← Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 7/20/26
00:44:17
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]
Jim Cramer
The board recommends approving regarding that seat on the committee. We're promoting quarterly earnings.
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Vanguard Announcer
Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard Index funds that participate in Investor Choice. Vanguard Marketing Corporation Distributor when the right
- [00:31]
Indeed Announcer
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- [01:01]
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 Kramerica. Other people make friends. I'm just trying to make a little money. My job is not just entertain, but to educate. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. Come in, work and you'll hear the Chinese are targeting all the frontier models, the anthropics of the opening eyes and you wonder if they can get their IPOs off. Maybe not because the Chinese also have cheap memory which we think they do or maybe they don't, but if we get some hands on it would be great. But if American companies truly avail themselves of the Chinese tech, won't they be targeted by China's open source models? And what does that mean for the price of tokens? Jevons Paradox and National Security. Did you understand that? I don't. I can't figure out how this will ultimately impact intel or in video 2 of my channel trust Core Holdings. Could it delay an open air IPO impact or deal with Oracle will keep repelling AMD every day with a Dow Shed 3 or 7 points S&P decline.1.9% Nasdaq dip.0.5% after what was by the way a very strong opening. All this hand wringing over competition from China and makes me want to turn my back on tech and just Find high quality companies like Goldman Sachs and Wells Fargo who dig my teeth into FedEx and FedEx freight, maybe scoop up some Honeywell Aerospace and Boeing. You know why? See, because if you own too much tech, you're gonna be slaughtered and you won't even know what hit you. Okay? Not today. And we've been hit pretty hard here as you will find out if you stick around. But I don't want to be some journal only piles on when things are down. We might have some momentum here. But if you own these kinds of non tech stocks that I like and they do go down, you know what you can do? You can confidently buy more of them because Goldman Sachs or FedEx are comprehensible and they're not subject to rumors or Chinese riposts. In so many ways that's what's wrong with this market. I mean right now, for example, if SK Hynix, the high bandwidth memory maker from Korea or SpaceX, the Musk satellite company or Oracle with its flagging bonds and stock really break down, then believe me, they're going to take everything with them. Including many tech stocks that do not deserve to be hammered. Now I've told you how my Chapel trust has diversified away from tech, from new with with new money with the exception of Intel. More on that in a second. For the club, I've been content to own industrials, not necessarily data center industrials, as well as health care. Because we don't want to be the next SK Hynix, the stock of a tremendous semiconductor company that's been hijacked by desperate traders who really should be, really should be. Stick with betting on the World Cup. The bulls. Remember the early 2025 deep seq affair where stocks were crushed because of the introduction of a Chinese AI program, then bounced right back. Now the bulls are arguing this new threat. Kimmy K3 brought to you by the Chinese company Moonshot AI is similar to the Deep Sikh affair where everything else is brought down. But if you bought tech, especially datacenter tech, you're going to make fortunes just like when Deep Seek turned out to be second rate. I'm not so sure that we should swoop in and buy this time because the stocks that could be rocked are stocks that even after the decline are still incredibly high. Like a Micron, like an SK Hynix. They're ridiculously cheap on an earnings basis, but they're high. We will examine some of the most hard hit stocks later the show. You can make up your mind. I'm thinking some will come down so much there is some real opportunity and I'm not lying to that said let me tell you what we're doing first we are not touching the trust long standing Apple position. The sharp knives are indeed out for the Apple let's say management from the tech intelligentsia the intelligence say that Apple missed the most important story of our lives. Artificial intelligence. They land based Siri. They regard the lost opportunity as critical to Apple's failure for the next generation. Yet you know what these same people are posting from their iPhone 17 Pro Max. You know what they'd rather slip. They would rather slit the wrist than switch to Samsung. They remind me of when I sat next to Steve ballmer at my 35th college reunion when he was still CEO of Microsoft and he put out some sort of gizmo that made me giggle. It was a Windows Mobile same way else remember that? I doubt it. So in its core business Apple's bulletproof and they never spent much one in the first place. I want you to think about this as you look at Apple down seven bucks. Did anyone switch to Samsung during this travesty of an AI issue? Did anyone say that's it, I am sick of it. I'm sick of the 17 Pro Max get get me a novo. Perhaps the cognizant who wishes that Apple would spend $200 billion maybe 70% of the data center structure and power maybe give the rest to Google GPUs, maybe buy some expensive Nvidia GPUs. As someone who owns Apple for my chapel trust I actually like that they let Alphabet spend those billions of dollars on AI and then they had Alphabet pay them a nominal sum to so it was in the iPhone. The pros have a term for this Apple Alphabet deal, you know it's called a great deal. Oh I also