← Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 3/26/25
00:44:19
Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money. Mad Money Disclaimer
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- [00:00]
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- [00:32]
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- [01:23]
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 Kramer America. Other people want to make friends. I'm just trying to save you some money. My job is not just to entertain, but to educate you. So call me at 1-800-7-for3 CNBC or tweet me Jim Cramer. It's time to praise the winners once you don't need to wait until April 2nd to find out whether their business will be slammed by tariffs when President Trump announces whose earnings will be cut and who stay the same in a host of industries because tariffs are like taxes and they can cut deep into profits. Say it all came together even as the averages got hit. Dow slipping 133 points as being losing 1.12%. But the NASDAQ tumbling 2.04%. Wall street basically decided to rally around the domestics, especially on service side, and really put the wood to Companies with big international businesses. You know what, it all makes sense because after the close, President Trump announced a 25% tariff on all cars made outside the US and that is a lot tougher than many thought we'd see. Although it's something that I suggested could happen this morning. All the better to own service company stocks of fair warning. I said that this could happen. Well, I couldn't find a soul. Believe, believe me. Yet now there will be huge tariffs on 7.38 billion cars coming here. And I think it's going to upset the world when? How about tonight? But that doesn't mean there can't be winners here. When the smoke clears, all you got to do is look at the S and P leaderboard, the stocks that shone brightly today at the top of the old Kramer favorite Cintas. It's the uniform rental play. It aged more than a million companies, mostly small, medium sized businesses with much more than their clothes used to be just uniforms. Now they got natural accessories, mats, mops, first aid equipment, all sorts of restroom supplies. Santos crushed the numbers today with much better than expected revenue growth. The highest gross margins the company's ever had. CEO Todd Schneider reached out to me to tell me, quote, there is some uncertainty in the marketplace which we are carefully monitoring, but our value proposition continues to resonate. End quote. See service business small cap not worried about tariffs. Now I was bummed to hear that they're no longer pursuing a merger with Universe. But the target didn't want to play ball. Too bad. Could have been an unassailable giant that we don't be talking about. But after looking at this quarter's book of business, I know that Cintos can live without them and is not impacted by tariffs and others paychecks which we have on tonight. Paychecks work with small and medium sized business. US US Businesses manage payrolls and they offer all sorts of services. Services being precisely the kind of thing that won't be hit by tariffs. Remember, you may think that's a low bar, but think again. So many of our major companies have expanded overseas that the sea of The S&P 500 is pretty much blanketed with mines. And we have very pure public service companies. There's also Dollar Tree. That's the all American dollar store that reported very good numbers today but mercifully dumped Family Dollar. Now that was an ailing business. It never should have been bought in the first place. More on that later. Now I know a very significant portion of dollar cheese merchandise comes from China. But on their conference call they said they'd be able to mitigate a lot of the costs. Now that is great news. No wonder the stock rally more than 3%. Finally, look at a little alpha called Millennial Health care. Again, I'm looking at the leaderboard, the domestic health insurer that works with state governments to give people health care while trying to keep costs down. These guys have no exposure to tariffs whatsoever. One reason why the stock could rallied more than 4% today. That's an ideal service business when you're talking about 25% tariffs on foreign cars. Now let's consider the other side of the trade. The biggest losers. All of which were somehow connected to the data center. Except moderna, which plunged 7% because of financial Times story. It says they might target RFK Jr be targeted by RFK Jr at health and Human Services. And it's certainly possible. Now, what happened in the service side here that was actually difficult was Surface Super Micro. They provide hardware, but they also provide services. They along with Arista Networks and Broadcom, they were all part of the data center story that people seem to have cooled on. And then what is really the one at the blast center right where you most felt it today? Nvidia. Hence this nearly 6% decline. We spent a lot of time in Nvidia last week. Right now people don't like the stock of Nvidia. Now, we can go over all of these and I can tell you that many people believe the data center story is done after rumored canceling of some data center builds by Microsoft. But given how intertwined Microsoft is with an Alpha called Open Air that we talked to last week, that's the alpha behind Chachi Beatty. I think it's possible Microsoft's cancellation may simply mean that they're making Open Air pay for its own computing power. I bet the data center buildout continues apace, but very few people believe right now. View, we're in a curious moment here where any reassurances that the industrial revolution of AI is still on just won't cut it. Every single stock in the sector is being mauled by the bears and video is being torn to pieces. So let's go to the epicenter of the zone, because that's what I like to do. I want you to put your containment suit on first. Make sure you have a Geiger counter with you. Because in videos being subject to nothing less than a nuclear bear attack and the radiation burns are