Wall Street puts Salesforce, Nvidia, Humana under the microscope. Here's our take.

Published Tue, Feb 14 20233:48 PM ESTUpdated Wed, Mar 8 20232:23 PM EST

Club holdings Salesforce (CRM), Nvidia (NVDA) and Humana (HUM) are the subjects of fresh Wall Street research. Here's what analysts had to say about the companies — and our Club take, too. Salesforce (CRM) CRM YTD mountain Salesforce's year-to-date stock performance. The news: It's all about margins at Salesforce, Wells Fargo analysts wrote in a research note Tuesday. With revenue slowing at the enterprise software giant, Wells Fargo expects investor focus to be "more squarely" on profitability going forward. Salesforce has targeted an adjusted operating margin of 25% or greater in its fiscal year 2026, compared with the 20.7% the company expects in fiscal 2023. Wells Fargo struck a bullish tone on the margin expansion opportunity, citing management's reported commentary on the potential to cut between $3 billion and $5 billion in expenses . That would come on top of the cost-cutting plan Salesforce already announced last month. "We believe this suggests an operating model capable of delivering further subsequent expansion," the analysts wrote, predicting a 25% adjusted operating margin in fiscal 2025, a year earlier than Salesforce's official guidance. Wells Fargo also noted that the five activist investors who have taken a stake in Salesforce all have track records of driving margin improvement at other companies. "We see Salesforce as poised to experience similar benefits, with cost discipline the first priority and divestitures towards accelerated buybacks and resultant [earnings-per-share] accretion also likely on the table," the analysts wrote. The Club take: We welcome the renewed focus on profitability at Salesforce, and there's no doubt it will remain a key theme. Management had begun to emphasize margin expansion in 2022. But the swarm of activist investors circling in recent months, combined with broader pressure from Wall Street, only adds to the sense of urgency at Salesforce. It remains to be seen whether Wells Fargo's more-optimistic margin outlook will prove true, though it would certainly be good news for investors. Nvidia (NVDA) NVDA YTD mountain Nvidia's year-to-date stock performance. The news: Bank of America raised its price target on Nvidia stock to $255 per share from $215, while reiterating a buy rating. Nvidia is uniquely positioned "to lead the nascent generative AI arms-race among global cloud and enterprise customers," BofA analysts wrote in a note Monday. Their reasoning: Nvidia has a complete suite of accelerated computing offerings, ranging from semiconductors to software. As a result, the analysts argued, the company's cloud operations are well positioned to see long-term growth tied to generative AI. Shares of Nvidia have had a big run so far this year, climbing 49% as of Monday's close and far outperforming a closely watched semiconductor index that advanced just 20.7%. This makes Nvidia stock vulnerable to some near-term volatility, Bank of America noted, especially considering the company's first-quarter guidance could come in on the conservative side when it reports earnings on Feb. 22. "However, we expect any pullback to be short-lived as investors look towards" Nvidia's AI developer event in late March, the analysts wrote. The Club take: Another day, another bullish Nvidia note. The semiconductor firm has benefited from ongoing Wall Street buzz about Microsoft (MSFT)-backed ChatGPT and the potential of generative AI to transform a host of industries. Generative AI refers to algorithms that create images and write human-sounding text in response to user queries. Those algorithms are trained on huge data sets, a process in which Nvidia's graphics processing units (GPUs) play a vital role. The Club has tried to keep our expectations realistic when it comes to the AI craze, worried about investors falling victim to the hype. That's why it's best to focus on pick-and-shovel plays within artificial intelligence, like Nvidia, which has long been a technological leader in the field. We're glad to see Bank of America strike a similar tone, too. "Generative AI is in its requisite hype cycle and predicting its adoption pace involves lots of assumptions. Regardless, the shift to accelerated computing , led by NVDA GPU, and away from conventional CPUs is structural," the analysts wrote. Humana (HUM) HUM YTD mountain Humana's year-to-date stock performance. The news: Managed care stocks like Club holding Humana have had a rough start to 2023, but Oppenheimer sees it as an opportunity. The sector's valuation is starting to "appear increasingly attractive," trading roughly 10% below its five-year-average forward earnings multiple, Oppenheimer analysts wrote in a note Tuesday. "While the trading around the managed care group could continue to be volatile as the economic environment remains unpredictable, we believe the group fundamentals remain strong and the insurers can successfully operate through all macro scenarios," the analysts argued. The firm recommended investors take a basket approach to the managed-care sector, with Centene (CNC), Cigna (CI), Humana and UnitedHealth Group (UNH) as "the most attractive targets." The Club take: Humana is our favorite way to play managed care, while our additional exposure to the defensive health-care industry comes from pharmaceuticals Johnson & Johnson (JNJ) and Eli Lilly (LLY). More broadly, we appreciate Oppenheimer's opportunistic view on the health insurer group given its underperformance so far this year. The rotation out of last year's winning sectors, including health care, back into Big Tech has created attractive entry points for stocks like Humana. The company's fundamentals — put on display earlier this month when it released strong quarterly numbers and robust full-year guidance — simply haven't matched up with the stock's recent performance. While the stock has been positive in four of the past six sessions, it's still down roughly 2% year-to-date, compared with the S & P 500's more-than-7% gain. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) 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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Salesforce signage outside office building in New York.

Scott Mlyn | CNBC

Club holdings Salesforce (CRM), Nvidia (NVDA) and Humana (HUM) are the subjects of fresh Wall Street research. Here's what analysts had to say about the companies — and our Club take, too.