Club holdings Apple (AAPL) Ford Motor (F) and Estee Lauder (EL) were in the news Thursday. Here are the headlines and the implications for the Club’s investment thesis for each name. Apple AAPL YTD mountain Apple’s stock performance year-to-date. The news: Apple is planning to ratchet up spending on movies to release in theaters, and mulling a bid for English football streaming rights, according to a Bloomberg News report on Thursday, citing people familiar with the company’s plans. Those moves would represent the iPhone maker’s latest efforts to boost awareness for Apple TV+. Apple intends to invest $1 billion per year on theatrical film releases, Bloomberg reported, a sizable increase from recent years. Apple has primarily released its content directly on Apple TV+, with some projects getting limited runs in a handful of cinemas. Meanwhile, Apple acquiring streaming rights for English football would mark its first foray into sports outside of North American leagues. The company began broadcasting every Major League Soccer game this season, part of a 10-year deal worth $2.5 billion. Apple also is set to show Friday night Major League Baseball games for the second consecutive season. The specific rights that Apple is considering are for Premier League games in the U.K. and matches in lower-tier professional leagues, according to Bloomberg. The Club’s take: We welcome Apple making smart, strategic investments that make Apple TV+ a more valuable streaming service to potential subscribers. By adding incremental value to offerings such as Apple News and Apple Music, the company can increase the attractiveness of its Apple One services bundle and raise prices in the future. In our minds, obtaining some rights to Premier League games would certainly qualify as boosting Apple TV+’s appeal to possible viewers. Similarly, Apple’s efforts to elevate its Hollywood profile may attract top-notch talent to film projects it backs; and the better the movies on Apple TV+, the more attractive the service becomes. Through our own experience, Apple has prioritized the quality of its content over quantity, unlike some of its competitors. It’s also worth noting: Apple’s rock solid balance sheet, including its massive cash position, allows it to continue exploring these investments in an uncertain macroeconomic environment. Ford Motor F YTD mountain Ford’s stock performance year-to-date. The news: Ford announced a new reporting structure Thursday that will better explain how the automaker delivers financial results in its three separate business segments. Management said breaking out Ford Blue (iconic gas and hybrid vehicles), Ford Model e (electric vehicles business), and Ford Pro (commercial products and services) will “provide new degrees of strategic clarity” on performance of each business while showing how it will bring its EV unit to profitability, according to the press release . Management reiterated it can still reach an 8% adjusted earnings before interest and taxes (EBIT) margin target by the back end of 2026 in its EV business through cost improvements, manufacturing efficiency and by increasing scale. Ford’s adjusted profit margin last year was 6.6%. However, Ford estimates its EV unit will realize a $3 billion loss for full year 2023 as the automaker continues to build out the segment. That would be a second consecutive year of losses in the EV business, which lost $2.1 billion in 2022. At the same time, the automaker expects its Ford e unit to reach breakeven this year on contribution margin, also known as the profitability of a product after fixed costs. Ford is set to release its fiscal first quarter earnings on May 2. Shares of the automaker were trading 2% higher Thursday at roughly $11 apiece. The Club’s take: Ford’s new reporting structure is a way to show investors and analysts how to better value each business unit. The breakout of its EV business versus its internal combustion engine (ICE) can help investors and analysts understand how much money the EV business is losing compared to the profits the ICE business is making. Given new EV players and legacy automakers are investing in the EV race, the market is unlikely to give much credit to Ford’s ICE business going forward. The quicker Ford can ramp up EVs to profitability, the better. As we said when Ford reported a messy fourth quarter in February, the company must showcase better execution after incurring a full-year net loss of $2 billion in profits last quarter. Ford CEO Jim Farley himself said he would deliver, so we are keenly watching to see the upcoming earnings results so we know how to proceed with the stock. Estee Lauder EL YTD mountain Estee Lauder stock performance year-to-date. The news: Citi outlined its bull and bear cases for Club holding Estee Lauder in a research note Thursday. The bulls highlight the beauty company’s opportunity to grow organic sales, improve profitability and margins and enhance its China business. The bears highlighted EL’s premium valuation relative to peers as a negative. They also said potential for growth in China could be lower than expected and a weaker economy could mean fewer discretionary purchases for consumers. Citi sided with the bull case and argued “the market still does not fully appreciate the longevity of EL’s growth potential.” The firm has a buy rating on the stock with a price target of $295. In a separate note, Piper Sandler traded Estee Lauder for Coty (COTY) as its top beauty idea, citing “stronger near-term upside potential.” However, the firm still sees “significant long-term growth opportunity from China and Hainan Island,” an island province of China. Shares of EL were trading 0.5% higher at roughly $238 per share Thursday. The Club’s take: We have long pointed out that China is a growth market for Estee Lauder and believe that as travel in the region normalizes, EL’s revenue and earnings will get a meaningful boost. We are already seeing improvement in travel footprint in the region. According to the Macao Government Tourism Office, visitors in Macao reached 96,000 this past Saturday, marking the highest number of visitors so far this year. Moreover, we’re focused on travel recovery in the Hainan province, a popular destination for Chinese tourists that’s expected to see an influx in duty-free sales. We took advantage of the oversold market last week and added to our EL position given positive checks on consumer demand for prestige skincare, makeup and fragrances. (Jim Cramer’s Charitable Trust is long AAPL, F, EL. 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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Ford Motor Co., CEO Jim Farley gives the thumbs up sign before announcing Ford Motor will partner with Chinese-based, Amperex Technology, to build an all-electric vehicle battery plant in Marshall, Michigan, during a press conference in Romulus, Michigan February 13, 2023.
Rebecca Cook | Reuters
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