here facing Affirm.

He also talked about, Akiko, some competition. We know Apple Pay later the new entrant into that space bringing up some questions just about their ability to attain that revenue growth that they've laid out in terms of their forecast.

AKIKO FUJITA: Yeah, competition a big one. But higher rates, you could argue even bigger when you think about the impact it's likely to have on Affirm. The analyst specifically, saying, that Affirm relies on loan sales to drive a huge part of their revenue.

And if you look at where the company is right now, they've increasingly held on to some of those loans on their balance sheet with higher rates. That's an even bigger concern. And you see that downgrade today reflected in the stock at least down about 10 and 1/2%.

We are also watching Microsoft shares a top performer on the Dow today. Morgan Stanley raising its price target on the stock, naming it a top pick in large cap software. Behind all of that, of course, optimism in Microsoft's AI exposure. We're talking specifically about OpenAI, ChatGPT.

By the way, Morgan Stanley increasing their price target by roughly 24%. Huge upside there. They say specifically that Microsoft is poised to top a $3 trillion valuation in early 2024 because of the big bump they're getting from AI

SEANA SMITH: Yeah. Akiko, they're not buying the fact that there's some concern out there that Microsoft is overvalued at this point. Lots of concern about whether the AI hype has been overdone. They're really reiterating the fact that they believe that Microsoft is a leader in this space and what's driving that narrative. This is a team led by Keith Weiss.

Is that their best position in software to monetize some of the expansion that they are expected to see as the automated workflow, that's a result of generative AI. As we talk about the fact that generative AI is going to disrupt jobs and how people think about jobs and do their jobs.

Morgan Stanley making the argument that Microsoft is best positioned to capitalize on that. We know obviously Microsoft has been really pushing even further into the AI space working it into various parts of their business, overhauling their entire lineup of office apps. So Morgan Stanley thinking that they are going to remain the leader in the space, at least for now.

We're also keeping a close eye on shares of JetBlue. The company announcing that it's going to end its alliance with American Airlines in the northeast. JetBlue saying that it will focus on its acquisition of Spirit, so a bit of a shift here from the airline. Not necessarily a surprise.

We know they have been really focusing on Spirit and what exactly that's going to do for their business going forward. A 7% drop though, in the stock today. Akiko, one of the biggest drops that we've seen and biggest intraday drop since March

AKIKO FUJITA: Yeah. I'm a little surprised by the drop because to your point, Seana, is so much of this and the potential for that alliance coming to an end came up during the whole acquisition, talking whether, in fact, JetBlue was finally going to acquire Spirit, which they did.

You could have argued that was kind of priced in. But I mean, I guess at least if you look at where the stock is right now, pointing to potentially a bumpy road ahead.

SEANA SMITH: Yeah there are some optimists out there. They were holding on to hope. They didn't want to buy the headlines and certainly we are seeing a sell the news type of reaction today.