want Nvidia. I know people think I've been unkind Nvidia of late they say I've been critical that they're not buying back more than $80 billion worth of stock given that the shares are insanely cheap when next year's earnings estimates do. You know this is actually more of a love tap people. Throughout this period there have been companies that claim that they think the world of Nvidia but they want to make their own chips. And you know what I say go ahead making videos day. But if the customer wants a video, what do you do? What do you say to. No, no you see like we don't have in video, you know we've got the deli worst. I mean that goes somewhere else. Nvidia's at the heart of the data center. Practically invented the data center. It has no Chinese competitor. For real. The fact is these machines, they are machines by the way, packed with hardware and so forth. They're the envy of the world. I definitely sue. AMD comes close, but there really is nothing like Nvidia. And that matters. Yes. And we want intel, which reports this week. Intel is a triple play CPUs that you need for the new agents, the foundries to manufacture chips and the packaging of chips with their high margins. Something CEO Lip Bhutan knows better than anyone. Why? Because he saved Cadence the best at packaging and then he gave you a 50 bagger while he was at it. His boundaries are going to be the best hope we have for an American semiconductor renaissance. Intel is a national treasurer. I hope the stock sells off on Thursday. Please, please sell off. Fee, sell off. You know why? So we can get a bigger position. Understand again, I think the world of amd, but I can't. On both intel and amd, too much overlap. We think AAM can be terrific, but it needs foundry space. We own Broadcom. Why? Because CEO Hawkin hates to lose. He's a competitor. Hey, by the way though, same goes for Matt Murphy Marvel Tech. But again, the concentration is too much for me. Because these stocks at the very moment mistakenly trade with the Korean stock market overnight. And then they get beaten down by the American press in the morning, which loves to praise the Chinese competition. Oh my, the American press loves China so much. They're so smart. They're so smart. We're so stupid. We're so stupid. Clowns to the left of me at Caltech, jokers to the right of Stanford stuck in the middle of MIT. In the end, today was a day to buy FedEx and it was there to pick up some Honeywell Aerospace. Hey, how about buying some ge? It was down a ridiculous amount even after it got the biggest order for its one ever 1000 Leap engines to power the Airbus A320neo as part of a joint venture. That wasn't enough. I was shocked that the stock wasn't up on that news instead of fell nearly 8 bucks. Kind of a crazy market. But to buy more tech only if we get a washout, sell, sell off first. Where all the margin mongers and the option ogres, they just get big blown
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Caller
out
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Jim Cramer
both here and in Korea, where the NASDAQ of course truly had to make a buck bringing them over. I should add we have plenty of hyperscaler stocks for the chapel shows, but we don't Talk about it much unless it's the month of many when we get that speculative washout so often I'll be all over tech and the values will be self evident to anyone who still has cash. But the bottom line for the moment, it's time to go to other sectors. They can make you money without the volatility. You know what it makes me think of? Pharaoh's Fury. The last time I threw up at a theme park. But I missed my daughter. I mean I didn't hit her. Bill in Indiana.
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Caller
Bill hi Jim. Member and I thank you for the help and advice you've been giving me over this period.
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Jim Cramer
Thanks buddy. Thank you. Thank you. Thank you.
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Caller
My question is about autozone. I've held the stock for about five years while there's been a big consolidation in the auto parts industry. So it's been a very profitable trade for me. But it has now lost about 30% over from its high from the last several months ago. So I'm thinking about selling it.
- [10:22]
Jim Cramer
No, no, Bill. I mean look, they could have a problem, Bill, they had a problem, you know, like they have a lot of Chinese. You know, they had some tariff problems. I don't this stock sells only at 19 times. They continue to buy back stock. I wish you would not sell it down here. I think that they can make a comeback. But I hear you because I did think this was going to be a big year for them and so far I am wrong. Thanks for being a member of the club. I'm looking at the stock and thinking, oh wow, don't sell it here right for the moment. When it comes to the market, I think you have to look outside of tech to get the best opportunities. But that'll change if we get a real washout on MY Money tonight. I'm digging deeper into the sell off in anything related to I don't miss my rundown of where the worst spots are and where to find our that is a time to press play on a position in Netflix and why the stock has been beaten down so much and whether now's the time to buy. I'll find you. And this earnings season hasn't been too exciting, but there are some things to keep your eye on that I'm pointing out. So stay with Kramer.
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Show Announcer
Don't miss a second of Mad Money. Follow Im Kramer 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. Missed something. Head to madmoney.cnbc.com
- [11:52]
Board Member
the board recommends approving
- [11:54]
Show Announcer
regarding that seat on the committee.
- [11:55]
Jim Cramer
We're providing quarterly earnings.
