Energy
Wednesday, July 13th, 2022 1:11 pm EDT
A number of Club holdings were in the news Wednesday. Here’s a breakdown of three headlines and our take. Apple price target lowered at Citi Chevron CEO sees oil supplies remaining tight Morgan Stanley set to report earnings Apple price target lowered at Citi The news : Citi was the latest research firm to lower its price target on Apple (AAPL). The analysts reduced their PT on the smartphone maker to $175 per share from $200 and lowered estimates due to “consumer spending cuts amidst macro woes coupled with continued supply chain bottlenecks that are likely to weigh on near-term fundamentals.” You may recall Apple previously indicated a revenue headwind of $4 billion to $8 billion in the June quarter due to supply chain challenges. Despite the cut to estimates, the analyst remained bullish on Apple for five reasons. They believe the iPhone 14 is on track for a mid-September launch and they expect a foldable phone in 2023. Middle-end and premium smartphone products are taking share away from lower-priced Android phones. The roughly $90 billion stock buyback program, which represents about 4% of current market cap, provides support to shares. The services revenue business is sticky and more offerings are likely in the future. And lastly, the analyst believes new product categories like augmented-reality and virtual-reality headsets and perhaps even an Apple car are not currently reflected in the current estimates or market cap. The Club’s take: During our July “Monthly Meeting” on Monday we voiced some concerns about Apple’s upcoming earnings release. But one tough quarter does not change our longstanding view that Apple is a stock that should be owned and not traded on a quarter to quarter basis. Chevron CEO sees oil supplies remaining tight The news : Oil prices fluctuated Wednesday as financials markets grappled with what the Federal Reserve’s response might be to the hotter-than-expected June consumer price index , global growth fears, concerns related to fears of new Covid related lockdowns in China, and President Joe Biden’s trip to Saudi Arabia, where he hopes to convince the OPEC+ members to release more oil. West Texas Intermediate crude , the American oil benchmark, dipped from its early highs after weekly data from the Energy Information Administration showed an unexpected increase in oil inventories. Crude oil inventories, excluding those in the nation’s Strategic Petroleum Reserve, increased by 8.2 million barrels from the previous week. Expectations were for a draw down of 154,000 barrels. From an individual company perspective, Chevron CEO Mike Wirth spoke at CNBC’s Evolve Global Summit earlier Wednesday and reiterated his view of how the tightness in oil supply has not changed despite the commodity’s recent drop below $100 per barrel. Chevron is still a cash-generating machine with WTI at $95 per barrel, but that didn’t stop analysts at Citi from lowering their price target on CVX to $150 per share from $170 and keeping its neutral rating. Even though Citi expects Chevron to deliver record second quarter results and possibly increase the floor of share repurchases, the analysts lowered their price target to reflect changes in oil price assumptions for 2022 and 2023. The Club’s take: The headlines around energy may change daily, but our broader portfolio management strategy remains the same. If oil prices decline even further from here, sure it will hurt the five energy stocks we own. Still, such a dynamic would greatly benefit the rest of our portfolio as it would mark a significant victory for Fed Chair Jerome Powell in his quest to squash inflation. If energy prices remain elevated, then we would expect our energy stocks to outperform the rest of the broader market, and we will likely profit-take into that strength. Morgan Stanley set to report earnings The news : Investment bank Morgan Stanley (MS) will report its second-quarter earnings before the opening bell Thursday. The bank’s earnings call will start at 9:30 a.m. ET. The bank is expected to report $1.56 in earnings per share off $13.386 billion in revenue, according to estimates on FactSet. The Club’s take: Second-quarter estimates have come down significantly in recent weeks as it is no secret that investing banking activity is down, and a weak market creates headwinds to the wealth and asset management businesses. But with shares trading at 1.8 times tangible book value and some support from a sizeable dividend yield and a recently announced $20 billion buyback plan, we think a lot of bad news is already reflected in the stock price. Here is a look back at what we said about the bank’s first quarter earnings report . (Jim Cramer’s Charitable Trust is long AAPL, CVX and MS. 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.
This post has been syndicated from a third-party source. View the original article here.
