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Cramer: Tesla Is Matched Only by Amazon in Shareholder Enthusiasm
Posted at 3:34 p.m. on Thursday, Feb. 23, 2017
I am talking about Elon Musk, the CEO of Tesla (TSLA) , the only person on this planet who could report a quarter with $1 billion in negative free cash flow, vastly declining gross margins, $16 billion in debt and a suddenly departing CFO, and still see his stock go higher on the news!
From the moment the conference call began last night--with a seemingly outrageous question from Morgan Stanley's Adam Jonas about the impact of President Trump's desire to put a man on the moon on Musk's plans for Tesla, to when Musk talks about being "very close to the edge" on the company's finances--there is an otherworldliness about this company that I have only seen or heard one other time ago: Amazon (AMZN) .
Musk, like Amazon's Jeff Bezos, has grand ambitions, and if you want to be in on those ambitions you have to buckle up and get ready for the turbulent ride.
In fact, there's only one real difference that I can tell between Bezos and Musk when it comes to these quarterly reports: Bezos never gave a damn about them. But Musk? He answers everything and, the more outrageous the answers, the more everyone likes it!
Of course, some of them are easier than others. Yes, the CFO Jason Wheeler, late of Google (GOOGL) finance, is leaving after only two years on the job. That could be horrifying. Except he's staying on until April and is being replaced by Deepak Ahuja, the former CFO, who was incredibly well liked before he retired.
Yes, the company may be close to the edge financially and, as Musk says, it "probably makes sense to raise capital to reduce risk." But when you consider that it last came to the markets with 6.5 million shares at $215 back in May of 2016 and you are up 70 points, maybe the next secondary is a gift.
And yes, Musk will run the company cash flow negative. However, that's because he doesn't want to miss out on sales. Don't sniff. How many times have we heard the fastest-growing tech companies say exactly the same thing and we have gone gaga over it? The fact is, there is no issue of demand here. We have to take it at face value that Musk could sell all 500,000 cars he can make--including the new, less expensive Model 3 series--because we know there's a long waiting list for the latter.
How long? Oops, after disclosing these numbers before, he no longer wants to do so. Creates too much speculation.
There isn't anything that Musk won't answer. Unions? Very interested in organizing. But his plants are the safest and the vesting package is better than any other auto company. Solar City drag? Hardly. It boosted the bottom line. Margins on new car? "Horribly negative." Then again, though, what would you expect, if he is going to churn out 500,000 cars next year?
As I said, he has answers for everything, and they work with the public, or this stock would be crushed today.
Oh, and Mars? Nope. He's not that interested that he would leave Tesla to work on the pending expedition. He's staying there "forever" or unless someone kicks him out. Although, in true Musk style, he didn't exactly put to bed the notion of merging Tesla and SpaceX.Who knows? If he did it, they'd probably lap that up, too.
Cramer: Home Depot Can't Be Beaten by AmazonPosted at 6:22 a.m. on Wednesday, Feb. 22, 2017
Yes, when you see numbers that you saw Tuesday on this company's quarter, numbers that showed "broad-based growth" in all categories, numbers that show great demand for both the professional and the do-it-yourselfer in all regions of this country, you can't just say Home Depot's doing it right, even as it most certainly is. There are too many positives here for it just to be management, as terrific as management are.
Now, I don't want to make too much of broader macro trends mentioned on this call, because Home Depot did so many things positive for shareholders this quarter, from a magnificent 29% dividend boost with a targeted payout ratio jumping from 50% to 55%, to an astounding $15 billion buyback, which is real and in there every day, to a staggering 7.1% December comp store sales figure.
But Carol Tome, the amazing chief financial officer, had to struggle on the call to figure out what all of this strength is emanating from. It's not just employment gains and it is not just share donor, although you could tell from between the lines that the company is still taking appliance share from Sears (SHLD) . Nor is it better online service or offerings, although I like the 500-store remodel concept they discussed on the call.
No, Tome is talking about a whole new level of strength coming from housing and is incorporating what she calls the cumulative wealth effect of home price appreciation. She noted on the call that since 2011 home equity is up 108%, which is $50,000 per household on average and that's driving some of the shift toward spending that Home Depot is capturing. The money that's not going to the car or the iPhone continues to go to the home in ever greater proportions.
And she's not fearful it goes away if the Fed raises, as she pointedly noted that with each 25 basis point increase in rates you get $40 a month more in interest, something that won't really hurt affordability until we have had many, many rate increases. Think about that as you worry about the Fed minutes today.
So the combination of that wealth increase and the lack of any spending inhibition from rising rates gives this company a very long runway to continue to report incredible quarters.
Now, a lot of what Home Depot does right involves what it doesn't do wrong, namely sell apparel and entertainment, two categories that Macy's (M) talked about that are just atrocious. Home Depot doesn't feature handbags or fashion watches or intimate apparel or fragrances, all of which Macy's pointed out as being subpar lines of merchandise. Instead it has flooring and garden equipment, both of which I bet have terrific springs.
Also, with Home Depot you do not have the possibility of losing a sale to the other guy in their mall. They tend to be the only guy in their mall. Plus, they've figured out online: order and pick up, just plain order, or order and store delivers. Doesn't matter. It works for the customer; it works for Home Depot.
The simple fact is that the consumer is still spending on housing, still putting more money into their house and they are doing it increasingly with Home Depot because it's just the best at what it does. Or to put it another way, unless Amazon (AMZN) wants to open stores that are the same as Home Depot's but with dramatically lower prices, this chain remains one of the few that can't be beaten by the big retail bear from Seattle.