- [11:57]
Vanguard Announcer
Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard Index funds that participate in Investor choice. Vanguard Marketing Corporation Distributor did you know
- [12:23]
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- [12:52]
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- [13:29]
Jim Cramer
After an ugly close last week's trading, it's clear we're witnessing a vicious meltdown for many of the key components of the infrastructure trading. I mean, this was the hottest part of the market until about a month ago. Today, many of the infrastructure stocks were able to bounce. Others tried and only failed. But they're still down dramatically from their highs. And that's what matters. And that's why I want to spend some time focusing on what's happening here, why it's happening, and how we'll know when this meltdown is truly over. Not the kind of thing I saw today, but truly over. See, the crazy thing here is that the infrastructure clubbing is barely reflected in the averages. The Dow and the S and P are only down about 2 to 3% off their highs. The NASDAQ indices give a bit more of a clue with the NASDAQ composite, the ICICI and the NASDAQ 100 down 6% and 7% from their early June highs respectively. But that's nothing compared to the declines you're about to hear about in the air. Infrastructure plays let's start with the memory and data storage stocks, formerly the single hottest part of the market. Now the Roundhouse round deal memory ETF symbol DRAM. You know, like DRAM, which launched in April, is now down an astounding 35% from its late June peak. Micron Technology, Sandisk, Seagate, Western Digital are all down anywhere between 30 and 41% from high set. About a month ago they all went parabolic. And this extends to the broader semiconductor industry. The Philadelphia semiconductor index, or SOX, is down roughly 20% from its high. And the Vandex semiconductor ETF is off nearly 17%. Looking at some of the top individual names, the semis, we see varying degrees of weakness. AMD and intel, which investors have piled into as we realize the simple CPU chips that they make would see an increased demand as agents exploded, have come down 40, 14% and 32% respectively just for the last day of June. Qualcomm's down 24%. Marvell is down 41%. ARM Holdings, a top chip design companies, all four 40% from its high. And Teradine, a semiconductor testing company that had been a real darling, is down 32%. Even the semiconductor capital equipment makers have been hit. ASML, the Dutch company that basically has a monopoly on the equipment used for leading edge chips, has been least damaged, down 13% from its high. As it just reported. Tremendous quarter. But Applied Materials, KLA and Lam Research have all come down between 28 and 33% from its highs. Their highs set less than three weeks ago. That's breathtaking. Beyond the semiconductor complex, many of the leading networking equipment plays have come in significantly. Corning, which I own for the Chabot, has come down 44% from its end of June high. It's taken my breath away. Astero Labs is off about 38% from its high. Same day Coherent Lumentum, the two leading photonics companies, have come down 35 and 30% from its high. Their highs set in either June or May. Now they are just, you know, trying to bounce some older networking plays that have been seeing a bit of a renaissance due to the air infrastructure trade. They've been hit to Seattle, down 41%. Oh my God, that was a good one. And Cisco is down 15%, both from early June highs. Hey, speaking of hardware, within the data center, the leading makers of service have been hit. Hewlett Packard Enterprise HP is off 31% from its early June highs. Dell, arguably one of the best quarters of the year, has fallen 19% from its high set at roughly the same time. It's not just that the great data center build out has been a boon to many classic industrials, at least until a few weeks ago. Vertical holdings, which makes power and cooling equipment for the data center, has come down 23% from its mid May highs. Modi Manufacturing, old maker of thermal management systems it found new life in the air, is off 29.5% from its late May peak. Caterpillar, it had been on fire both because its equipment is being used to build data center structures and because its power generation equipment was increasingly being used to power these sites. It's now down over 19% from its high three weeks ago. And Bloom Energy, oh my, a company that makes distributed power systems, had been one of the darlings of the year, but it's now plunged 44% from its high late June. Late June the biggest winners from infrastructure are the biggest losers of the last few weeks. Now that includes the construction and engineering companies that we've been, you know, I've been talking a lot about these. They've been making a mint helping to build data centers or power infrastructure. Sterling Infrastructure. Oh man, we had them on. What a hot stock. Quanta Services, these have come down 35% and 20% respectively. And of course the companies that actually build data centers have seen their stocks get slammed to take the Neoclouds, which exist to rent out their computing power to other companies so loved at one point. The leading name in the space, Core weave, is down 47% from a recent high set in May. Same story with Iran, which is down 43% from a local local high set last month. Nepius, arguably the second best new cloud name after Core Weave, is down 39% from its late June high. And smaller players like Applied Digital 8 Terawulf, are down anywhere from 28 to 45% from their highs. You can argue the same sell off has hit new IPOs with Exposure Space X Cerebras. The former is down 47% from its high set on the third trading day, while the latter is down 54% from where it peaked on its first trading day. I remember when that was the one that was supposed to wipe out Nvidia. SK Hyex, the Korean memory chip maker, has seen its shares whipsaw around after debuting on the NASDAQ 10 days ago. They're currently down about 22% from their highs. Just at last. That's Tuesday. From what it's worth, the company's Korea listed shares are down about 39% from their late June high. By the way, Samsung's down 34% from its peak in mid June. If it's connected to the data center, it's getting crushed. Other 2026 IPO names with infrastructure exposure have also come in. There are a few industrial roll ups that were popular because they were selling equipment into the data center like Forge and Power Solutions. We got a question on that last week, Madison Air Solutions and any of those are all down anywhere from between 22 and 41% from highs set last month.
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Indeed Announcer
Wow.
