Mad Money w/ Jim Cramer 12/13/24

Summary

Mad Money w/ Jim Cramer – Episode Summary (12/13/24)

Release Date: December 14, 2024

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1. Market Overview

Jim Cramer kicks off the episode by analyzing the current state of the stock market. As of the episode's release, the Dow is dipping by 86 points, while the NASDAQ is advancing by 2%. Cramer attributes the lackluster performance in the semiconductor and tech sectors to the consistently down bond market and higher-than-expected inflation, which dampens investor appetite for growth stocks.

• "Nobody wants to buy growth in that environment." (00:42)

Cramer expresses caution, noting that Wall Street has been excessively negative and warns against remaining overly optimistic until there's sustained improvement in bond yields alongside the stock market. He emphasizes the importance of not obsessing over Federal Reserve (Fed) movements, advocating for a long-term investment perspective.

• "As an investor, it doesn't do any good to obsess over the minutia of central banking." (05:30)

2. Upcoming Corporate News

Cramer outlines the key corporate events to watch in the upcoming week:

• Qualcomm vs. AAM Holdings Trial (Monday): A patent dispute concerning high-performance processors that could impact Qualcomm's licensing.

• Retail Sales Numbers (Tuesday): Critical data expected on consumer spending, especially significant due to the heightened focus on Black Friday sales.

• Earnings Reports (Wednesday):

  • General Mills receives an upgrade due to accelerating pet food sales, though Cramer expresses concern over their sugary cereal segment.
  • Micron and Lennar report earnings, with Micron showing a positive rally and Lennar facing challenges in the housing market.

• Darden Restaurants Earnings (Thursday): Focus on how Darden manages consumer pushback against high prices, particularly in casual dining.

• Nike's Report (Thursday): Anticipation of insights from the new CEO, Eliot Hill, on revitalizing the brand globally.

• Personal Consumption Expenditures Number (Friday): Inflation data that could influence Fed policies and present buying opportunities amidst market volatility.

• Carnival's Performance (Friday): Analysis of the cruise line industry’s bullish stance within the S&P 500.

3. Listener Call-ins

Cramer engages with listeners, addressing various investment queries:

• Jay from Arizona (08:36): Inquires about investing in Goldman Sachs amidst expectations of increased M&A activity under the new administration.

  • Cramer: "Do I buy Goldman Sachs or do I buy the field? You buy Goldman Sachs and I will be talking about that." (08:55)

• Tyler from Florida (08:59): Asks about Alibaba's prospects towards 2025.

  • Cramer: "Baba is the only Chinese stock I'm recommending." (09:10)

• Mike from New Jersey (09:27): Discusses considering AT&T for growth and income.

  • Cramer: "I've been impressed... If they were doing it wrong, they get it right." (09:59)

4. Interview with Jesse Singh, CEO of asic

In a featured segment, Cramer interviews Jesse Singh, the CEO of asic, delving into the company's impressive growth in a stagnant market.

• Company Performance:

  • Achieved a 12% growth in a flat decking, repair, and remodel market.
  • "We grew 12% in a market that in R and R repair and remodel in general has been flat." (14:28)

• Growth Strategies:

  • Focused on customer satisfaction and expanding product lines beyond traditional wood.

  • Emphasizes sustainability by using recycled materials in products like decking and trim.

  • "We give people better aesthetics, we give people long life and low maintenance." (16:07)

• Capital Deployment:

  • Retired debt, executed stock buybacks, and invested 5-7% of revenue into growth and margin expansion.

  • "We retired a portion of our debt, we bought back an additional few points of stock." (17:14)

• Market Positioning:

  • Targets both consumers and contractors, ensuring product quality and supporting small businesses.

  • "It's both. We market to the consumer, but we have a very large sales force that is focused on training and helping our contractors." (18:59)

Cramer lauds Singh's leadership, highlighting asic's ability to control its growth trajectory independent of Fed actions.

• "You are more in control of your destiny than anyone in the segment that you play." (15:14)

5. Discussion on Service Titan IPO

Cramer reviews the recent IPO of Service Titan, a technology platform for tradespeople, noting its strong market reception despite a high valuation.

• IPO Performance:

  • Priced at $71 per share, surged to $101 on the first day, then settled back.

  • "I would like it a little bit lower. I don't want to pound the table on a software company that doesn't pass this rule of 40 tests." (23:58)

• Company Fundamentals:

  • Achieved 31% revenue growth in fiscal year 2024.
  • Operates on a subscription revenue model with increasing profitability.

• Valuation Concerns:

  • Currently trading at nearly 12 times this year’s sales, which Cramer considers rich but not unreasonable.

  • "Service Titan’s valuation is rich but not unreasonable." (26:00)

Cramer remains cautiously optimistic, suggesting that while the story is strong, the stock may be better positioned as it retraces to more favorable price levels.

6. Cybersecurity Insights with Vasu Jakarta, Microsoft

Cramer hosts Vasu Jakarta, Corporate Vice President of Microsoft Security, to discuss the escalating cybersecurity threats and Microsoft's strategies to combat them.

• Current Threat Landscape:

  • Password attacks have surged from 579 per second in 2021 to 7,000 per second.

  • "In today's age of AI, security must come first." (31:58)

• Microsoft's Initiatives:

  • Launching the Secure Future Initiative to enhance industry-wide cybersecurity measures.

  • Employing AI for defense, achieving 26% faster and 35% more accurate threat detection.

  • "Copilot for Security helps defenders 26% faster, 35% more accurate." (33:06)

• Cultural Transformation:

  • Emphasizes the importance of cybersecurity awareness and education across all organizational levels.

  • "Security is a cultural transformation as much as it's a technology transformation." (34:14)

• Advice for Businesses and Individuals:

  • Stay vigilant against phishing and scams.

  • Implement comprehensive security practices and prioritize proactive measures.

  • "Every time you see something suspicious, don't click on that link." (38:29)

Cramer appreciates Jakarta's expertise, acknowledging her role as a calming and informative voice in the realm of cybersecurity.

