Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday October 25.
Cramer was happy with Verizon's (VZ) earnings on Friday, when it reported one million new subscribers worldwide and a 27% jump in revenues. The company is soon going to distribute Apple's (NASDAQ:AAPL) iPhone and iPad, which means even more upside, and it has a 6% dividend to boot. The only negative news is CFO John Killian is leaving after 31 years with the company. Killian discussed Verizon's tremendous growth potential with the smartphones, since only 23% of subscribers currently have one. FiOS internet and cable service is going strong, and Verizon was able to use its increase in cash flow to increase the dividend by 2.6%.
Netflix has been triumphant like an underdog in a Hollywood film, and has risen $70 in just three months. Those who thought the company's most important metric was average revenue per subscriber rather than subscriber growth missed the boat, and may have placed too much importance on the Netflix decline to $95 after its disappointing quarter this summer. Analysts seem clueless and old-fashioned as they fail to see the company's true potential for providing easy access to streaming video rather than DVDs by mail. Concerns about streaming costs and competition are dwarfed by the potential of streaming video which will create a "tectonic shift" in the way we watch movies. With subscribers growing by 54% over last year and a 33% growth rate, Netflix is still a buy even with a multiple at 44. "Estimates are probably way, way too low," said Cramer.
Are Stocks Overvalued? United Health (NYSE:UNH), Abbott Labs (NYSE:ABT), Eli Lilly (NYSE:LLY), Google (NASDAQ:GOOG), Apple (AAPL), IBM (NYSE:IBM), Chipotle (NYSE:CMG), McDonald's (NYSE:MCD), Bank of America (NYSE:BAC), Macy's (NYSE:M), Kohl's (NYSE:KSS), Best Buy (NYSE:BBY),
With the Dow finishing up on Monday, the bears are murmuring that the market is overvalued. Cramer doesn't think so, since companies reporting are consistently beating estimates and upping guidance. Even companies that might get hit hard by government reform, like the healthcare stocks United Health (UNH), Abbott Labs (ABT) and Eli Lilly (LLY) performed well. Other strong earnings that helped their respective sectors included: Google (GOOG), Apple (AAPL), IBM (IBM), Chipotle (CMG) and McDonald's (MCD). While Bank of America (BAC) was a disappointment, other financials reporting gave good numbers. Cramer predicts Macy's (M), Kohl's (KSS) and Best Buy (BBY) will raise guidance and said they are stocks to watch this week. He also reiterated his bullishness on aerospace, chemicals and transport stocks.
“All of these quarters are the building blocks of a bull market,” Cramer said. “They make me come back to my central thesis: The market is not, and cannot be expensive based on the earnings reports we have seen. And the negative predictions of the bears who told us the numbers would have to be sliced and diced and cut some more—I think they’re looking more and more ridiculous and untrue by the day.”
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