Nvidia's ascent continues unabated, while Citi says buy J&J
Nvidia (NVDA) stock on Tuesday kept up its spectacular climb following last week's blowout earnings report. Meanwhile, analysts struck a bullish note on Johnson & Johnson (JNJ) and its recently separated consumer-health unit, Kenvue (KVUE). Here's a deeper look at the headlines, and the potential impact on our investment outlooks for both Club holdings. The news: Nvidia's market capitalization topped $1 trillion Tuesday , the first semiconductor company to reach the exclusive 12-zero club. At their highs Tuesday, Nvidia shares rose more than 7%, to over $419 apiece, before giving back some gains to trade up nearly 3% — hovering around the $401 level, slightly below the $1 trillion market cap threshold. The other S & P 500 members worth at least $1 trillion, as of Tuesday, are fellow Club holdings Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL) and Amazon (AMZN). NVDA YTD mountain Nvidia's year-to-date stock performance. Nvidia has soared roughly 175% since the start of the year on the back of its artificial intelligence prowess. The chipmaker's latest leg higher has been fueled by its stellar fiscal year 2024 first-quarter earnings and jaw-dropping guidance for the current quarter. Those results, issued last week, reinforced Nvidia as an own-it, don't-trade-it stock — a rare distinction Jim Cramer had previously only bestowed on Apple. Shares of Nvidia have soared 34% over the past five days alone. The Club's take: Nvidia's AI-powered rally has been nothing short of remarkable. The company's chip technology is central to the AI boom cycle that has lifted a host of technology stocks poised to benefit from adoption. We remain optimistic around Nvidia's AI leadership, and last week raised our price target on the stock to $450 per share , from $300. However, our 2-rating indicates that we'd wait for a pullback before buying more shares. In general, we don't like to buy stocks near all-time highs. As Nvidia's beat and raise helped lift tech stocks higher, we booked some profits Tuesday by trimming our positions in rival chip designer Advanced Micro Devices (AMD) and Meta, the parent of Instagram and Facebook. These sales were made out of discipline , taking advantage of the near-term momentum. As Jim likes to say, nobody ever got hurt taking a profit. Optimism for J & J, Kenvue The news : Investors should buy shares of Johnson & Johnson for its "world-leading medical technology and pharmaceutical franchises," Citigroup analysts wrote in a research note Tuesday. The firm, after a period of restriction, resumed its J & J coverage with a buy rating and $185-per-share price target. That represents nearly 20% upside from the stock's close Friday. Citi's call is notable because two-thirds of Wall Street analysts who cover J & J have the equivalent of a hold rating on the stock, according to FactSet. Citi analysts said J & J is now a more-focused company following the separation of its consumer unit, Kenvue, which began trading on the New York Stock Exchange at the start of the month. JNJ YTD mountain Johnson & Johnson's stock price year to date. The Citi note pointed to favorable trends for J & J's med-tech unit, given "patient volumes are recovering" after years of Covid disruption. J & J's product pipeline also looks "robust," the analysts wrote, noting that a number of late-stage drug trial readouts are expected this year. And, crucially, Citi expressed optimism around a potential settlement for J & J's ongoing talc lawsuits , which have been a big overhang on the stock. "In other words, there is momentum at the new, streamlined JNJ," they argued. Separately, two Wall Street shops published bullish notes on Kenvue, which are relevant to the Club because J & J still owns more than 90% of the consumer-health company . Bank of America and JPMorgan initiated coverage of Kenvue with the equivalent of buy ratings and price targets of $30 and $29, respectively. J & J is expected to shed its remaining Kenvue stake by year-end. Both firms expect Kenvue — which makes household brands like Tylenol and Band-Aid — to deliver solid revenue growth in the years ahead. The Club's take: We've stuck with J & J on the continued belief its strong business fundamentals will only get stronger in the wake of the Kenvue separation, allowing management to focus its energies on the faster growing med-tech and pharma divisions. But a resolution on the talc lawsuits is needed to meaningfully unlock upside for the stock. Jim said Tuesday he could see J & J jumping to around $170 per share, if plaintiffs were to approve the company's proposed settlement . The next hearing in the case is scheduled for June 13 in U.S. Bankruptcy Court. J & J has long rejected plaintiffs' claims that its baby powder and other talc products caused cancer. It's not clear yet how J & J plans to unravel the remainder of its Kenvue stake — it could distribute the stock to shareholders on a proportional basis, in what's known as a spin-off , or give investors the option to swap JNJ shares for KVUE ones through a split-off. In any case, we like Kevnue as a standalone company and will keep a close eye on its performance as we await more information from J & J management on finalizing the divestiture. (Jim Cramer's Charitable Trust is long JNJ and NVDA. 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. 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Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company's event at Mobile World Congress Americas in Los Angeles on Oct. 21, 2019. Patrick T. Fallon | Bloomberg | Getty Images