7. Lightning Round

In the high-energy Lightning Round, Cramer offers rapid buy, sell, or hold recommendations on various stocks based on listener calls:

• IBM:

  • Cramer: "I like IBM. It's still an inexpensive stock. It's still got upside." (42:15)

• Indy Semiconductor:

  • Cramer: "The auto business is really much worse than people realize right now." (28:59)

• Alcoa:

  • Cramer: "It's a material stock linked with China, so nobody wants them even though Alcoa had a great quarter." (29:05)

• Energy Core TV:

  • Cramer: "I say to start buying some... holding off for now because oil is so weak." (29:06)

• Dollar General vs. Walmart:

  • Cramer: "There’s another company called Walmart, and they are crushing it. Buy Walmart over them even though Walmart's at its high." (32:37)

This segment provides quick insights and actionable advice for listeners on a spectrum of investment opportunities.

8. Insights from Interview with President Elect Trump

Cramer shares his takeaways from his recent interview with President Elect Trump, focusing on the administration's stance towards China and its implications for the market.

• China Relations:

  • Emphasizes the need to protect Taiwan and transform China from an adversary to a trading partner.

  • "We need to protect Taiwan if we want to protect Taiwan Semiconductor, perhaps the most important non-American company to our national security." (44:15)

• Economic Policies:

  • Advocates for corporate tax cuts to benefit shareholders.

  • "Cut corporate taxes once again to let more money fall to you, the shareholder." (45:30)

• Market Impact:

  • Positive outlook on the administration's pro-business approach, likening it to Reagan's era which welcomed a multi-decade bull market.

  • "A pro-business conciliatory president... nothing could be better for the market." (46:50)

• Crypto Affinity:

  • Seeks to position the U.S. as a capital of crypto, integrating it with the dollar and traditional financial systems.

  • "I want our country to be the capital of finance and that means being the capital of crypto too." (44:20)

Cramer's analysis suggests that Trump's policies could foster a favorable environment for the stock market, emphasizing tax cuts and improved international relations as key drivers.

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Notable Quotes with Timestamps:

• "Nobody wants to buy growth in that environment." – Jim Cramer (00:42)

• "As an investor, it doesn't do any good to obsess over the minutia of central banking." – Jim Cramer (05:30)

• "We grew 12% in a market that in R and R repair and remodel in general has been flat." – Jesse Singh, CEO of asic (14:28)

• "Security is a cultural transformation as much as it's a technology transformation." – Vasu Jakarta, Microsoft (34:14)

• "We need to protect Taiwan if we want to protect Taiwan Semiconductor, perhaps the most important non-American company to our national security." – Jim Cramer (44:15)

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Conclusion

In this episode of Mad Money w/ Jim Cramer, listeners receive a comprehensive analysis of current market conditions, upcoming corporate events, and strategic investment advice. Through insightful interviews and dynamic interactions with callers, Cramer provides valuable perspectives on growth opportunities, cybersecurity advancements, and the potential impact of new administrative policies on the financial landscape. The episode underscores the importance of a balanced investment approach, emphasizing both short-term vigilance and long-term strategic planning to navigate the complexities of the modern market.

Transcript

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[Jim Cramer]

