Public Health
In this fast-paced bull market, we’re increasing our Club price targets on 4 stocks
It’s been hard to keep up. That’s the story of the big stock winners this year. They just keep winning and winning and winning. For analysts on Wall Street and here at the Club, it seems like some of these names are smashing through our six-to-nine-month price targets every few weeks. To that end, we’re increasing our Club PTs on four of our portfolio stocks. Eli Lilly price target hike to $850 from $750 Starting with Eli Lilly , which has been nothing short of incredible, advancing roughly 60% in 2023 and tacking on another 30% so far this year. Nonetheless, we continue to see further upside as the company has completely reinvigorated growth on the back of GLP-1 drugs. Following last week’s $120-per-share price target hike to $750 on strong earnings, we’re raising our PT again Thursday to $850. LLY 1Y mountain Eli Lilly 1 year GLP-1s are the new kind of diabetes and weight loss drugs taking the world by storm. Lilly and Novo Nordisk dominate the market. Lilly has Mounjaro for diabetes and Zepbound for weight loss. Novo has Ozempic for diabetes and Wegovy for weight loss. Those four injectable drugs are also being studied to treat a host of conditions from heart disease to sleep apnea. In addition to Zepbound and Mounjaro, Eli Lilly has an exciting pipeline of next-generation GLP-1s, which include a weight-loss pill. Lilly is also waiting on regulator approval for its Alzheimer’s drug donanemab. While trading at a significant valuation premium to its historic forward price-to-earnings (P/E) multiple, this isn’t the Eli Lilly of old. It actually screens quite a bit cheaper when accounting for growth using the PEG ratio, which adjusted the P/E to growth estimates. Even at our new $850 price target, Lilly shares still represent a lower PEG than we’ve seen historically but that provides some margin of safety. The stock hit an all-time high in price Wednesday of 764.05 per share. Costco price target hike to $770 from $680 Costco also trades at a premium valuation, but we think it’s warranted due to the company’s reliability and consistency. We’re taking our price target to $770 per share, up from $680, which we had just raised it to in mid-December. By competing to have the lowest gross margins and implementing a membership model, Costco has developed an incredibly defensive moat that will continue to result in market share gains. COST 1Y mountain Costco 1 year Given the incredible value buyers get from Costco, we think management can pass through a membership price hike with minimal risk of elevated churn. It’s historically overdue. In December, alongside reporting a strong quarter, Costco delivered the special dividend that we had been waiting for. It’s important to acknowledge that the entire market is currently trading at a premium. So, on a relative basis, Costco’s valuation is easier to stomach, especially considering the geopolitical uncertainty we already face, which tends to push investors further into quality large-cap names. Costco hit an all-time high of $728.17 last Thursday. A week later, it’s only about $8-per-share below that level. Salesforce price target hike to $320 from $275 Salesforce is a Club name we recently highlighted in our 10 undervalued stocks commentary . The stock has gained nearly 10% year to date after nearly doubling in 2023. However, we continue to see more upside ahead as management has pivoted at breakneck speed to better balance profitability with growth. We’re raising our price target to $320 per share from $275. CRM 1Y mountain Salesforce 1 year While the artificial intelligence revolution remains in its early stages, we think Salesforce has plenty of opportunities ahead. As companies are still learning how to implement generative AI, Salesforce has made initial inroads with its Einstein GPT tool, designed to make users of its consumer relationship management platforms more productive, with features including writing personalized emails. The company also announced AI integration for its work messaging platform Slack. Microsoft has a similar AI assistant for its Office Suite called Copilot. Salesforce shares were trading about Friday’s all-time high of $295.24. Broadcom price target hike to $1,400 from $1,200 Speaking of AI, that brings us to Broadcom , which hit an all time high of 1,295.97 per share last Thursday. While slightly off that level, we continue to see upside in the stock despite its valuation premium. The need to update data centers for the type of accelerated computing required for the current and the future capability of AI remains early innings. We’re raising our price target to $1,400. That comes on the heels of a $200-per-share PT hike to $1,200 in mid-December. AVGO 1Y mountain Broadcom 1 year Broadcom’s AI networking sales are already growing at a rapid clip – up 23% year over year in the fourth quarter of 2023 – and expected to grow 30% in 2024. In fact, analysts at UBS recently said AI networking sales could accelerate even further to 50% growth in fiscal year 2025. There’s also the VMware integration underway, which stands to help Broadcom profit margins and reduce cyclicality. Analysts at JPMorgan recently said that Broadcom’s software business, currently at about 40% of sales, will lead to “earnings power higher with step-up in gross, operating and free cash flow margins.” High-margin, recurring revenue businesses like VMware also get rewarded with higher valuation multiples on Wall Street. In chips, Broadcom stands to be a big winner from big cloud providers, known also as hyperscalers, looking to develop their own custom silicon solutions. Customers include fellow Club names Meta Platforms , Microsoft and Alphabet ‘s Google. While management did guide 2024 sales a bit below what the Street was looking for, the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guide came in well ahead of expectations. Palo Alto Networks price target change pending Lastly, we are aware that our price target on Palo Alto Networks requires an update as well. Like Broadcom and Costco, Palo Alto got a mid-December PT bump to $320 from $300. That’s where it stands at the moment. We will be taking a closer look at what to do after the cybersecurity leader reports earnings next week. While slightly below last week’s all-time high $380.84, the stock on Thursday was still up roughly 24% year to date. It more than doubled in 2023. PANW 1Y mountain Palo Alto Networks 1 year (Jim Cramer’s Charitable Trust is long LLY, COST, CRM, AVGO, MSFT, META, GOOGL. 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 bronze Charging Bull in the financial district of New York City.
Robert Nickelsberg | Getty Images
It’s been hard to keep up.
