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The market had an excellent performance in 2019, said Jim Cramer at his Crazy money viewers on Wednesday. If you have big gains, taking profits would be profitable. But aside from an overheated IPO market, Cramer said he saw no red flags.
Some investors have tried to compare the current market to that of 1987 and 1999 – two other times when stocks have made significant gains, until they collapse dramatically. But Cramer noted that the current market looks nothing like 1987, when stocks traded on average 29 times earnings, which is far below the current average of 17 times earnings. In 1987, there was also a flood of foreign money flowing into the shares, as well as a foamy "portfolio insurance" interfering with the futures markets. None of these things exist today.
For 1999, Cramer said the market was not yet valued, nor even sales, at the time. Instead, investors measured companies based on eyeballs and clicks. It is also very far from today, where Apple (AAPL – Get Report) sells 16 times more than its revenues and Facebook (FB – Get Report) is trading 21 times.
In fact, what scares Cramer about the current market, it is neither the assessment, nor the Federal Reserve, nor China, but the tidal wave of new IPOs that risk of overwhelm investor demand. Apart from that, Cramer concluded, the stock market remains in pretty good shape even after the rebound of 2019.
Cramer and the AAP team add Shopify (SHOP – Get Report) to their memory. Find out what they say to their investment club members and join the conversation with a free trial subscription at Action Alerts Plus.
Executive decision: Advanced Micro Devices
For his "Executive Decision" segment, Cramer met with Lisa Su, president and CEO of Advanced Micro Devices (AMD – Get Report), the chip maker who took market share from rival Intel (INTC – Get Report).
Su said that AMD had excellent end markets, including PCs, games and the data center, which all remain very powerful and continue to grow. She said that 2019 would be a great year for the company and that its revenues would increase sharply.
Asked about the low gross margins, Su pointed out that margins had increased five points from last year, but that as their new products are adopted, they will only grow.
Acting partners, Su explained that AMD was partner of the best companies in the sector, including Sony (SNE – Get Report), Amazon (AMZN – Get Report) and Apple. That's partly why AMD was able to celebrate its 50th anniversary this week.
Know your IPO
In its "Know Your IPO" segment, Cramer is interested in Beyond Meat, the herbal food company that is expected to debut under the BYND ticket. On Wednesday night, Beyond Meat set its initial public offering at $ 25 per share. The company plans to sell 9.6 million shares at this price, generating more than $ 240 million.
Beyond meat is already one of the fastest growing food companies in America and if herbal meats are turning into herbal milk, this company has a lot of growth margin. Its products mimic the appearance, feel and packaging of ordinary burgers and sausages, but are designed to be better for you and better for the environment. Beyond Meat products are already available in 17,000 stores across the country.
In terms of financial results, Beyond Meat recorded a 170% growth in revenue last year, but midway through the expected IPO range, Cramer said the company is would trade 17 times more than last year's sales. However, based on 2019 sales, this estimate drops to just six times sales.
Cramer noted that previous IPOs, such as Pinterest (PINS and Zoom Video, were trading at 20 and 50 times sales, respectively). He stated that Beyond Meat was a purchase below $ 35 per share. .
Decision of the executive: Chegg
In his second Executive Decision segment, Cramer also met Dan Rosenweig, President and CEO of Chegg (CHGG – Get Report), the student services company whose shares have grown 550% over the past five years. years, of which 22.3%. far in 2019.
Rosenweig said that students today are learning more and learning more often than ever before, which means they need more help. He stated that there were 36 million high school students and colleges around the world, as well as other students holding partial diplomas or taking part in other programs.
Chegg's technology simply did not exist five years ago, Rosenweig added. The company has 28 million online content and resources for students for as little as $ 14.95 per month.
Asked about their reputation, Rosenweig said that most schools and teachers welcome and encourage Chegg's help. Chegg does not encourage cheating and does not have any papers to download, he added.
The key metric for Apple
In his "No-Huddle Offense" segment, Cramer reminded viewers that Apple was no longer just a gadget maker. That's why equities could have exploded 4.9% on Wednesday, while sales of iPhone, the flagship product of the company, fell by 17% for the quarter.
Cramer said the key measure for Apple was no longer units or sales, its subscribers, since the revenue from services now exceeded $ 11.5 billion. This is important, he said, because subscription companies have a different value than the companies in the devices. This is partly for this reason that Apple has seen its rating go from 11 times its profits to 16 times its profits and that is why this valuation should continue to increase.
In real money, Cramer remains true to his vision of Apple. Get more of his ideas with a free trial subscription to real money.
Lightning Tower
In the Lightning Round, Cramer was optimistic about Kohl (KSS – Get the report), Exxon Mobil (XOM – Get the report), Chevron (CVX – Get the report), Delta Air Lines (DAL – Get the report), Arrowhead Research (ARWR). Report), Wayfair (W – Get Report), Varonis Systems (VRNS – Get Report) and Palo Alto Networks (PANW – Get Report).
Cramer was bearish on Allergan (AGN – Get Report).
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