My mission is simple to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad MONEY starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to kramerca other people who make friends. I'm just trying to make you a little bit of money. My job is not just to entertain, but I'm trying to put it all together and explain it to you. So call me 1-800-743-CBC. Tweet me at Jim Kramer. All right, the market's Biden its time right now. I mean, the Dows dipping 86 points today. SB essentially unchanged. NASDAQ advancing point one. 2%. And when the market buys this time, guess what? People tend to get a little nervous. For example, usually when $1 trillion semiconductor company like Broadcom reports a monster good quarter sending its stock up more than 24%, we get what I call some pin action. But today we got next to nothing in the semis or most tech. Maybe we haven't been able to mount a rally because the bond market's been down every day this week as inflation runs hotter than we thought. Nobody wants to buy growth in that environment. I think the Wall Street's gotten a little too negative, frankly, as we get oversold and we're getting there. But I've been warning about stocks going to excessive levels for two weeks now, so I can't be all that positive until we see a couple of days with bond yields actually go lower with the stock market. That's why we want to start our game plan for next week with Monday, but Wednesday because that's when the Federal Open Market Committee is expected to cut rates by a quarter percent. Now nothing's a given in this league, but we heard from many Fed officials that they prep does the expected 25 basis point cut okay, now you know me. I hate the endless focus on the Fed by everybody because it detracts you from benefiting from long term performance for your stock portfolio. You'll trade in and out and in and out. Every little signal from the Federal Reserve brings out predictions causing many people to sell good stocks when they are freaked out. You also have people who just can't let it go. Dogs with bones. As soon as we get the Fed rate cut, well guess what? They're immediately focused on the next cut. I think this is absurd. There are endless in their Jeremiah, it's about the future and I don't like to scare you. I'm not going to be complacent, but I'm not going to scare you out of your stocks. Don't get me wrong. Fed's very important, but as an investor it doesn't do any good to obsess over the minutia of central banking. We don't have an ideological Fed. We have a data dependent Fed. So unless you have access to data that the rest of us don't and you don't all the speculation, it's a fool's error. I do believe we'll have some dissent this time from the open market committee members. And while I don't think the data is cool enough to be positive about the prospect of more cuts for now, I also don't want you to make decisions based purely on what the Fed does. Contrary to popular belief, there is more to investing than monetary policy and I wish everyone knew that they don't. Now I'll make this point when we have our monthly investing club meeting on the very Wednesday that we have the Fed meeting. I think you'll want to tune in as I walk you through the prospects of each charitable trust holding for the coming year. And some of them are indeed in flux. Beyond the Fed, there's a ton of just regular old corporate news next week on Monday for instance, a trial begins people aren't talking about, but I will in a Delaware federal court between Qualcomm and AAM Holdings. It's a Patent dispute involving high performance processors. And if ARM wins, it'll take away Qualcomm's license to use important chips and cell phones and laptops. Now the smart money is betting on a settlement, which I think would be good for everyone. Tuesday morning we get some retail sales numbers. Now, while this number does come out on the eve of the Fed meeting, these numbers will be hotly debated as we try to figure out the state of the consumer during a period where Black Friday had more significance than ever because of the shortened time frame between Thanksgiving and Christmas. The bond market just had a terrible week. So cooler retail sales numbers could actually be a self fulfilling antidote, maybe an opportunity to buy after the Fed meeting. Besides the Fed, we have some big earnings reports on Wednesday, starting with General Mills, which caught an upgrade today thanks to accelerating pet food sales. Actually, I'm more worried about sugar cereal. And I say that having interviewed incoming Health and Human Services Secretary Designate Bobby Kennedy on the floor of the New York Stock Exchange yesterday, I think that his chief objective is not vaccines, it's healthier eating. And he seemed to confirm that yesterday when I spoke with him. If that's the case, then General Mills could be in trouble because, well, sugared cereal is a major profit generator for the company. After the close, we hear from two bellwethers. There's Micron, the semiconductor company, which you know I like very much, and Lenore, the huge homebuilder, which I also share affection for. Micron had a nice rally today. I think you can tell a good story about the entire line of chips after a period of subpar performance. Not just the high bandwidth chips. Lennar. Okay, that's trickier. This week saw the housing stocks just get clubbed after Toll Brothers reported a less than perfect quarter for Getting downgraded by JP Morgan 12 Punch this very morning that sent the group cascading. It's a casualty of the frail bond market which is not cooperating with the Fed's rate cut agenda. Mortgage rates are stubbornly high and we just aren't getting the turnover we would have expected by now Thursday morning. Well, Darden tells us how it's doing and I got to tell you, this one's still being driven by Olive Garden. I think the market's actually moved away from the formerly important restaurant chain. Instead it's focused on the results of Texas Roadhouse and Brinker, both of which offer great value and are being rewarded with tremendous numbers and then much higher stock prices. I want to find out if Darden gets the consumers pushing back against high prices. They have to tell us what they're doing to entice these people who seem to be going elsewhere for casual dining. Pretty much for people who want to spend no more than $11 per dinner at the close. We believe we're going to get a revelatory report from Nike. Now. The new CEO, Eliot Hill, he's an old Nike hand, by the way. We'll have to lay out a story about how to reignite this brand globally, which is undersold from Adidas, Hoka Decker Deckers, that Hoka of Deckers. And then on holdings, which we've had on a bunch of times. I think Nike has to do more than just say it'll work harder with its partners. That's a Hackney statement. Doesn't hold any water with me anymore. Companies are showing innovation, dazzling innovation, the kind that makes us feel like fools are even thinking of abandoning Nike. It's amazing how much damage the previous CEO did to this once on a saleable brand. It won't be undone easily. And we'll need a both a roadmap with a line of sight to the end of the number cuts and a sense of newness. What else? The transports have been picking up of late, which tells me maybe we got to be a little more hopeful. In the great FedEx reports, this company has been working hard to take out costs and it's still working aggressively to improve gross margins. I think we hear good things. I look I'd like to Fraser still do. This is the period where people are most nervous about it because of the upcoming holiday. Finally, on Friday we get our first look at the next set of inflation data. That's called the personal consumption expenditures number. Remember, my view is that we'll continue to get endless chatter about what the Fed might do or not. So if this number runs hot, you can hear a lot of doomsday. And why do I put it up there then? Well, because maybe it's a good opportunity to buy something on weakness because other people will be freaked out by what the doomsayers say. We also get numbers from Carnival. Now Carnival is. This is the cruise line. This has got to be the most bullish industry in the S&P 500 at this moment, cruises remain the most popular form of travel, leisure activities post Covid. They're a great bargain. I think the estimates will be beaten. Right now you can throw darts at this group and make money. I just booked myself a cruise for next year. Nothing lasts forever. But the love for this group currently knows no bounds. The bottom line we're in a seasonably strong period, or at least we thought we were. But don't tell that to the owners of health care, technology industrials or material stocks which have been horrendous. As I said, we have to get through the Fed meeting for Santa Claus town. Now, it's not a fairy tale. Wall Street Santa Claus rally is usually a reality. But let's get the Fed news out before we go all in with that next and final contribution to your IRA or 401k. I want to start the calls with Jay in Arizona. Jay, Jim, thank you so much for.

[American Express Representative]

Taking my call from sunny Arizona.

[Jim Cramer]

So glad you called it. Why did they for you yesterday on the floor? Thank you, Jay. I did wish that my folks saw it. Tell you the truth, how can I help? So with expectation of the next administration being friendlier to M and A activity, do you have a preferred investment bank that you think will reap those benefits?

[Jesse Singh]

I was thinking Goldman Sachs, but I know there are three or four other players.

[Jim Cramer]

So do I buy Goldman Sachs or do I buy the field? You buy Goldman Sachs and I will be talking about that, by the way, at our Wednesday meeting we have we convene a club meeting and I think it is worth focusing on just the exact question that you asked. And I thank you for it and thank you for the kind kudos about yesterday. Let's go to Tyler in Florida. Tyler Kramer, man, I loved you on Seinfeld. Listen, man, you know, that was hard for me. I had so much hair then. It was such a great treat. How you feel about Alibaba going to 2025? Baba is the only Chinese stock I'm recommending. I do hope I was, you know, I'm working on a piece, you'll hear it later on about the idea that maybe President Trump is going to do something President Elect Trump going to do something a little more creative than President Biden did when it comes to China. So stay tuned. Let's go to Mike in my home state of New Jersey. Mike, my Mike. Hey, Big Birdzilla. Booyah to you, Jim. I'm like with you since your first show and your help. I've actually recently retired and listen to your advice. Daily taking some chips off the table and I'm thinking about AT&T for growth and income. Okay, I've got to tell you I've been impressed. Look, I was not impressed at one point and then when somebody gets it right, if they were doing it wrong, they get it right. Here's what I say. Thank you and great job Bye bye bye at I think if the market's going to look for a Santa Claus Santa Claus rally, the slay will have to wait until after next week's Fed meeting on that money tonight. Speaking of Santa, deck the halls. Have a decking company ASIC that's up 40% so far this year, but can it keep building on a own growth? I've got the CEO to talk the state of the consumer and the housing market. Then Tech player Service Titan soared to it on its intro to the tape yesterday. Wow. I'm eyeing the company what it really means for the IPO landscape too. And later I'm checking in on the state of cyber with the Vice president of Microsoft Security. So stay with Kramer.

