Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Thursday, April 21.
Four of the market's much-loved stocks reported earnings after-hours on Thursday, the market turned against them all and touted them as shortfalls. Microsoft (NASDAQ:MSFT), Starbucks (NASDAQ:SBUX), Visa (NYSE:V) and Alphabet (GOOG, GOOGL) were hit after-hours on their earnings.
The market has made a snap judgment in each of these cases, in Cramer's opinion. "What we really have in each case is a set of expectations created by stocks that have been moving up consistently, expectations that were too much for each of these companies' managements to muster," he added. All these stocks have had a good run so far.
Starbucks' earnings were better than expected on every line, including China. Investors are used to seeing Starbucks beating earnings by a mile, which led to high expectations that made good earnings look ordinary.
Microsoft, which is in a transformation phase moving away from the legacy PC market and embracing the cloud, did well. Those numbers were not good enough for investors. Cramer said things are starting to get better and these stocks should be left alone.
Visa, which reported a great quarter, still went down after hours. All investors could see was the cautious guidance by management. The reduced forecast played on the stock, but their numbers were good, according to Cramer.
The only company that failed to deliver on both the top and bottom lines was Alphabet. After few good quarters, 17% revenue growth in the last quarter was not enough. "The darned thing was priced for perfection, and we didn't get it. So, it is getting clobbered," said Cramer.
Cramer said all these companies have consistently beaten expectations and recovered whenever they went down. Sit back and take a deep breath. The fall in stock prices will be a buying opportunity.
CEO interview - Snap-on (NYSE:SNA)
Snap-on, the maker of high-quality tools and diagnostic equipment for auto repair shops, serving clients in aerospace, agriculture, construction, mining and power generation, reported a revenue miss. Cramer interviewed CEO Nick Pinchuk to know more about the quarter.
Pinchuk mentioned that the oil & gas business and its military sales have been weak over the last few quarters. These businesses are cyclical for the company, and they will recover eventually. Snap-on is investing in the business by creating more than 700 new tools for the military and over 300 for the oil & gas market.
"We know that we are going to expand in those segments, rolling the Snap-On brand out of the garage because customers there really want our product and we haven't paid attention to it in the past. We are rolling out, and it is going to work for us," he added.
The automotive sector is the company's bread and butter. Every car requires some sort of diagnostics to determine what's wrong. As the average age of cars increases every year, the need for more tools will increase. The company not only makes these tools, but also has a huge crowd-sourced database behind it to let mechanics know how other mechanics have fixed it in the past.
The company has seen 3 years of solid growth, which is why Cramer continues to recommend the stock.
Las Vegas Sands (NYSE:LVS)
The world is getting better, in Cramer's opinion, and Las Vegas Sands has no clue about it. The company reported disappointing results, due to which the stock plunged 9%. Management mentioned on the conference call that Chinese tourism and consumer numbers are depressing across the globe.
"What this market really needs right now is for Steve Wynn, CEO of Wynn Resorts (NASDAQ:WYNN), who also has a ton of Macau exposure, to say that Las Vegas Sands doesn't know what it is talking about," said Cramer.
Las Vegas Sands COO Robert Goldstein was not bullish about Macau on the conference call, which worries Cramer. He is seeing better signs of better Chinese consumer spending, improved import of raw goods and exports to Europe. "If we lose China, as Las Vegas Sands seems to be suggesting, then a lot of Dow points are going to get repealed here," adds Cramer.
The narrative that Macau could be getting worse is poison for the markets at a time where a lot of hope rests on China. Cramer wants Steve Wynn to put an end to the thesis laid out by Las Vegas Sands. Steve purchasing 100M shares of Wynn just confirms that things are getting better.
Is the entire Macau facing issues, or just Las Vegas Sands? If there is really a problem in Macau, Cramer hopes it is because of the government cracking down on gambling and consumers spending money elsewhere. If this is not the case, many investors will lump the decline in oil with China along with the "Macau is not good" thesis, which will hurt the Dow. "I am not saying that is necessarily the case here, but it is certainly something you need to be aware of," concluded Cramer.
CEO interview - Lam Research (NASDAQ:LRCX)
Lam Research reported a strong quarter, and its stock went up initially, only to plunge later. In Cramer's opinion, the stock had run up 18% going into the quarter, and the decline was nothing but profit-taking. To know more about the quarter, Cramer interviewed CEO Martin Anstice to know more.
Anstice mentioned that innovation plays an important role in the semiconductor industry. "I think the headline for the semiconductor industry broadly is innovation is never more valuable, never more important. Some part of that is a challenge for innovation to overcome technical challenges, and some of it is economic," he added.
Cramer asked what makes the company dominate in such a complex industry. Anstice replied saying the company's portfolio of products is helping it grow. Lam accounted for 12% of all wafer spending, but now accounts for 30%. Due to its acquisition of KLA-Tencor for $10.6B, the trend is moving towards 40%.
Anstice said semiconductors make everything possible, from cloud computing to the newly connected world via the Internet of Things. Every device will require a chip, and every chip will require manufacturing or testing by Lam Research.
COO interview - Starbucks
Starbucks reported a decent quarter, but the market did not like it. Cramer interviewed COO Kevin Johnson to know more about the quarter and the market's reaction to it.
Johnson mentioned that the lat quarter was very strong, with 9% revenue growth and an 18% rise in EPS. The company also reaffirmed its full-year guidance. "Without a doubt, every business segment contributed to our performance. It was a record quarter for us. I think in every business there is just a great story underlying those numbers," he added.
The company's same-store sales figure of 6% was lower than anticipated. "We posted 6 percent increase in comps globally, but if you go region by region, there is a story under each of those regions," said Johnson. The increase in revenue was driven by rise in US sales which helped offset slow 1% growth in Europe.
In China, the company has 2,000 locations. Johnson expects to open 500 stores a year in China in the next 5 years, which will be larger than its US operations someday. Mobile payments are also doing well.
"This is not the first time Starbucks has run into a speed bump, and in the past, whenever the stock has pulled back, it has been a buying opportunity," said Cramer.
Viewer calls taken by Cramer
Twitter (NYSE:TWTR): Cramer preferred being in a beaten stock like Microsoft rather than a beaten Twitter.
Expedia (NASDAQ:EXPD): Its acquisition was good, and the stock is cheap. This is a long-term story, so don't expect a short-term spike.
Groupon (NASDAQ:GRPN): Some things about the stock are good and some are not. It's worthy of a spec.
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