Mad Money w/ Jim Cramer - Episode Summary (February 1, 2025)

Host: Jim Cramer
Produced by: CNBC
Release Date: February 1, 2025

1. Market Overview and Initial Insights (00:00 - 13:10)

Jim Cramer opens the episode by highlighting the dual nature of the trading day. The first session saw positive momentum with Apple surpassing earnings expectations and video stocks gaining traction. However, the second session was overshadowed by unexpected tariff announcements:

• Tariff News: At 3:46 PM, the White House imposed 25% tariffs on Mexico and Canada, and 10% on China, leading to a significant market downturn.

  “Sell, sell, sell, sell.” ([07:15])

  The Dow plunged by 337 points (−5.5%), and the Nasdaq fell by 8.0%, exacerbating investor concerns. President Trump later commented that he wasn't worried about the market's reaction, a stark contrast to Cramer's outlook.

• Looking Ahead: Cramer outlines the upcoming week's focus, including potential fallout from tariffs and key earnings reports.

2. Stock Highlights and Recommendations (13:10 - 26:25)

Cramer delves into several companies poised for significant movements in the coming week:

• Palantir Technologies:

  Described as a "Gamestop with the brain," Palantir is expected to reach $100.

  “I call it Gamestop with the brain.” ([04:50])

• PayPal and Spotify:

  • PayPal: Under new leadership by Alex Kriss, anticipated to return to robust growth.

    “I believe Chris can restore the growth rate and the luster.” ([05:20])

  • Spotify: Positioned as a strong subscription-based business akin to Netflix and Amazon.

• Pharmaceutical Giants – Merck and Pfizer:

  • Merck: Focused on revolutionary cancer treatments with expected good numbers, though recent acquisitions bring additional considerations.

  • Pfizer: Recent acquisition of C Gen raises questions about breakout anti-cancer drugs to justify the $43 billion deal.

• Packaged Food Stocks – PepsiCo:

  Despite challenges from new weight loss drugs and inflationary pressures in supermarkets, PepsiCo offers a 3.6% yield, making it a potential candidate for investors seeking yield.

• Alphabet (Google):

  Awaiting a report to determine if the search business is being cannibalized by Gemini AI. Strong performance in YouTube and potential growth in Google's cloud infrastructure could drive the stock higher.

  “If [Google's cloud] is strong, the stock will fly.” ([06:45])

• AMD:

  Speculation around AMD’s competitive edge as AI firms optimize computing power, making AMD's GPUs more attractive compared to Nvidia's offerings.

• Chipotle and Restaurant Chains:

  Chipotle emerges as a premier growth stock with stable leadership and potential for significant upward movement.

3. Insider Buying and Stock Movements (26:25 - 39:04)

Cramer emphasizes the importance of insider buying as a bullish indicator, citing recent examples:

• Restoration Hardware (RH):

  • CEO's Insider Purchase: CEO Gary Friedman bought $10 million worth of RH shares ([26:25]).

    “Insiders only buy for one reason. That’s because they think the stock’s going up.” ([28:15])

  • Stock Performance: RH has nearly doubled since June, underscoring the positive impact of insider confidence despite initial skepticism from analysts like Goldman Sachs.

  • Historical Context: Cramer notes that RH’s significant buybacks and recent insider buying have been pivotal in the stock’s resurgence.

    “RH has made a huge move ever since Gary Friedman did that insider buying back in June.” ([29:02])

• Marvell Technology:

  • CEO's Purchase: Matt Murphy acquired 13,000 shares, increasing his stake by over 6% ([40:14]).

    “Insiders buying because they think the stock's going up.” ([28:39])

  • Stock Surge: Marvell’s stock soared from $70 in September to over $113, driven by strong quarter results and positive guidance.

Cramer advises investors to pay close attention to insider activity as a potential indicator for future stock performance.

4. Interview with Otis Worldwide CEO Judy Marks (32:21 - 38:59)

Jim Cramer interviews Judy Marks, Chair, President, and CEO of Otis Worldwide, the leading manufacturer of elevators and escalators.

• Financial Performance:

  • Record Cash Flow: Achieved $1.6 billion in cash flow by focusing on service efficiency and reducing net working capital.

    “Service 90% of our profits. We were up 7% in revenue for the year in service.” ([32:42])

  • Modernization Business: Significant growth in modernization with 18% increase in orders and revenue, targeting high single-digit growth in 2025.

• Impact of Tariffs:

  Otis has strategically shifted its manufacturing footprint to mitigate tariffs, relocating production to Florence, South Carolina, ensuring minimal impact from recent tariff implementations.