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[Jim Cramer]

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[Jim Cramer]

Now the Fed is our friend, even as it might be a little less friendly. After that producer price index number, we need to check in with some of the best names in housing, including the renovation and remodeling space. Which brings me to asic. That's the maker of composite materials. They're basically faux wood, except unlike wood, it doesn't fall apart. I've been a fan of as both the product and the stock for a long time because they consistently outperform their own markets. Hence why the company reported a strong quarter three weeks ago. The stocks now up 40% for the year and it's in housing. So can it keep running? Yesterday we got the chance to sit down with Jesse saying the President CEO of ASA, take a look. Mr. Singh, welcome back to bed, buddy.

[Jesse Singh]

Great to be here. Thank you, Jim.

[Jim Cramer]

Jesse, I got to tell you something. I spent a lot of time thinking about your group and how it's a no growth group, but you have tremendous growth. How can you overrun your sector?

[Jesse Singh]

Thanks for that intro, Jim. We last year with the fiscal year we just finished, we grew 12% in a market that in R and R repair and remodel in general has been flat. I think for us it starts with a pretty strong focus on the customer and a strong focus on converting our products TimberTech decking and AZ trim from wood, which is the predominant market and our types of products, launching new products and then using that to expand our shelf position in the marketplace. So we've got a formula that we've been focused on executing over the last few years that we believe between the things I just listed, gives us an opportunity to do at least grow 5 to 7% over the marketplace.

[Jim Cramer]

Well, that's amazing because I'm not hearing you say if the Fed cuts this or if this happens. It just seems to me that you are more in control of your destiny than anyone in the segment that you play.

[Jesse Singh]

Yeah, it's really important when people say, you know, we control what we can control. We believe growth is something that should be part of that equation. And as part of that, we know the products we have, we know the market opportunity that's out there, we know where we can expand with customers and we are laser focused on continuing to grow our business through the TimberTech brand in particular, which grew 18% last year in a flat Market.

[Jim Cramer]

One of the things that I find unusual about your many things unusual about your company is that you have premium value. And I say that because you're not the cheapest. But people recognize that there is a tremendous value proposition with going with the best.

[Jesse Singh]

Yeah, absolutely. So if you start in our types of products and just as a reminder, this is kind of an odd thing to show, but I'll show it to you. We take recycled materials, this happens to be a record album, and credit card punches, and we put those into things like decking, rail siding and trim. As you point out, that's a premium value proposition, which means we give people better aesthetics, we give people long life and low maintenance. And so value for us is really value to the customer. Having said that, we continue to expand the product portfolio to meet more and more price point points and which is also important in this type of a market. So always adding more value, but doing it across multiple price points.

[Jim Cramer]

Now you are a serial buyer of your stock, which is what we want because it returns value. But you're also pulled the plans. I mean, you guys are unstoppable in terms of your capital expenditures and the ability to be able because you have to meet demand. So you're doing both meeting demand and also buying back stock.

[Jesse Singh]

Correct. Last year was a good capital deployment year for us. We retired a portion of our debt, we bought back an additional few points of stock and we invested 5 to 7% of our revenue in both in growth and margin expansion. And it's important for us that we do that selectively. In addition, we bought a couple of tuck in acquisitions, we bought a recycler, and we bought a rail company. And these are relatively low investments that we're able to add value to that ultimately gives value to our customers.

[Jim Cramer]

I know. I was at Lowe's yesterday talking to Marvin Ellison and we were trying to figure out frankly, what, what is, what is a customer really want? And it's got me thinking, who is the customer? For instance, when I switched as I did it not because of you, because I didn't know it was you, is because my contractor told me how to use asic. And then later on when I did another job, I said, I knew you. And the guy said, well, that's interesting because that's who I recommend. Is it the contractor or is it the person?

[Jesse Singh]

In our case, it's both. And it's really important to engage a consumer so that they recognize that, you know, they're, they're buying a really premium product that gives them the right Visual and the great performance. But it's also really important. There's tens of Thousands, if not 100,000 contractors out there. Each and every one of them is a small business. They have their own credibility to manage, and it's really important that we take care of them. So for us, we market to the consumer, but we have a very large sales force that is focused on training and helping our contractors to run their business and giving them the right tools to help a consumer.

[Jim Cramer]

Well, you do have a kind of a varied audience. And I have the good fortune to have a beach house. And my daughter said, you know, look, dad, you keep using the wood, it's costing a fortune. I looked into it and I found this outfit didn't know that I know you, but why did she want to use you? Because she is sensitive to the environment. Now is this younger generation, do you pitch them that first? Because I know you're a replacement for wood. But there are a lot of people who say, thank heavens they're also using this stuff, getting out of the landfill.

[Jesse Singh]

You know, environmentally, by using a very high percentage of recycle like we do, we're actually more environmentally sustainable from a carbon footprint standpoint than wood. I would say it varies by segment. In the DIY segment, it's important that we offer the right price points and the right accessibility. In the more premium segments, we continue to offer a really premium value proposition. And in the millennial segment that I believe your daughter fits into, it's really important, important that we market both, that we market sustainability, but also long lasting and, and have the right kind of value proposition.

[Jim Cramer]

When you took this job, come from 3M, did you know this was a growth company or just turn it into a growth company?

