From Morningstar: 2024-12-20 09:17:05

Estée Lauder (EL) stock, once touted for its potential in China’s market rebound, has fallen 45% since February. Despite Morningstar’s previous undervaluation call, the company cut its dividend by almost half. The Chinese economy stagnated, causing sales to disappoint. Even with fair value estimate cuts, EL remains below its initial recommendation price. The Estée Lauder Company’s sales growth forecast for 2025 has been revised to a negative 2% due to a decline in Asia, particularly China. Analysts predict a recovery in China in the long term, with a 6% annual sales growth and 15% operating margins over the next decade.

Crispr Therapeutics’ stock has plummeted by 43% since March, prompting a lowered fair value to $106 per share in November. The slower sales ramp for Casgevy, treating sickle cell disease, impacted projections, despite potential for over $1 billion in annual sales. The stock trades at a 57% discount to fair value.

APA’s stock recommendation turned disappointing due to uncertainties in Egypt assets and the North Sea production halt by 2029. The market’s perception of its Permian position as mediocre and regulatory challenges in the UK contributed to the stock’s 25% decline since the recommendation. Morningstar will cease analyst coverage in 2025. Sekera explains that Morningstar’s equity research team adjusts coverage to focus on stocks where they can add the most value to clients. Analyst transferred from covering APA to other stocks due to better opportunities in the sector.

Norwegian Cruise Line (NCLH) stock rose 80% since August, with a 56% increase since June. Undervalued at a 45% discount, new CEO driving turnaround. Bookings and pricing strong, appealing to higher-end consumers.

Insulet PODD recommended on March 25 show, up 65%. Undervalued at 32% discount, growth potential underestimated. Company well-positioned to meet market needs, strong growth forecast. Potential buyout candidate, currently at a 10% premium to fair value.

Fortinet FTNT in cybersecurity sector recommended twice in 2024, up over 60%. Essential spending in critical area, manager’s priority. Company-specific success, expanding business beyond firewalls. Trading in 3-star territory after significant gains. Dave Sekera discusses the performance of cybersecurity stocks, with Fortinet leading the pack at over 60% gains. However, not all stocks have fared well, with Okta down 13% and CrowdStrike down 6%. Year-to-date, CrowdStrike is up 40%, while Palo Alto is up 35%. Knowing when to sell stocks can be challenging, but taking profits is crucial to avoid missing out on gains. Sekera reflects on past sell recommendations and the importance of diversifying a portfolio. Sekera admits to a poorly timed sell recommendation for Palantir, which has surged 195% since the call. Despite Morningstar’s fair value estimates, the stock continues to trade at a significant premium, raising concerns about future growth expectations. Dell, another stock Sekera suggested scaling back in, has seen a 46% increase since February. Despite volatility, the stock remains close to Morningstar’s fair value estimate and is rated 3 stars, indicating it may provide long-term returns in line with the cost of equity. Morningstar analysts discussed the performance of various recommended stock sales on a recent show. Dell’s cost of equity is at 9%. Netflix continues to rise despite being a sell candidate. Arm Holdings and Eli Lilly are still advised as sells. Southern, another sell recommendation, has underperformed. Bristol-Myers Squibb remains a good pick due to an underestimated drug pipeline. Bristol-Myers stock is trading at 8 times projected 2025 earnings, making it a value stock. The company has little to no exposure to vaccine manufacturing, unlike other pharmaceutical stocks. Verizon is a 4-star-rated stock with a 6.4% dividend yield, narrow economic moat, and medium uncertainty rating. AT&T has outperformed Verizon due to its fiber strategy. FMC is a five-star-rated stock with a 50% discount and 4.3% dividend yield. The company is expected to bounce back in 2025 after facing revenue pressures from destocking in 2023. New products are driving incremental growth for FMC, indicating positive performance. Tune in to Morningstar’s 2025 Market Outlook for more insights from Dave. 1. The stock market reached record highs today, with the Dow Jones Industrial Average closing at 30,000 points for the first time in history. This milestone comes amid optimism about a potential COVID-19 vaccine and hopes for a strong economic recovery.

2. In other news, Apple announced today that it will be releasing a new line of MacBooks powered by its own custom-designed chips, marking a significant departure from its reliance on Intel processors. The move is expected to improve performance and battery life for users.

3. On the international front, protests in Belarus continued as President Alexander Lukashenko ignored a deadline set by opposition leaders to step down. The European Union has taken steps to impose sanctions on Belarusian officials responsible for the crackdown on protesters following the disputed election in August.

4. Meanwhile, the United Nations reported that humanitarian aid to Yemen is at risk of being cut off due to a funding shortage. The country is facing one of the world’s worst humanitarian crises, with millions of people in need of assistance amid ongoing conflict and a fragile healthcare system.

5. Lastly, a new study published in a leading medical journal revealed that wearing a face mask can significantly reduce the transmission of COVID-19. Researchers found that mask-wearing, along with social distancing and hand hygiene, is crucial in preventing the spread of the virus in community settings.



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