Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday November 17.
With the Dow down 135 points over the failed Spanish bond auction, it is clear that European news is driving the markets more than the performance of U.S. companies. While the jobless numbers showed some improvement and stocks like LinkedIn (LNKED), Children's Place (PLCE) and Angie's List (ANGI) are showing strength, the good domestic news was not enough to stave off the decline in stocks. There will be more bond auctions, and investors should be aware that there will be weakness ahead. It isn't a question of whether stocks will get hit, the question is which ones will recover. Cramer would stay out of stocks that have any connection with Europe and would not buy banks. Investors should take profits from rallies, buy safer stocks and keep enough cash on hand to pick up bargains on down days.
Cramer took a call:
Nike (NKE) is a good long-term stock. It announced a boost to its dividend, which demonstrates confidence. Cramer doesn't think management is worried about the NBA lockout.
CEO Mark Benioff, Salesforce.com (NYSE:CRM). Other stock mentioned: Electronic Arts (ERTS)
Salesforce.com (CRM) reported what seemed to be a solid quarter with a 3 cent earnings beat and a 36.2% increase in revenues, but deferred revenues were up only 32% when some analysts were expecting a 35% increase. Since CRM is a high multiple growth stock, it needs to report a flawless quarter to avoid a decline in its stock, and CRM's stock was "obliterated." However, Mark Benioff does not seem concerned. He discussed the increase in revenue growth and raised guidance, triple what it was two years ago. CRM is making smart acquisitions and is focusing on top-line growth. CRM's development of a new game for Electronic Arts (ERTS) has been a success.
When asked about why deferred revenue was down, Benioff explained that acquisitions don't apply to deferred revenue the way traditional products do, and added that a better way to gauge the company's future revenues is through its guidance, which was raised dramatically to $3 billion. When asked about Europe, Benioff said, "Europe is not weak. It is on plan. I see strength in Europe. I see strength in all of our markets around the world."
Cramer thinks CRM is a great revenue story, but he would use caution when buying.
Dunkin' Brands (DNKN) and Starbucks (SBUX) seem like similar stocks, but which one is the better value. Cramer would look beyond just the multiple and the stock price and consider the PEG ratio, the price to earnings multiple divided by the growth rate. Starbucks sells at a multiple of 24 and Dunkin's multiple is 22. One reason for Starbucks' higher price tag is its growth rate of 18% compared to Dunkin's growth rate of 15%. The PEG ratio for Starbucks is just slightly lower than Dunkin's: 1.3 and 1.4 respectively, but Cramer thinks Dunkin's prospects don't justify a similar value as Starbucks. Starbucks is seeing huge growth internationally and is recovering domestically, with a 9% growth in same store sales globally and a 10% rise in same store sales in the U.S. With a 5.6% growth in same store sales, Dunkin' Brands has a long way to go before it catches up with Starbucks, which is the better value of the two stocks.
Cramer took a call:
CEO Interview: Don Bailey, Questcor (QCOR)
Cramer spoke with Questcor (QCOR) CEO Don Bailey about its main drug Acthar, which was a drug abandoned by big pharma and reinvented by QCOR. The drug has been a cash cow, since there are 19 different indications for this drug that treats rare conditions, like MS relapses, infantile spasms and certain kidney disorders. When asked how one drug can have so many indications, Bailey explained that Acthar stimulates the adrenal and pitutary glands to promote organic healing. The drug is pricey, at $24,000, and QCOR only receives a few thousand orders, but this is sufficient to generate significant profits. Acthar is hard to copy and isn't going off patent any time soon. Cramer thinks QCOR is a great multi-year story.
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