Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Tuesday, February 2.
Interest rates going down is a good thing, and so are declining gasoline prices. "I think this sell-off is all about the way we got a strong dollar, the way oil has come down so much and the way interest rates have plummeted," said Cramer. The stock market is facing a crisis. How do you know that? When the interest rates go down, the market reacts positively as money becomes cheap, but when the interest rates go down real fast, it signifies worrying and crisis.
"Right now rates are sinking so fast that we have to believe there is a crisis somewhere, and that riptide is creating a huge flight to safety as investors hide in the U.S. Treasury bonds," said Cramer. The financial stocks are being sold and the money is flowing into bonds. Banks are reporting good numbers but falling interest rates puts fear among investors and they are unwilling to take chances on banks.
The next negative is the falling crude price and the terrible report by BP (NYSE:BP) which led to the selloff in the stock. The poor guidance from Royal Caribbean (NYSE:RCL) shows that the strong dollar is impacting companies.
When professional traders panic, it becomes very difficult to invest. The political fears and strong dollar are making investors reach out for the safety in Treasury bonds.
CEO interview - Adobe (NASDAQ:ADBE)
Adobe is a digital and print media software maker that has transformed itself into a cloud based SAAS player. The company has $4B in cash and Cramer interviewed CEO Shantanu Narayen to hear what's in store for the company.
Narayen mentioned that the company has two main drivers of growth in business - first, the creative content such as Photoshop or Illustrator; second, that many do not know is the digital marketing stream that is helping customers such as Under Armour (NYSE:UA), MasterCard (NYSE:MA) and Starwood Hotels (HOT) into the digital age.
"The whole world is moving online. People want to spend their money in a personalized way, and it adds a tongue-in-cheek way of doing both of our businesses proud," said Narayen. The digital media business is a $25B opportunity, and digital marketing is a $20B opportunity.
The company manages more than 40T customer transactions every year. "That has got to be one company touching more companies and more people than anybody in the world," said Cramer.
Alphabet could have been bought at 17 times earnings in July last year. While many said the stock was expensive, the reality is that it's never too late to buy into hyper-growth stocks. The latest results from the company proved the point. They had accelerated revenue growth and decline in costs which enabled beating the estimates by such a huge margin.
"The really great growth stocks out there always look ridiculously expensive before we see the earnings in the out-years," said Cramer. Alphabet's business is growing on all counts and the stock is immune to the market-wide selloff. This stock should be on everyone's shopping list and should be bought on weakness.
President and Co-Founder interview - Lyft (Private:LYFT)
Lyft is a ride-sharing company that is second in size after privately held Uber (Private:UBER). The company has presence in 190 cities with 7M riders per month. The company is growing at a rapid pace and Cramer interviewed president and co-founder John Zimmer to find out what lies ahead.
It's not about Uber vs. Lyft, it's about millennials vs. guys with cars. Lyft is winning 3 to 1 with millennials as they don't want to own a car. For the first time ever, the percentage of 19 year olds getting a license dropped over 70%. In today's world, a car is a burden with parking, tickets, maintenance etc.
Every year $2T is spent on car ownership and the cars are used only 4% of the time. This is highly inefficient and therein lies a massive opportunity to replace the car ownership with ride-sharing. Lyft has partnered with General Motors (NYSE:GM) which will give the riders access to GM vehicles at an affordable rate. GM has also invested in Lyft.
Zimmer said that autonomous cars are the future and it makes sense for services like Lyft to own and operate autonomous cars as they will be utilized more than being owned by individuals.
On the difference between Lyft and Uber, Zimmer said that Lyft treats drivers better with express payments and tips, and they are focused on the US market.
Off the tape
In the second off-the-tape segment, Cramer interviewed CEO Chip Bergh of Levi Strauss & Co, the 163-year-old company that brought us blue jeans and owns brands like Dockers, to talk apparel and football. The company owns the Levi's Stadium, the home to the San Francisco 49ers, where the Super Bowl game will be taking place this week.
"After two decades of really, really tough business conditions, we have now turned the corner and stabilized the ship," said Bergh. "We've done the things that we needed to do, and we are growing again and growing again profitably. And I think the outlook more importantly is really, really bright," he added.
The football game has taken 2 years of planning. They have more than just the naming rights as there will be 1.5M visitors in the city. They are offering free concerts and NFL merchandise to engage fans. It's a $220M investment over 20 years.
Viewer calls taken by Cramer
Chesapeake Energy (NYSE:CHK): Their bonds signals that it's not all clear. It is foolish to own this stock.
JetBlue Airways (NASDAQ:JBLU): It's a fine airline for the longer term. It still looks expensive.
Mattel (NASDAQ:MAT): This is a good stock that blew up the earnings.
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