scaring shareholders as they question what the heck they're in this one for. Let's start with the White House There have been a feeling among executives that the strictures put on by President Biden against Nvidia when he did it right on the way out, once it limited the countries that Nvidia could sell its best chips to, they might be lifted by President Trump. Now all day I'm hearing that that's wrong, that Trump actually may even go harder against Nvidia, and that alone could be reason to sell the stock. But there's more. This morning the Financial Times penned a story saying that a video chip somehow ran afoul of Chinese pollution controls. Given that China puts up two coal plants a week, I was astonish. You hear that they could care about the pollution at all from Nvidia. It sounded like the typical journalist hit job against the video that keeps popping up. Nevertheless, along with the rumor White House shut slap down, well, you can expect the stock to get hit. I know some of you don't care about the technicals, but you know what? There are enough people who do that. I'm going to bring it up in videos. Death cross formation happened about a week ago. That's where the 50 day moving average plunges below the 200 day moving average. And it's widely seen as a terrifying development. Sell, sell, sell. Why does this matter? Because this stock is the subject of a tremendous amount of technical pressure. There are multiple inverse Nvidia ETFs. That's bets against the stock. There are also used bets being placed all day against Nvidia in what's known as the zero day options market. That's where traders can make a one day bet against Nvidia. And boy are they ever doing that. How does it work? You buy a put option on the stock. The customer on the other side isn't interested in making that same making a long bet, which is what they have to do. So what do they do? They have to go in and short the stock to the people who do these trades aren't all that savvy about Nvidia, but they're savvy about the death cross, which makes it a bit of a self fulfilling fair raid. Sell, sell, sell. The house of pain. So what do you do if you own Nvidia? Well look, if I were back in my old hedge fund, I'd ask myself why the heck did I buy this in the first place? The answer is that I believe in the new AI powered industrial revolution where everything tech has to be remade with Nvidia's GPUs allowing autonomous vehicles and robots eventually rule the world. I haven't changed My stance, however, I don't believe in self flagellation. I see the stock coming down from here. I've been saying that it's become a whipping boy. I've been saying that it will only get worse with tonight's tariffs. Believe me, it's okay to believe in the stock, but understand that right now it's not right down here. Less than 25 times this year's earnings estimates though. I think in video is cheap. But I don't think it's done going down because the bears can plan stories about it. And as long as it goes down after the Bears plan stories, that means the stock is in the wrong hands. So how do I describe it? I think this stock trades like a wavy inflatable tube man, also known as an air dancer. Not exactly a Statue of Liberty. My advice, if you think of videos cheap and you and the data center, the chief home of various ships is bent, well, then what? You know, there's nothing wrong with owning a tube man, except when you see a move south like this, you have to give it some room. You have to let it come down. Okay, you know those two men, you know that it's like, you know, used car. That's what Nvidia feels like right now. All right, now, one day we'll get certainly we're going to get some certainty on Nvidia. And if we can get that certainty, we also know what's happening with a whole host of other stocks. They'll all stop going down on Marvel Tack, a Broadcom, ge, Bruno Vista. But the bottom line, Nvidia is the linchpin of this group and the pin is failing. I don't know whether the stock plunges from here, but if you like it enough to keep owning it, I say prepare for the tube man. Turbulence Jeff in South Carolina.
- [09:54]
Jeff
Jeff, booyah.
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Jim Cramer
J.C. man, what's shaking with you, Mr. Non Tariff man, or else you wouldn't be so up. What's going on?
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Jeff
Watching that as well. The JP here from Okatee, South Carolina, long time, third time. Okay, so days like these, as you usually open up, we're just trying to save you some money today, right?
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John Gibson
That's it.
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Jim Cramer
I mean, and it's in tomorrow too. And already I'm feeling it, believe me.
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Jeff
Go ahead, have a long time club, Best of breed name just seems to be stuck in the mud. So should I hold on consistently, continually buy more or dare say sell and move on? Hey, I love your interactions with Regina and the crew, especially when we try to do those two first. How about the very first time on a three for Regeneron, Elf. Chipotle.
- [10:49]
Jim Cramer
Chipotle. Chipotle. I don't want to be a weasel here, but it sells at 38 times earnings. And that kind of stock is going to take a little bit of heat just because the market's going to be down off the tariff news. But it is the kind of stock you would buy after the tariff news is digested. And it's. But it is going to feel like you're digesting something that's real bad tasting. Let's go to Tina in Florida. Tina.
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Tina
Hey, Jim, years ago when you've told us how you came to the decision to buy a position in Apple, you've told us about your daughters and how they had ipods in every color and everyone had ipods. Similarly, now I'm thinking about starting a position in a company and I travel a lot and everywhere I go in every airport, I see people wearing these shoes. And I'm wondering if on holdings would be a good investment.
