Disney (DIS) gets a bullish call on Wall Street. Johnson & Johnson (JNJ) gets ready to start its consumer unit IPO roadshow. Analysts express optimism about Advanced Micro Devices (AMD). Here’s a look at the headlines along with our take for each of these Club holdings. DIS YTD mountain Walt Disney’s stock performance year to date. The news: Wells Fargo analysis called out Disney as the “best opportunity in media” in a research note Monday, emphasizing management shifts to profitable growth in streaming and away from chasing subscribers. Wells Fargo said Disney is “massively underearning” in direct-to-consumer (DTC) and sees significant opportunities to increase profits in the segment through price increases and cost control. Both of these actions would help improve the company’s margins. Analysts estimate that Disney currently has about a 17% share of the roughly $200 billion streaming and linear television market Disney. They expect Disney’s share to rise to 40% by fiscal year 2025. Wells Fargo increased its price target on the stock to $147 per share from $141, while keeping its overweight (buy) rating. The Club’s take: We’re encouraged by Wells Fargo’s recognition that Disney still has massive potential for growth. With Bob Iger back as CEO and his pivot to profitable growth in streaming, we should start to see losses improve as the company executes on planned layoffs and broad restructuring efforts. The second wave of previsouly annoucned job cuts began Monday . For its upcoming fiscal second quarter — set for release May 10 — investors should not expect major progress at Disney since it will likely take some time for those changes to take effect. In fact, it may take another quarter to see the impact of Disney’s $5.5 billion cost reduction plan make a difference to the bottom line across the organization. JNJ YTD mountain Johnson & Johnson’s stock performance year to date. The news: Johnson & Johnson is heading to Wall Street soon to meet with prospective investors for its planned initial public offering of its consumer health unit, according to The Wall Street Journal. That process, known as an IPO roadshow, could begin this week. J & J hopes to raise at least $3.5 billion at a roughly $40 billion valuation in the IPO, which will establish the division that makes Tylenol, Band-Aid and Neutrogena products as a separate publicly traded firm called Kenvue. J & J will initially retain at least 80.1% ownership in Kenvue, with plans to offload its remaining stake later in 2023. The Club’s take: We welcome fresh details about J & J’s upcoming business separation, which has been taking shape since late 2021. The company’s medical technology and pharmaceutical business, which accounted for just over 84% of its total 2022 revenue of $94.94 billion, will retain the Johnson & Johnson name. As we’ve explained at length before, we’re fans of the business separation. After divesting the slower-growing consumer division, J & J’s management will be able to focus more easily on its core responsibilities, ensuring those business units are operating at maximum potential. Likewise, the leaders at Kenvue can do the same. That may not have been happening with all three units under the same roof. Kenvue has “very good brands,” Jim Cramer said during a Club “Morning Meeting” earlier this month. “But it’s been completely under-managed because it takes so much time, and [J & J leaders would] rather spend a lot time on pharma and medical devices, so I love what’s coming.” AMD YTD mountain Advanced Micro Devices’ stock performance year to date. The news: Analysts at Susquehanna raised AMD’s price target to $115 per share from $112 and reiterated a positive rating on the chipmaker’s shares. AMD is set to report first-quarter earnings on May 2. While analysts see a “modest risk” to Q2 guidance, they believe it would be the last challenged quarter for the company. The personal computers market has been an overhang for AMD, but analysts said the inventory correction has likely bottomed. In AMD’s data center business, analysts are expecting slower uptake of the new Genoa processor because it is a new platform that will take some time to gain traction. Susquehanna is modeling a pushout of data center revenues. AMD’s gaming revenue is expected to grow this year albeit at a slower pace as inventory in the segment continues to normalize and as “pricing and demand appear to have stabilized,” analysts explain. The Club’s take: We’re pleased to see Susquehanna’s PT increase on AMD shares on the belief that its inventory glut will soon no longer be an issue. Excess inventory has been a drag on the business and AMD stock. It dented AMD’s financials and contributed to shares falling 55% in 2022. AMD has gained about 35% so far this year. We hope to see that inventory bottom start showing up in the company’s upcoming earnings report, which could help lift the stock higher. CEO Lisa Su has previously said she expects a strong second half of the year. We hope to see that come through in the company’s guidance when it reports Q1 next week. (Jim Cramer’s Charitable Trust is long DIS, JNJ, AMD. 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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Walt Disney World fireworks display in Orlando, Florida.
Joe Burbank | Orlando Sentinel | Getty Images
Disney (DIS) gets a bullish call on Wall Street. Johnson & Johnson (JNJ) gets ready to start its consumer unit IPO roadshow. Analysts express optimism about Advanced Micro Devices (AMD). Here’s a look at the headlines along with our take for each of these Club holdings.
