Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday May 11.
CEO Interview: Terry Lundgren, Macy's (M)
"The American consumer is alive and well and shopping at Macy's (M)," declared Cramer after Macy's beat earnings estimates by 11 cents with a 5.7% rise in revenues and a 5.4% increase in same store sales for the quarter. Macy's delivered an outstanding dividend boost and met Cramer's criteria for the "Congratulations factor." Cramer has noticed that a sign of strength for a company is in the number of analysts who congratulate management on its quarterly conference call; 5 analysts congratulated Macy's management. "I also want to Congratulate Macy's," Cramer said.
The stock is up 74% since 2009 when Cramer got behind it and the company seemed to be on the verge of going under. "We didn't waste a good recession," said CEO Terry Lundgren. The company took advantage of low prices to make profitable acquisitions and streamlined the number of buyers. Macy's previously had 7 buyers across the country and decided to consolidate the number to one buyer but expanded into 69 districts. This was the birth of the My Macy's concept, which allows the retailer to tailor-design its merchandise to reflect the buying habits and tastes of local consumers. My Macy's has enabled the company to take substantial market share from both high and low end retailers, and is particularly successful in the South. "We have the brands, but we are considered a value retailer."
Macy's has dispensed with its aggressive red tag sales and is investing in management and sales training. Terry Lundgren praised Cramer for recommending his stock; "You called it early, and you called it right."
CEO Interview: Andrew Damico, IntraLInks (IL)
Intralinks (IL) was one of the worst-performing stocks on Wednesday, as it dropped 9 points on a disappointing quarter. The company reported in-line earnings with weaker than expected revenues and lowered guidance. The root of the problem is that a customer that provided IL with 10% of its enterprise business is no longer using the company's services, and just before hearing this news, the company offered a secondary at a price above the level IL's shares dropped; investors in the secondary dumped the stock and it fell further.
Intralinks benefits from Merger Mania and provides a secure, virtual deal room where parties can access otherwise confidential information blocked by a firewall. IL also works with pharmaceutical companies on their clinical trials and private equity firms. The company provides business services on a subscription model and offers its software as a service.
Cramer asked CEO Andrew Damico what he would say to those who bought the secondary and lost money; "We disappointed some of our investors," he replied, "But that doesn't change my view on the prospects going forward." Damico said IL has no direct competitors and has seen a couple of big wins in the enterprise business in the last quarter. "I look at this as a blip...nothing has changed in terms of competition or pricing." Intralinks' pharma business has grown 81% quarter over quarter with renewal rates of 122%. Intralinks has raised guidance for its M&A business by 5%.
Cramer told Damico that the company might have to "put two quarters together" to regain the trust of potential buyers. He added that Damico had the "guts" to come on the show on such a bad day for the stock. "You get the benefit of the doubt." Cramer said $20 is an interesting price for the company and urged viewers to do homework on the stock and decide for themselves.
Travelzoo (TZOO) is a quintessential momentum name which recently roared $2.59 higher. However, like many momentum stocks, it is a wild trader that sometimes gives back its gains. Cramer confessed he thought the stock was too risky to own, not least because of competition, but on further examination of the company, he concluded "Travelzoo is nothing like Priceline (PCLN)." Travelzoo is not an online travel company but an online deal company that has shifted its business into offering local deals in almost 60 markets. This Groupon-like business model could dwarf the company's other segments, and with Google's (GOOG) rejected offer of $6 billion for Groupon, Travelzoo's current market cap of $1.2 billion seems quite small, especially considering that some have valued Groupon as high as $20 billion. The company recently beat its earnings by 9 cents and saw a 29% rise in revenues, and yet the stock is barely above its level before its earnings report in April.
CEO Chris Loughlin discussed the company's 23 million subscribers and its plan to grow the number of subscribers and revenue per subscriber. The latter can be doubled by offering local deals, he said. When asked how the business compares with Groupon, Loughlin replied that the business is only 7 months old and has grown organically while Groupon bought companies to expand. Travelzoo concentrates on higher quality deals and researches each deal thoroughly, and has clients representing every major travel brand. There is ample opportunity to grow in Europe, adding to its 50% growth rate in the continent. Since Europeans, particularly Germans, have up to 6 weeks of vacation a year, there is more opportunity for travel.
"Why is this stock at $1.2 billion and Groupon may be worth $20 billion? I'm scratching my head at this equation," said Cramer.
The market doesn't seem to like high or low oil. When oil was too high, companies were worried. Why are stocks getting hammered because of lower oil prices? Basically, market mechanics, not fundamentals, are to blame. Hedge fund managers who speculated on commodities dumped their positions when margin requirements were raised. This sent down oil along with other stocks. Cramer would use the continuation of these "moronic mechanics" as an opportunity to buy companies that thrive on lower oil prices like autos, industrials, chemical plays like Dupont (DD), and restaurants like Darden (DRI).
Cramer took some calls:
Disney (DIS) will benefit from lower oil prices, especially at its theme parks. Cramer would buy at $40-41.
Ruth's Chris (RUTH) is another beneficiary of low oil and declining commodity costs.
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