The Federal Reserve ‘s 75-basis-point interest rate hike is the big event for Wall Street on Wednesday. Overlooked in all the hoopla, perhaps, are a number of headlines involving stocks in Jim Cramer ‘s Charitable Trust, whose holdings are used as the portfolio for CNBC’s Investing Club. We didn’t make any trades ahead of the Fed decision — we’re not trying to be heroes , borrowing a phrase from what hedge-legend David Tepper told Cramer the other day. That said, here’s a quick rundown of the headlines and the implications, if any, for our companies. Qualcomm The second-highest court in Europe canceled a roughly $1 billion fine that had been imposed on Qualcomm (QCOM) by European Union antitrust regulators. The European Commission had fined Qualcomm in 2018, alleging that Qualcomm made anticompetitive payments to Apple (AAPL) between 2011 and 2016 to ensure Apple exclusively used its baseband chips in iPhones and iPads. The European Commission told Reuters in a statement it’s reviewing the decision and considering whether to appeal to the highest court in Europe, known as the EU Court of Justice. Our take: Qualcomm shares are not really moving on this news. Their roughly 0.5% gain Wednesday is actually lagging the VanEck Semiconductor ETF (SMH). Nevertheless, it’s still a positive development for Qualcomm, which already recorded a $1.2 billion charge related to EU fine in its first-quarter 2018 results . We recognize the European Commission may still appeal, so Qualcomm cannot remove the fine amount from its liabilities. However, one fewer legal battle to fight would be a good thing. Apple Morgan Stanley analysts trimmed their price target on the iPhone maker to $185 from $195, while maintaining an overweight rating on the stock. That’s still about 39% upside from where Apple shares closed Tuesday. The analysts lowered their revenue and earnings estimates for their entire coverage universe in the IT hardware sector, citing a slowdown in spending even for higher-end consumers. Other companies in this universe include speaker maker Sonos and GPS tech firm Garmin . Morgan Stanley now sees Apple generating $409.36 billion in sales in fiscal year 2023, down from $422.33 billion, while earning $6.23 per share. Its previous estimate was for EPS of $6.43. Our take: We’re not necessarily surprised to see Morgan Stanley cut their numbers. Earlier this month, Morgan Stanley warned about slowing App Store revenue in a note to clients, saying it represented a near-term challenge for results even though the analysts emphasized their bullish long-term view. We understand Apple is unlikely immune to a broad-based slowdown in discretionary consumer spending, even if it may hold up better than peers given its premium positioning and strong ecosystem. That said, we continue to believe Apple is a company to own, not a stock to trade. Amazon On Wednesday, analysts at JPMorgan reaffirmed Amazon (AMZN) as their “best idea” while reiterating their $200 price target. The core of the note focused on the company’s Prime subscription offering, estimating that unbundled everything offered in the $139 per year (in the U.S.) membership, you would see a package worth roughly $1,110 per year. The difference between what Amazon charges and what the parts of the Prime bundle are arguably worth speak to the service’s low churn and incredible pricing power. Factoring into their unbundled valuation were enhancements to the delivery network, a larger Prime Video library following the MGM acquisition, NFL “Thursday Night Football” and gaming. More specifically, the analysts value (based on competitor prices) the delivery network at $325 per year, grocery at $312 per year, video at $144 per year (comparable to a Netflix subscription), music at $72 per year, photos at $24 per year, reading (think Kindle) at $108 per year, gaming at $120 per year. Our take: This note is similar to what we called out Tuesday with the Apple One Bundle, which the JPMorgan analysts called attention to, as well. The best part about offering so many services in a single bundle is that none of them really have to be the best of the best – Amazon Music doesn’t have to be better than Apple Music, Prime Video doesn’t have to necessarily be better than Netflix, and so on. That’s because as long as users are getting some value out of them, the bundle can be more than justified. For example, maybe you really do value Prime Video as much as you value Netflix. If that’s the case, then everything else is just a free bonus that comes with the Prime subscription. And if you shop online constantly, well at an estimated value of $325 per year, you’re getting more than double your money’s wroth on that alone before factoring in any of the other services. Eli Lilly SVB Securities analysts reaffirmed their overweight rating on shares of Eli Lilly (LLY) with a $341 price target on the stock. That represents just over 17% upside from Tuesday’s closing price of $290.79 per share. Analysts said their optimistic outlook on the stock is due, in part, to a belief that Wall Street will continue to raise their estimates on sales of Mounjaro, the company’s new type 2 diabetes drug that recently received Food and Drug Administration approval. SVB Securities also noted the promise Mounjaro has shown as an obesity treatment in trials, writing they expect Lilly to file for FDA approval in the third quarter of 2023 and launch it in 2024. “In addition, we are bullish on Lilly’s pipeline, which eclipses our skepticism about donanemab for Alzheimer’s (for which we est. 40% odds of success).” Our take: While we hold a more favorable outlook on Lilly’s experimental Alzheimer’s therapy than SVB Securities, we both share a general bullishness toward Lilly’s drug pipeline. We’ve repeatedly highlighted it as a primary reason we’re investors in the company. The recent FDA approval for Mounjaro to treat diabetes only underscores that, as does the full results from Lilly’s phase 3 trial for the drug as an obesity treatment. The latter development isn’t contributing to the company’s top-line sales right now, but it offers a sizable new market down the road. That’s good for us as we invest with our eyes on the future. We’re not traders. Meta The pricing challenges facing Meta Platforms ‘ (META) digital advertising business appear to be moderating, according to analysts at investment bank Piper Sandler, who maintained their neutral rating on the stock. When looking at the average cost-per-impression pricing for ads on both Facebook and Instagram, the analysts wrote in a note to clients that “the trend is showing tentative signs of improvement.” Individually, the year-over-year pricing comps for ads on Facebook are still negative. “However, Instagram pricing looks better and has grown consistently since mid-April (albeit y/y growth declined the last several weeks),” the analysts wrote. Our take: We’ve believed that Meta’s digital ad business would hold up better than other, lesser social media rivals such as Snap . We recognize that there are growth concerns for that entire industry, given a slowdown in ecommerce spending and inflation weighing on the economy more generally. Nevertheless, we see Meta as a reasonably priced stock — at less than 13 times forward earnings — that’s still growing overall. As mentioned with Lilly above, we have a long-term view on Meta and have added to our position in recent weeks because we’re confident management can overcome the near-term issues. (Jim Cramer’s Charitable Trust is long QCOM, AAPL, META and AMZN. 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.
Here are 5 Investing Club stocks in the news and our take on what’s happening
Qualcomm president and CEO Cristiano Amon speaks about Qualcomm’s technology for automakers at a news conference during CES 2022 in Las Vegas, Nevada, January 4, 2022.
Steve Marcus | Reuters
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