Cramer's Mad Money - Netflix Takes Some Flack (7/13/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 13.

Netflix (NASDAQ:NFLX) Takes Some Flack

The internet was abuzz with criticism of Netflix (NFLX) for raising its prices. However, the stock shot up 7 points following this news. Is it worth giving Netflix the benefit of the doubt? Since the stock has risen from $54 where Cramer got behind it in 2009 to $300 for a 450% gain, Cramer thinks Netflix's pricing power is a benefit not a liability. What is the real story behind its increases? Netflix is not upping the cost of its streaming service but is raising the price for ordering DVDs. Cramer sees this price hike as a strategy to encourage its customers to move away from the old-fashioned, expensive delivery service to its streaming service. The company saves money if its customers watch streaming videos, and the move could raise revenue per customer, a key metric, by 20%. Cramer doesn't think Netflix will lose many subscribers over the price increase, and those who dump Netflix are just "complaining about being dragged kicking and screaming into the future."

Caterpillar (NYSE:CAT), Cummins (NYSE:CMI), Amazon (NASDAQ:AMZN), Novellus (NASDAQ:NVLS-OLD), Google (NASDAQ:GOOG), Amazon (AMZN), Fossil (NASDAQ:FOSL), Panera Bread (NASDAQ:PNRA), Nike (NYSE:NKE), Capital One Financial (NYSE:COF), Knight Capital (NYSE:KCG)

The media likes to play pin the tail on the Fed and assumes every time the Fed Chairman speaks, the market moves. Cramer thinks there was more to Wednesday's rally than Ben Bernanke's remarks about remaining flexible to avoid recession. The industrial numbers out of China and Japan caused Caterpillar (CAT) to be one of the biggest movers in the Dow and Cummins (CMI) to move higher. Tech has been a poor space, especially since bad news from chipmaker Novellus (NVLS-OLD), but the rally in the beleaguered sector was not because of the Fed, but was led by Amazon (AMZN), Google (GOOG) and Netflix. Retail was hot, with moves up in Fossil (FOSL), Panera Bread (PNRA) and Nike (NKE). In fact, Cramer thinks credit card play Capital One Financial (COF) is a buy on consumer confidence, and he recommends getting into the company's secondary offering.

Cramer took a call:

Knight Capital (KCG) has been hurt by the decline in small stock trading. Cramer would not buy.

Kirby (NYSE:KEX), Carrizo Oil & Gas (NASDAQ:CRZO)

After his interview with CEO Chip Johnson of Carrizo Oil & Gas (CRZO), during which Johnson reported that barges are increasingly being used to transport oil and gas domestically, Cramer thought of a pin action play on this trend: Kirby (KEX), the only publicly traded inland barge maker in the U.S. Companies are drilling in Texas and shipping oil to Louisiana where they can fetch higher prices. There is a reason to believe in the barge bull market because of the limited supply of barges, high pricing and growing demand. While Kirby's oil and gas business generates only 10% of its revenues, Cramer expects this number to grow. Its petro chemical business makes up 60% of its revenues and is a healthy segment . Kirby has no foreign competition, since the Jones Act does not allow overseas companies to operate barges in the U.S., and port restrictions help keep the number of barges low; this is good news for the company. Kirby has great earnings visibility, since 75% of its clients are under contract. The stock trades at a multiple of 16.8 with a 15% growth rate. Some analysts think Kirby can earn $4 per share, which means the stock could rise 45% from where it is now.


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