Raphael Stevens

We’re updating a handful of price targets in the portfolio to reflect recent earnings reports, comments from company executives, and general market multiple compression. Cisco Systems (CSCO): We are reducing our price target to $56 per share , representing about 15 to 16 times fiscal 2023 earnings estimates. We are comfortable giving CSCO a small premium to its five-year average because the makeup of the company is much different now than what it was five years ago. The significant change relates to the company’s transformation into more software and subscription sales. We place more value on software and subscription sales because they tend to be higher in margin relative to hardware, and the recurring nature of subscriptions adds a layer of predictability. Also, the record value of Cisco’s backlog suggests it will have a strong fiscal year 2023, if, of course, the supply chain cooperates. Energy stocks: We are increasing our price targets on Coterra Energy (CTRA), Chevron (CVX), Devon Energy (DVN) and Pioneer Natural Resources (PXD) because oil and natural gas price have remained elevated, and these stocks still screen attractive on a free cash flow basis. Remember these companies are staying disciplined and focusing on maximizing cash flow generation and returning that cash to shareholders through large dividends and steady buybacks. We are increasing our price target on CTRA to $40 per share, DVN to $82, PXD to $300, and nudging CVX up to $185 . Disney (DIS): We are lowering our price target to $140 per share , representing about 25x fiscal 2023 earnings per share estimates. Despite the big change to our price target, our bullish view about the company has not wavered. We still think the margin performance of the theme parks business — the profit engine of the company — is underappreciated. We also think upside to second half of the year Disney+ subscriber additions is possible thanks to its robust content slate of new shows and movies. Marvell Technology (MRVL): We are lowering our price target to $85 per share to reflect lower group multiples on semiconductor stocks. Even though we are lowering our price target Tuesday, we want to reiterate that Marvell’s quarterly results were great and its 88% sales exposure to data infrastructure projects means its business is much more secular growing and less cyclical compared to other chip makers who have big cellphone and PC businesses. Eli Lilly (LLY): We are increasing our price target to $350 per share as long-term estimates for tirzepatide have moved higher following the Food and Drug Administration recently approving the treatment in Type 2 diabetes, and the full phase three obesity data on the drug that was presented on this past weekend. Although our new price target puts LLY at an even heftier premium to its peers, we think it’s justified based on how big of a sales opportunity tizepatide will be. The strength of Lilly’s pipeline and new launches, as well as management’s track record of expanding margins are also factors. (Jim Cramer’s Charitable Trust is long CSCO, CTRA, DVN, PXD, CVX, DIS, MRVL and LLY . 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.

A trader works on the floor of the New York Stock Exchange.
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Elon Musk last week told SpaceX employees the company isn’t likely to take its Starlink satellite internet business public until 2025 or later, CNBC has learned.
The latest timeline signals another IPO delay and comes despite repeated questions from a variety of investors over the years about owning a piece of SpaceX.
Musk emphasized, as he has previously, that the Starlink business needs to be “in a smooth sailing situation” with “good predictability” before it goes public.

SpaceX CEO Elon Musk stands at the base of a Starship rocket prototype at the company’s facility in Boca Chica, Texas.
Steve Jurvetson on flickr

Elon Musk last week told SpaceX employees the company isn’t likely to take its Starlink satellite internet business public until 2025 or later, CNBC has learned, extending the estimated timeline for an initial public offering yet again.
“I’m not sure exactly when that [IPO] is, but maybe it will be like — I don’t know, just guessing — three or four years from now,” Musk said at an all-hands meeting of the private company’s employees on Thursday, according to an audio recording obtained by CNBC.

Musk emphasized, as he has previously, that the Starlink business needs to be “in a smooth sailing situation” with “good predictability.” At that point, “I think spinning it off as a public company can make a lot of sense,” the SpaceX CEO said.
The latest timeline delay comes despite repeated questions from a variety of investors over the years about owning a piece of SpaceX, a stock which remains privately traded.
Musk previously targeted an offering as soon as this year, according to an email to SpaceX employees obtained by CNBC. The email, sent by Musk in May 2019, said “it will probably make sense to take Starlink public in about three years or so.”
Musk then pushed back that estimate, saying in a tweet last year that it would be “at least a few years before Starlink revenue is reasonably predictable,” adding that “going public sooner than that would be very painful.”
SpaceX did not immediately respond to CNBC’s request for comment on Musk’s remarks.

