Jim Cramer Explains Why Workday (WDAY), Splunk (SPLK), Salesforce.com (CRM) and Veeva Systems (VEEV) Are Good For The Market

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says the "cohort" of momentum stocks such as Workday  (WDAY), Splunk  (SPLK), Salesforce.com  (CRM) and Veeva Systems  (VEEV) cannot bring down the whole market.

Cramer points out the last time a cohort got "out of control" like this was in March 2000 when the momentum names took over almost the entire market and were predominant in the S&P 500. This time around, these stocks are not as much of a factor despite how often they are discussed.

More importantly, Cramer points to the bottom in March 2000 that led to out-performance from industrial, consumer package goods, utilities and oil stocks. Cramer encourages investors not to think the momentum stocks will pull down the whole market; rather, it could be good for the rest of the market as these stocks come down.

Must Read: Warren Buffett's 10 Favorite Growth Stocks

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Separately, TheStreet Ratings team rates WORKDAY INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate WORKDAY INC (WDAY) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 80.9% when compared to the same quarter one year ago, falling from -$30.94 million to -$55.98 million.
  • WORKDAY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WORKDAY INC reported poor results of -$1.00 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings (-$0.56 versus -$1.00).
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Despite currently having a low debt-to-equity ratio of 0.41, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.69 is very high and demonstrates very strong liquidity.
  • Compared to other companies in the Software industry and the overall market, WORKDAY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: WDAY Ratings Report

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Separately, TheStreet Ratings team rates SPLUNK INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SPLUNK INC (SPLK) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 429.6% when compared to the same quarter one year ago, falling from -$6.16 million to -$32.63 million.
  • SPLUNK INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$0.75 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.75).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SPLUNK INC is currently very high, coming in at 90.99%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -32.66% significantly underperformed when compared to the industry average.
  • Net operating cash flow has increased to $34.43 million or 38.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.60%.
  • You can view the full analysis from the report here: SPLK Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Separately, TheStreet Ratings team rates SALESFORCE.COM INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 37.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, CRM's share price has jumped by 33.78%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SALESFORCE.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SALESFORCE.COM INC continued to lose money by earning -$0.40 versus -$0.48 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.40).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 459.5% when compared to the same quarter one year ago, falling from -$20.84 million to -$116.62 million.
  • Net operating cash flow has declined marginally to $271.24 million or 3.67% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: CRM Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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