[Jesse Singh]

You know, we coming in the market, you love coming into a market where the vast majority of the market, in my case when I started, 85% is an inferior material, which in our case was wood. And so you look at it, we had a strong technology base that required some investment, some nurturing brand building and an expansion of new products. And when you start with a base like that, you assume that there's a growth business underneath that. And I'm really proud of what the team's been able to accomplish in driving the TimberTech brand, driving the ASAC brand to really add value to our consumers.

[Jim Cramer]

Well, you've made a lot of money for people, but you're also an inspiration and actually I think kind of the, the textbook of what a company and CEO can do to make it. So you've got great growth in an industry, frankly, where there is very little growth. Congratulations.

[Jesse Singh]

Thank you, Jim.

[Jim Cramer]

That's Jesse Singh, CEO of asic. I didn't mean to be a commercial for it. It just happened to be you. I happen to be a big user of it. Money's back after the break.

[American Express Representative]

Coming up, Service Titan soared in its first day of trading yesterday. Does the successful debut signal a welcoming market for IPOs in the new year? Cramer is covering the newly public company Next. Support for this program is provided by Chevron. The Anchor offshore platform is utilizing breakthrough technology to enable us to produce oil and natural gas in the US Gulf of Mexico at pressures up to 20,000 psi. A new industry benchmark. Anchor is part of Chevron's plan to produce 300,000 net barrels of oil equivalent per day by 2026 in the US Gulf of Mexico, home to some of our lowest carbon intensity producing operations. That's energy in progress. Visit chevron.com anchor Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella. Edu.

[Jim Cramer]

Yesterday we got one last major IPO before the holidays when Service Titan came public. This is a technology platform for tradespeople, one that makes life much easier for all sorts of small businesses. Came public with a bang. The deal was supposed to price to somewhere between 52 and 57, but there was so much demand that they raised the range to 65 to 67 before ultimately pricing it at $71, then immediately opened up 30 bucks at 101, which is near where it closed yesterday for pulling back one buck today. Now, after this one, I have to admit I am hesitant to recommend Service Titan because now it's expensive. But I want to walk you through what happened here because we've been in an IPO drought. This is exactly the kind of deal we need in order to get privately held operators to start thinking about coming public again. First, Service Titan's got a terrific backstory. Company was founded by two Armenian immigrants who saw how their parents, both trades business owners, struggled with all the tedious back office minutia that comes with running a service business. So they created a platform to help plumbers, electricians, contractors, H Vac, Technicians, roofers, landscapers, and you name it. To help handle the paperwork, the two co founders went on Squawk box yesterday. Here's how they explained it.

[State Street Representative]

We think of it as a business in a box.

[Jim Cramer]

If you were running a contracting business.

[State Street Representative]

You need a tool to manage your.

[Jim Cramer]

Advertising online, your call center, your dispatching.

[State Street Representative]

Scheduling, payroll, everything in the back office.

[Jim Cramer]

And so our solution is kind of.

[State Street Representative]

Like a perfectly tailored suit made specifically for contracting businesses that does everything end to end.

[Jim Cramer]

Though it was built with small family run businesses in mind, Service Titans platform has become so robust that even much larger professional contractors use it. That includes some large franchises with over 500 locations. More than $1 billion in annual gross transaction volume. Service Titan makes the bulk of its money from subscription revenue. You know I love subscription revenue models. That's for their core offerings as well as usage based revenue including from transactions that use their payment solution. They have a baseline platform, then you pay up for higher end functionality if you need it. I think these guys have found a great niche and you can see that in the numbers surface. Titan put up 31% revenue growth in their 2024 fiscal year that ended in January. They grew at a 24% clip in the first six months of the current fiscal year and the prospectus says they expect similar growth in the latest quarter which ended in October. And because this is a software as a service business, well that revenue is very sticky, very consistent. It how about profitability? In the first six months of the current fiscal year, Service Titans gross margin expanded from 66 to 70% year over year. I like that their operating adjusted operating margin came in at 5% up from negative 5% the year before. Now I should point out the Service Titan doesn't pass the incredibly important at least on this Show Rule of 40 test. Now this is how Wall street grades cloud software plays, many of which are not profitable. You add the growth rate to the operating margin and if the results under 40, the conventional wisdom says you steer clear. Looking at the first half, service tightens at 29. Yeah. Below 40 still. Overall I think this company is trending in the right direction. When these software as a service companies start turning profitable, they often turn out to be terrific investments. And that's where Service Titan stands right now. However, with some back of the envelope valuation. Matt, this stock selling for nearly 12 times this year sales. Now is that appropriate? It depends. A few years ago, any remotely attractive cloud software IPO would instantly trade at 20, 30 or even 50 times sales. But then the Fed started tightening and those stocks collapsed. They cost you a lot of money. As for right now, Service Titans a bit more expensive than Salesforce IT Salesforce, the gold standard for cloud software and yesterday during the Squat Box interview, Management listed a number of potential comparisons in the vertical software as a service sector. Viva Systems Toast through the Restaurant Play Shopify we know them small business app Folio compared to these Service Titans valuations rights. Back in the middle, take Appfolio, which makes cloud based property management software for landlords. I think that's a good comp making software for businesses in a specific industry and it's got roughly the same price to sales multiple. So I'd say Service Titans valuation is rich but not unreasonable. At the end of the day I like the story very much. But as for the stock, I would like it a little bit lower. I don't want to pound the table on a software company that doesn't pass this rule of 40 tests, especially when the valuation feels a little stretched. To me, Service Titan certainly worth buying somewhere though it's a 10 times sales meaning you've got my blessing to buy this one handover fist if it comes back down to the mid-80s. But for me, what's not about the Service Titan IPO is just how well it was received by Wall Street. Last week I mentioned that Reddit shares have been on fire in part again today. It was one of the few big IPOs we've had this year. We've had far fewer deals than 2021 or 2022, or even the pre Covid Trump year from 2017 through 2019. That's not good. Not good for corporate America, not good for you in particular. There have been very few tech IPOs, largely because successful tech startups can raise more money than ever in private markets and by the way, often in higher valuations than they get from the stock market. I bring this up because that is exactly what happened with Service Titan. Their last four private fundraising rounds were done at much higher prices than where this thing came public was. Their IPO price is $71 per share, but in the recent fundraising rounds they got anywhere from $84 and changed to nearly 119. Now that is a humbling thing to do, isn't it? To accept that your company might not be worth what a handful of venture capitalists said it was and come public anyway. And I love to see that Service Titan was rewarded for taking the plunge. Their last private fundraising round was under 85 tower stock. I also want to say something you don't usually hear very often. I want to Praise service titan titans. Investment bankers, including the team at Goldman Sachs that acted as what we call the lead left underwriter. They priced this deal perfectly. They priced it high enough that their client Service Titan was able to raise plenty of money, but also low enough so that their other clients, the money managers that participate in the offering, also made a lot of money. That means these big institutional investors would likely be back to get the next big deal. Which brings me to the bottom line. I'm hopeful that this successful service titan deal will encourage more venture capital backed tech companies to come public next year. Come on guys, the water is fine. Let's take some calls. Let's start with Anthony in New York. Anthony. Hi Jim, how are you? I am good. How about you? Doing well, thank you. I'm calling about this dog with fleas.