SpaceX’s Starlink network is designed to deliver high-speed internet anywhere on the globe through thousands of satellites in low Earth orbit. The company disclosed late last month that Starlink now has over 400,000 subscribers around the world. SpaceX has launched about 2,500 satellites to date to support the system.
While SpaceX offers a variety of Starlink products and services, the base price of $110 per month and the company’s most recent subscriber numbers suggest annual service revenue of more than $500 million a year.

A Starlink satellite terminal, also known as a dish, setup in front of an RV.

Musk warned employees during his comments on Thursday that they “should not think of things going public as, like, a sure path to riches.”
“The public markets are fickle” and “really pistol-whip you if you don’t meet expectations,” he said.
Musk has had an often contentious relationship with the regulations of publicly traded companies. In 2018, he agreed to pay millions in settlement charges with the Securities and Exchange Commission in response to fraud charges around an aborted plan to take his electric vehicle maker Tesla private. He’s also currently battling with Twitter over a proposal to take the social media company private.
“Being public is definitely an invitation to pain,” he told SpaceX employees Thursday. “And the stock price is just distracting.”
SpaceX continues to raise billions in capital to develop both Starlink and its mammoth Starship rockets. The company’s valuation hit $127 billion during its latest funding round.

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The CDC on Monday ramped up its monkeypox alert to level 2 and encouraged people to “practice enhanced precautions” to stem the recent outbreak.
The new guidance includes wearing face masks while traveling, as well as avoiding close contact with sick animals and people, especially those with skin lesions.
As of Monday, 1,019 confirmed and suspected cases of monkeypox have so far been reported in 29 countries, according to the public health body.

Test tubes labelled “Monkeypox virus positive and negative” are seen in this illustration taken May 23, 2022. 
Dado Ruvic | Reuters

The U.S. Centers for Disease Control and Prevention has stepped up its monkeypox guidance, urging travelers to take extra precautions including wearing face masks as global cases of the virus surpass 1,000.
The CDC ramped up its alert to a level 2 on Monday, encouraging people to “practice enhanced precautions” to stem the outbreak, which has spread to 29 nonendemic countries in the past month. The highest level alert — level 3 — would caution against nonessential travel.

While the public health body said the risk to the general public remains low, the heightened alert encourages people to avoid close contact with sick people, including those with skin or genital lesions, as well as sick or dead animals. It also urges those displaying symptoms of the virus, such as an unexplained skin rash or lesions, to avoid contact with others and to reach out to their healthcare provider for guidance.
Monkeypox is a rare disease caused by infection with the monkeypox virus, with symptoms including rashes, fever, headaches, muscle ache, swelling and backpain. 
It is typically endemic to Central and West African countries, but the recent outbreak across North America, Europe and Australia has confounded health professionals and raised fears of community spread.
As of Monday, 1,019 confirmed and suspected cases of monkeypox have been reported in 29 countries, according to the CDC. The U.K. has recorded the most cases by far, with 302 suspected and confirmed infections. It is followed by Spain with 198, Portugal with 153 and Canada with 80.
Health experts have been searching for clues as to the source of the outbreak, which has historically been linked to travel from endemic countries. The World Health Organization’s technical lead for monkeypox said Wednesday that the virus could have been transmitting undetected within non-endemic countries for “weeks, months or possibly a couple of years.”

U.S. detects two monkeypox strains

Until recently, the current outbreak was thought to have derived from the West African strain of the virus, which produces less severe illness than other variants and has a 1% fatality rate.
However, the CDC said Friday that at least two genetically distinct monkeypox variants are currently circulating in U.S., adding to health experts’ confusion. The U.S. has so far reported 30 cases of the virus in total.
“While they’re similar to each other, their genetic analysis shows that they’re not linked to each other,” Jennifer McQuiston, deputy director of the CDC’s high consequence pathogens and pathology division, said of the two variants at a Friday press briefing.
McQuiston said it is likely that the two strains stem from two different instances where the virus has spilled over from animals to humans in Africa, before spreading via person-to-person contact.
Professor Eyal Leshem, infectious disease specialist at Sheba Medical Centre told CNBC Monday that the spread of the virus to non-endemic countries was unsurprising given the frequency and ease of international travel, as well as the increased interaction between humans and animals.
“Diseases that were locally spread are now able to make their way across countries and continents much more easily,” Leshem said.
“Meanwhile, interaction between humans and animals has also amplified. Climate change has forced some animals into closer contact with humans, you will see more of these types of diseases,” he added.
Though most cases of monkeypox are mild, typically resolving within 2 to 4 weeks, the U.S. said Monday that it has 36,000 doses of a suitable vaccine which it is sending to people who have had high-risk exposures to the virus. Some European countries, including the U.K. and Spain, have announced similar measures to stem the spread of the disease.
Monkeypox is not considered a sexually transmitted disease, though the majority of cases so far have spread via sex, and particularly men who have sex with men, according to the CDC.

