Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 4.
Salesforce.com (CRM) announced that it will acquire long-time partner ExactTarget (ET) at a 53% premium of $2.5 billion. CRM was hit and fell $3.24 in one session. Now it is 20% off its high. The reason for the dive in share price was that many analysts feel that CRM is spending too much for ET.
CEO Marc Benioff discussed why the deal is essential for Salesforce. The company is already number one in sales and service, but requires ET to become number one in marketing. Benioff used the example of Bank of America (BAC) a client of both CRM and ET. CRM handles the sales and service aspects of BAC's business and ET handles the marketing. Now all of the services for a client like BAC are going to be under one roof, thanks to the acquisition. Integration shouldn't be a challenge, since ExactTarget and Salesforce have a long relationship. ET is a fairly young company with plenty of room to grow. When asked about the price of the acquisition, Benioff pointed out that CRM has 30% growth and generous cash flow; it can absorb the costs and monetize the acquisition quickly. Cramer said that with CRM down 20%, this may be an opportunity to pick up "the best large cap growth stock," for growth investors who have some tolerance for risk.
With the Dow dipping 76 points on Tuesday, Cramer observed there are two camps in this market, and both camps are selling. The first camp doesn't want strong economic data, because they fear the Fed will raise interest rates. This camp was hiding in bond equivalents or high yielders, but now that many of these stocks have appreciated in price and their dividends have fallen, their advantage has been weakened. In addition, bears are so convinced that rates will go up that many are ditching these stocks.
The other camp wants the economy to be strong, and thinks that companies that perform well, rather than the Fed, will keep the market humming. However, recent volatility and some lackluster data caused those in this camp to question how reliable the economy is, so growth stocks are being sold off too.
"Sometimes you can't please everybody. Right now, you can't please anybody."
Cramer took some calls:
Zynga (ZNGA) is a stock Cramer thinks may be a bit too speculative for the current market.
Cramer is neutral on Canadian Pacific Railway (CP). The stock in the sector he is bullish on is Union Pacific (UNP), which is firing on all cylinders, except for the coal business, which Cramer thinks is coming back when inventories diminish.
CEO Interview: S.A. Ibrahim, Radian (RDN)
The housing recovery is still in its early stages, and Radian (RDN) is benefiting from the trend. The company is the largest mortgage insurer by market share. The stock has risen 60% since Cramer recommended it in February and has gained 21% since March. The stock has pulled back and may provide investors with an entry point. While, during the housing crisis, Radian had many "bad loans," half of its loans on the books are post 2009. Stricter standards will ensure that there will be many more "good loans." The FHA is pulling back from insuring mortgages, and this will add to RDN's market share. CEO S.A. Ibrahim doesn't think an increase in mortgage rates will lessen demand, since there is still a shortage of houses in some areas. May was a record month for RDN, and its pipeline has increased dramatically; "It is an exciting time in terms of volumes," said Ibrahim. Cramer is bullish on Radian.
CEO Interview: Susan Salka, AMN Healthcare (AHS)
AMN Healthcare (AHS) deals with the shortage of doctors and nurses by providing healthcare staffing solutions. It is the largest company in this field, and also helps hospitals reduce costs. AHS has specialized software to handle hiring, billing and other workforce-related processes. The company beat earnings by 4 cents a share and reported robust revenue growth. Susan Salka says the shortage of doctors are nurses continues to grow because of the aging population and the Affordable Care Act, and demand for AMN's services should continue to grow.
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