Nvidia (NVDA) stock continued its dramatic rise on Tuesday after last week’s earnings report. Meanwhile, analysts have issued a bullish rating on Johnson & Johnson (JNJ) and its recently separated consumer healthcare unit, Kenvue (KVUE). Here’s a more in-depth look at the headlines and the potential impact on our investment outlook for the two Club holdings. The news: Nvidia’s market capitalization topped $1 trillion on Tuesday, the first semiconductor company to reach the exclusive 12 zeros club. At their highs on Tuesday, Nvidia shares rose more than 7%, to over $419 apiece, before giving back gains to trade near 3% – hovering around the $401 level, slightly below the $1 trillion market capitalization threshold. Other members of the S&P 500 worth at least $1 trillion as of Tuesday are fellow Club companies Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL) and Amazon (AMZN). NVDA YTD have been driving Nvidia’s stock market performance since the beginning of the year. Nvidia has soared around 175% since the start of the year thanks to its prowess in artificial intelligence. The chipmaker’s latest rise was fueled by its strong fiscal 2024 first-quarter results and jaw-dropping guidance for the current quarter. These results, released last week, cemented Nvidia as a not-to-trade stock — a rare accolade that Jim Cramer had previously bestowed only on Apple. Nvidia shares are up 34% in the past five days alone. Club’s perspective: The Nvidia AI-powered rally was nothing short of remarkable. The company’s chip technology is at the heart of the AI boom cycle that has lifted a host of tech stocks poised to benefit from adoption. We remain bullish on Nvidia’s leadership in artificial intelligence and last week raised our share price target to $450 per share from $300. However, our rating of 2 indicates that we would wait for a pullback before buying more shares. In general, we don’t like to buy stocks near historical highs. While Nvidia’s beat and rise helped push tech stocks higher, we posted profits on Tuesday as we trimmed our positions in rival chip designer Advanced Micro Devices (AMD) and Instagram’s parent company Meta. and Facebook. These sales were made by discipline, taking advantage of short-term momentum. As Jim likes to say, no one has ever been harmed by taking a profit. Optimism for J & J, Kenvue The news: Investors should buy shares of Johnson & Johnson for its “world’s leading medical technology and pharmaceutical franchises,” Citigroup analysts wrote in a research note Tuesday. The company, after a blackout period, resumed its J&J hedge with a buy rating and price target of $185 per share. That’s almost 20% upside from the stock’s close on Friday. Citi’s call is notable because two-thirds of Wall Street analysts who cover J&J have the equivalent of a hold rating on the stock, according to FactSet. Citi analysts said J&J is now a more focused company following the separation of its consumer unit, Kenvue, which began trading on the New York Stock Exchange earlier this month. JNJ YTD have been driving up Johnson & Johnson’s stock price since the start of the year. Citi’s memo pointed to favorable trends for J&J’s medical technology unit as “patient volumes recover” after years of Covid disruption. J&J’s product pipeline also appears “robust,” the analysts wrote, noting that a number of late-stage drug trial readouts are expected this year. And, crucially, Citi expressed optimism about a potential settlement of J&J’s pending talc lawsuits, which have been a big downside to the stock. “In other words, there is momentum in the new streamlined JNJ,” they argued. Separately, two Wall Street outlets posted bullish ratings on Kenvue, which are relevant to the Club as J&J still owns more than 90% of the consumer healthcare company. Bank of America and JPMorgan launched a hedge of Kenvue with the equivalent of buy odds and price targets of $30 and $29, respectively. J&J is expected to dispose of its remaining stake in Kenvue by the end of the year. Both companies expect Kenvue – which makes household brands like Tylenol and Band-Aid – to see solid revenue growth in the coming years. The Club’s view: We have remained with J&J on the belief that its strong business fundamentals will only strengthen following the separation from Kenvue, allowing management to focus its energies on the med- faster growing tech and pharma. But a resolution on the talc-related lawsuits is needed to significantly unlock the stock’s rise. Jim said Tuesday he could see J&J jump to around $170 a share, if plaintiffs approve the company’s proposed settlement. The next hearing in the case is scheduled for June 13 in US bankruptcy court. J&J has long rejected plaintiffs’ claims that its baby powder and other talc-based products cause cancer. It’s not yet clear how J&J plans to unravel the rest of its stake in Kenvue – it could distribute the shares to shareholders on a proportional basis, in what’s called a spin-off, or give investors the option to exchange JNJ shares for KVUE ones by split. Either way, we like Kevnue as a standalone business and will be watching its performance closely as we await more information from J&J management on the completion of the divestiture. (Jim Cramer’s Charitable Trust is long JNJ and NVDA. See here for a full stock list.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll 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 talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Jen-Hsun Huang, president and CEO of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles on October 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Nvidia (NVDA) continued its dramatic rise on Tuesday after last week’s earnings report. Meanwhile, analysts issued a bullish rating on Johnson & Johnson (JNJ) and its recently separated consumer health unit, Kenvue (KVUE).
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Rana Adam31/05/2023