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“Yellowstone,” Paramount’s hit streaming show, has given rich city slickers an idea of what it would be like to become a real-life baron of the Wild West.
“We’ve had an influx of all sorts of wealthy individuals looking for ranches,” Robert Keith, founder of boutique investment firm Beartooth Group, told CNBC.
But as rich buyers move in, and the state’s population grows, native Montanans and others on the lower end of the income spectrum are feeling the squeeze from higher rents and property prices.

“Yellowstone” has become one of the hottest shows streaming. Filmed on location in the West, much of it in Montana, the scripted drama tells the story of a modern day ranch owner John Dutton, played by Kevin Costner, and his family dynasty.
The storyline is deliciously captivating, with back-stabbing and family intrigue, high stakes power plays and dramatic plot twists, but the cinematography is a major element of the appeal. Sweeping vistas, snow-capped mountains and charming small towns are captured throughout the episodes.

Still, ask native Montanans what they think of the show, though, and you’ll likely be met with grimaces and criticism.
Ginger Rice, a lifelong resident of the state, said she initially vowed not to watch the series after seeing just one episode.
“It’s unreal,” she said. “It doesn’t portray Bozeman or Montana life as far as I’m concerned.”
Yet Rice, who admits the show eventually sucked her in, also recognizes that the show makes her home state alluring to viewers: “Do you see what our state looks like? The mountains and prairies and who can can’t love this?”
The production itself has a significant economic impact on the state, according to a study by the University of Montana. When season four was shot on location last year, the production spent $72 million dollars in the state, with businesses in the state getting another $85 million economic boost. The study was funded, in part by Paramount, which owns the show.

That study did not quantify the impact of all the free advertising Montana gets from “Yellowstone.” But it’s clear the fictional John Dutton and his fictional sprawling ranch have given rich city slickers an idea of what it would be like to become a real-life baron of the Wild West.

A still from the TV series Yellowstone on Paramount Networks that is set in Montana.
Courtesy: Paramount Networks. 

“We’ve had an influx of all sorts of wealthy individuals looking for ranches,” Robert Keith, founder of boutique investment firm Beartooth Group, told CNBC. “They’re looking to own really amazing large properties.”
As demand for land and homes has soared, prices have followed suit.
Around Bozeman, the median cost of a single-family home spiked from less than $500,000 before the pandemic to nearly $750,000 according to the Gallatin Association of Realtors. The areas around Missoula and Kalispell saw even more dramatic price increases. Rents are so high that even working professionals are having a tough time finding housing they can afford. And some landlords, seeking higher rents, aren’t renewing leases with tenants.

Huge demand in Big Sky

Big Sky Country’s population boom had been years in the making. Montana, the eighth smallest state by population, now has a population of more than 1.1 million people. From 2010 to 2020, the state grew 9.6% according to the U.S Census Bureau.
Then came Covid and remote work. In 2021, Montana became one of the fastest growing locations in the nation, according to the U.S. Census Bureau.
“A lot of our clients during the pandemic, came out and found shelter at the ranches, a safe place to be and no people around,” says Tim Murphy, a longtime ranch broker from Bozeman and partner at Hall & Hall.
Last year, Chris Kimbrell, who had been living in Georgia, joined the mass migration to Montana, for a job as a veterinarian in Bozeman. From his very first visit as a nine-year-old, he said he was hooked on the state and kept making return trips for fly-fishing through college.
But he carefully weighed the soaring cost of living.