- [11:41]
Jim Cramer
Okay. We have liked on holdings for some time. We actually started liking in the 30s. We've had. We borrowed on the company multiple times. It is a high multiple stock. Same multiple around this Chipotle. I want you to buy the stock. Yes. But I want you to let it come in first because the market's going to be looking a little peaked off of these, frankly, off of the very high tariffs that many people weren't expecting. But if you watch our show, you know they were coming. All right. I don't know whether Nvidia keeps going down from here, but if you like it enough to keep owning it, I say prepare for traditional tubular turbulence. Remember, all I'm doing is being that guy, you know, the guy with the tube, man. That's what Nvidia feels like right now. I'm just trying to put it as it really is. All right. On Mad Money tonight, core weaves IPO is on deck for later this week, but is the stock ready to tackle the tape? I'm looking to Cloud's backstory, balance sheet and more. Then fresh off a top and bottom line beat from Paychex this morning, I got to check in with the CEO to what he hears about the state of small business not subject to tariffs and mostly services. And later, I'm digging into the path forward for discount retailers after Dollar Tree announced it will divest its family dollar business. Tough day here. Harder tomorrow. Stable Kramer.
- [12:59]
CNBC Producer
Don'T miss a second of Mad Money. Follow Imkramer on X. Have a question tweet kramer madmentions. Send Jim an email to madmoneynbc.com or give us a call at 1-800-743- CNBC. Miss something? Head to madmoney.cnbc.com a Squawkbox exclusive banker financier philanthropist Sandy Weil on the health of the economy and the consumer, plus his thoughts on the state of Wall street and Washington's impact on the market. Squawkbox tomorrow, 6am Eastern, CNBC.
- [13:42]
Jim Cramer
The first major IPO of this year is coming later this week when Core Weave takes itself public. This is a cloud infrastructure play built for the air, and they plan to raise roughly $2.5 billion. Regardless of how you feel about Core Weave, the company, I think Corey the IPO is a very encouraging sign. We came in the new year expecting a lot of deals, but these deals never came. This one suggests that the IPO market might be waking up, although the horrible action in the NASDAQ today might put a damper on any of the animal spirits that you need for real recovery. So what's the deal with the scoring? This is arguably the single best pure play on the AI infrastructure theme, something that would have been loved just 10 days ago, but not so anymore. I know there's a lot of newfound skepticism about this story, but after visiting Nvidia's GTC event last week, I came away with a feeling of confidence about the growth of AI, even though I'm not sure the infrastructure buildout can continue at the same rapid pace. Today's market certainly said that things are slowing, and some people think it's slowing dramatically. I don't see that. That's why I want to walk you through this story, because what Corey does is very intriguing, but it's also a little hard to understand. It's become very controversial. I got to tell you, this company backstory is pretty well CoreWeave was founded by three former commodity traders almost eight years ago. Originally it was a cryptocurrency mining operation. It was called Atlantic Crypto. But after the crypto crashed back in 2018, the company changed its name to Corweave and changed its strategy too, basically acquiring as many computing resources as possible. They buy and assemble large pods of computing power, specifically Nvidia's high end GPUs. Originally they used these chips for cryptocurrency mining. Then they realized this hardware could potentially do a lot more more things, a lot more useful, like provide computing for those who need to run AI programs. Compute. That's why they brought up the chips like crazy. After the crypto crash in 2018, they knew that they would be used for computing by 2020. Core we've had arrived at a business, a new cloud computing service called the Cloud Weave cloud platform. It's just like Amazon Web Services, Microsoft Azure, Google Cloud, our Oracle cloud infrastructure, where the basic business is running data centers and having customers effectively rent those computing resources via a software as a service platform. For most companies, that's more flexible and more cost effective than building and operating their own data centers. But here's the crucial difference between Core Weave and the Hyperscalers. From its inception, Corey was built from the ground up using Nvidia's latest and greatest GPUs, whatever they were at the time. The H100, the H200, the GH200, now the Nvidia Blackwell chip, maybe next year the Vera Rubin. Of course, the Hyperscalers are basically the biggest buyers of various chips in the world, but they built their own platforms before they realized the greatness of Jensen Wong's company. Coral Weave, on the other hand, was purpose built for Nvidia's chips. And that made the company a perfect fit for the arrival of the year, which is kind of unofficially began in late 2022 with the launch of the original Chat CBT by OpenAI. This is a very short period of time, people. Since then, Corby's business has indeed exploded, with its revenue growing from $15.8 million in 2022 to 228.9 million in 2023 to a staggering 1.915 billion last year. Because their systems were purpose built around Nvidia's technology, Corvette's cloud offering can give customers a major leg up when they're trying to train on AI models. Now, I like this basic business a lot. Besides studying the IPO perspectives, we've done a good amount of additional work on Core Weave in recent weeks, including conversations with the company's executives and with other tech industry leaders and multiple Core Weave partners. We even took a field trip to a CoreWeave data center outside Las Vegas during our travels last week. After doing all this research, I've got to tell you, I've come away as a fan of Cor Weave, Corey of the business, and a fan of the people running. It may sound like they're just buying a bunch of chips from Nvidia and bundle them together, but it turns out assembling these massive clusters of GPUs is really, really hard work. Even for the smartest people in the industry. It's not as simple as acquiring chips and connecting them with some cables. You're going to hear a lot of people describe Core Weave as basically a financing play and they've been pretty creative about