Shares of the old-line department store operator saw their worst trading day ever after Macy’s reported lower holiday sales for the end of 2018 and slashed its earnings outlook for the year. Management specifically highlighted women’s sportswear, sleepwear, fashion jewelry, fashion watches and cosmetics as areas of weakness.
“It gave you the impression of a broad-based slowdown in consumer spending,” Cramer said on “Mad Money.”
But after seeing sportswear retailer Lululemon raise its fourth-quarter outlook, consumer technology giant Apple get supply-constrained for its increasingly popular Watch, and price-conscious companies like Amazon and Ulta Beauty seize on selling affordable makeup, Cramer started to think that Macy’s weakness was company-specific.
“Put it all together and it makes me think that Macy’s has some unique issues that simply don’t reflect what’s going on in the rest of retail,” he said, adding that PVH, the apparel manufacturer that sells its products in Macy’s stores, recently issued a positive pre-announcement of its quarterly results.
That’s why investors can’t always look at the retail sector as one bucket of similar companies, the “Mad Money” host said.
“To me, the real takeaway from the Macy’s madness is that you’ve got to go category by category,” Cramer explained. “When you do that, you realize that retail isn’t a losing ETF, it’s a sector with both winners and losers. If you want to try to make money by picking stocks, you need to be able to tell the difference.”
“Netflix serves as a powerful reminder that the subscriber business model is incredibly strong here,” the “Mad Money” host said. “A recurring service revenue stream is very, very lucrative.”
Better yet, Wall Street loved the move, with Netflix’s 6.52 percent rise taking the broader market higher. That’s a signal that other service providers that charge customers on a recurring basis can follow in Netflix’s footsteps, Cramer said.
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The market’s fear gauge is signaling that stocks will see less volatility and higher prices in the next few months, Cramer said after consulting with a top volatility chartist.
The fear gauge, also known as the CBOE Volatility Index or the VIX, tracks S&P 500 option prices to measure near-term expectations of volatility, or the chances that the stock market will endure dramatic swings in the near future. When the VIX rises, it tends to mean investors are growing concerned about the market and making bets to protect themselves.
But the VIX has been trading lower since it peaked in December amid a marketwide sell-off, suggesting that fears about the market are subsiding. To make sense of the action after the late-2018 fallout, Cramer asked technician Mark Sebastian, founder of OptionPit.com and resident “Mad Money” VIX expert, for his input.
Sebastian, who also works with Cramer at RealMoney.com, said that while the nature of the VIX has changed, it’s still helpful in predicting what’s next for the market. And, right now, it’s quite positive, he told the “Mad Money” host.
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It’s no secret that Apple has lofty ambitions in the health-care space. Now, it’s time for the company to make “a big, splashy acquisition” to prove it’s serious, Cramer says.
“Apple has a problem here,” he said Tuesday. “As much as we might love the service revenue stream created by all these apps, including the health-care ones, most investors treat Apple like it’s some kind of hardware company … on the verge of becoming obsolete.”
The problem stems from the iPhone, Cramer explained. In 2018, iPhone sales accounted for 63 percent of Apple’s revenue, so the moment they started to decline, investors wrote the company off.
But with an installed base of 1.4 billion users, a growing ecosystem of apps and services and goals of becoming a leading force in digital health care, Apple has a lot more going for it — it just needs to show Wall Street, Cramer argued.
“It’s time for them to make a big, splashy acquisition … in the software space,” he said. “The idea here is that this would make the service revenue stream a larger piece of the pie. […] Perhaps more important, it would force investors and analysts to reevaluate Apple as more than just a hardware company.”
And, to the “Mad Money” host, the answer seemed obvious.
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As companies all over the world transfer their data to the cloud, the cloud itself is fragmenting, says VMware’s Chief Operating Officer of Customer Operations, Sanjay Poonen.
“But then there’s many country-specific clouds. If you go to Germany, [they use] Deutsche Telecom. In France, there’s OVH,” he said. “We have 4,000 of those cloud providers that have built their stack on VMware. So while the big hyperscalers get a lot of attention, those multi-clouds exist. We think that those cloud providers are in their first or second inning of growth and we have got to build partnerships by which we can optimize the world for this multi-cloud world.”
Poonen also touched on VMware’s relationship with its controlling stakeholder, Dell Technologies. The two companies made headlines in 2018 when Dell tried to secure more control over VMware.
“The beauty of this setup is, now, the economic interests of Dell and VMware are perfectly aligned,” he said. “VMware is this Switzerland company that serves any hardware infrastructure on premise, any cloud in the world, and what’s good for VMware is good for Dell.”
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In Cramer’s lightning round, he rattled off his responses to callers’ stock questions:
Dominion Energy Inc.: “That stock is down a lot because it’s merging with a South Carolina utility that a lot of people don’t like. I think they’re wrong. I think you buy it at [a] 5 [percent yield]. And congratulations for what they’ve done in terms of exporting [liquefied natural gas]. They’ve been fabulous.”
IBM Corp.: “I’m with you [on buying IBM down 30 percent]. There was a very good note out today that said, you know what, with a 5 percent yield, and if they get [Red Hat CEO Jim] Whitehurst more involved with management — remember, they’re buying Red Hat — it’s going to be a good deal. I am with you on that.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Amazon, Microsoft and Alphabet.
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