Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday, June 16.
The market is yet to digest the $13.7B acquisition of Whole Foods (WFM) by Amazon (NASDAQ:AMZN). The next week will also have some key events which will impact the market. Cramer discussed those in his game plan.
The Paris Air Show starts on Monday where aircraft companies usually reveal their order numbers. Cramer expects huge order book from Boeing (NYSE:BA). United Technologies (NYSE:UTX) will also hold their analyst meeting. "Greg Hayes, the CEO of United Technologies, will be talking about his fuel-saving engine which he gets fired up about and I bet he tells a real tremendous story," said Cramer.
GE will hold an analyst meeting and talk about their management shakeup. Lennar's earnings will determine how the house market is playing. "I hope Lennar can solve some of the conundrum about whether the consumer's weak, like the bond market says, or strong, like the unemployment rate says," said Cramer.
When FedEx reports earnings, Cramer expects good numbers from them along with their take on e-commerce.
Adobe's post-earnings report brings selling and hence investors should wait for the stock to show weakness before buying. Carmax, on the other hand, will give clarity on the state of the auto industry. "I'm going to listen to the call, but only to find out the state of the industry, as I, too, am worried about whether autos have become a big drag on the economy and that used cars have lost a lot of their value," added Cramer.
Oracle could benefit as industries move to the cloud. Cramer expects that to show in the report.
Accenture also drops after every earnings report and this time will be no different either.
Bed, Bath & Beyond is facing the brunt of competition from Amazon and its performance will be no different than any other retailer. Avoid the stock.
BlackBerry (BBRY) and Baker Hughes (BHI) rig count
BlackBerry has been able to monetize its intellectual property. If the stock trades above $10, Cramer cannot recommend a buy.
Cramer will be watching the rig count closely to check if oil will bottom at $43 or if there is more pain ahead.
Amazon's merger with Whole Foods
Amazon's acquisition of Whole Foods is a disruptive merger according to Cramer. He added that the magnitude of this purchase cannot be understated. "Today is a day that will live in infamy for everyone who sells groceries in this country. This merger changes everything," said Cramer.
Amazon's terrific delivery system combined with Whole Foods will do to the supermarket what they did to the mall. Whole Foods' footprint is relatively small with 400 locations, but the plan is to triple it and with Amazon's backing, it will happen. "I know anyone in grocery was crushed by this today and that makes sense, at least initially. Yes, it's that much of a disruption to have the company that wanted to clothe and entertain you decide that that's not enough. Now it wants to feed you, too," he added.
The combination of the merger will allow Amazon to deliver fresh products with a distribution platform and well-known brand. Both these companies will emerge as winners from the deal as Amazon's technical know-how will make shopping at Whole Foods a lot simpler and Whole Foods shareholders have already gained 30%.
There will also be losers from this deal. Grocers Supervalu (NYSE:SVU) and Kroger (NYSE:KR) will suffer as they will struggle to compete. Target (NYSE:TGT) will have issues in re-igniting its grocery business. Grocery store suppliers like United Foods (NASDAQ:UNFI) and Hain Celestial (NASDAQ:HAIN) will have to squeeze their margins.
"In some ways, I feel it's too small to really just talk about these individual companies, though, because it, frankly, throws you off the much larger scent. I think the grocery industry has gone from being a not-so-hot area to invest in to basically hideous overnight," said Cramer. Most stocks have shown some rebound but investors should be cautious. "The revolution is here. Amazon's desire to clothe and feed and entertain every American cannot be denied. It will be realized. And things will not end well for all of Amazon's competitors because cavalry? Let's just say it never had much hope against tanks," he concluded.
The stock of Coach is up 32% since Cramer last recommended it a year ago. Cramer thinks the company is getting its groove back and the stock has more room to run. The new CEO Victor Luis has been relatively quick in turning around the company considering that retail turnarounds take time.
Luis made several changes by closing under-performing stores, re-modelling existing ones, installing shop managers at other department stores and restored the brand's 'aspirational touch'. He also bought luxury shoemaker Stuart Weitzman which revived Coach's growth prospects.
The numbers stated improving in 2016 but the company received a downgrade with a note saying they are too promotional and are squeezing their margins. They also bought Kate Spade in May. "So it's not like Coach needed to do a deal; Wall Street was already plenty interested in the stock regardless. Still we learned that Coach would buy Kate Spade for $2.4B. Here, we got a sense of Luis' new vision: he wants to create a house of modern luxury lifestyle brands," said Cramer.
They believe that the Kate Spade deal will yield synergies of $50M in three years. Coach will also re-invent the brand the way they re-invented themselves. The stock trades at 19 times 2018 earnings, but Cramer thinks it's worth a premium.
Praxair (NYSE:PX) merger
Amazon and Whole Foods merger is not the only winning combination. Cramer pointed to the merger of Praxair with German Linde Group (OTCPK:LNEGY) which will combine the second and third players in the industrial gas suppliers industry to become the top player.
The merger is expected to close in 2018 and the company will have a combined annual revenue of $30B. It will have a global footprint including 43% in North America and 26% in EMEA. They expect to have synergies of $1.2B due to cost reductions as their core competencies are the same.
Cramer thinks Praxair can still be bought.
Viewer calls taken by Cramer
Shopify (NYSE:SHOP): They are more immune than most as they are an e-commerce platform.
J.M. Smucker (NYSE:SJM): Cramer likes the company but they are in the middle of strong cross-currents. Wait till it comes in lower before buying.
Lululemon Athletica (NASDAQ:LULU): It did have a good quarter but the stock did not rise. It can be bought at $52.
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