raising money. But that fundamentally misses the real story is actually a way to affiliate it with a bear position. Corey has become an industry leader because it can assemble these Nvidia chips in a way that maximizes performance, meaning computing power per watt of energy while minimizing downtime. And you can't have downtime in this stuff. It just, it really shoots the whole, the whole proposition of it is it never goes down. And because its advanced data centers are highly automated, it can remedy any issues that happen much more quickly than its peers. Stuff breaks down all the time in these data centers and Corey fixes things much faster, faster than anyone else, according to multiple sources. That's the moat people. Now, in part because of that last point about the company's expertise, Corey has become a trusted partner of many players in the space, including Video itself, which by the way actually owns a stake in Corey. If you hadn't heard, by now, Nvidia's GPUs are in high demand and the company's in a position to be choosy with who it allocates. That's why it's noteworthy Nvidia chooses to give meaningful allocations of its latest chips to Core. We've in fact, when Video was fixing its production hiccups with Blackwell last year, guess what? They were trying to ramp a full launch. It was working with coreweb to see how a product would perform once deployed at scale in interconnected clusters. Even when nobody else could get these Blackwell chips, Core Weave was testing large quantities of that shows you trust. No wonder they were the first cloud provider to make Blackwell based instances generally available to customers. But it's, it's not just the company's close partnership with Nvidia. Corey's platform is trusted by leading AI enterprises like Cohere, IBM, Mad Platforms, Microsoft, Mistral AI and OpenAI. In fact, just a couple of weeks ago, Core we've announced this deal with OpenAI signing a newly $12 billion contract for the use of its AI infrastructure. Aside from the eye popping amount, that was a real surprise because Open Air has got a deep relationship with Microsoft to the point where they're obligated to use Microsoft Azure to a certain extent. OpenAI is also planning on building tons of AI infrastructure on its own through the Stargate initiative, starting with a huge new data center being built in Abilene, Texas. Yet they yes they agreed to this $12 billion contract to Corvette. They still did. They made a huge commitment here and even got $350 million worth of Corey stock as part of the deal. Beyond all these public indications of trust in Corvette, I've spoken to privately the top industry leaders about the company and almost universally they have positive things to say about these guys. By the way, very different what you've been reading the Financial Time if you've been reading their incredible parade of horrible about this company. So here's the bottom line. You now know why I'm a big fan of Core Weave the story and Core Weave the company. But what about Core Weave the stock? Stick around the break and I'll tell you what I think this one should be worth once it comes public later this week. Remember, you could be a fan of a company but not necessarily want to buy the stock if the price isn't right. I'm trying to get this one right for you. Mad Money is back after the break.
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CNBC Producer
Coming up is now the time to go all in on AI Kramer's continuing his look into AI cloud provider Core Weave ahead of its ipo. Next, a Squawk Box exclusive banker financier philanthropist Sandy Weil on the health of the economy and the consumer, plus his thoughts on the state of Wall street and Washington's impact on the market. Squawk box tomorrow, 6am Eastern, CNBC.
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Jim Cramer
For the break I told you about Core Week, which is coming public later this week. These guys basically buy chips from Nvidia, assemble them into clusters and then rent out that computing power to their customers. And are they in demand as a business? I'm a big fan. Like I said earlier, these guys have a real expertise and it's incredibly close relationship with Nvidia, which owns the stake of the company. But what about Core Weave the stock? We haven't talked about that. Well, I like the story very much. I only like the stock at the right price. So let me walk you through the way to figure that out. First, in recent years, this company's been putting up staggering revenue growth. Last year it grew at a 7, 137% clip and that was actually a deceleration from 2023. In its perspectives, Corve emphasizes that it has, quote, significant revenue visibility with $15.1 billion in remaining performance obligations. They also note that 96% of the revenues come from contracts that on average last about four years, very sticky revenue stream while Corvette was not yet profitable. While when you look at some of the less stringent metrics, they're certainly moving in the right direction. Their adjusted operating income, which reflects the profitability of the actual business excluding financing activity, went positive in 2023 and reached nearly 356 million last year. Good for a 19% operating margin. That's excellent. Excellent. Even their adjusted net income almost turned positive this year, and it's definitely headed in that direction this year. Okay, how about the balance sheet? Corey certainly got more debt than you'd expect from a high growth tech company. Usually these firms are backed by venture capitalists who take equity, not debt. But at the end of last year, Core we've had nearly $8 billion in debt, roughly 2.5 billion of which was current, meaning due in a year. That's offset that by a little over $2 billion in cash equivalents, which translates into 5.86 billion in net debt. This company has a leverage ratio that is high. 4.8. Actually, it's really high. Although when you factor in the expected IPO proceeds of 2.5 billion, they can do a great deal to clean up that balance sheet. That said, I expect Cory to continue borrowing money in order to buy computing resources going forward because that's the business model. Actually, they're proud of it. They recently raised 7.6 billion by borrowing against their Nvidia chips as collateral. That should be good collateral. I get where they're coming from, but just know that Cory's extensive use of leverage makes the story more risky and produce a lot of red flags, particularly because people feel that these are going to lose value with the collateral, the