Cramer Tech Picks: 2 Buys, 2 Sells

 |  Includes: ATVI, CSCO, EA, JNPR, S
by: Chris Lau

Jim Cramer, host of CNBC’s Mad Money, was net bullish on stocks last week. Of the 52 calls made between November 7 – 10, 43 were “buys” and just 9 were “sells.” Volatility remains elevated, and the wild gyrations in U.S. markets in the last week helped the Dow Jones Industrial Average hold onto a gain for the year.

Digging in on technology and telecom calls, Cramer was split between bullish and bearish calls:






Sprint Nextel




Cisco Systems




Juniper Networks




Activision Blizzard



Click to enlarge

1) Sprint Nextel – Cramer says ‘Sell’

Sprint shares continue to recover from a bottom reached in early November. Trading volume on Sprint is lighter than that seen during the sell-off in October. In a letter by Einhorn to his investors, the hedge fund manager said that the company’s management is “on the verge of losing the confidence of financial markets.” Still, Sprint CEO Hesse recently bought 100,000 shares in the company.

Sprint also managed to secure its financing. The company closed an offering of $1 billion aggregate principal amount of 11.5% notes due 2021, along with a $3 billion aggregate principal amount of 9% guaranteed notes due 2018.

Analysis: Negativity peaked last month, and the company was still able to raise sizable funds in the debt market. The iPhone launch, while thought to be expensive, will help the company grow its customer base in the smart phone market.

2) Cisco Systems – Cramer says “Buy”

Cisco Systems surprised markets by reporting strong earnings. Non-GAAP earnings per share were $0.43, margins were 62.4%, and product orders increased 13%. The all-important book-to-bill ratio was 1:1.

Analysis: Compared to VMWare (NYSE:VMW) and Citrix Systems (NASDAQ:CTXS), Cisco trades at a far lower P/E. The company saw a run rate of $1-billion in revenue (annualized) for UCS (Unified Computing System) in its data centre. The mantra that Cisco was too large to turn itself around was clearly negated by the company’s ability to leverage its strong long-term relationship with its customers.

Cisco shares closed recently at around $19, a price not seen since February 2011. Shares are up 43.62% from its 52-week low.

Investors may see further upside as Cisco’s Nexus 2000 through to 5000 product gains momentum in sales. The ASR 9000 product will also see exciting growth.

3) Juniper Networks – Cramer says “Buy”

Like Cisco, Juniper Networks is up nearly 50% from its 52-week low.

Juniper reported Q3/2011 earnings on October 19 a quarterly (non-GAAP) EPS of $0.28 and a 9% year-over-year growth in revenues. Management acknowledged experiencing a lengthening in customer project cycles. The company extended delivery for some customers.

The company reported a $101 million increase in deferred revenue (to $886M), but also said its book to bill ratio was about 1.2 for the quarter.

Analysis: Investors might find excitement for some of its new products. QFabric, which only started shipping in the second half of September, might help Juniper. The product offers customers lower power consumption and capital expenditure.

Second, Juniper’s MobileNext software that runs on the MX 3D Edge router is positive. The product is a small percentage of revenue, but it provides investors with a long term play in carriers shifting from 2G to 3G to LTE.

4) Activision Blizzard – Cramer says “Sell”

Activision broke the $14 price level but sold off promptly after it announced earnings. Its $14.40 high prior to earnings may have been due to excitement around the Call of Duty: Modern Warfare 3 and Call of Duty Elite launch. Activision closed recently at $12.71, down 11.74% from its high.

Analysis: The company reported GAAP earnings of $0.13, and raised its earnings forecast. The company now expects EPS to be $0.76 for 2011, up $0.08. It also reported that earnings from digital channels increased 25%, and represented 38% of total revenue. Activision’s cash flow was over $1B.

The gaming company’s shares are not cheap: its P/E is 23.11. More worrisome is a decline in active subscribers on World of Warcraft. Most of the decline came from the East.

Diablo 3 offers upside for Activision, but shares are priced to perfection. Investors interested in exposure to gaming stocks should consider Electronic Arts (ERTS).

Electronic Arts closed recently at $23.90 and is 8.5% below its 52-week high. An executive from the company confirmed a new Battlefield game is being developed.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CSCO over the next 72 hours.