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Jim Cramer
Just last week we saw evidence that the weakness of the infrastructure trade was impacting the IPO market. One new data center operator, C Square, oh, that would have been loved a month ago, was priced in Steel at 21, down big from the proposed range of 2027 and it traded even lower since then. Oh my. Nuclear play. Oh boy. Remember those Standard Nuclear nearly cut the size of its offering in half and price and steel well below the range, but the stock still fallen from its offer price of $15 in the single digits now in the first three days of trading. That's awful. Now I haven't mentioned the Magnificent Seven yet because this is a diverse group of vaguely tech companies with enormous market capitalizations. But the max 7 names have varying degrees of exposure to the infrastructure trade. For Nvidia it's almost everything. For Apple it's barely connected at all. But even Nvidia is only down 14% from its mid May all time highs. It's holding up much better than the other datacenter supporters, thank heavens. Because you know, I think that even though it's a supplier, I think it's head and shoulders above the others. Let me give you the bottom line here. When you look at the carnage in the infrastructure space, once the hottest part of this entire stock market, it is clear we got a problem here. But is this merely a temporary detour or are we looking at something much more worrisome? Stick around after the break. I'm going to give you the answer.
- [20:55]
Show Announcer
Coming up. Is the sudden AI stock sell off just a blip or something you should seriously worry about? Kramer's doing the calculus.
- [21:03]
Board Member
Next, the board recommends approving regarding that
- [21:06]
Show Announcer
seat on the committee we're promoting quarterly earnings.
- [21:09]
Vanguard Announcer
Every day shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard index funds that participate in investor choice. Vanguard Marketing Corporation Distributor it's smart to
- [21:36]
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- [22:02]
Show Announcer
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- [22:03]
Jim Cramer
Get all the data and complete state by state analysis.
- [22:07]
Show Announcer
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- [22:23]
Jim Cramer
Like I mentioned before the break, the whole AI infrastructure complex has been melting down for weeks now and we need to know what to make of it and whether now now that everything is real negative, there might be some stocks worth buying. So let's talk about why this is happening. The truth is, there are a bunch of overlapping reasons. First, we've got the macroeconomic factors. Now that the war with Iran has flared up again, oil prices are rising and it'll be much more difficult for the Federal Reserve to cut rates. We've seen this movie before. These infrastructure stocks were able to roar after our government reached a kind of detente with Iran in early April. But now it's over. The price of crude has jumped from $67 on July 2 to $83 and change today. That actually impacts these stocks very hard and not in a good way. On the interest rate front, after the benchmark 10 year treasury yield peaked at 4.7% in mid May, it then fell to a low of 4.36% in late June. But now it's back to just below 4.6. So 4.3 all the way back to 4.6. The market wasn't even able to enjoy a cooler than expected June CPI report last week because we knew that it was just likely to be ephemeral. That makes this a tricky market, especially for stocks that had huge gains. Those are the stocks people sell when they're worried about economic turmoil and inflation. How about more specific issues? The big worry with the infrastructure build out is it just seems to be costing too much and now the bears are wondering who the heck is going to be able to make any money from all this Investment. We know that the hyperscalers are paying increasingly large sums to build these data centers because many of the components have skyrocketed. Price labor costs are getting mighty steep. It's gotten to the point where even Alphabet, which spews cash, needs to raise money. Roughly $85 billion in total, consisting of $45 billion placed in unwritten, unwritten secondary offering last month, followed by a $40 billion at the money offering that's likely going on right now. And it's coming up the works. Who else is footing these bills? Well, there's Oracle. After a nice run through April, May, this stock's fallen an astonishing 51% from its high on June 1st. By the way, the price of credit default swaps. Oracle's debt, you can insure it, have risen to fresh highs, up more than five fold year over year. That's not a sign of confidence. We need Oracle to pull some sort of rabbit out of a hat, make some money here, anywhere. Meanwhile, the two leading labs, Open Air and Anthropic, are going to be paying a fortune for these data centers one way or another. In late June, again, right around the time these stocks peaked, it was reported that OpenAI was thinking about delaying its IPO until 2027. They raised $122 billion, largest private funding round ever, earlier this year. And you got to figure that they will, it'll tide them over until an IPO next year. But with the amount of spending they're committed to, that's an open question. Here's what they should do. First of all, they should listen to me. They got to shoot for a fourth quarter deal no matter what. As for Anthropic, at one point in early June, we heard that a late July IPO could be a new offering. Well, we aren't hearing that anymore, though an IPO this year still seems likely. For now, that should come in September. But the. Well, that's my. Again, that's my view, okay? And by the way, I'm going to be right. But that's okay. I mean, my wife said I've been arrogant lately. So I just decided to go all in. All right, right here. Said, you know, you really have been arrogant, Jim. I said, you know what?
- [25:47]
Indeed Announcer
Ha.