chips. And there are reasons to be concerned about that risk. Just this morning, the Financial Times published a piece about how Corvey had technically defaulted on its big debt facility with Blackstone Big Customer, after it made what the paper called a slew of administrative errors, as the article put it. One investor believes the incident cast a horrific light on Core weaves internal controls, given how obvious the restrictions were, while another investor just said, hey, you know what this is? Considering the investing, it just doesn't really matter that much. It was the term that they use, dumb oversight. At worst. After doing some research on this one, I am more in the dumb oversight camp. But when you've got a debt laden balance sheet, you really can't make some stupid mistakes. This was wrong. Now, there are other concerns with this one too. For example, I think Corby might suffer simply because there's really nothing like it out there. Sure, the hyperscalers are in the same business, but they aren't pure plays on AI infrastructure. Instead, they're more mature businesses that are pretty profitable at this point. So it's tough to find what we call good benchmarks or comparables comps to value the stock. There's another small, quirky question that matters a great deal here. What are the previous generation Nvidia GPUs worth? For example, once Nvidia releases Blackwell what are core? We use vast holies of H1 hundreds, H200G H200. What are they worth if they're essentially worthless once a new model comes out? Well, that's not so good. It means Corey will have to depreciate its chip use much faster. That means they'll have smaller earnings on paper and they won't be able to raise as much money by borrowing against these other older chips. I tend to believe that these GPUs still have a decent amount of value even after a new model comes out. That's been the trend so far. After all, computing power is computer power. I also could argue that the software stack on top of the GPUs holds a lot of value too. Next up, there's the revenue concentration issue. This is not good. Corey gets 62% of its revenue from Microsoft last year at least up from 35% this year. But it's going to come down. But that type of concentration would already be a yellow flag at least. And this specific issue became even more noteworthy a couple of weeks ago when it was reported that Microsoft was looking into looking to cancel some of its contracted business with CoreWeave reportedly over delivery issues and missed deadlines problematic. I could not confirm that story. I'm less worried about the concentration issue than the myriad bears are here because much of what that was Microsoft buying computing power for Open Air so these numbers will look better now that Core we've has a direct long term contract with Open Air itself. We're also looking into the report about Microsoft canceling contracts with Core Weave and doesn't seem to be that much to it. After visiting Silicon Valley list, we can ask you all about this. I got the sense that Corey is actually the leader in this space. Technical leader too. More importantly, whatever was going on there wasn't about demand for computing power, which remains enormous despite what you saw on your screens today. But that level of demand for computing power is really the key question for Core. We will the heavy hitters keep spending fortunes to fuel their development of AI? Or could this year be the high watermark when it comes to compute demand? After coming back from GTC last week, I believe that demand for infrastructure will stay very strong for a long time. Which is why I'm interested in Core Weave. Of course, if you think it's a bubble, it's about the burst. As many of the sellers indicated today. You've got to stay away from this one. It's be awful for you. So I like Core. We have the company, but I only want core of the stock at the right price. The IPO is being marketed with a price range of 47 to 55. At the $51 the midpoint, Corvette would have a market capitalization of roughly 20 to 24.5 billion. If you add back the net debt of around 6 billion, well, it gets you an enterprise value of just over 30 billion. Given quarterly lack of profitability, I think the best way to value the stock here is with what's known as an enterprise value revenue multiple. Though you have to make some assumptions about the growth rate to put that together. Let's say that after growing by more than 700% last year, core weaves revenues grow slow, slower to 200% in 2025. At $51 per share, that would imply the stock got an enterprise value to revenue multiple of 5.3. Seems reasonable. If you look at the hyperscalers or some of the smaller companies like DigitalOcean Nimbus, they're trading at five to eight times those numbers. On the higher end of the range, Corvette could be worth 60 to 76 per share. That's very aggressive. I don't want you there. Even the incredibly negative analyst, the D.A. davidson, which invoked unbelievable the specter of Enron when it decided to put their work on paper, they still stopped the $47 price target on this thing. And they said it look like Enron. My God. And they're projecting 3 and 23% revenue growth this year. Putting it all together, I think you can buy core. We've anywhere in the 50s after comes public, but once it reaches the 60s or higher, just say no. But the bottom line, if this IPO goes well, we could get a lot more big deals this year and the ones that we've been waiting for since Trump won the election. If this is a flop though, expect the gloom to continue. John in Texas. John. Jim, I bought hewlett Packard Enterprises HPE at the end of December for around 21 $21. And I sold it. I sold it last week for $16. And I'm wondering, did I make a mistake doing that? No, you did not make a mistake. I did spend a lot of time with Antonio Neri when I Was out at gtc. It was nice time. Well, I shouldn't call it a lot of time, but what concerned me was that last quarter was bad. And they're in the penalty box with me. And I would have done the same thing once I saw that quarter. I would say, okay, I got to move on. There's not much here. Now be aware that everything's headed down now to where HPE is. But that may afford you an opportunity to swap out of to put money into a new name that's better than hpe. And here what I'm thinking about is Dell. Okay, let's go to Brian in Florida. Brian, what's up, Jim? How's it going? Oh, I don't know. You know, today was a bad day for a lot of tech stocks. I like how about you? How are you doing?
