The Club on Friday is changing the rating and price target on one of our favorite stocks, and updating the price targets on 5 other names in the portfolio to reflect recent quarterly earnings reports, new developments at the companies and broader economic forces. We’re increasing our price target on shares of Palo Alto (PANW) to $300 from $280. In our broader assessment of cybersecurity companies this earnings season, it’s clear there are just three winners gobbling up market share: Palo Alto Networks, CrowdStrike (CRWD), and Zscaler (ZS). This trio keeps making new high after new high as companies consolidate their security budgets around the best providers who can offer the broadest set of solutions. At the same time, we recognize that PANW has made a huge move since reporting Nov. 15 what was initially viewed as a confusing earnings report but looked like a clear-cut buying opportunity to us. This roughly 21% rally in 10 sessions has sent the company near a $100 billion valuation, which makes it hard for us to say it should be bought right here. That’s why we are moving our rating to a 2 — meaning we would buy on any pullbacks — even though we remain long-term bullish on this industry leader. We’re raising our price target on Costco (COST) shares to $630 from $600 as the wholesale retailer continues to see steady sales growth and market share gains from customers seeking value. On Wednesday, the company reported its sales for the retail month of November, and the results once again showed how Costco outperforms its peers and is a model of consistency. As we look out to 2024, a long awaited membership fee hike and special cash dividend could finally be in the cards, representing two potential catalysts that could send shares higher. We suspect management will be asked questions about both when Costco reports earnings on Dec. 14. We’re raising our price target on shares of Salesforce (CRM) to $275 from $240. The move comes after Wednesday night’s blowout third-quarter report that gave us everything we wanted to see. Continued double-digit revenue growth. Check. Better-than-expected Current Remaining Performance Obligation (cPRO) growth (deferred revenue). Check. And strong operating margins with talk of further expansion in the future. Check. To top it off, we learned that the company is seeing a rush of new business for its AI-related solutions. It’s hard not to be impressed by Salesforce’s ability to steadily grow revenues and stay laser-focused on cost discipline at the same time. That’s why the stock has more room to run from here. We’re lowering our price target for Ford (F) stock to $13 from $16. The company reinstated guidance for the full year 2023 Thursday, updating its expectations to reflect the impact of the UAW strike and new labor agreement. Management now expects full-year adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion, which was within the range of the $10.5 billion consensus estimates. But cash flow remains a positive story, with management now estimating adjusted free cash flow of between $5 billion to $5.5 billion, which is nicely higher than the $4.2 billion expected. We didn’t learn plans of a buyback to take advantage of the stock’s low price-to-earnings multiple, like what General Motors (GM) announced Wednesday. However, management explained Friday that its strategy is to pay out 40% to 50% of free cash flow to shareholders annually, with anything in excess potentially eligible for a special dividend. Ford is two months into the fourth quarter, so it’s a good sign that management guided full-year profits in the general neighborhood of expectations after that blunder of a third-quarter earnings report . But we still see the need to take down our price target due to the mounting losses of electric vehicle business and some of the operations miscues on quality and costs that we’d like to see Ford course correct before warming back up to the name. We’re increasing our price target on Linde (LIN) shares to $440 from $410. This stock can keep trucking high due to appreciation for its consistent, double-digit percent earnings per share growth. The industrial gas giant has achieved this feat year in and year out despite headwinds like wars and surging energy costs. More recently, Linde’s pulled off strong earnings growth without any volume support, thanks to its dependable business model, rigorous approach to return on investments, and relentless drive to improve productivity. All of this was on display in the company’s recent third-quarter earnings report where it beat and raised for the 19th consecutive quarter. Linde is also seeing huge growth in its backlog, partly due to increased investment in energy transition projects, which in turn will take the company’s earnings growth up a notch. We’re lifting our price target on shares of Eli Lilly (LLY) to $630 from $600. The stock has had a great 2023, gaining roughly 60% against a more than 3% decline in the S & P Healthcare sector. But more gains are ahead due to its leadership in the diabetes and obesity market, and its potential in Alzheimer’s once its therapy known as donanemab receives FDA approval sometime in the first quarter of 2024. There’s a view in the market that it’s only a matter of time before competition in obesity heats up and other players beyond Lilly and Novo Nordisk (NVO) enter the space. However, we just learned that it’s not always so easy: Pfizer (PFE) on Friday said it will discontinue studies on its twice-daily oral pill for obesity due to poor tolerability. It’s also worth mentioning that the weight reduction achieved with Pfizer’s drug of up to 13% in 32 weeks was less effective than Lilly’s phase 2 results of its once-daily oral pill, called orfoglipron, which achieved up to 14.7% weight reduction at 36 weeks. (Jim Cramer’s Charitable Trust is long COST, CRM, F, LIN, LLY and PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
The Club on Friday is changing the rating and price target on one of our favorite stocks, and updating the price targets on 5 other names in the portfolio to reflect recent quarterly earnings reports, new developments at the companies and broader economic forces.
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