Why Did Tech Rally? – Cramer's Mad Money (5/9/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, May 9.

Everyone knows that energy stocks went up on the Iran deal, but why did the tech sector rally? Cramer has the answer. It all started with Morgan Stanley’s note on Micron Technology (NASDAQ:MU) that called near-term conditions exceptional and the cloud business good.

This led to pin action in other tech stocks and the analysts also realized how good Apple’s earnings were, especially when they learned that Warren Buffett raised his stake in the company.

Cramer also added that interest rates breaching 3% is a good thing and it signifies strength in the economy. There is no reason for fund managers to dump stocks due to interest rates. That’s the reason Cramer is liking the banks and thinks they will be market leaders.

The only thing investors should fear now is the up market openings as a decline later can erase the gains and does not present buying opportunities.

Unfair market

Cramer called the market unfair. When the market thinks of a company like a startup – say Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) or Tesla (NASDAQ:TSLA), they are rewarded for spending big. However, when a big company increases spending for growth, they are crushed.

Cases in point are Disney (NYSE:DIS) and Walmart (NYSE:WMT). When Disney said it’s spending on streaming services, the stock got crushed. When Walmart said it’s spending on acquiring India e-commerce giant Filpkart (FPKT), the stock went down.

Cramer said big companies spend too for future growth. If the market doesn’t see this and punishes them, it’s unfair.

CEO interview – Etsy (NASDAQ:ETSY)

The stock of Etsy was up 50% going into earnings and yet the stock went down more than 4% after they reported. Cramer interviewed CEO Josh Silverman to hear more about the quarter.

Silverman said Etsy is different from commodity online shopping. The shopping experience is special and they sell 50M handmade items to 30M users around the world. They have 1.5M sellers registered. He added that no one can comes close in the handmade world.

“It’s just not obvious that their advantages transfer directly into our space. If you’re going to one place over and over again every day to buy all of the commodities of life, when you want something special, you want the antidote to that. You want something that feels different. And Etsy is all about special,” added Silverman, on competition from the likes of Amazon.

Their growing gross merchandise sales would benefit most specialty e-commerce retailers. “The more we can grow gross merchandise sales, the more everybody wins,” he added. The company is also improving search and discovery by acquiring Blackbird in 2016 and also moved their infrastructure to the cloud.

Its mission is, “to make its platform easy-to-use for its sellers so they can focus on making products instead of being businesspeople,” added Silverman.

CEO interview – Zebra Technologies (NASDAQ:ZBRA)

Zebra Technologies reported a huge earnings beat and their stock went up 11%. Cramer interviewed CEO Anders Gustafsson to find out what lies ahead.

Gustafsson said since its start the company has evolved from a productivity enhancement provider to a tech player that helps companies across industries execute on their corporate strategies. They were a part of Super Bowl and yet invisible.

Every player had two sensors under their shoulder pad that tracked every movement of every player, the referee and the ball too, which had a chip that weighed 3 grams under the laces.

The company’s core business is productivity enhancement and that helps companies achieve efficiency. Beyond that, the company has also entered the healthcare arena and that is their smallest but fastest growing segment.

CEO interview – XPO Logistics (NYSEMKT:XPO)

The stock of XPO is up 16% in 2018. The company recently reported good earnings and Cramer interviewed CEO Brad Jacobs to hear more about the quarter.

Jacobs said XPO is growing along with the e-commerce environment. While Amazon may be growing at 45%, smaller players like XPO are enabling that expansion. “We have Amazon as a customer. We have many other e-commerce players as customers. We’re facilitating their growth,” he added.

Their new service, XPO Direct, is a shipping giant that will “open its network of 75 facilities to clients, allowing e-commerce companies to leverage XPO’s warehouses, last-mile hubs and hybrid services for smaller shipments,” said Jacobs.

“The problem that we’re solving for them is they’re now closer to the customer. They’re within 95% of the whole population within one or two days. It’s very, very big,” he concluded.

Viewer calls taken by Cramer

Whirlpool (NYSE:WHR): Cramer decided to get rid of Whirlpool. If they can’t make it in the current environment, there’s no point buying it.

Dropbox (NASDAQ:DBX): It’s a secular long-term growth story. Don’t bother about short-term pain.

Pandora (NYSE:P): They reported a decent quarter but Cramer think Spotify (NYSE:SPOT) is the future.

LGI Homes (NASDAQ:LGIH): All the home-builders went down on interest rate fears.

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