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Cramer's Mad Money Recap 10/5: Amazon, Netflix, Starbucks

Jim Cramer says stocks are recovering because investors are coming to terms with inflation and oil prices, and the reopening trade seems to be back in fashion.
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If a company is doing well, but their stock price doesn't reflect it, that's when you get a relief rally like this, Jim Cramer told his Mad Money viewers Tuesday. If you missed this however, Cramer said you'll have to wait for the next buying opportunity.

So what was behind Tuesday's bounce? First, many of the "buy-the-dip" investors have been driven out of the market because they can't take the pain. Next, investors are beginning to accept that higher inflation might be here to stay for a while longer. And third, some of the market's former leaders, like big tech, are starting to gain some steam. Cramer called out Amazon  (AMZN) - Get Amazon.com, Inc. Report, Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report and Workday  (WDAY) - Get Workday, Inc. (WDAY) Report as a few of the standouts.

Over on The Street's Action Alerts PLUS, Chris Versace and Bob Lang write Tuesday that they're unfriending Facebook: 'We'll exit FB shares and book a hefty win. Candidly, with the opportunities ahead of us in 5G, artificial intelligence, augmented reality, virtual reality, big data, cybersecurity, precision farming, and plant-based proteins, to name a few, we'd rather be involved with companies that offer superior growth prospects with a lot less hair on them.' Read more and get their investing insights and active trading ideas.

Investors have also come to terms with rising oil prices, Cramer said. Any rally when crude oil is heading higher is a positive sign. He noted that higher interest rates also didn't hurt the growth stocks today, which is also good news.

Finally, Cramer noted that the reopening trade seems to be back, and even the Chinese stocks were able to mount a comeback in today's session. He said it might be time to nibble on stocks like Starbucks  (SBUX) - Get Starbucks Corporation Report and Nike  (NKE) - Get NIKE, Inc. (NKE) Report if the Chinese economy begins to recover.

Discipline Trumps Conviction

If there's one thing to remember on Wall Street, it's to take profits when you have them. "Discipline always trumps conviction," Cramer reminded viewers, as he circled back to Lightspeed LSPD, the turbo-charged payments processor. Shares of Lightspeed have plunged over 18% in just a week, after a scathing research report was issued on the company.

Among the allegations raised in the report are that Lightspeed overinflated its business outlook pre-IPO, its suffering from slowing organic growth and it grossly overpaid for recent acquisitions. The research firm dubbed Lightspeed "the poor man's Shopify"  (SHOP) - Get Shopify, Inc. Class A Report.

In its most recent quarter, Lightspeed posted 220% revenue growth, but Cramer noted it also had no less than five acquisitions last year, meaning it paid over $2 billion for that growth rate. There's a big difference between organic growth, the good kind, and inorganic growth, which stems from acquisitions. Organic growth is sustainable, inorganic growth is episodic. And when your stock is priced for perfection, you can't afford any hiccups.

Cramer said given the stock's sky-high valuation, he cannot recommend owning it in light of these recent allegations.

Off the Charts

In his Tuesday "Off The Charts" segment, Cramer checked in with colleague Carolyn Boroden, also known as the "Fibonacci Queen," for her latest read on where the markets are headed.

Using a daily chart of the S&P 500, Boroden previously noted a number of Fibonacci timing cycles coming due between Sept. 3 and Sept. 10, which signaled to her the market was about to change direction. Indeed, on Sept. 2, the market peaked and we've been trading lower since.

Boroden now sees timing cycles converging between today and Thursday, however she wasn't ready to sound the all-clear and declare us at the bottom. She felt the market could still head lower, but noted that a relief rally is certainly warranted. She determined the S&P's floor of support is around 4,278, which happens to be the level we hit Monday.

Executive Decision: Enbridge

In his first "Executive Decision" segment, Cramer spoke with Al Monaco, president and CEO of Enbridge  (ENB) - Get Enbridge Inc. Report, the pipeline operator that has pledged to reach net-zero emissions by 2050. Shares of Enbridge currently yield 6.6%.

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Monaco explained that a lot has changed at Enbridge over the past four years. He said his company delivers critical energy to the best markets in North America and it does so with a focus on safety and reliability. Enbridge is providing predictable cash flows that it's putting to work in the ground and also returning to shareholders. The balance sheet is in great shape as well, he added.

When asked about their environmental targets, Monaco said that as a pipeline operator, Enbridge is not a huge carbon emitter, but it will still take an "all of the above" approach to achieve the net-zero goals. It will be employing new technologies, including self-powering solar facilities, as well as conservation efforts to help get the job done.

As for the price of natural gas, Monaco admitted he is worried about pricing in the Northeast going into the winter months. He said natural gas isn't connected globally, as is oil, which means the Northeast and other areas, like Europe, are in for higher prices as our current infrastructure struggles to keep up with demand.

Back to FAANG

In his No-Huddle Offense segment, Cramer provided an update on FAANG, his acronym for Facebook  (FB) - Get Facebook, Inc. Class A Report, Amazon, Apple  (AAPL) - Get Apple Inc. (AAPL) Report, Netflix and Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report, along with Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report.

Cramer said the appeal of FAANG has always been the companies' willingness to adapt and change. Remember when Netflix mailed DVDs? Now the company streams its own films. Meanwhile, Amazon has evolved from a "nice-to-have" to a post-pandemic essential service.

Apple is always evolving, with new phones and a slew of new services that users can't live without. Google's YouTube has evolved into one of the most important content channels on Earth, meanwhile Microsoft has been able to raise prices on Office365 without anyone even noticing thanks to their continued innovation.

And that brings us to Facebook. Cramer said Facebook continues to be a terrific advertising platform and champion for small business, but we cannot ignore recent events. First, Apple made it harder for apps like Facebook to track users. And then there's this week's Senate hearings which Cramer said "concerns me greatly."

The Internet is not a child-friendly place, he noted, and issues like teen depression and suicide must be addressed. Facebook needs to prove they care about the safety of their users. Until they do, we must think twice before investing with them.

Lightning Round

Here's what Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Tuesday evening:

Jefferies Group  (JEF) - Get Jefferies Financial Group Inc. Report: "I think they're terrific. That one goes higher."

Hut 8 Mining  (HUT) - Get HUT 8 MINING CORP. Report: "I'd rather bet on crypto directly. If you want Bitcoin, buy Bitcoin."

Lexicon Pharmaceuticals  (LXRX) - Get Lexicon Pharmaceuticals, Inc. Report: "I like companies like this."

Bank of America  (BAC) - Get Bank of America Corp Report: "I like Bank of America. I think it's a great situation."

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