Honeywell breakup seen as buying opportunity ahead of June separation

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Honeywell breakup buying opportunity

Highlights

Honeywell will separate into aerospace and automation businesses on June 29, with investors underestimating the automation segment's long-term value creation potential.
Jim Cramer anticipates volatility and 'grave dislocations' around Honeywell's breakup but views any share weakness as a buying opportunity, citing '50 points to be had' post-restructuring.
SpaceX's upcoming IPO draws major investor focus, with New Street Research setting a $165 target and Oppenheimer a $190 target as Wall Street begins pre-debut coverage.

Market backdrop and Honeywell separation

As reported by CNBC Investing, stocks move higher Thursday as a rebound in semiconductor names helps investors look past escalating tensions between the U.S. and Iran and a hotter-than-expected wholesale prices report. The Dow Jones Industrial Average rises about 341 points, or 0.67%, while the S&P 500 and Nasdaq Composite gain 0.38% and 0.52%, respectively.

Oil prices climb earlier in the session after President Donald Trump says the U.S. would strike Iran "VERY HARD TONIGHT" and take control of key Iranian oil infrastructure, but crude later pares those gains as chip stocks lift the broader market. Jim Cramer says there are effectively two markets, one focused on inflation and geopolitics, and another centered on technology and the anticipated SpaceX IPO.

Against that backdrop, Honeywell holds an investor day Thursday ahead of its planned breakup into separate aerospace and automation businesses on June 29. Cramer says he remains optimistic about the long-term value creation potential of the automation segment and argues investors are underestimating the size of that opportunity.

Trading implications and broader investor focus

Cramer says he expects some volatility and "grave dislocations" around the separation later this month, but he views any weakness in Honeywell shares as a buying opportunity. He says he would be a buyer and adds that he sees "50 points to be had" once the restructuring is complete and investors can more clearly value the standalone businesses.

The Club also raises cash in recent sessions to preserve flexibility ahead of the expected SpaceX debut, which Cramer says is likely to have an outsized effect on broader market trading. Wall Street analysts begin coverage on SpaceX before its debut, with New Street Research assigning a $165 price target and Oppenheimer setting a $190 target, while Honeywell CEO Vimal Kapur is scheduled to appear on "Mad Money" Thursday night.

In our earlier article on SpaceX’s IPO and Nasdaq 100 rebalancing risk, we outlined how the $135-per-share pricing and the prospect of fast-track index inclusion could trigger sizable index-fund flows and heightened volatility. We also noted that, despite short-term bullish moves in the Nasdaq 100, mixed technical signals and key resistance levels suggested a choppy, range-bound setup as investors brace for liquidity shifts around the debut.

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