Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, July 17.
The Nasdaq reached a high and the market refused to go lower on Tuesday. Even Netflix (NASDAQ:NFLX) rallied parsing lots of its after-hours fall on Monday. "The mystery here is not why Netflix got shoved into the woodchipper like Steve Buscemi in Fargo; it’s how the heck was the stock able to claw back most of its declines in an almost Lazarus-like resurrection?" said Cramer.
Despite the competition from other platforms, Netflix's growth is still strong. They added 5M subscribers and it just showed that the management forecast of their own growth was over-optimistic. Netflix's earnings also showed that binge watching is not dying and investors are still willing to give CEO Reed Hastings the benefit of the doubt.
"Investors don’t seem frightened about how much money Netflix is spending on new programming, and it's spending boatloads. They trust Hastings when he says he doesn’t mind all of these competing paid services popping up. They’re not worried that the company might be charging people too much after its recent price increase," said Cramer.
"You have literally never gone wrong buying Netflix on the dips. When you’ve got an amazing track record like the CEO, Reed Hastings, at Netflix, the market can be very forgiving," he concluded.
Since the trade war threat has been looming, the retail cohort have been under pressure. Yet, the domestic stocks are not that bad. Cramer reviewed three domestic retail stocks; one too cold, one too hot and one that is alright.
Bed Bath & Beyond (NASDAQ:BBBY) is the cold retailer. It has been struggling since 2014 and is down 75% from its 2014 highs. Their latest quarter showed declining margins and market share loss to online retailers. The company's turnaround plan is not working even when it has retired 38% of its stock. Cramer suggested staying away till the company shows a concrete turnaround.
Wayfair (NYSE:W) is the online-only retailer that has been hot. It went up 129% in 2017 and is up 55% in the current year. Cramer called Wayfair the opposite of Bed Bath & Beyond as the stock has run up a lot and that makes buying risky. The company is not yet profitable and it trades at 14 times sales. Any speed bump would be disastrous for the stock. Don't buy.
Lastly, Williams-Sonoma (NYSE:WSM) is the omni-channel retailer that is doing fine. They have great brands and an online business that is 53% of revenue and growing. The stock trades at just 14 times earnings. This stock is working and is worth a buy.
The apparel stocks seem to have found their footing. Cramer reviewed the three best apparel stocks - Canada Goose (NYSE:GOOS), Lululemon (NASDAQ:LULU) and Urban Outfitters (NASDAQ:URBN). "There are the companies that have figured out how to compete on the web with a workable omni-channel strategy, as they call it, and, more important, there are the ones with the best understanding of what the consumer wants," said Cramer.
Cramer had suggested booking partial profits on Canada Goose earlier this year and he admits he was wrong. The company issued a secondary offering but that was absorbed much better than he anticipated. Their last quarter was a blowout. The company's transition from wholesale to a direct-to-consumer business model has been good and the management seems to have a solid grip on what they are doing. At current levels, the stock is attractive and Cramer recommended buying it on weakness.
The athleisure chain Lululemon's stock is up 64% in the year. Despite the company being without a CEO, they have delivered two great quarters. Their strength has come from a fast growing e-commerce business and healthy brick-and-mortar sales and dearth of new products. The stock is costly, trading at 35 times next year's earnings. "I don’t like to chase, but I would definitely put this one on your shopping list and pick some up the next time we get a market-wide pullback," he said.
Lastly, Urban Outfitters looked dead just a year ago but has turned around nicely. The improvement in the economy, consumer spending and changing trends have worked in favor of Urban Outfitters. The company has reported four good quarters with 10% same-stores sales growth in the last quarter. Despite a big move, the stock trades at 17 times next year's earnings. "I’d be a buyer right here, although I’d like to buy some more into weakness," he concluded.
Off the charts
Gilead charts show a series of higher highs and lows with a positive Chaikin Money Flow and RSI. This is a clear bullish sign after the weakness in the stock for two years.
Celgene is down 20% for the year but the charts show strength. The Chaikin Money Flow indicator is turning positive as buyers start to step in. Lang thinks the stock's rise to its 200-day moving average is possible.
Illumina has been going up steadily and the chart indicates more upside. The Chaikin Money Flow indicator is positive and MACD is strong. The RSI shows the stock is in overbought territory and hence Cramer advised buying it on weakness.
Viewer calls taken by Cramer
McDonald's (NYSE:MCD): Buy it on weakness as the stock is lower 7% for the year and it's a good opportunity.
Virtu Financial (NASDAQ:VIRT): The stock is already up 44% for the year. Cramer needs to work more on the stock to find the cause of its recent decline.
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