[American Express Representative]

That I own, SMCI Super Microcomputers Incorporated.

[Jim Cramer]

Most analysts when it was down 34% were either a buy or a hold. And Now I'm down 56%.

[American Express Representative]

And I was just wondering what's going on with management and what do you recommend? Should I ditch it and go somewhere.

[Jim Cramer]

Else or hold it?

[American Express Representative]

I'm not.

[Jim Cramer]

Well, I know Bloomberg this evening did say that they brought in Evercore to help the company raise capital. When that, when you see that that's both good and bad. Good that they are going to raise money, bad that they even needed the money. I, I have a strict rule in the show, accounting irregularities equals sell. They've had accounting irregularities. I never deviate. I don't even care if it's business is good. I say sell. Let's go to Andrew in New York. Andrew. Hey Jim, how are you? I'm good. How are you? I'm good, I'm good. I had a question about sound. High sound. How about about 24% up? I'm watching this really closely, but I want to know. I bought this at $6. Okay? This is a cold stock. It's a short squeeze. There's no reason why it's where it is. I'm not saying that. Therefore it's the end. I'm not saying to short it. I'm not saying you can't go to 40. I'm not saying it's going to go to four. I am saying it's a cold stock. So therefore I have very little value when you ask me about it because I cannot opine on a company that is in the stratosphere because of a short squeeze and a lot of excitement driven by people who don't really know how the stock market works. And if they don't get out, will lose a lot of money. I like the stock of Surface Titan, which is the opposite of sound, but I think I'd like to stock a lot more at a lower level. When it comes to VC backed tech IPOs, though, I'm very bullish on what's become much more bad money ahead, including my read on where Microsoft stands in the security space after yet another high profile CyberAttack. Plus, after Trump's historic visit to the trading floor, I'm running through some of the key takeaways from my interview with the President Elect and all your calls rapid fire in tonight's edition of the Light Email. So stay with Kramer on that money. We spent a great deal of time focusing on cybersecurity because businesses can't afford not to invest heavily and protect themselves. Which brings me to one of the largest players in the industry, if not the largest Microsoft. Yet while it sometimes file flies under the radar because, well, it's part of a much larger operation, Microsoft's the heavy hitter in cybersecurity with a bird's eye view of the industry. It's another reason why we own this stock for my child trust and have forever. So let's take a closer look. Vasu Jakarta, she's the corporate vice president of Microsoft Security. To learn more. Mr. Carl, welcome back to Mad Money.

[State Street Representative]

Thank you so much. It's so great to be here with you, Jim.

[Jim Cramer]

I don't know if people realize but you guys put out, I think the most informed formed brief briefings for someone like me, for anyone in this country to know where we are. Secure Future Initiative this Microsoft Ignite November 2024 I read it. I feel great about what you're doing. I feel badly that things have gotten even worse from when I saw you last. But like by a you guys were saying in 2021 only 579Password attacks per second, down 7,000. What's happening?

[State Street Representative]

Yeah. So first of all, thank you for the acknowledgement on Secure Future Initiative. In today's age of AI security must come first because as you said last year when I was here with you, we were seeing 4,000 password attacks per second. Two years back, 570. Now today it's 7,000 password attacks per second. And what makes it even worse is if you look at the defender side and the gap, we have a talent shortage of 4.8 million jobs today. So it's become really easy for anyone to become an attacker, ransomware, nation state, all over, really hard to become a defender. And as we look at AI and the potential that AI brings. We have to use AI for defense. So that's why Secure Future Initiative is about how do we bring the industry together, how do we prioritize security for Microsoft and for all? How do we advance our innovations so that we can bring this comprehensive security.

[Jim Cramer]

Right now, everybody uses. Nearly everybody uses Microsoft. I am going to go into some of the larger companies, but I find them going after now companies with 10 people, 5 people, and shutting the company down. What do you advise to those?

[State Street Representative]

Yeah, you know, it's so easy to say that, hey, this is not going to happen to me because we always think about cybersecurity as a big enterprise or a government issue. But the reality is, let's talk about phishing and scams. They're all around us because it's become really easy to make a dollar in cybercrime. Cyber crime, Jim, is costing us trillions of dollars every single year. Imagine what we could do if we poured that back into the economy. My advice is be cyber vigilant. Like, start with that cybersecurity awareness. Everyone is vulnerable to attacks. All our companies need to make sure we're doing all we can to do security. And security is a cultural transformation as much as it's a technology transformation. In fact, Secure Future Initiative is about culture. We have mobilized the equivalent of 34,000 engineers, probably the largest cybersecurity movement in our industry. And what we're doing is we are making security a core priority for every single employee. So that's what we need to do. Because when we as consumers, as employees are aware of security, when we use the best tools out there, when we are visually, we are ahead of the attackers.

[Jim Cramer]

Right? So about, I don't know, 10 yards from me, right here was President Trump yesterday. Would you have said that to him? And then how would you say that? Should we play offense? Is there a way to be doing something differently from the current administration?