  “Tariffs on the equipment side should be very, very de minimis for us.” ([35:03])

• Commercial Real Estate Trends:

  Despite concerns over a real estate crisis, Otis reports steady demand driven by residential conversions and the necessity for modern, reliable elevator systems.

  “We expect America new equipment to be up low single digit and the service business and modernization to grow significantly.” ([36:40])

Cramer commends Marks on navigating challenging economic conditions and maintaining robust growth through strategic pivots.

5. Lightning Round Highlights (39:18 - 43:02)

In the Lightning Round, Cramer rapidly addresses investor questions and provides quick stock tips:

• Western Digital:

  Recommended as a "money side up" due to numerous upgrades despite recent stock splits.

  “I'm calling that one money side up.” ([41:34])

• Walmart (WMT):

  Acknowledged as an oversight in the trust portfolio but recognized as a strong investment option.

  “Walmart is amazing. ... The next time you see insiders buying up shares...” ([42:45])

• Adobe:

  Addressed concerns over Adobe's significant decline but maintains a positive outlook based on strong cash generation.

  “It generates too much cash. I can't sell with 21 times earnings.” ([42:40])

Cramer encourages listeners to consider insider buying as a signal for potential investment opportunities.

6. Deep Seek Debate and Nvidia Analysis (43:20 - 47:57)

Cramer delves into the controversial Deep Seek report challenging Nvidia’s dominance in AI chip manufacturing:

• Deep Seek’s Claim:

  A Chinese firm, Deep Seek, alleges it can achieve similar AI performance using Nvidia’s cheaper, lower-end chips, potentially reducing the need for Nvidia’s high-priced GPUs.

  “Deep Seek claims it only spent $6 million and got something almost as good, if not better, AI for the masses.” ([43:26])

• Market Impact:

  The revelation led to a sharp decline in Nvidia's stock as investors fear decreased demand for expensive GPUs.

• Counterarguments:

  • Credibility Concerns: Cramer references a Semiannals analysis questioning Deep Seek’s claims, suggesting the $6 million figure might be misleading with actual hardware spending potentially exceeding $1.6 billion.

  • Industry Validation: High-profile CEOs like Mark Zuckerberg, Elon Musk, and Larry Ellison continue to invest heavily in Nvidia’s chips, indicating strong market trust.

    “We learned... are all paying full price for the chips from Nvidia.” ([46:20])

• Analogy: Cramer compares the situation to using a less efficient juicer, questioning the practicality and economic sense behind Deep Seek’s claims.

  “It’s like a brand new juicer that can get 10 glasses of OJ out of the same one.” ([44:10])

• Conclusion: Cramer remains skeptical of Deep Seek’s impact on Nvidia, suggesting the challenges faced by Deep Seek may be part of a broader attempt to undermine Nvidia’s market position without substantial evidence.

  “Maybe it’s not so great to be the king after all.” ([47:57])

7. Closing Remarks and Final Thoughts (47:57 - 49:00)

Cramer wraps up the episode by reinforcing the importance of due diligence and staying informed amidst market volatility. He hints at future segments, including his upcoming podcast "Smartless Presents Clueless, a Bite", promising engaging content for listeners.

Notable Quotes with Timestamps

• Jim Cramer on Market Reaction to Tariffs:

  “Sell, sell, sell, sell.” ([07:15])

• On Palantir Being a Growth Stock:

  “I call it Gamestop with the brain.” ([04:50])

• On PayPal’s Growth Potential:

  “I believe Chris can restore the growth rate and the luster.” ([05:20])

• On AMD’s Competitive Edge:

  “AMD's cheaper GPUs suddenly look a lot more attractive versus Nvidia's best of breed chips.” ([06:30])

• On Restoration Hardware’s Insider Buying:

  “Insiders only buy for one reason. That’s because they think the stock’s going up.” ([28:15])

• During Otis CEO Interview on Modernization Growth:

  “Modernization is really important to have amenities and to have a fast, safe, esthetically pleasing, capable elevator in your building.” ([34:40])

• On NVIDIA and Deep Seek's Impact:

  “That's how it goes in this business when you're investing in a comeback story.” ([28:15])

Conclusion

This episode of Mad Money provided a comprehensive overview of current market dynamics, insightful stock analysis, and strategic investment advice. Jim Cramer emphasized the significance of insider buying, highlighted key growth stocks, and critically examined industry developments affecting major players like Nvidia. The interview with Otis Worldwide offered a deep dive into successful business pivots amid economic challenges. Overall, the episode serves as a valuable resource for investors looking to navigate the complexities of the stock market with informed strategies.