Netflix (NASDAQ: NFLX)
“I love streaming, but I don’t see why I have to run out and buy stock,” Cramer said on “Squawk Box.” “That is insufficient.”
However, he stated that he has no plans to sell the stock.
Even as the stock fell more than 4% to around $508 on Wednesday, the “Mad Money” host suggested that investors who already own Netflix keep it.
According to Street Account, Netflix’s global paid net subscriber additions slowed to 1.54 million in the second quarter, compared to analyst expectations of 1.19 million. While earnings per share of $2.97 were lower than expected, net income increased by nearly 90% year on year to $1.35 billion. Revenue increased by nearly 20% year on year to $7.34 billion, slightly exceeding expectations.
According to a FactSet transcript, Netflix saw strong subscriber growth during the early months of the coronavirus pandemic, and the company’s chief financial officer, Spencer Neumann, acknowledged during Tuesday’s earnings call “a bit of choppiness to our growth” in recent quarters.
“We had a significant pull-forward of subscriber additions in 2020. We also had a push in production of some of our key returning titles as well as big tentpole new releases until the end of the year. However, the company is doing well overall, according to Neumann.
Cramer, on the other hand, expressed reservations about Netflix’s growth trajectory at this point in its maturation process, saying “you don’t want to hear” that some subscriber adds were pulled through.
“Looking at where they’re gaining, it’s in areas where they’re in Covid. Brazil was mentioned. They brought up India. So, I’d like to see a smoothed-out growth story. So I leave and say, “Do you want smoothed-out growth?” “Well, you’ll have to go to Chipotle,” Cramer said, referring to the fast-casual restaurant chain, which also reported earnings Tuesday evening.
“You must visit [semiconductor supplier ASML].” You must have gone to UnitedHealth yesterday or Anthem today. “You can’t go for phony growth,” he advised.
Cramer reacted to Netflix’s first-quarter results in late April by saying investors should feel comfortable buying the stock if it fell to $490. It did reach that level in mid-May and again in early June. On January 20, the stock reached an all-time high of $593.29.
Cramer also stated in April that he believes Netflix will be able to overcome disappointing subscriber growth in the first quarter due to the strength of its upcoming content releases.
He mentioned the new show lineup again on Wednesday.
“You’re betting on a great second half slate for Netflix,” he said, attempting to differentiate between companies that investors “really want to buy” and companies that “you might want to own.”
Netflix will not stop growing, according to Cramer, who emphasized the opportunity in international markets. However, he claims that there is now real competition from Disney+ and other streaming services such as HBO Max, which would join the rest of AT&T-owned WarnerMedia assets that will be merged with Discovery in a deal expected to close in the middle of next year.
“I think the competition, which I have been dismissing, has finally caught up,” Cramer said, comparing Netflix’s dominance in the streaming landscape to Amazon Web Services’ dominance in cloud computing, where rival offerings from Alphabet’s Google Cloud and Microsoft’s Azure have emerged as real players.
“I’m just trying to explain why [Netflix] is a hold rather than a buy,” Cramer explained.
Apple Stock (AAPL)
The device upgrade rate in the telecom giant’s retail postpaid connection category increased to 4.6 percent in the second quarter, up from 3.7 percent a year earlier and 4.3 percent in the first quarter. The figure represents the percentage of the company’s subscriber base that upgraded their phones during the quarter.
“It has been declining for many years. According to Walter Piecyk, partner and analyst at LightShed Partners, “Apple refers to this as the lengthening of the product cycle.” “A higher upgrade rate indicates that people are beginning to upgrade more quickly. In Apple speak, this means shortening the upgrade cycle. This simply means that there will be more phone sales.”
Apple has stated that it is in a new iPhone “super cycle,” which is being driven by the latest 5G models, which provide consumers with access to improved, faster wireless networks provided by carriers.
The pandemic boosted Apple’s business as consumers and businesses purchased computers to work and entertain themselves at home. Many people expect the momentum to continue as the global economy reopens. Next Tuesday, the tech behemoth will report earnings.
Verizon announced on Wednesday that approximately 20% of its wireless phone customers had upgraded to a 5G device.
“This trend is ahead of Wall Street expectations, and the 5G transformation has clearly benefited Apple in recent quarters,” said Dan Ives, managing director of equity research at Wedbush Securities. “Verizon, in particular, has done an admirable job on 5G build-out and branding, which directly benefits Apple and its 5G ambitions, which appear to be shifting into high gear with the September release of the iPhone 13.”
Ives has an outperform rating on Apple and a 12-month price target of $185, implying a 27 percent increase from current levels. This year, the stock has risen nearly 10% to around $145.
Apple reported double-digit growth in all of its product categories in the first quarter, with its most important product line, the iPhone, up 65.5 percent year on year.