[State Street Representative]

So we have always partnered with every administration to advance cybersecurity as well as AI, and I look forward to working with the incoming administration on that. What I would say is, in this age of AI, cybersecurity needs to come above all else. Like, it needs to be our top priority. We need to look at the investments we are making in cybersecurity. We need to look at the cooperation, the collaboration, accountability. Because cybersecurity, I've shared with you before, is a team sport. Every single organization, every public sector, we all need to partner with that. And there's a lot we have to.

[Jim Cramer]

Do well, I'm glad you said that because we had George Kurtz on the day of his. This is. We're talking about crossroad, horrific attack that it was not. And it was not, by the way, a breach. It was a glitch. But I understand that he just said, look, your boss, and he sat down. So let's figure this out together. That we're now getting to the point where people are no longer spitballing or anything like that when it comes to these things. They're too big. Right. You have to get together.

[State Street Representative]

Totally. And I remember having this exact conversation on, hey, let's come together and figure this out. That crowdstrike incident is a great example. What we did was what we should do. We leaned in, we put our customers first, we helped them recover, we stepped back, we worked with all the ecosystem vendors on, hey, what can we do to better protect, how do we do safe deployment? Because it was such a great lesson in resiliency for us. Like, we've got to think of resiliency. And I'm really heartened, like you, with all the progress they have made that we are making and how we are protecting end to end. And this is one of the reasons, you know, Microsoft is building out a platform, one of the coolest innovations and you're going to love. This is what we call exposure management because it helps defenders now look at an organization and a digital estate the way an attacker would look. That is going to be game changing. And imagine that with AI for security. So I'm excited, I'm excited about the progress that we are making with all of the ecosystem. And that was a great example of why we need to work together.

[Jim Cramer]

I was so thrilled that everybody got together. I like both sides, so it's difficult. Now. Charlie Scharf, recently a fantastic banker, Wells Fargo, said, he said that cyber is by far the biggest risk that we all face. And he's saying he wakes up at night thinking, is he spending enough money? Are we doing everything we possibly can? Our business is just doing everything they possibly can, or people trying to say, you know what, don't worry, it'll be fine.

[State Street Representative]

Well, we should worry. Cybersecurity is a continuous improvement game because it's a cat and mouse game. The attackers are getting smarter. Defenders have to stay ahead. There are three things we should look at as we move forward. The first one is how do we use AI for defense? There's a lot of potential of AI. I absolutely believe security is one of the best, best and the most serious use case. So what are we doing? Like Copilot for Security is a great example where it helps defenders. In fact, one stat which I think you're going to love is it's helping novices so people who don't really know cybersecurity get faster and better. 26% faster, 35% more accurate. Voila. The second thing I would say is, as we build AI and as organizations start using AI, 90% plus organizations are using some form of generative AI, let's make sure that we're securing and governing that AI. That's a very important thing. And we're using technologies for that. And third, remember, security takes all. It's a team sport. So think about the ecosystem, think about who we need, think about comprehensive protection. So those are the three things. And we have to be vigilant. We have to move from defense to prevention and proactive security. So I think that's what we need to do. And yes, we have to make it priority number one.

[Jim Cramer]

But I would say, and I, in full disclosure, showed you something that I got that I thought looked real. They're so good now. I mean, initially I said, come on, are they like, is this what they're sending? Dear beloved, now they look exactly like I would expect. What's your advice to the people out there, working people who just say, you know what? I can't tell the difference.

[State Street Representative]

It is really hot. We looked at that text just a few minutes back. So I would say, every time you see something suspicious, you know, if you are like, well, is this right? Don't click on that link. Do not click. Do your research. Ask someone. And I think all companies have an obligation to make sure they're following the right processes and the right procedures so we can educate the consumers and our employees on what the right thing is. Cybersecurity awareness is going to be critical because you took a pause before clicking on that. That's what we need to do.

[Jim Cramer]

Well, look, I think that you are a calming voice in an otherwise hysterical world of cyber, of cyber terms. Not that you aren't out there trying to get the bad guys to. I'm doing much more than we are, but it's great to have you on. That's Vasu Jakarta. She's the corporate vice president of Microsoft Security. I always want to bring these people to because it's so important. And I also did like it when Microsoft and CrowdStrike got together. Mad money's back in.

[American Express Representative]

Coming up, Kramer takes your calls. And the sky's the limit. It's a fast fire, lightning Round next.

[Jim Cramer]

