Retail gains and meme stocks (hello Bed Bath & Beyond) dominated much of the market’s coverage this week. But some companies in other sectors managed to grab attention, including three that currently sit in our Bullpen: Starbucks (SBUX), Estee Lauder (EL), and Palo Alto Networks (PANW). Before we go over what happened and our updates on these stocks, a quick reminder that the Bullpen is a collection of stocks identified by the Club team as having potential to join Jim’s Charitable Trust, the holdings of which they serve as a wallet. These are companies we consider high quality and will monitor outside of the current portfolio. Most importantly, there is no guarantee when, or if, we will initiate a purchase; we are analyzing and looking for opportunities to buy these stocks. Before we initiate a position, we are usually waiting for certain events to unfold, both company-specific and macro-oriented, or a more attractive entry point. The current composition of the portfolio can also delay an initiation to keep it diversified. Starbucks The news: Cowen analysts raised their price target on the stock to $104 from $94 on Thursday, ahead of the company’s Sept. 13 investor meeting. In his view, the event could prove to be a positive catalyst if management appoints a new CEO and provides an update on its long-term operating margin target. (Howard Schultz is currently running the program on an interim basis though the first quarter of 2023.) Club view: We continue to like the stock and, if the opportunity presents itself, may look to start the name before the company’s Investor Day event in September. As Jim pointed out during Thursday’s “Morning Meeting,” ideally we want a level below where he entered the Bullpen (somewhat below the $86 per share level) in a market that no longer reads as overbought according to the S&P Short Range. oscillator Estee Lauder The News: Estee Lauder reported fiscal fourth quarter earnings on Thursday. The results came in ahead of analysts’ estimates: earnings of 42 cents per share versus expectations of 32 cents on sales of $3.56 billion versus expectations of $3.43 billion. However, forward forecasts for both the current quarter and FY2023 are well below expectations. Club takeaway: On the company’s earnings call, management said its skin care business, which accounted for 55% of total sales in fiscal 2022, was the hardest hit by China’s Covid policies. The restrictions not only reduced foot traffic to stores, but also hampered distribution capacity. But China is reopening and the team remains optimistic about the long-term opportunity in the region. In the short term, it is a concern. After all, our investment in Wynn Resorts (WYNN) has had an impact on longer-than-expected lockdowns in Macau. We think Estee Lauder stock will eventually rise. While we currently have no plans for the stock, investors should consider owning it if they are confident that the lockdown restrictions in China will be eased, as this will boost the beauty company’s stock. We have owned EL for the portfolio in the past, exiting our previous position in December 2021 after good stock management. Palo Alto Networks The News: Morgan Stanley analysts released an industry note discussing cybersecurity defense. However, they expect security to be less of a “rising tide” in the future “and continue to lean more toward mission-critical platforms with [free cash flow] They view PANW as their “top pick” as it best fits their criteria of broad supply, secular growth tailwinds and an expectation of 30% free cash flow growth. The club’s takeaway: Data is the currency of the day, and as a result, protecting that data is of the utmost importance. This makes cybersecurity revenues among the most resilient when it comes to IT budgets, and Palo Alto is the leader in the space. While management is doing an excellent job of balancing top-line growth with profitability and cash generation, at roughly 51 times forward adjusted earnings estimates, the stock is far from cheap. So while we love the business, we have to let the stock fall to levels that are a little more bearable. (Jim Cramer’s Charitable Trust is long WYNN. See a full list of portfolio stocks here.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending it. a trading alert before you are buying or selling shares in your charitable trust’s portfolio. If Jim has discussed a stock on CNBC TV, wait 72 hours after issuing the trade alert before executing the trade. INFORMATION ON THE ALTERNATE INVESTMENT CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTOR CLUB. NO SPECIFIC RESULTS OR BENEFITS ARE GUARANTEED.
An employee hands a bag to a customer on the bus at a Starbucks coffee shop in Hercules, Calif., Thursday, July 28, 2022.
David Paul Morris | Bloomberg | Getty Images
Retail gains and meme stocks (hello Bed Bath & Beyond) dominated much of the market’s coverage this week. But some companies in other sectors managed to grab attention, including three that currently sit in our Bullpen: Starbucks (SBUX), Estee Lauder (EL), and Palo Alto Networks (PANW).
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