Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday May 20.
Not Enough Good News In Retail: TJX (NYSE:TJX), Urban Outfitters (NASDAQ:URBN), Dick's Sporting Goods (NYSE:DKS), Staples (NASDAQ:SPLS), Home Depot (NYSE:HD). Other stock mentioned: J.C. Penney (NYSE:JCP)
"There is not enough good retail news to outweigh the bad," said Cramer. The shortfall of TJX (TJX), Urban Outfitters (URBN), Dick's Sporting Goods (DKS) and Staples (SPLS) casts gloom over the sector. Some would include Home Depot (HD), but it didn't fit the negative thesis, because management indicated that May has been strong. URBN fell 8%, because it once again disappointed in its flagship brand. However, its Free People and Anthropologie are doing well. Staples fell 12.6% and is not benefiting from the merger between its competitors. Management indicated that small businesses are not spending. Dick's had a huge 18% decline, even though management said apparel and footwear were positive. TJX's 7.6% drop was a true disappointment, because the company has been consistent. It is possible TJX is losing share to a re-emerging JCP. Cramer doesn't think the consumer is as sluggish as many retail managements indicate, and the main fault in these companies lies with poor execution.
The Dow descended 138 points. Many believe rates are going down because the economy has failed to generate real growth, but some economic numbers are decent. Fears of recession are causing selling. TJX, Urban Outfitters, Dick's Sporting Goods and Staples signaled weakness, which dovetails with the decline of rates. Caterpillar (CAT) has been the strongest Dow stock, but management painted a picture of slight weakness in non-residential construction, although its industrial construction segment was up 17%. Home Depot discussed robust brands, oil and gas companies are reporting good news, housing starts are increasing and jobless claims were the best in 7 years. However, these bullish facts didn't come into play on Tuesday. Cramer thinks buyers will come in on Wednesday and buy safety stocks and those that are immune to macro economic data. The selling was a kneejerk reaction to lower interest rates.
Cramer took some calls:
Darden (DRI): "Good riddance to Red Lobster," said Cramer concerning DRI's spinning off of the restaurant, but he added that The Olive Garden isn't very well-run either.
Cramer consulted the technical analysis of Carolyn Boroden of fibonacciqueen.com to see where IBM (IBM) and Apple (AAPL), both holdings in Cramer's charitable trust, are going. Cramer noted that Boroden has been accurate in her calls on Apple. Those who bought on Boroden's analysis have seen a 13% gain in Apple in 4 months.
Boroden is more cautious about Apple currently, and thinks it is due for a pullback, since, according to Fibonacci ratios, Apple has crossed a key extension point. Netflix (NFLX) and Baidu (BIDU) both fell after crossing significant extension points.
IBM (IBM) has also hit an extension point, but it is extended to the downside and may rally. IBM has crossed 3 Fibonacci extension points, and Boroden thinks the current pullback may be a launching pad for the stock.
Cramer took some calls:
Cisco (CSCO) is not a buyout candidate. Cisco has reported "an excellent quarter." Cramer thinks it is a cheap, value stock with a good yield.
CEO Interview: Marc Benioff, Salesforce.com (NYSE:CRM)
Following Salesforce.com's (CRM) February earnings report, Salesforce and the entire software as a service cohort declined dramatically. This time, CRM beat earnings by one penny and revenues rose 37% yoy. Deferred revenue, a crucial metric, rose 34% and operating cash flow increased 67% yoy. CEO Marc Benioff pointed out the revenue growth of 37% is a significant achievement for the company. Healthcare, retail and financial services segments were strong. Foreign exchange was more stable than it has been for CRM. When asked how CRM can thrive in a market that prefers stocks with buybacks and dividends, Benioff said, "My job is to focus on my customers' success ... the shift in technology is really what is paramount to me. I have to leave the stock market to you, Jim."
When asked about the plethora of cloud plays, Benioff said that service is the key, and many of these smaller companies do not provide the advanced services that CRM offers. While Cramer says there is uncertainty in the current market concerning momentum stocks like CRM, the company definitely exceeded analyst expectations.
Hanesbrands (NYSE:HBI) Is On Fire
Hanesbrands (HBI) has been "on fire" while other apparel plays have been struggling. The stock has doubled since Cramer recommended it fourteen months ago. How has HBI run so much, and can it continue? Cramer thinks the company deserves every point of its recent gain and can continue to go higher. HBI delivered an 18 cent earnings beat and a 180 point rise in operating margins. Point of sales numbers are trending higher, and management raised guidance. It has a portfolio of popular brands, and much of the business is vertically integrated. The company has cost-cutting in manufacturing "down to a science."
Cramer thinks HBI is a "clothing technology" company with cutting-edge t-shirts that are weather resistant and new items without those uncomfortable tags. Its sporting apparel brand, Champion, is seeing a 50% increase in sales. HBI bought Maidenform bras, and the acquisition will provide significant upside. Management has implied that another acquisition may be imminent. Cramer thinks it is possible that HBI could buy back stock or provide a modest dividend. The stock has a multiple of 16 and is still cheap, in spite of its substantial run. Cramer thinks this $81 stock could be headed to the $90s. He would wait for a pullback before buying.
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