It is time. It's time for the Light Brown Curse by Raffles about buy. So just be good, know the course, talk questions at a time. My staff person, you play this out and then the lightning round is over. Are you ready? Ski D? Time for the light round, cameras. We'll start with Kenny in New Jersey. Kenny. Kenny. Thank you, Chair for taking my call. Kenny. And of course New Jersey, your man. You're coming down to see me down here? I'm waiting. Oh, yeah. I'm going to Cherry Hill. I'm going to Cherry hill tomorrow from 12 to 3 to sign some bottles for my wife. Mezcal at Total Wine and more. I'll see you at Cherry Hill. Thank you. Let's go to work. You go, I'm there. What do you think of IBM, Jim? What should we do? IBM, I like IBM. It's still an inexpensive stock. It's still got upside. It's a little more episodic than I like. But you had that down drip. But you had 22 times earnings. I am on board. Let's go to Sal in New York. Sal. Jim, what's up? How are you? I am good. How about you, partner? Very good, sir. All right. I got a small cap company. You had their CEO on a couple of times. The auto industry has been through a challenging period. No doubt. This small cap company has managed to grow its top line and build a 7.1 billion strategic backlog. With consistent design wins from top OEM, the CEO projects to return to significant growth in 2025. Over 700 million in revenue by 2028. What do you think about Indy Semiconductor? I think he may be a tad too bullish because the auto business is really much worse than people realize right now. So I'm going to have to take a pause on that one. I am sorry. You made a nice brief for it, but I can't go there. Let's go to Frank in New York. Frank. Hey, Jim. Hey. Great work yesterday with the President Elect. Thank you. Thank you very much. Thank you. I'm asking about alcohol aluminum. All right. Now here's the problem with Alcoa. In the end, it's a material stock. The material stocks are linked with China and therefore nobody wants them even though alcohol had a great quarter. So I have to go with the crowd and say not now. Let's go to Jim in New York. Jim. Hey, Jimmy. Question for you on the Energy Core TV and I don't know, Rick Moncrief just left it. He built the company. The stock is at its 52 week low. It's at 33. People expect oil to go down 10 bucks. We heard it from President Elect Trump yesterday. I say to start buying some and I almost, I almost put it in the bullpen today for the, for my travel trust in preparation for next Wednesday's meeting. I'm holding off for now because oil is so weak. Let's go to Alma and. Hi, Jim. Yo. What's going on? Longtime listener, long time listener. You helped me out so much. I really thank you. Join the club. Oh yes. I'll see you at Wednesday's meeting. 12:00. I'll tell Jeff you're going to be there. Thank you, Jeff. I'll be there. Be there or be square. Right. Excellent. I wanted to ask you about Paychecks. Doesn't seem to me like it's doing a whole lot. Okay. Paychecks reports next week and I think people, this is on hold. Like a lot of people feel that if the Fed stops cutting rates or says listen, we can't cut any time soon, the stock's going to fall. Let's wait to see it. Yields 2.7%. I like to buy this stock at 3%. That's been the right thing to do. Let's keep, let's employ that strategy. I need to go to Nicholas in Florida. Nicholas, Booyah. What's going on, Big Daddy? No, you tell me. What shaking? Not too much. Just wanted to get your opinion on Dollar General. Dollar general yields 3%. I like my Dollar General. It's right near Quaker Town. Here's the problem. There's another copies called Walmart and they are crushing it. I think you got to buy Walmart over them even though Walmart's at its high. Let's go to William in California. William, happy holidays. Jim, I would like to ask you about a stock apld, Applied Digital Corporation. Yes. You know, look, this high performance computing and you know when I see high performance computing I think about a stock that everybody suddenly hates again. And that's the stock of Nvidia. And I'm not backing away from Nvidia. She's actually been very good to my travel trust and everybody else in the world. And that. Ladies and gentlemen's conclusion of the Lightning Round.

[American Express Representative]

The Lightning Round is sponsored by Charles Schwab. Coming up, what could the new administration mean for stocks, crypto and the market's direction over the next four years? Kramer shares his takeaways from yesterday's conversation with the President elect.

[Jim Cramer]

Next. Hey, still getting a lot of good feedback from my interview with President like Trump from the floor of the stock Exchange yesterday. Thank you and I want to share the most important morsels with you. The biggest takeaway I heard was from Trump's statements about China where he first talked about how he has a good relationship with President Xi. In itself revelatory, but also that China has not been a good actor and it can't stay that way. This is so important in so many different ways. We need to protect Taiwan if we want to protect Taiwan Semiconductor, perhaps the most important non american company to our national security. At the same time, we need to figure out how to turn China from a full time adversary into a worthy trading partner. I don't know what one president can accomplish with a country that's taken advantage of our trade policy for years and years. But let me tell you what I think can happen. I believe the President Xi needs the US much more than people realize. The Chinese economy is morbid and deeply indebted. He's lost the good faith of our country which was truly involved with China not that long ago. He's losing the good faith of his own people with his old school Maoist leadership style. Something has to give. I think Trump is a deal making move. He can say President Xi, you can either deal with with me or you can deal with Peter Navarro, the biggest China hawk in my retina. Maybe in the country what will be civil, direct, it just might work. But like Ronald Reagan with the Soviet Union, Trump will have to trust but verify. Could this be like when Nixon went to China to open the door to better relations? I think the President Elect wants to be thought of as someone who can really change things for the better in this country. And putting our relationship with China on an even keel would be a big step in the right direction. I also thought the President Elect had no bluster when it came to the stock market. That was very good thing. To crave yourself by the stock market is to take a taskmaster on that doesn't play by the rules. It's not worth it to link your performance to such a fickle beast as the averagers. The President Elect's affinity for crypto will ultimately give the dollar a strange betfall. I want our country to be the capital of finance and that means being the capital of crypto too. I believe the dollar can cooperate with crypto as it's cooperated with gold all these years. But I want Washington to get the deficit under control, to take the luster off crypto. Finally, I heard from a huge number of people from all sides of the political equation. Who liked that there was an upbeat tone, a lack of rancor and a sense of forgiveness toward the vanquished rival. It was almost like Trump had just too much to be to be consumed by the past, got too much to do. The best business people don't want to dwell on what went wrong in the past. They're laser focused on what could be done to make the future better. We got a hint that Trump's headed in that direction. Less adversarial, more sternly cooperative. A lot of people in the floor of the exchange seem to think that nothing could be better for the market than a pro business conciliatory president, not unlike what we got when President Ronald Reagan came to the floor in 1985. I can see why people want to believe in the analogy, because Reagan coming back then was the beginning of a multi decade embrace of stocks, even if it was occasionally interrupted by the 87 crash.com bomb and finally the financial crisis. In the end, all those actually did turn out to be terrific buying opportunities. I want to believe that White House's attitude toward bullish business is important to the direction of stocks. The current president is often going way out of his way to show his disdain for any business people, but what's more important is profits. So it certainly doesn't hurt that Trump talked about wanting to cut corporate taxes once again to let more money fall to you, the shareholder. Love him or hate him, you gotta admit that's good for your portfolio. Which by the way, is still the true north of Mad Money. Like I said, as always, a bull market summer. And I promise you find just for you right here on Mad Money. I'm Drew Kramer. See you Monday.

[American Express Representative]

All opinions expressed by Jim Cramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC, NBCUniversal or their parent company or affiliates, and may have been previously disseminated by Kremer on television, radio, Internet or another medium. You should not treat any opinion expressed by Jim Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit cnbc.com madmoneydisclaimer@ Capella University. Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn [e-mail].