- [25:48]
Jim Cramer
But the labs are part of the problem. We've seen more and more grumbling recently about how much it costs to run some of these leading models like those from Anthropic in an enterprise setting. That's how we got to the latest issue du jour for the infrastructure trade. The emergence of a New Chinese model called Kimik3, an open source model from an outfit named Moonshine AI that's supposedly just as good as the top Frontier US models. Sure, that's what caused the latest leg down for the infrastructure stocks last week. But given that these stocks were already getting hammered before the China news, it's clearly not the whole story. There are other similar smaller issues that have contributed the weakness here. For example, over the last few weeks we've been realizing in real time how much of an impact bullish Korean retail investors have had in pushing up the memory stocks. Last week, Korea's top financial regulators suspended new listings for single stock leverage ETFs. Got to wonder how much those Korean leverage ETFs were responsible. The final extreme push higher that we saw the memory stocks before they all peaked in late June. Either way, leverage is likely magnifying the moves of this broader group, pushing them up excessively and then making the down days all the more painful. Sector and thematic ETFs that package all these stocks together compound the issue as well. They really make it difficult to find a bottom. Let me give you another reason for the infrastructure meltdown. Too much stock. I mean, this is something I've been warning you about all year. With new IPOs and secondary offerings, we have been flooded with ways to play the AI data center theme and eventually an oversupply of stock can and will push down the entire group. I think we need to breathe here. I think it's happening right now. Keep in mind, we just had three of the largest offerings in history. The $75 billion IPO SpaceX, the monster secondary offering from Alphabet, and that dastardly $26.5 billion listing of SK Hynix, the NASDAQ earlier this month. According to the stats from IPO experts at Renaissance Capital, we have had 86 IPOs that raised a collective 142.4 billion this year. Okay, that figure alone is up 791% for this point last year. And it matches almost exactly the amount of proceeds from all of 2021, which by the way, was a wild year for IPOs. We don't have enough money sloshing around to pay for much more stock at these levels. It's killing us. So at the end of the day, while we don't dismiss each of these individual new factors that might have caused or contributed to the infrastructure sell off, we also wonder if we're just running to the wall of supply that we always knew was going to come, always knew was going to present us with problems. And it's happening right now. Put it all together. These data center stocks have turned. Let's just say they've been sunk by a perfect storm of negativity. I think the main issue is the flood of new stock which makes it hard for these names to keep rallying. But the resumption of the war with Iran definitely hasn't helped. So how does this all end? Well, a couple of things need to happen. We probably need the IPO market to calm down, but that's a problem that tends to fix itself by lower prices. Last week's two related deals flopped. That tends to dissuade others from coming public. We need that to happen too. I'll also have to be watching the earnings reports from the hyperscalers closely. They need to give us tangible evidence that their huge capex bills are actually worth it. We've seen in recent quarters companies with cloud infrastructure businesses have seen accelerating growth and we need that to continue for the theme in general. I also want to see evidence that the end users of AI, the companies that pay for Claude and Chat CBT are getting let's at least their money's worth. Someone other than the suppliers must start making visible amounts of money here or at least forecast a profit. What else? How about a fresh cheese firing or in that help. Here's the bottom line. It's very tough to own these infrastructure stocks right now. But if you want to stick with this group, I recommend circling the wagons around the highest quality stories, especially profitable companies with reasonable valuations. Like I said at the top of the show, or at least historically ones that are coming back, those are the ones that will make it to the other side relatively intact. The others for those we can wait until the new stock is digested and then we can pick at the rubble. Hey, how about we go to Evelyn in Florida? Evelyn?
- [29:56]
Board Member
Hi Jim. I'm at the Villages of Florida. I watch a show all the time and tell my grandkids to watch and learn. Oh, you're welcome. I previously was in a ladies stock club in Newtown, Connecticut where I researched and bought CLS Celestica at $31 a share. Today it's over $300. Yeah, and but where is it going now with the new Canadian tariff?
- [30:27]
Jim Cramer
Okay, well look, the problem with Celestica is it's part of the build out of the of this entire data center movement. So it's going to head lower. It's the 2910 earnings. These stocks are all coming down. It's not to say the Canadian tariff, the real issue here And I hate to say it like this, but it had such a run. I mean, you bought it at 30, it's at 307. There's just going to be profit taking. And that's what it is because it is a really good company. Let's go to Stuart in Florida. Stewart.
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Caller
Booyah. Jim. How you been, my friend?
- [30:58]
Jim Cramer
I'm doing fine, Stuart, how about you?