Montana Housing Prices Soar: Robert Keith, Founder of the Beartooth Group, rehabilitates damaged land and sells the restored ranches to conservation-minded buyers
Contessa Brewer | CNBC

“If it wasn’t for a family member who’s letting me live on his property, I would really have to think hard about moving out here,” Kimbrell said. “Rent and housing is becoming extremely expensive.” The support staff at his veterinary practice are being priced out of housing, he added.
Rice, the lifetime Montana resident, said her daughter and son-in-law were recently served notice that their landlord would not renew their lease in a three-bedroom home they’d rented for more than a decade. It was a mad scramble even to find a two bedroom apartment at three times the rent they were paying, she said.
“My daughter says we’ll never be able to afford a house,” she said. “We tried to save but everything’s going up and up and up.”
Some families, even those with full-time employment, are moving into recreational vehicles or tents. The local roads are now scattered with people in campers who can no longer afford to pay rent or own a house. Habitat for Humanity calls it a housing crisis. “Montana has quickly become inaccessible to those who live and work here,” said the nonprofit, which is pushing lawmakers to prioritize housing affordability.

Fly fishing and designer jeans

Longtime residents also criticize the cultural divide between newcomers and long-time Montanans. They frown on newcomers buying property but refusing to join in and commit to their communities.
“I used to love the fact that you knew your neighbors. We still do know our neighbors, but we’re not really friends with our neighbors,” Rice said.
She quietly complains that Bozeman is crammed with “highfalutin people” wearing posh attire who make her feel uncomfortable around them. And she says downtown has become nearly unrecognizable.
“I don’t like how busy it is. I don’t like the traffic. And it’s too expensive,” she said.
Longtime residents told CNBC the changes are obvious in Missoula and Kalispell, as well. Outsiders, they say, are always in a rush and too loud with their unrealistic demands. Rice said in her former job at a dry cleaner, a customer insisted on having paint splatters removed from designer jeans. “What were they doing painting in those pants anyway?” she wondered.
The “Yellowstone” effect reminds residents about another culture clash, which developed when Hollywood depicted Montana in the movie “A River Runs Through It.” The movie, which was directed by Robert Redford and featured an up-and-coming movie star named Brad Pitt, was filmed on location in 1991 and released in 1992. It won the Academy Award for Best Cinematography.
“At that point, fly fishing became in vogue,” ranch broker Murphy said, “as massive amounts of people wanted to buy fly fishing properties in the area.”
As a result, the fly fishing industry grew by 60% in both 1991 and 1992, according to Forbes.
He’s seeing the surge again, he said, even as uncertainty clouds the economy. “When the stock market gets shaky and there’s turmoil, that just fuels our market because the land market is pretty stable,” he said.
Many of the newcomers arrive with deep pockets and entrepreneurial aspirations that fuel Montana’s growing economy. Gov. Greg Gianforte’s office said in May the state economy grew by 6.7% in 2021, the fastest pace in more than 40 years, making it the seventh-fastest growing state economy in the nation.

Montana Housing Prices Soar: Robert Keith, Founder of the Beartooth Group, rehabilitates damaged land and sells the restored ranches to conservation-minded buyers
Contessa Brewer | CNBC

The Beartooth Group is betting that investors not only want a financial return but a legacy as well. The firm specializes in rehabilitating degraded land – such as old mines, feedlots or ranches – and then selling it.
Keith, the Beartooth founder, showed CNBC a creek that had been restored into a winding waterway, perfect for trout. Generations ago it had been forced into a ditch to be used for agricultural purposes. But now the fish draw birds. Ospreys built a nest and the parents were seen feeding their young.
That’s the kind of property that appeals to would-be buyers with notions about the wild spaces of Montana, Keith said. They want to see deer and bear and butterflies.
“I think we can all agree there aren’t enough dollars going into conservation, ” he said. Wealthy, conservation-minded buyers often invest even more in restoring the land once they own a property. He said Beartooth’s pitch is unique: “By doing something good for the world, we’re making it more valuable financially and environmentally.”
The state is also hoping to draw former residents back to the Big Sky state with a marketing campaign, “Come Home Montana.”
“No matter how long you’ve been away, now is the to come home to rural Montana,” the campaign says. “Embrace the life you truly want to live.”
But if you want to live there, bring your checkbook. Former residents will find their home state is far more expensive than when they left.

