Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Wednesday, February 10.
Is there cord-cutting trouble in the Magic Kingdom?
Disney (NYSE:DIS) on Tuesday reported a strong quarter, including an all-time high for quarterly earnings (that number was $2.98 billion, up nearly 32% from the same period the prior year). Revenues jumped 14% year-over-year.
Yet, the stock closed down more than 3% during trading Wednesday. Worse still, Disney shares are trading near their 52-week low.
Mad Money host Jim Cramer attempted to answer that question. During his show Wednesday, Cramer pointed out the Mouse House has 11 franchises that generate $1 billion or more in sales every year. One of those assets - Star Wars - delivered for the company during the holiday quarter. And the stock is trading at 15 times earnings - better than a lot of other stocks.
Yet, Wall Street is frowning upon ESPN, Disney's sports programming jewel, thinking the property has seen better days. Investors are fixated on the perception that changing viewer habits are going to take down the sports behemoth. Consumers are cutting the cord, going instead with alternative video services.
Cramer pointed out the network is available in about 95% of all multi-channel packages sold to U.S. television viewers. Yet, he acknowledged that consumers "are not watching entertainment like they used to." Also, eventually, ESPN will need to collect lower fees for its programming, Cramer added.
While analysts and others only look at ESPN, Cramer suggested investors take a look at the bigger picture. Disney is a long-term investment.
There are suggestions Disney should spin off its media assets. Cramer reminded his viewers that one of Disney's successes is its integration of properties across businesses. "Disney works because it's all under one roof," he said. And the times when the media giant reinvented itself - such as with the acquisitions of Pixar and the Star Wars franchise - the company flourished.
"You can short Disney until the cows come home, or you can acknowledge that when the cows do come home that maybe you want to own it," Cramer said.
"Long term, Disney is going to go higher."
Skyworks In Spotlight
Cramer spent time with Skyworks (NASDAQ:SWKS) Chairman and CEO David Aldrich, giving the top executive a chance to explain the company's strategy moving forward. In late January, Skyworks reported fiscal first quarter 2016 EPS of $1.60, which beat by two cents. Revenue of $926.8 million (a 15.1% year-over-year increase) beat by $6.84 million.
Despite the solid numbers, Skyworks' stock is trading near its 52-week low.
Some are wary of the stock given that Skyworks derives a lot of business from one customer (Apple (NASDAQ:AAPL)). Yet the company's technology also can be found in entertainment devices, thermostats and smoke detectors, automobiles, and even light bulbs. "We make it easy for the consumer, make it easy for our customers, to integrate their technology," Aldrich said.
The four core areas for Skyworks' business: Mobility connectivity, the Internet of Things (IoT), the connected home and the automobile.
"We're solving the problems that we had to solve with our cellular and smartphone customers - these new customers are entering markets that have never been connected," the CEO added.
Skyworks may see an inventory correction in March, but the company can move up from there, Aldrich said.
2015 IPOs: What a Bunch of Losers
Outside of a few small biotech names, the IPO market in 2016 has been dry.
The reason why? The 2015 IPO market was a disaster.
"The 2015 class was a debacle," Cramer said. "It was miserable."
Out of the 211 IPOs listed last year, 45 are up from their offering price. Four are unchanged. The remaining 162 are down from where they were priced.
"Take that, unicorns that are trying to go public," Cramer mused.
The biggest losers of the group?
First Data (NYSE:FDC), the top IPO last year, has plunged more than 40% from its IPO price. "It looked like a real loser from the beginning," Cramer said. "Throw in today's quarter (the company reported slower-than-hoped revenue growth for the fourth quarter and didn't provide 2016 guidance) and you have a real stinker of a stock."
Also on the list is Tallgrass Energy (NYSE:TEGP), down 61% from its market debut. The company has suffered along with other energy sector names.
Master limited partnerships (MLPs) flooded the IPO market in 2015, and they "have been crushed" in the market. Columbia Pipeline Partners (NYSE:CPPL) is down 40% and EQT GP Holdings (NYSE:EQGP) is off 31%, and "they may go lower still," Cramer suggested.
Fitbit (NYSE:FIT) also had its IPO in 2015 and is down 27%. However, Cramer said he likes the company given its ecosystem and its numbers. Trading at 12 times earnings, "it's a bargain."
Blue Buffalo Pet Products (NASDAQ:BUFF), delivering high-quality pet foods, is down 20% from its IPO, but Cramer said that may be due to an expensive valuation at the time of its market debut.
One of the bigger IPO deals last year that hasn't seen a decline is Kearny Financial (NASDAQ:KRNY), up 17% since its debut. "A genuine winner," Cramer said. But he added he would not own this bank.
Warming Up To Wyndham
Investors are not warming up to hotel and time share company Wyndham (NYSE:WYN), with the stock $4 off its 52-week low. Nonetheless, the hotel and time share company reported this week inline EPS of 98 cents and revenue of $1.31 billion, which beat estimates by $20 million. The company is also buying back stock and recently delivered a 19% dividend boost.
The CEO, Stephen Holmes, is also a big buyer of the stock.
Cramer had Holmes on his show. While the company is seeing some challenges for properties in Brazil and in energy-dependent regions, the time share business is going strong.
"We have a real resilient business model," the CEO said.
Wyndham's businesses produce a lot of cash flow, which gives the company some room for acquisitions. If the company isn't buying properties, it's putting the money toward a bigger dividend and buybacks, Holmes said.
Rock, Paper, Scissors
Cramer ended his show with a rock, paper, scissors analogy. With oil as the rock, and the scissors as the Fed, the markets are paying very close attention to these two items and their next moves. Rock seems to smash anything, while Fed Chair Janet Yellen can slash through stocks if the Fed is stuck in tightening mode. Meanwhile paper (stocks) is generally left out of the mix.
The game has led to a disconnect on Wall Street, Cramer said. While some think certain stocks will benefit from low energy prices, "stocks go down no matter the exposure," he said. "It's irrational."
Cramer's conclusion: All three work in conjunction in a strong market, "but in a bad market, all are unpredictable and you will lose."
Viewer Calls Taken by Cramer
Carnival (NYSE:CCL): Will the Zika virus cut into the cruise ship operator's business? Cramer pointed out that the stock is down 20%, and hinted it may be a buy. He called the reaction "ridiculous."
Chicago Bridge & Iron (NYSE:CBI): Cramer said to avoid this stock - too related to fossil fuels.
CVS Health (NYSE:CVS): Cramer said the stock is a buy.
McDonald's (NYSE:MCD): Cramer said he believes in CEO Steve Easterbrook and shares are going higher.
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