- [31:01]
Caller
Doing great. I want to buy a dominant long term compounder. While the Stock is down 36% and trading at its lowest P multiplier in five years, bears are focused on transient macro headwinds like inflation compressing restaurant margins down to 23.7%. But I'm looking past that. Their massive expansion plan of 370 new locations and 38% digital sales mix protecting throughput and positive transactions. Is this time to get in Chipotle,
- [31:34]
Jim Cramer
I think. You know, look, it reports on the 29th. I doubt it runs away. But if you want to put a quarter position quote a position on only right now because there's always a chance that frankly they have this lettuce issue and we just can't have the lettuce issue get in the way of building a new position. All right. It's tough to own anything in the related space right now. There's too much supply. But if you want to say stick with a couple of high profile quality companies, I'm in favor of that now. Much more. Mad moneyhead. Are investors still watching the stock of Netflix? I'm still take a deep dive into the company amid a big day for media news. Then I'm running through the top stories of this earnings season so far. And all your calls, rapid fire in tonight's edition of the lightning round. So stay with Kramer. Has the stock of Netflix finally becoming too cheap to ignore over the last 12 months? This stock's now down 44% including a 9% decline just since it reported last Thursday. It's gone from a beloved market darling to a complete pariah. Of course Netflix is not alone here. The entire media cohorts been struggling. But in the old days, Netflix rarely traded just like another media stock. This is the company that invented streaming video. But now everybody in the business has their own subscription streaming platform. Now we've got to start asking ourselves if Netflix is still unique or is the competition for your eyeballs at last catching up to this amazing business? When the company reported last week, the sales missed expectations slightly and earnings per share match the consensus estimates, these were not awful numbers, but they certainly weren't what the bulls hoped for worse. Netflix's free cash flow was much, much lower than expected. Just 1.53 billion. Wall street was looking for 2.67 billion. That was mostly from higher tax payments, including taxes on termination fees they got when Warner Brothers walked away from that merger. So this wasn't necessarily a collapse in the underlying cash generating power the business. But when a stock has already lost the market's confidence, a free cash flow miss of more than $1 billion is not what you want to see. The worst part? That was the guidance for the third quarter. Netflix guided for weaker than expected revenue and earnings while also narrowing their full year forecast. Of course, the company isn't falling apart. It's still on pace for 13 to 14% revenue growth this year with a 31.5% operating margin, 12.5 billion in free cash flow. Most companies would kill for those numbers. The problem is that the direction of travel is a lot less exciting than it used to be. In the second quarter quarter of last year, Netflix is at a 16% clip. The growth here is decelerating. Management blame some of the deceleration on timing and tougher comparisons. But it's harder and harder for the bulls to dream up ways for the company to accelerate its course reduction business. Netflix also announced that it will begin releasing its what we Watched engagement report annually rather than twice a year. Remember, Netflix stopped giving us quarterly subscriber numbers in the first quarter 2025. Now it's reducing the frequency of engagement disclosures. Whenever a company decides to give you less transparency, Wall street tends to assume management's hiding something. Again, not ideal. At the same time, Netflix hasn't been producing the kind of franchises that used to drive dramatic subscriber growth. Where's the next Squid Games or Stranger Things? Maybe they're coming. We're certainly ready for it. Personally, I like their American Experiment documentary and I Will Find you series. But those weren't pop culture sensations like Netflix has had the past. Unfortunately, the streaming business has become increasingly Here's a word you never want to hear. Commoditized consumers can subscribe to Netflix for one month, switch to HBO Max for the next, and move over to Disney plus, Apple TV plus and Paramount plus. The switching costs zero. Apple, Google and Amazon can afford to treat entertainment as a strategic side business. Apple doesn't need Apple TV plus to generate Netflix. Like margins, Amazon uses Prime Video to make prime subscription more valuable and more products and gain market share. Which brings me to the Warner Brothers deal. Many investors hated the idea of Netflix buying Warner Brothers. The prospect of that acquisition crushed the stock bulls didn't want Netflix entering a bidding war with Paramount over an old media business filled with declining cable networks. When the transaction fell apart, Netflix got a $3 billion termination payment. Wall street actually treated that like it was a victory. But the problem here is that it now looks like Netflix arguably needed Warner Brothers more than even the skeptics thought. This deal would have brought an enormous library of intellectual property, including hbo, DC comics characters and decades of television programming. Still, the stocks almost been cut in half over the last year. So let's talk about what makes the stock interesting. When they're cut in half or near it, I get more interested, not less. First of all, Netflix repurchased $4.7 billion of stock during the second quarter. That's the largest quarterly buyback in its history. It still has roughly $27 billion remaining under the repurchase authorization. Netflix expects to produce $12.5 billion of free cash flow this year. It can fund the slate. The slate invested advertising sperm with games, live programming, and still retire enormous amount of stock. If the share price remains depressed, efforts can keep up the buyback. Don't forget, they've been among the best capital allocators in the industry, going into a global behemoth while maintaining relatively little debt versus when it first started. At 19 times this year's estimates, Netflix is the cheapest spin since 2022. And you know what happens then? It turned out to be one of the great buying opportunities I've seen. From 2025 through 2028, JP Morgan expects Netflix to produce compound annual growth rate of 12% for currency mutual revenue, 20% for operating income, 24% earnings per share, 22% for free cash flow. If those numbers are even close to right, sign me up. The stocks trade in a discount. The S&P 500 as a whole. That's crazy. Premium growth expected for the next few years. Then again, many members of the Magnificent Seven traded similar discount to the market, and some of them are better businesses. Heck, Nvidia trades their lower price journeys multiple based on next year's numbers. So should you buy the dip? Look, I won't pretend that the quarter was great. It was a disappointment. The content slate clearly isn't as strong as usual. Meanwhile, Netflix is investing heavily across ads, games, live programming, podcast sports, including some potentially big NFL games and AI. And while it's historically cheap, 19 times earnings isn't exactly a steal. If engagement keeps slowing and revenue growth falls into the single digits, this stock can certainly still get cheaper on the Other hand, this is not a broken company. It's one of the best companies around with one of the best products and the numbers are still better than most. I think there's a reason why these guys are buying back stock at the fastest pace in history. Advertising revenue should roughly double to $3 billion this year. And management believes the gap between the economics of the ad supported and the ad free plans is narrowing. Netflix estimates it is less than 45% penetration of its addressable broadband households, captures only about 7% of the entertainment revenue available in its markets and accounts for just about 5% of global television viewing. So there's still plenty of room for growth. So here's the bottom line. Netflix may no longer be a hyper growth monopoly story, but 19 times earnings. Hey, I'm thinking you're getting a well managed business. One of the largest corporate buybacks in America. It's not often you get one of the best companies ever created put on sale. That said, you know what, you can take your time as you saw from today. You don't have to rush this if you're still believer in Netflix. I put a small position here and then gradually add on to weakness in pyramid style because I wouldn't be surprised if the weakness sticks with us for a while but that ultimately you have a potential big winner. Bad Bunny's back after the break.
