Jim Cramer's Mad Money Review

Gap Inc.'s sales are slumping and shoppers appear unlikely to spend more anytime soon, but the clothing retailer still boosted its first-quarter profit by 40 percent by managing inventory and cutting costs.
"We are pleased with our first-quarter performance in what undoubtedly was one of the most difficult retailing environments in recent memory," Gap Chairman Glenn Murphy said in a conference call with analysts.
The San Francisco-based merchant said Thursday that it earned $249 million, or 34 cents per share, during the three months ended May 3. That compared with net income of $178 million, or 22 cents per share, at the same time last year.
Revenue for the period fell 5 percent to $3.38 billion.
The earnings released after markets closed beat the average estimate of 30 cents per share among analysts polled by Thomson Financial. The revenue missed analysts' target of $3.42 billion.

Labels: Gap Inc., GPS

Fall into the Gap (GPS)
Although Cramer admits he has disliked retail lately, the sector will be a hot area when the Fed continues to cut interest rates. What was once the worst of the worst, Gap, is now best-of-breed, with a better balance sheet, new CEO Glenn Murphy, $2.7 billion in cash and investments and a revenue of $151.9 billion. In addition, this "great turnaround story" is buying back stock aggressively and is polishing its Banana Republic Brand. Cramer would wait about 5 days before buying.
Old King Kohl's: Limited Brands (LTD), Tween Brands (TWB) and Kohl's(KSS)
Unlike LTD and TWB, retailers Cramer thinks deserve to be doing badly, it is a mystery that people seem not to like Kohl's, which has "dropped like a rock;" a full 28% since April. Cramer likes the fact no one is paying attention to Kohl's which sells at 13x forward earnings and has a growth rate of 18%. He also noted the store is focusing on high-end designer brands, such Vera Wang's label. Cramer concluded KSS has the best risk-reward if the Fed keeps cutting and "deserves to be bought."
Fly Like an Eagle: American Eagle Outfitters (AEO)
Cramer suggests looking for retail stocks with vigorous insider buying and low evaluations; these factors characterize AEO, which is "worth buying." AEO's sales increased 17% year over year and is currently selling at 12 times next year's earnings. Craner would wait until the stock dips to between $22 and $25 before buying.
Mad Mail: Crocs (CROX), American Eagle Outfitters (AEO) Although Cramer still believes CROX has further to climb, he admits concern over the company's insider selling; "I will temper my enthusiasm a tad," he said. Cramer added AEO is a good stock for a 7th grader, and is an investment that can be held onto for a few years.

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Labels: AEO, CROX, GPS, Hot Stocks, Jim Cramer, KSS, LTD, Mad Money, TWB

"Pipeline Play": Biosite (NasdaqGS: BSTE)Cramer wanted viewers to take a look at Biosite which will be in demand if the Democrats "storm the winter palace" in November, because the money will go out of Big Pharma into "small, diagnostic plays." He likes the fact that Biotech is new and not yet played out, and comments that this producer of diagnostic tests keeps reinvesting money into new products. Cramer added Biosite is "sitting on top of a new product cycle," and should see an upside as well as more analyst coverage. He also predicts a short squeeze which should bring the stock up, and notes the company implemented a 12% buyback of its stock, and Fidelity is increasing its stake in the company from 12% to 15%. Cramer likes Biosite as a "pipeline story" and thinks the shorts are going to be sorry.Here Comes the Sun Microsystems (NasdaqGS: SUNW)Cramer declares that SUNW, a stock he has "hated for a very long time," is now an "under -$10 turnaround" because its new management is making serious changes by cutting costs and continuing to improve its sales. However, he cautions against impulse buying, and urges investors to find a good entry point and not to buy before Monday afternoon. Cramer sees upgrade potential, notes that its server business is "en fuego" and its software business is strong. He reminds investors to use limit orders when buying.The Week Ahead: GlobalSantaFe (NYSE: GSF - News), Marvell Technology (NasdaqGS: MRVL), Analog Devices (NYSE: ADI - News), Blockbuster (NYSE: BBI - News), Dynegy (NYSE: DYN - News), Foster Wheeler (NasdaqGS: FWLT), McDermott (NYSE: MDR - News), Charter Communications (NasdaqGM: CHTR), Sprint (NYSE: S - News), Gap (NYSE: GPS - News), Viacom , and VeriFone (NYSE: PAY - News)On Monday, Cramer suggests buying GSF before it reports a "blowout quarter" and would pick up MRVL after its disappointing report. He sees hope for MRVL because ADI indicated the worst is over in the chip inventory cycle. Cramer says investors should sell BBI before Tuesday and buy some back after a selloff, and he would do the same with DYN. He predicts strong earnings for FWLT and MDR, would buy CHTR ahead of its report, and would only pick up Sprint if it has an "incredibly miserable" quarter. Cramer also suggests taking a look at GPS, Viacom and PAY.Mad Mail: Sirius Satellite Radio (NasdaqGS: SIRI) and XM Satellite Radio (NasdaqGS: XMSR)When faced with a potential merger, Cramer says it is better to buy stock in the stronger rather than the weaker company, because even if the deal is off, the better company will rise.

