Wall Street analysts revealed bold predictions on four portfolio stocks this week, as investors digested the latest inflation data and December earnings season kicked off. Here’s a summary of each report, along with the Club’s updated take on each. Morgan Stanley Wall Street’s take: HSBC cut Morgan Stanley’s rating to hold from buy on Monday, citing weaker guidance for the firm’s wealth management business. “We have cut our earnings estimates notably for Morgan Stanley in recent months even as the share price has risen, leading to a material increase in the PE (c15x 2024e) despite a softening outlook for wealth management (a higher multiple business) revenue,” analysts wrote ahead of the bank’s Jan. 16 earnings release. MS 1Y mountain Morgan Stanley 1 year The Club’s take: We don’t blame analysts for stepping to the sidelines. Bank stocks have had a stellar performance over the past couple of months, and when expectations are high heading into earnings it can lead to sell-the-news events. And to be fair, weakness in its Wealth Management unit was the driver behind the stock’s near 7% decline on earnings in October. Still, Morgan Stanley has strong growth prospects from its investment banking segment, a business we see improving on a better macroeconomic outlook and a pickup in deal activity. The company is scheduled to report its fourth-quarter earnings next Tuesday before the opening bell. Apple Wall Street’s take: Redburn Atlantic downgraded shares of Apple to neutral from buy on Wednesday, citing limited growth opportunities. “While we expect the iPhone to return to growth in CY24, we see little room for upside over the next few years, and an anticipated underwhelming March quarter could impact confidence in this outlook. At the same time, there appears to be rising regulatory risk that may impact Apple’s ability to monetize its ecosystem,” analysts argued. AAPL 1Y mountain Apple 1 year The Club’s take: After Apple’s nearly 50% gain in 2023, it’s fair to assume shares may cool off in the new year. In fact, we trimmed our Apple position, along with seven other tech holdings, in anticipation of investors allocating to other high-quality areas of the market. Still, our “hold it, don’t trade it” mantra on the company stands. Ongoing services revenue growth and the upcoming launch of the Vision Pro have the potential to change the narrative around sluggish iPhone sales. Palo Alto Networks Wall Street’s take: Morgan Stanley named Palo Alto Networks the bank’s top cybersecurity pick on Wednesday. The firm highlighted “multiple growth drivers” for the stock, along with rising security threats, regulatory guidelines and generative artificial intelligence as tailwinds for the sector broadly in 2024. “PANW remains our top security pick, given our confidence in durability of growth, broader platform adoption and low expectations with valuation increasingly attractive at 22X EV/CY25 FCF for 20%+ FCF CAGR,” analysts contended in the research note. “Our most recent checks indicate a notable demand uptick in CQ4 vs CQ3, with Next-Gen offerings (Cortex XSIAM, SASE) contributing more meaningfully to topline growth. Given recent underperformance and relatively mixed investor sentiment, we see a more favorable setup here.” PANW 1Y mountain Palo Alto Networks 1 years The Club’s take: We’ve said time and time again that Palo Alto will outperform its peers and gain market share as businesses consolidate their security budgets around providers that offer a full suite of solutions. This multiyear theme has helped the company become the first in its group to record a $100 billion market cap , a long-held goal by management. But $100 billion won’t be the ceiling due to Palo Alto’s leadership in one of the most important investment categories of IT spending. Salesforce Wall Street’s take: Baird analysts upgraded Salesforce stock to buy from hold on Thursday. “We underestimated the company’s willingness to deliver margins, which drove strong performance last year. With current valuation (~25x NTM FCF) near historical lows, top-line growth and expectations muted (Street +11% next two years), we see upside from current levels,” the analysts wrote. “Price increases, the potential return of front office spend, and crisper sales execution should drive upside.” CRM 1Y mountain Salesforce 1 year The Club’s take: Baird’s comments were a call made too late. The cloud software stock already surged 98% in 2023 as CEO Marc Benioff & Co. embraced the input of activist investors and committed to margin expansion. But after a historic run like this, investors shouldn’t jump the gun as gains of this size are bound to be followed by a breather. (Jim Cramer’s Charitable Trust is long AAPL, PANW, CRM, MS, WFC. 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 . 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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 13, 2023.
Brendan Mcdermid | Reuters
Wall Street analysts revealed bold predictions on four portfolio stocks this week, as investors digested the latest inflation data and December earnings season kicked off. Here’s a summary of each report, along with the Club’s updated take on each.