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Caller
I like bad days like today.
- [29:57]
Jim Cramer
Okay, fair enough. That's good. Apld Applied Digital. I'm curious, do we have a contender in the long term? Frontier here? Losing too much money. Not a good time. You can't lose a lot of money in this tape. It just doesn't work. I'm sorry. I know It's a nice $6 bet, but I'm not going to do it. All right. Corve's IPO will be the one to watch. If it goes well, we get a lot more similar deals. If it goes badly and it flops, what can I say? Much more made money at quitting my post earnings exclusive with one of the hottest companies out there right now, payroll and HR company Paychex. Then after today's news, that dollar tree is selling family dollar. I'm telling you what I make of the change. Of course. All your calls, Rapid Fire. Tonight's History of the Lightning round. So stay with Kramer. Lately we've been hearing so much negativity about the state of the economy, but then Paychex goes and reports phenomenal quarter. This is a huge payroll processor for small medium sized business with a big outsourced human capital management business. So they have some real insight to the heart of the economy. And that's why when Paycheck reports a modest top and bottom line beat. Very encouraging conference call. Center stock up 4%. It means something like I said at the top of the show, this is a good sign. Do not take it from me. Let's check in with John Gibson, the president and CEO of Paychex together. Better read on the quarter. Bishop Gibson, welcome back to Man Money.
- [31:27]
John Gibson
Hey, Jim, it's great to be back with you.
- [31:30]
Jim Cramer
All right, well, I'VE got to tell you, there's so much gloom that it's been scary. And I know a lot of people are just saying to me over and over again, look, we're on the, we're really watching it. Things could fall over. And then, John, I read your quarter and I read all the notes that you've come out with. I just don't feel like I can be as negative as everyone else is after reading your stuff.
- [31:53]
John Gibson
Well, Jim, there's no question this is an interesting time. Small businesses are expressing optimism and uncertainty all at the same time. And my general view is any time emotion is leading us, I like to look at the data and what I can tell you when I look at our data, I'm not seeing any signs of a recession in our data. The underlying labor market remains fundamentally healthy. We continue to see moderate growth for small businesses. We see wages continuing to be moderate. Look, I think job growth has been relatively stable the last year in small businesses and been in line with historical averages. So right now we're not seeing anything. There's certainly a lot of concern and uncertainty and hopefully as we get through April 2nd, that'll calm down. And I think the optimism that small businesses have will continue to propel us.
- [32:43]
Jim Cramer
I'm glad you brought up April 2nd because when I read through what you're saying, I say, okay, the companies that are small business, they themselves are doing well, but they have a lack of confidence that comes from Washington. I don't political here, but there is an element which just says, wow, what the hell is going on there and could it wreck my business? And I don't think that's such a bad view to be worried about.
- [33:07]
John Gibson
Well, Jim, look, I would say this about small businesses. Regardless of what's going on in Washington on any day or any topic, I always go back to this. Small businesses are very resilient. We've been through hurricanes, floods, fires, global crisis, a global pandemic. And small businesses continue to lead the U.S. economy. And I think generally entrepreneurs are optimistic and I think that there's optimism there. There's things in Washington that they're hearing that they like and there's other things that they don't like. So we have this weird state we're in right now in terms of optimism and uncertainty at the same time. And I think that we get through some of this uncertainty and there's more clarity on what's going forward. I think the optimism is going to win the day.
- [33:51]
Jim Cramer
Well, are you seeing anyone who's now saying, you know what there's, we're getting some deregulation. We're getting some of the breaks that we expected if we voted out the Biden people, Vice President Harris, and brought in Trump.
- [34:07]
John Gibson
Well, I would say this, Jim. Look, there was a spike in optimism in small businesses. And when you and I last talked in that December timeframe, what I told you is there's a lot of optimism, but I'm not seeing action. I wasn't seeing the acceleration in hiring. I wasn't seeing the acceleration in business formations. And then uncertainty came and I also haven't seen action. So we're not seeing whether that's our HR generalists engaging our clients in trying to prepare for any type of downsizings. We're not seeing it. And in fact, what we're seeing is a very stable small business macro environment at this time. I'm sure a lot of small businesses are waiting to see that the tax situation gets resolved. They're waiting to see the deregulation start to come through. And they're probably waiting to see some of these things and some of this talk on tariffs. But when you look at the data, I'm not seeing anything to be concerned about in the short term.
