Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Friday, October 13.
The averages have been going higher. However, it can go up and sustain only if the earnings allow it to. The coming week is pivotal for earnings. With that, Cramer discussed the game plan for the week.
Netflix (NASDAQ:NFLX) will report earnings on Monday. Cramer is usually cautious with companies that run up going into the earnings. Netflix is unique in that regard. “My prediction is that when Netflix reports after the close, the stock will either go up instantly by a huge amount or go up over time after a dip, because I think this company is worth more than its current $86B market cap,” said Cramer.
Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), UnitedHealth (NYSE:UNH), IBM (NYSE:IBM), Johnson & Jonson (NYSE:JNJ) and Lam research (NASDAQ:LRCX) will report earnings.
Cramer expects Morgan Stanley to issue a good report that comes from its stable wealth management business. He hopes the selling in bank stocks will subside. Goldman Sachs on the other hand is a trading-oriented business and they know how to make money on their products.
UnitedHealth would have been a buy if President Trump’s plan to repeal and replace Obamacare had failed. However, as key Obamacare subsidies have been eliminated, the future of healthcare program is unclear. “The situation’s gotten murky. So I’d rather wait until we get more information,” added Cramer
IBM has been reporting decline in core business revenue. If it can report growth, it will bounce back. “If you give a downbeat projection, the stock can go still lower if the company only meets that downbeat projection rather than beating it.”
He expects Johnson & Johnson to report good earnings and was bullish on Lam Research as well.
American Express (NYSE:AXP), United Continental (NYSE:UAL) and United Rentals (NYSE:URI) will report earnings.
American Express was a market darling once. Cramer expects that to happen again. Strong numbers are already baked in the stock price so once can buy MasterCard (NYSE:MA) or Visa (NYSE:V) which are better managed companies.
The airline sector is showing strength. Cramer expects United Continental to beat numbers and catch up with the peers. United Rentals can see strength in earnings from re-building required due to the hurricane.
Verizon (NYSE:VZ) and PayPal (NASDAQ:PYPL) will report earnings.
Cramer is not thrilled about Verizon’s earnings. “I think it’s fine for income generation. I prefer something that offers both dividends and growth. Growth is hard to come by in that industry,” he added. PayPal on the other hand has growth. The company get beat the street estimates.
Schlumberger (NYSE:SLB), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE) and Honeywell (NYSE:HON) will report earnings.
Schlumberger expects 2018 to be better after a difficult 2017. “This is a must-listen-to conference call,” said Cramer. PG has just finished a close proxy vote. “Will Procter be able to maintain better-than-average growth, as it’s been doing the last few quarters, or did the proxy take their eye off the ball? We’re going to find out,” said Cramer. He expects them to lay out a strategy for growth.
General Electric has been disappointing and this time will be no different. Honeywell’s earnings will give a good read of the global economy.
“Without good earnings, we’ll find ourselves out of the streak and up the creek without a paddle,” concluded Cramer.
CEO interview – HP Inc (NYSE:PQ)
The stock of HP went up by 6.4% after their analyst day. After the split HP has become a computer and printing company. The stock is up 46% for the year. Cramer interviewed CEO Dion Weisler to know what lies ahead of the company.
3D printing has huge opportunities in mass production, personalization and new-age manufacturing. “This is why we got into the production side of 3-D printing. We weren’t terribly interested in home-based printing. We see this not as the $5B market it is today. We really want to disrupt a $12 trillion manufacturing industry,” said Weisler. They have 65 channel partners across 170 countries. Their 3D technology for plastic polymers has disrupted the industry with its speed, quality and cost.
Weisler thinks that just like computers, 3D printing will become cheap and efficient for both products and manufacturing as time goes on. They have partnered with Johnson & Johnson and Nike to explore the possibility of 3D printing in their industries. “It’s a question of matching the right material science with the technology and finding exactly those kinds of very specific applications,” he added.
It has use cases in medical equipment as well where the multi-jet fusion technology can create custom made spinal spacers coated with nano-crystals. “Just imagine the patient outcomes when you can do that,” he added.
“We’re selling real products, real technology, an incredible ecosystem of partners and real revenue. I guess this would make any venture capitalist ecstatic with what we’ve done in such a short period of time,” said Weisler.
Texas Instruments (NYSE:TXN)
The semiconductor stocks have been rallying. “The moment we get any meaningful signs of an economic downturn, you better believe these high-flying semiconductor stocks will lose some of their mojo,” said Cramer. He thinks that Texas Instruments is the best buy currently in that group.
They are the world’s biggest analog chip manufacturer and the stock is up 30% for the year. They make chips that process speed, sound and voltage for power management and mobile phones’ radio signals, among other applications. Over the last five years, the company has bounced back from every downturn.
After their acquisition in 2011, their portfolio of products has increased. Moreover their gross margins have increased from 50% to approximately 60% today. Their free cash flow was $4B in 2016. “Once you are generating a ton of cash like that, there are a lot of ways you can use it to make your stock safe, more durable and a better investment, and that’s exactly what the incredibly shareholder-friendly Texas Instruments has done,” said Cramer.
In the last 10 years, they have spent $32B in R&D, $25B in share buyback, $9B in dividends and $6B in M&A. Their earnings have been consistent in the last 8 years. The stock trades at 21.8 times earnings, which is a steal for the semiconductor group. “Texas Instruments allows you to sleep at night. Maybe it’s the way to go,” he added.
Cramer came back with his homework on stocks he could not opine on earlier.
Extreme Networks (NASDAQ:EXTR) is into development and sale of network infrastructure equipment. Their stock is up 140% in the last year as they have made many acquisitions. However, they don’t have a consistent track record and hence Cramer advised staying away from the stock.
Athenex (OTC:ANTX) looks like a promising biotech company but it has no drugs in the market. This stock is good for speculation only.
Lastly, Eros International (NYSE:EROS) is a distributor of Indian films. They have 58M users in a market that has growth potential. The company has financial problems and that worries Cramer. He did not recommend the stock.
Viewer calls taken by Cramer
Thor Industries (NYSE:THO): Cramer likes the stock.
Blackberry (NASDAQ:BBRY): They have huge amount of cash. Cramer thinks they should be taken over.
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