- [39:47]
Show Announcer
Coming up, you've got questions. Kramer's got the answers. Get charged up for a fast fire lightning round.
- [40:04]
Jim Cramer
It is time to cover the White Mountain. Bye bye bye Stamp Pierce. Five weeks later. You hear the sound and then the lightning round is over. Are you ready? Ski dad. Turn light round. Crazy. Let's start with Sam Messers and Sam
- [40:22]
Caller
Jim Fire service seeing new management and I think the stock might be a buy down 70%. What do you think?
- [40:28]
Jim Cramer
I think that they have to merge with someone. I'm looking calling for like as I did this weekend in a piece I wrote for the club. Massive consolidation in the fintech area. We have way too many companies in that area. Let's go to Sean in Michigan. Sean.
- [40:40]
Caller
Hey. Booyah.
- [40:41]
Jim Cramer
Jim, how's it going? I am doing well. How about you?
- [40:45]
Caller
Good, good.
- [40:46]
Jim Cramer
Love your book. Oh, thank you.
- [40:48]
Caller
That I'm talking about seems to have turned a corner. Gross bookings and revenue are growing and they generated over a billion dollars in free cash flow. I'm wondering if now is a good time to start a position and lift.
- [40:59]
Jim Cramer
I think David Richard's doing a good job. I mean it's been trading back and forth and back and forth. The 15 is a good level to start. I agree with you. Let's go to George in New York. George. Hello, Jim.
- [41:10]
Caller
Thank you.
- [41:10]
Jim Cramer
George, it's Jim. How are you? Of course, good.
- [41:12]
Caller
How are you doing?
- [41:13]
Jim Cramer
Thanks for taking my time.
- [41:15]
Caller
Good. What's your thoughts on clean spark?
- [41:19]
Jim Cramer
You know, look, it's bitcoin, you know, just go buy bitcoin, it's a lot easier. Bitcoin seems to bottom once again. Incredible. Let's go to Frank in New York. Frank.
- [41:29]
Caller
Hi Jim. It's so good to talk to you.
- [41:32]
Jim Cramer
Oh, thank you.
- [41:32]
Caller
I've been international shipping for a while and I'm going to continue to hold it to see if Israelis allow the sale. Even if they don't, I'm still going to hold because it's been such a good investment for me. I just wanted to get your thoughts on on Zim International Shipping.
- [41:50]
Jim Cramer
I think you're right. I mean I do think that there's worth there and I. If the deal doesn't happen, maybe someone else buys it. I'm with you on that. Not crazy about it, but I'm with you. Let's go to Brian, illinois. Brian.
- [42:01]
Caller
Booyah, Mr. Kramer.
- [42:03]
Jim Cramer
Oh, booyah. Brian, what's going on?
- [42:06]
Caller
Hey, I got this stock, it's pretty highly profitable. It's got a lawsuit against it right now. And it's kind of worrying me a little bit. The stock is First Solar.
- [42:17]
Jim Cramer
Man, that thing has just been crushed. You're buying it at a very inexpensive price. But it has, I mean, I hate to default to being a technician. It has one of the worst charts I've ever seen. Let's go to Al in New York.
- [42:28]
Board Member
Al,
- [42:31]
Jim Cramer
Jim, this is Al from Bronx. Bronx, New York, home of the Yankees, but you know, Nixon 5. Yeah, man, I love your take on Cheesecake Factory. Okay, people don't understand. The Cheesecake Factory has a fantastic menu that has a lot of stuff for everybody. And it's confounded people because they don't go to cheesecake. They just say, oh, I don't want to own that 52 week high, big menu, lots of stuff for people who don't want to put a lot, a lot of weight. Wait, it's a mistake that people make. Avoiding that one. Let's go to Patrick in Virginia. Patrick.
- [43:04]
Caller
Hey, Pat.