- [34:58]
Jim Cramer
I really like that. I mean, that's just terrific because I like empirical. I don't like emotional. Now, speaking of waiting, you've got a very big deal. It's about to close. Is it your expectation that there could be tremendous synergies perhaps, and there'll be a lot of cross selling?
- [35:13]
John Gibson
Yes, Jim, I'm very excited. We made a lot of great progress in the third quarter, not only just in the fundamentals of driving revenue growth and adjusted earnings per share up 8%, but we also made good progress on completing the acquisition of Paycor, which we announced in January. We now expect at the close in the coming weeks. Based upon what we know now in the planning, we now expect to exceed the $80 million cost synergies targets that we set back at the start of the deal. And I've been very, very happy with how things are going both in terms of putting the teams together, in terms of looking at our product set. And when we get this deal announced in the next several weeks, we're really going to have the most comprehensive, flexible and innovative set of HCM solutions in the industry, really built for organizations of all sizes. And so this is an exciting time for paychecks. I think it's an exciting time to be in our industry.
- [36:09]
Jim Cramer
I definitely agree with you. I think that's one of the reasons why the Stock popped was you had a very good overview of what was going pay cord. Now we always, if there anyone who has something that's, that's intelligent that can add to the debate, it would be you. Because small, medium sized businesses would be the people I'm most concerned that maybe they're worried about AI, but perhaps they're just optimists when it comes to AI. To.
- [36:33]
John Gibson
Jim, you're absolutely right. You know we've been introducing AI into our products as you know for probably the last three years. Matter of fact we won an AI award before Chat GPT was launched. No one knew what I was and now what we see, we just did a survey on this. Small businesses are already using AI to drive productivity and drive their business. They're using it today. And what we're finding with our clients is when we package the AI technology with our proprietary data set, we can bring powerful insights to them that enable them to, to really punch above their weight. They can now compete against bigger companies and they can be more effective in competing in their local markets. And so I think the power of AI for small business is just going to be really fantastic.
- [37:23]
Jim Cramer
Do you find that it's good for them to be able to find people who want to work for them? Because I know that there's a certain level, there's still dearth of talent levels. There's starting to be a lot of talent but when you try to do a search it's, it's almost impossible. But with AI it seems very easy to do.
- [37:41]
John Gibson
It is. And in fact we introduced the Paychecks recruiting copilot and that actually is a product that has over 20 million workers in it. You can tell them what you're looking for and it will give you a curated list of both active people that are active in the job market, but also the inactive. So people you may want to reach out to. We've seen a lot of success for that upmarket. Now Jim, one of the things we're looking at is how can we package that better for the small entrepreneurial owner who maybe, you know, doesn't want to use the AI tool. They want us to use the AI tool for them and then have us reach out on their behalf and actually help them find the candidate and place that candidate for it. That's where HR outsourcing really comes in. And, and that's been one of our fastest growing businesses, as you know.
- [38:25]
Jim Cramer
That makes so much sense. It just makes so much sense. Well, congratulations, you led the market today. The analysts are finally getting on board. They Understand the juggernaut that you have. John Gibson is the president and CEO of Paychex. It's great to have you on the show, Jim.
- [38:40]
John Gibson
It's always great to be with you.
- [38:41]
Jim Cramer
Excellent. Everybody's back everybody.
- [38:44]
CNBC Producer
Coming up, Kramer takes your calls. And the sky's the limit. It's a fast fire lightning round.
- [38:50]
Jim Cramer
Next stock watch if that might stand for a plane of sound. And then the lightning round is over. Are you ready? See that light round Crazy bunches up with Tony in Florida. Tony.
- [39:16]
Caller
Hey Jim. I just want to thank you. I'm a club member since day one and I love it. Every single 1020 meeting. I never miss it.
- [39:24]
Jim Cramer
Thank you. We're doing our best to be able to contempt you. Give us 10 minutes we will tell you everything you need need to know including tomorrow. How can I help you?
- [39:31]
Caller
Yeah, I'm trying to hide out in this stock. I bought it before dividend in February said $70 and it's gone down a little bit more and I give them money every single month for my electric and it's a 3.3% dividend. Do you think Natera Energy should I.
- [39:48]
Jim Cramer
Oh, I like next. I think it's a good move particularly this environment. Thank you. Remember the club. That is exactly the kind of stock that I am a looking for. Let's go to Billy in Connecticut.
- [39:57]
John Gibson
Billy.
- [39:58]
Jim Cramer
Hey Jim. Happy New Year again. Jim. Real quick, real quick break. Break it down for me Jim. Will Blackrock ever become the Golden Rock? Well, Blackrock is going to be a long term position of the travel Trust. I am betting on Larry Fink and all the good things they can do. They're switching their model to a much more much more lucrative model. They have great technology. It is just a true buy and homework stock. I do the homework and I like what I hear. Let's go to Nick and Marilyn. Nick. Hey Jim Craner, how you doing? First I just wanted to shout out my. My business teacher Mr. Marks. How you been?