Labels: ADI, BBI, BSTE, CHTR, DYN, FWLT, GPS, GSF, Jim Cramer, Mad Money, MDR, MRVL, PAY, S, SIRI, SUNW, XMS

Laureate Education (NasdaqGS: LAUR), The Gap (NYSE: GPS - News): The online education, paper and bank sectors are rising from the dead amid the frenetic M & A activity recently, commented Cramer who discussed LAUR as an undervalued stock which is not getting enough credit for its Latin American division. However, he doesn't think that leveraged buyouts are for every company, but sees GPS as a perfect LBO opportunity, because he believes it would perform better as a private company. Selling 500 to 1,000 stores would be "catastrophic for the company's earnings," said Cramer, pointing out that GPS would have the flexibility as a private company to undertake unpopular reforms that are necessary for a turnaround. Although many companies do well publicly, "the payday for private, I find, has been very positive," he said. He concluded by noting that not a lot of capital has been going into the market because people are "fed up with our country" and he thinks that Europe may be a safer place to invest.
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Labels: GPS, Jim Cramer, LAUR

Summary: Analysts are negative about Gap Inc. (NYSE: GPS - News), citing its lack of fashion focus and the difficulties of replacing outgoing CEO Paul Pressler. Since early 2005, the company has seen a steady trend of declining sales. But Robert Olstein, head portfolio manager of the Olstein All-Cap Value Fund, recently began accumulating Gap shares, and says he has the answer to the companies woes. Olstein says Gap needs to perform a McDonald's-like turnaround by closing underperforming stores and freeing up cash to find the clothing customers want. Timothy Kang, an Olstein analyst, says it can easily boost cash-flow from $1 to $1.50/share. The company, which had $2 billion in debt before Pressler took over, now has $1.9 billion to spare. Olstein also has a couple of recommendations about whom to hire to replace Pressler, and says that if all goes well, shares ($19) could hit at least $27 in 12-18 months.
Published by SeekingAlpha

Labels: GPS

A Toast for Diageo (DEO)
Continuting his series on favorite foreign stocks, Cramer declared that his #2 pick is the British liquor company, Diageo. In spite of a 30% increase since he began to recommend it, Cramer calls the stock cheap, notes its generous dividend and declares it "recession proof" since people drink even (or especially) when times are bad. In addition, he says the company is a low-risk, indirect play on China where its scotch is popular and cheap. Cramer expects Diageo to expand into Russia, India and Brazil and notes that it is "dominating" the U.S. market with its positive volume growth. In addition, Cramer likes Diageo because of its low estimates and strong marketing.
Fall Back into the Gap (GPS)
Although Cramer has hated the Gap for a while, he now declares that it is a triple buy since it did not budge after reporting the worst quarter Cramer has seen with "horribly deteriorating" cash flows and the resignation of its CEO, Paul Pressler. However, Cramer's rule is that if a stock does not decline on bad news, it is going higher, and his favorite retail analyst, Dana Cohen, has predicted that GPS will go to $25 from $19.38. Retail comebacks, evidenced by J.Crew and Gucci, happen, and even if GPS will not see a turnaround, Cramer believes the stock will rise on an acquisition by private equity firms, which have cash "shloshing around" and are eager to spend.
Mad Mail: Plantronics (PLT) and World Wrestling Federation (WWF)
Cramer would sell PLT because it is too "commodity focused," but gave two thumbs up again to WWF, which he believes is a "great play" although it hasn't moved very much.
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Labels: DEO, GPS, Jim Cramer, Mad Money, PLT, WWF