- [43:05]
Jim Cramer
Hey, how's it going, Jim? I'm doing well. Patrick, what's going on?
- [43:08]
Caller
Excellent. I'm actually in New York City, right down the road from here, the Cross
- [43:11]
Jim Cramer
Tavern, as a matter of fact, on vacation. I tell you to come over, but you know, I gotta I gotta go. I'm going to the doctor after the market. I gotta get my foot.
- [43:19]
Vanguard Announcer
My ankle.
- [43:19]
Jim Cramer
Yeah, what can you do? What can you do, what can't do?
- [43:22]
Caller
Yeah, no kidding, man. Been a rough one the last couple weeks. Listen, my question is that AFC Space Mobile.
- [43:27]
Jim Cramer
All right, I'm on it real long on it.
- [43:30]
Caller
But I'm a little bit worried about the competition.
- [43:34]
Jim Cramer
The company's losing a fortune. We no longer, you know, that kind of stock is now out of favor. I think at $40 you can wait till it gets to 40 before you have to pull the trigger. I am not kidding. And that, ladies and gentlemen, conclusion of the night in round,
- [43:51]
Show Announcer
the lightning round is sponsored by Charles Schwab. Coming up with a new week underway, Kramer's giving out some key advice for making it a great one.
- [44:00]
Jim Cramer
Next. Booyah.
- [44:07]
Caller
Jim Cramer. I'm a first time caller, a happy club member.
- [44:11]
Jim Cramer
I want to thank you for being
- [44:12]
Caller
the people's champion of investit. Thank you for helping me become a millionaire.
- [44:28]
Jim Cramer
Jeez, this earning season is pathetic. First we front load all the banks on one day so we don't have time to even examine them. Who knows what's the best after Goldman Sachs? I don't know. In the interregnum we get the first good quarter from habit laps at ages. I think you can go much higher. That UnitedHealth makes me want to kick myself. They were there for the taking. I was too busy focusing on Kimmy K3 Schmidt and the moonshine whatever was to buy out the. Then we have that nasty Netflix with insistence that it gets 100% of the world watching. Better to work to get it to say mid teens. I know it wasn't the perfect quarter. I know they're trying to get sports right. But I also know it's a tough road. Not a lot of humility. But when they were crushing it they didn't do a lot of gloating. Now I want to do some shameless self promotion. I don't know if you're aware of what's known as the home stretch. This is a fabulous bulletin for members of the CNBC investing club that tells you in the mid afternoon what's happening and shows you what could happen next so you can take action on it before the close. For example, tomorrow we have General Motors. I found myself wondering what would constitute a good quarter for the company. What am I looking for? GM is a stock that tends to move down on earnings day, usually after blip up and then once earnings day is done, people realize they just sold A company that's incredibly lucrative for no reason whatsoever given that it trades just about six times earnings. My father used to sell Scotch tape and sasheen ribbon for 3M and they always treated pop well, much different from the others you work for. So I'm partial. The company, it's got this terrific pastiche of manufacturing and it's not dependent on the data center. I've been following the work of CEO Bill Brown closely. I think a breakout's coming. The home stress also flags Dan Here's a stock that is quietly moving up this time without my travel trust, health care and science stocks are going higher. This one fits the bill. The market's been kind to Novartis and if he gets hit on any one particular drug, you might want to step up because it could be a non tech day tomorrow. Remember, these tech days are either up or down. Mostly down. So you need something in case tomorrow's not like today. The inconsistency maddening finally, is Charles Swap. Now this is a tough one because we keep hearing that it's vulnerable to those who want to poach clients who don't get as much return on their cash balance and swap. I can imagine some other broker offering some sort of sweep one day using AI, but right now I think we have to just take a hard look at what the stock does. At first reports, the home stretches. One other thing, it breaks down the most important stories of the day. This time it's how Alphabet's trying to come up with a chip that allows it diversify away from, yes, Nvidia. Given that Microsoft has aligned itself with AMD on a new chip, causing AMD stock to soar, I would say it's still one more day when the knives are sharpened and Nvidia's the target. I want to let you know about this Homestead feature because when I was away in British Columbia with limited wireless, I was desperate for the zeitgeist. What was really going on those days? I just tuned in to what our director of Portfolio analysis, Jeff Marks writes about and I didn't need to bother with much else. That was terrific. When you're with your kids on a fishing, kayaking and nature ride adventure, you don't want to waste your time and you don't want to get caught looking at the market. The investing club's Homesteads Bolton, therefore, is the ideal way to go. Alex as always, Bulma, consulting my problems just for you. I'm Drew Kramer. See you tomorrow.
- [47:27]
Disclaimer Narrator
All opinions expressed by Jim Cramer on this podcast are solely Kramer's opinions. And do not reflect the opinions of CNBC or its 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 Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer'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 VisitForward/MadMoneyDisclaimer which are America's Top States for Business?
- [48:02]
Jim Cramer
Get all the data and complete state by state analysis.
- [48:05]
Show Announcer
See how your state measures up America's Top States for Business. See the full list now at topstates cnbc.com.