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Cramer's 'Mad Money' Recap: Dolby Stock Still Hums

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

Although Dolby (DLB) has had a big move over the last month, it is still a buy, Jim Cramer told viewers of his "Mad Money" TV show Thursday.

"We're not concerned with what has already happened at Dolby, but what is going to happen there in the future," he said. After reporting a "great" quarter last month, the stock soared, but according to Cramer, it did not soar high enough.

Dolby reminds Cramer of MasterCard (MA). Cramer said when he first recommended MasterCard the stock was in the $40s and after it went higher he recommended taking some off the table.

He reminded viewers that when the stock hit $60 he advised people to get back into it, as it kept going higher. Cramer believes Dolby should also continue to go higher, even though it has had a big run.

The company raised its 2007 estimates by 8 cents a share, which Cramer believes is too conservative, considering this year was a bad year and the company still managed to earn 80 cents a share. Cramer said Dolby should earn at least a $1 a share in 2007.

Also, not only does he consider Dolby "a great play on the flat-panel TV upgrade cycle," but the company is also reaching into gaming consoles, which is a lucrative market.

Plus, 79% of Dolby's revenue comes from licensing its products, where the margins are "so, so big," Cramer added. And during an investor meeting on Thursday, Dolby talked about new initiatives in the video market, which should further increase its licensing revenue, he said.

When you see Dolby, think of a stock that is going higher, Cramer said.

eBay Stock's Worth the Bid

The time has come to buy eBay (EBAY), the company that flushed $2 billion down the toilet to buy Skype and the same stock Cramer kicked around all summer, he told his viewers.

At $31 and change, Cramer dared, he said, to call it "a steal." "It has become the ultimate value stock."

At the price it's at right now ($31.30), the stock reflects all of the problems the company has but none of the positives, Cramer said. "It has gotten too cheap."

Although people generally know all of the bad things about eBay, the company also has some positive points, he said. For one thing, it owns PayPal, which Google (GOOG) has been trying to conquer with an alternative service, Cramer said. "But for once, Google is losing."

He went on to say that he hasn't given Margaret Whitman, eBay's chief executive, enough credit. While Cramer's been talking the company down, she has been "wheeling and dealing" with other companies like Google and Yahoo! (YHOO), a stock he owns for his Action Alerts PLUS charitable trust.

In May, eBay launched a new partnership under which it made Yahoo! "the exclusive provider of graphic advertisings and sponsored-search results on eBay, a great deal for eBay," Cramer said. In August, it made Google "the exclusive provider of text-based advertising outside the U.S."

In addition, it struck a deal in November with Baidu.com (BIDU), under which Baidu will promote eBay's version of PayPal in China, Cramer said.

Moreover, said Cramer, not only does eBay have $3.2 billion in cash with no debt, but it is buying back stock.

Although this stock was previously "a victim of its own success," as the stock went too high and fumbled, "it is now worth owning," Cramer said. "Not only is it cheap, it's good."

Sell Block: Eating Crow

In his "Sell Block" segment, Cramer said he got Hershey (HSY) wrong and encouraged people to sell the stock once it hits $50. Hershey shares closed Thursday at $49.34. The company on Wednesday lowered its earnings projections.

After Sirius Satellite Radio (SIRI) lowered its sales outlook this week, Cramer realized that although he thought it didn't need to merge with XM Satellite Radio (XMSR) to do well, he was wrong.

He said he's going back to the way he felt originally, which is that there's too much competition and not enough demand for Sirius to succeed without merging with XM. "It's probably not going anywhere except slightly down unless it gets that merger with XM Radio," Cramer said.

Also, even though he liked Panera Bread (PNRA), Cramer said the company recently reduced its earnings forecast because of storms in the Midwest.

He does not believe that the storms, which only affected 40 out of Panera's 976 bakery cafes are the reason for the reduction, however. "I believe its growth is slowing," Cramer sad. "It is running out of steam and I was wrong to recommend it. Get rid of it."

Moving on, Ford (F), which he suggested buying as "a turnaround play," is now issuing convertible bonds at a 4% yield.

"Now [buying] the common stock is plain wrong," Cramer said. "If you want to play Ford, then play it with the convertible bond for less-risky exposure."

He also advised market players to take some profits in Smith & Wesson (SWHC) and Bankrate (RATE).

Winged Sales Growth

Cramer welcomed Buffalo Wild Wings (BWLD) CEO Sally Smith to the show and asked if the restaurant chain's 11.8% company-owned comparable sales growth is maintainable.

"We think it is," Smith responded, adding that the company is doing everything it can to continue to provide a great experience for its guests that would make them want to come back time and time again.

When Cramer asked if there's room for the company to grow from 400 to 1,000 stores, Smith said, "Absolutely."

The Minneapolis-based chain is also expanding to the coasts, she said. "We just opened a new store in NYC, in Brooklyn, yesterday." She said the chain's guests demanded that the company go national, which is why it made that move.

"We started getting letters from all over the country," she said. "They were craving the sauces and the wings and were wondering when we were going to their towns."

Cramer said he sees "a multiyear growth path," with this Buffalo Wild Wings. "If it ever comes down, you have to back up the truck" and buy some.

To view Cramer's interview with Smith, click here.

Lightning Round

Cramer was bullish on Brush Engineered Materials (BW), Barr Pharmaceuticals (BRL), Disney (DIS), Riverbed Technology (RVBD), Harley-Davidson (HOG) and Companhia Vale do Rio (RIO).

Cramer was bearish on Compuware (CPWR), Mindray Medical (MR), China Medical (CMED), AtheroGenics (AGIX), Biovail (BVF), AMREP (AXR) and Rambus (RMBS).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.