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Target said it will take a short-term hit to profits as it cancels orders and marks down unwanted merchandise.
CEO Brian Cornell said the big-box retailer wants to clear room for the merchandise including groceries and back-to-school supplies.
Target anticipates its operating margin rate for the second quarter will be around 2%. That’s lower than the outlook it gave less than three weeks ago.
The company also reiterated its forecast for sales growth and said margins will look healthier in the back half of the year.

Shoppers walk in front of a Target store at the Lycoming Crossing shopping plaza in Muncy, Pennsylvania.
Sopa Images | Lightrocket | Getty Images

Target warned investors Tuesday that its profits will take a short-term hit, as it marks down unwanted items, cancels orders and takes aggressive steps to get rid of extra inventory.
The retailer slashed its profit margin expectations for the fiscal second quarter to account for a wave of goods winding up deeply discounted or on the clearance rack. Shares fell about 7% in premarket trading following the news.

“We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” CEO Brian Cornell said in an interview with CNBC.
By taking swift action, Cornell said Target can fend off further pain and make room for merchandise that customers do want, such as groceries, beauty items, household essentials and seasonal categories like back-to-school supplies. He said the company’s stores and website are seeing strong traffic and “a very resilient customer,” but one who no longer shops popular Covid pandemic categories.
“We want to make sure that we continue to lean into those categories that are relevant today,” he said.
Target anticipates its operating margin rate for the second quarter will be around 2%. That’s lower than the outlook it gave less than three weeks ago, when it anticipated its operating margin rate would be roughly around its first-quarter operating margin rate of 5.3%.
In the back half of the year, Target anticipates profit margins will be in a range around 6% — better than its average performance for the fall season in the years before the pandemic began. The company said it still expects revenue growth to be in the low to mid single digits for the full year and to maintain or gain market share in 2022.

Retailers from Walmart to Gap face a glut of inventory as inflation-pinched shoppers skip over categories that were popular during the first two years of the pandemic. Gap, for instance, said customers want party dresses and office clothes instead of the many fleece hoodies and active clothes the company has. Walmart said some families are making fewer discretionary purchases as the prices of gas and groceries rise. Abercrombie & Fitch and American Eagle Outfitters both reported a steep jump in inventory levels, up 46% and 45%, respectively, from a year ago from a mix of items not selling and supply chain delays easing.
The extreme shift in consumers’ spending habits comes as retailers start to get back to healthy in-stock levels. That means some have an abundance of sweatpants, throw pillows and pajamas just as consumers search for swimsuits and suitcases. Plus, some shoppers are trimming back on spending due to inflation or putting more of their dollars toward experiences like dining out and traveling.
Cornell said Target decided to roll out its new inventory plan after hearing retail competitors had similar woes. He said the company also wanted to get ahead of key sales seasons, such as back-to-school and the holidays, when stale merchandise could clutter stores and drive away customers.
Target said it had nearly $15.1 billion of inventory as of April 30, the end of the fiscal first quarter. That’s about 43% higher than in the year-ago period.
Target shocked Wall Street on May 18 with a wide earnings miss for the fiscal first quarter, as it got hit by fuel and freight costs, higher levels of discounting, and a rotation away from items like TVs, small kitchen appliances and bicycles. Its shares fell nearly 25%, marking the company’s worst day on Wall Street in 35 years.
Walmart missed earnings expectations, too. Its inventory levels were up about 33% compared with a year ago. Walmart U.S. CEO John Furner said at an investor event on Friday that about 20% of that is merchandise the retailer wishes it did not have. Roughly a third is additional inventory to help the retailer restock key items. He said it will be “a couple of quarters to get back to where we want to be.”
That company’s shares also fell after Target’s announcement on Tuesday. Walmart’s shares were down about 3% in premarket trading.
Cornell said Target is sorting through its inventory, deciding in some cases to pack away merchandise to sell at full price in the future and in other cases to promote or come up with ways to sell through it now.
For instance, he said, Target had a big sales event over Memorial Day weekend to clear bulky outdoor items like patio furniture out of its backrooms. It also got additional space near U.S. ports to hold merchandise, so it has a place to move goods — some of which are arriving too early or too late.
– CNBC’s Lauren Thomas contributed to this report.

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