- [40:38]
Jeff
High school.
- [40:39]
Jim Cramer
Yeah, right. Booyah.
- [40:41]
Caller
I was interested, I was interested in.
- [40:42]
Jim Cramer
Striker Syk Strike Watch. Strikers are good company and I think that a medical device company in this environment will do well. Now there's some people going to say listen, they're going to be tariffs on that company. I'm not sure whether they'll really matter. I think Stryker works in an environment where putting 25% tariffs on all foreign cars. As I've been saying to you Germany, Japan and Korea have to pay. I've been saying it and saying it and it happened tonight. People say why do we know? I don't know what else I could do. Let's go to Princeton, Illinois for it. Jim, it's my third time calling. Thank you for having me back, sir. And I'm glad you're on the show. How can I help? Well, you're two for two. Let's try to go three for three. My friend always tells me about FactSet. He thinks it's undervalued. What do you think? You know what? If you like FactSet, I actually want you to suggest to buy ICE I, C E. I think it's got a lot more upside to it. Oh, no. And that, ladies and gentlemen, the conclusion of the Lightning Round.
- [41:40]
CNBC Producer
The Lightning Round is sponsored by Charles Schwab. Coming up is a dollar sold, a dollar earned. Kramer's giving you his take on Dollar Tree's decision to sell off its Family Dollar brand and whether this is good news for stock.
- [42:18]
Jim Cramer
Addition by subtraction always sounds suspect, doesn't it? Voodoo mathematics. But in the case of Dollar Tree, the voodoo works. This morning, Dollar Tree announced that it's selling its Family dollar division for $1 billion. Now, this whole saga is pathetic because they bought family dollar for roughly 9 billion in cash stock a decade ago. They got 8,246 family dollar occasions with that deal. And I covered it closely because I have a fascination for these stores at this. At the time, at the time of the acquisition by by Dollar Tree, Family Dollar was renovating its stores. And it looked like it might be working, but it wasn't. Family Dollar has been a loser for many, many years. As Dollar Tree CEO Michael Creeden said on a very upbeat conference school this morning, they really got the stock going. But kick Family Dollar on the curb. Quote, Dollar Tree and Family Dollar are two different businesses with limited synergies, end quote. And now without the burden of Family Dollar, the strength of dollars, you can finally shine. That sure isn't what a different management was saying way back when this deal was announced. When the deal closed, then CEO Bob Sasser crowed that it was, quote, a transformational opportunity for our businesses to offer broader, more compelling merchandise assortments with greater values to a wider array of customers, end quote. Dollar Trees meant for middle America, the release said. While Family Dollars meant for low and lower middle income people, in reality those two chains had nothing to do with each other. And keeping them as separate brands under the same roof never made much sense to me. I recall going to Family Dollar down in Asbury a few years ago and you know, they were saying it was being remade it was part of the remake. But you know what? I couldn't tell the difference. Sometimes I wonder if they could either. Virtually no synergies came true. Nothing was truly complimentary. I always found Dollar Tree a much more appealing place to go and now it's free to go about its business, which includes the mitigation of tariffs on China. They've actually been handling the situation surprising well. It's remarkably well owned chain and quite fun to go to. As bright and cheery as Family Dollar stall defying and gloomy. I have to tell you though, I am upset about this. I am steamed. See, I told the previous management over and over again that the way this merger was conceived never made any sense to me. I've always been a huge fan of Dollar Tree. Never like Family Dollar had several I considered my own, went there with my pop a lot. But every Family Dollar store was dowdy and really awful. I would never go with him. I complained every time the management how they should just take make these stores into dollar trees where they didn't overlap and get out of leases where they were in direct competition. But no, they always told me the deal was working out spectacularly. What was I complaining about? Even as the numbers showed otherwise with Family Dollar same store sales struggling every quarter, their denial was palpable. Of course now we see the truth. The amount of capital destruction you're basically $8 billion in losses is just shameful. We've not heard a thing about it until today and that is shameful too. So now that we know that they never had a plan. There was no integration. They were run as two separate alphas. Even as Family Dollars seem like a doom chain on its own, descended from mediocrity to force to tragedy. What do we have to say here? Could we never be any accountability for this lame brain obliteration of capital? Something that could have easily been avoided had they just made all these nasty family Family Dollar stores into clean, refreshed and yes, fun dollar trees. But hey, you know what? At least we won't have Family Dollar kick around anymore. I like to say as always, bull market summer. I proud of it. Just for you right here on Man Money. I'm Jim Kramer. I will see you tomorrow.
- [45:32]
All opinions expressed by Jim Cramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC N or their parent company or affiliates and may have been previously disseminated by Kramer 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 A squawk box.
- [46:12]
CNBC Producer
Exclusive Banker, financier, philanthropist Sandy Weil on the health of the economy and the consumer, plus his thoughts on the state of Wall street and Washington's impact on the market. Squawkbox tomorrow, 6:00am Eastern, CNBC.