Most Under Priced Calls: These are the most under priced calls of all stocks in our database. While the Equities Explosion List finds groups of calls for individual equities that are under priced, this list finds the most under priced individual calls. Thus, the options listed here will tend to be more severely under priced.
Diamond Offshore Drilling Mar 85 Calls (NYSE:DO - News). DO's PowerRating is 4.
Most Under Priced Puts: These are the most under priced puts of all stocks in our database. While the Equities Explosion List finds groups of puts for individual equities that are under priced, this list finds the most under priced individual puts. Thus, the options listed here will tend to be more severely under priced.
Vertex Pharmaceuticals Mar 40 Puts (NASDAQ:VRTX - News). VRTX's PowerRating is 7.
Most Overpriced Calls: These are the most overpriced calls of all stocks in our database. While the Equities Implosion List finds groups of calls for individual equities that are overpriced, this list finds the most overpriced individual calls. Thus, the options listed here will tend to be more severely overpriced.
Intuitive Surgical Feb 100 Calls (NASDAQ:ISRG - News). ISRG's PowerRating is 4.
Most Overpriced Puts: These are the most overpriced puts of all stocks in our database. While the Equities Implosion List finds groups of puts for individual equities that are overpriced, this list finds the most overpriced individual puts. Thus, the options listed here will tend to be more severely overpriced.
eBay Inc. Feb 30 Calls (NASDAQ:EBAY - News). EBAY's PowerRating is 5.
Stocks with Abnormal Call Volume: These are stocks which showed unusual call option volume not easily explained by arbitrage operations. The appearance of a stock on the Call Volume Alerts list suggests a possible takeover, extraordinarily good earnings report, or other news which may favorably affect the stock.
Pacific Ethanol (NASDAQ:PEIX - News). PEIX's PowerRating is 3.
Stocks with Abnormal Put Volume: These are stocks which showed unusual put option volume not easily explained by arbitrage operations. The appearance of a stock on the Put Volume Alerts list suggests an extraordinarily negative earnings report, or other news which may negatively affect the stock.
Beckman Coulter (NYSE:BEC - News). BEC's PowerRating is 5.
Abnormal Put/Call $ Volume: These stocks have the highest dollar put volume in relation to their call volume. These high ratios are indicative of extreme bearish sentiment in the underlying stock.
The Gap (NYSE:GPS - News). GPS' PowerRating is 6.
PowerRatings are courtesy of PowerRatings.net

Labels: BEC, DO, EBAY, GPS, ISRG, PEIX, VRTX

Gap (NYSE: GPS - News): Cramer says its time to get out of Gap amid rumors of a takeover. The stock jumped 8% on this speculation, but Cramer thinks the "fundamentals are so bad" that it is unlikely that Gap will fetch a buyer who will offer to pay a premium to Monday's prices. "This is a challenged company," Cramer said. "Sell it right here."
Nordic American (NYSE: NAT - News), Exxon (NYSE: XOM - News), Verizon (NYSE: VZ - News) and General Dynamics (NYSE: GD - News): Cramer says there will be a glut of doubled hulled oil tankers approaching and he would sell oil tanker builders such as NAT. Although these companies offer high dividends, he cautions that they do nothave the support to sustain such yields through declines since they are not earnings machines like XOM and Verizon. Cramer predicts that GD will go higher even after a 3% rise on Monday following an upgrade by Cowan. He says the Democrats don't want to seem weak on defense and Cramer gives GD two thumbs up.
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Labels: GD, GPS, Jim Cramer, NAT, VZ, XOM

Bright Smile: Syneron Medical (NASDAQ: ELOS - News) with Palomar (NASDAQ: PMTI - News)
After telling people to swap out of ELOS into what he had thought was best-of-breed laser company Palomar, Cramer says Syneron is going to make a comeback after having been written off by The Street following two lackluster quarters. The stock was in the mid-40s, but is now sitting at $25.70, has an average of 30% revenue growth and is up46% in operating margins. Cramer likes ELOS because it has a major catalyst, dental laser, which will mean significant growth for the company. In addition, ELOS could be a takeover target. Cramer says the worst is over for this cheap stock and it is "ready to run."
DivX (NASDAQ: DIVX - News) Delay
Although he called DivX "the hottest of the hot" and the stock is up 52% since he recommended it in September, Cramer would wait on DivX. This compay has a deal with Google and is expanding into Eastern Europe and India, but has limited upgrade potential, since analysts give it four buys and one hold. Although there won't be a major selloff until its lockup expiration on March 22, Cramer believes that not many people will want to get into DivX until after that date. In addition, a second offering could crater the stock. "I don't want you in DivX for the next few months," Cramer said, addomg that he likes the stock cheaper.

Mad Mail: Trump Entertainment (NASDAQ: TRMP - News) and Gap (NYSE: GPS - News)
Cramer regretted making the prediction that TRMP would get a license to build a casino in Philadelphia, and said investors could hold onto the stock, but it probably won't be moving until summertime. Concerning GPS, Cramer doesn't want to be for or against it and said that it has no leveraged buyout on the horizon.
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Labels: DIVX, ELOS, GPS, Jim Cramer, Mad Money, PMTI, TRMP