On Twitter, Jim Cramer was on the defensive on his once-bullish calls for JP Morgan (JPM). The surprise trading loss by the JP Morgan led markets lower at the end of last week. The technology index managed to close flat, but negative sentiment stemming from the bank sector is hurting share prices.
NAME | AVG VOL | Call | Date |
Intel Corporation | 36,818,400 | Buy | 5/9/2012 |
LSI Corporation | 11,278,600 | Buy | 5/7/2012 |
Electronic Arts Inc. | 7,087,220 | Buy | 5/8/2012 |
Brocade Communications Systems, Inc. | 5,268,410 | Sell | 5/11/2012 |
Groupon, Inc. | 2,449,950 | Sell | 5/11/2012 |
Intel (INTC), which Cramer ranks as a "buy", is range-bound at around $28, and closed recently at $27.63. Two major events in the sector are influencing Intel. First was Cisco's (CSCO) weak outlook. Intel said that "the enterprise is good, it's not fantastic, so we don't see a change in that." Unlike Cisco, which is seeing weakness in Europe, Intel is not experiencing any weaknesses in this geography.
In its latest filing, Intel illustrated its strong growth in all of its businesses: PC, data centre, software and architecture.
LSI Corporation (LSI), whose shares are on a steady decline since peaking at around $9 in March, will be posting its 8-K. During its last quarterly report, the company discussed its growth opportunities in social platforms, mobile, video, big data, and the cloud. LSI forecasts Non-GAAP operating margins will improve to between 20 and 22% in 2012. In Q1 2012, its operating margin was 16%. LSI continued to show steady improvements. In 2009, the company reported an operating margin of 6%.
Electronic Arts Inc. (EA) is the cheapest stock followed by Cramer. EA trades with a market capitalization lower than that of Zynga (ZNGA). EA has a market capitalization of $4.83 billion, compared to $5.51 billion with Zynga. Cramer spoke to John Riccitiello, EA's CEO. The CEO pointed to EA's intellectual property, deployment of games on multiple platform and organic growth as reasons why investors will realize the value in EA shares.
Brocade Communications Systems, Inc. (BRCD) is a company Cramer said not to buy. Investors who bought shares in Brocade were hoping the company would be taken over. Cramer said this is not a good strategy.
Investors should recognize that macro events tend to shake the confidence of investors, a sentiment that may linger for quite some time. Scrutiny in JP Morgan will add indirect negative pressure on Brocade shares. Brocade shares are down 3.18% year-to-date, and are down 31.16% from 52-week highs.
Groupon, Inc. (GRPN) is a company Cramer says to "sell." Groupon shares are at a 52-week low, down 68.21% from a 52-week high and well below the highs reached when the company began trading. Groupon once rallied nearly 25% when Facebook's IPO was announced, a positive event that might help shares once again when Facebook starts trading on May 18.
Groupon reports earnings on May 14. Investors should look at AMP, or accrued merchant payables, the amount Groupon owes the merchants that run its daily deals. In its last quarter, AMP rose 23% to $572 million from the previous quarter. Revenue failed to grow at the same rate, rising just 14%. Any additional rise in AMP will be a red flag for Groupon. Better terms for merchants will place additional pressure on Groupon's margins. Groupon is experiencing higher costs for advertising and for sales staff. A rising AMP will weaken cash flow to such an extent that cash flow would be "adversely impacted."
Disclosure: I am long (EA).
