Tesla stock (TSLA)
Tesla shares rose about 1% in premarket trading after Cramer spoke on “Squawk on the Street.”
As Wall Street digested Tesla’s better-than-expected earnings of $1.45 per share, the stock fell 1.95 percent to $644.78 per share. Revenue of $11.96 billion also exceeded expectations.
“Elon Musk put an end to the magic yesterday. “He sounded like another car company, just another car company making a few more cars,” Cramer commented.
“I’m saying these things because, you see, the stock is up $6,” Cramer explained, referring to the premarket gain. “It isn’t $60. It has not increased by $600. It used to be that if he mentioned the magic, he’d be charged… [up] $60. Instead, he’s talking about earnings and how they’re being harmed by a chip shortage,” Cramer said, adding, “Manufacturing is difficult.”
Tesla’s market value surpassed $600 billion on Tuesday morning, making it by far the most valuable automaker in the world. In comparison, Ford is worth approximately $54 billion, while General Motors is worth approximately $79 billion.
Ford and General Motors both sell far more vehicles than Tesla.
Stocks, on the other hand, are forward-looking assets, with prices based on projections of future cash flows and other financial metrics.
In Tesla’s case, investors have high expectations for the company, which is reflected in its valuation, as global sales of electric vehicles increase. Tesla has been a category leader for years, and some argue that the company should be viewed as more of a technology play than a traditional automaker.
“I keep coming back to the idea that you never want Tesla to be just another car company because the magic is lost,” Cramer said on Tuesday.
Cramer praised Musk a year ago as a “big thinker” who “makes us look like Lilliputians,” adding that “this man is selling technology.” Cramer first became optimistic about Tesla in late 2019.
Morgan Stanley auto analyst Adam Jonas, for example, explained in a interview earlier this month that potential high-margin software revenue, not just vehicle sales, was central to his $900 price target for Tesla. Investors value recurring software revenue at a higher multiple than they do car sales.
According to Cramer, Tesla’s earnings call was a fairly routine affair when compared to previous quarters, as Musk and management discussed the effects of the semiconductor crunch that has hampered the global auto industry. Tesla’s progress on new factories in Germany and Texas was also discussed during the call.
“In the end, goals were set higher. [The quarter] was well received. They’re making a lot of cars and would’ve been able to sell a lot more cars if they had more availability, according to the “Mad Money” host.
“What I didn’t like about it is that it’s what all the car companies will say. The quarter was devoid of wizardry,” Cramer added.
During the call, Musk also stated that he will most likely not participate in future earnings calls unless he has “something really important” to communicate.
AT&T stock (NYSE: T)
Analyst Joseph Bonner downgraded the stock’s 12-month outlook to hold from buy late Monday, saying the company’s transformation could result in a dividend cut in the near term. AT&T currently has a dividend yield of around 7%, which is significantly higher than the average for major US stocks.
“While management has assured investors that AT&T will maintain a dividend in the ’95th percentile’ of companies, the math simply does not work when the DirecTV and WarnerMedia spinoffs are factored in. As a result, we will wait and see as the company restructures through large divestitures while also implementing its costly 5G network buildout,” Argus.
AT&T sold a stake in DirectTV this year and agreed to spin off WarnerMedia into a merger with Discovery.
In an earnings call earlier this month, CEO John Stankey stated that the transactions were designed to “balance long-term value creation with an attractive dividend.”
Argus maintains a positive long-term outlook on the company despite the downgrade.
“On the plus side, we believe AT&T’s wireless Mobility business is performing well in the aftermath of the pandemic, and that management is correct to focus on this business,” the note stated.
Argus does not currently have a price target for the stock. AT&T’s stock has dropped nearly 2% year to date.
Alphabet (NASDAQ: GOOGL)
Alphabet shares are up 53% this year, compared to the S&P 500′s 18% gain, but JPMorgan says the stock is still one of its top ideas for 2021.
Analysts led by Doug Anmuth cited four key reasons for the stock’s overweight rating: re-opening will continue to be a tailwind for Search and YouTube ads, overall margins will “remain meaningfully above” pre-pandemic levels, cloud growth will “remain solid” at more than 40%, and a larger capital return program is likely on the horizon.
The firm has a $2,875 price target on the stock, which is 7% higher than where it closed Monday after reaching a new all-time high during the session.
According to StreetAccount, Wall Street analysts expect the company to earn $19.24 per share on $56.19 billion in revenue. Alphabet’s earnings per share were 66.2 percent higher than what the Street expected in the first quarter.
Bank of America named Alphabet its top FANG pick in a note titled, “Expect another upside quarter as the economy kicks into gear,” citing its exposure to the cyclical recovery. The stock has a buy rating and a $2,755 price target from the firm. However, the company warned that it could be a “as good as it gets quarter.” In other words, tougher comps could harm the stock in the long run.
According to FactSet data, no Wall Street analyst has a sell rating on Alphabet. Currently, 43 firms rate the stock as a buy, while two rate it as a hold.
Here are some other analysts’ predictions for Alphabet’s earnings:
Evercore ISI recommends a buy with a $2,825 target.
“Our channel checks indicate that the strength in Online Ad demand has persisted, and we now believe that
Street estimates of $44.40 billion (+49 percent Y/Y) in Ad Revenue are in the ballpark. We believe that Google’s exposure to Travel and strong positioning in Local (i.e., physical stores) will provide tailwinds for ad revenue growth in the event of a reopening scenario.”
Cowen: Outperform, target of $2,900
“We are bullish for 2Q21, as GOOG benefits from tailwinds related to 1) ad market recovery, 2) cloud momentum, 3) elevated eCommerce, and 4) travel vertical recovery. While comps will be more difficult in 2H21, we expect strong growth as the post-pandemic reopening continues.”
Bernstein is overweight, with a $3,000 target.
“As always, Google’s fortunes are based on Search performance, and we anticipate sequential growth to be led by the continued recovery of travel (surprise) and the faster-than-expected return of Google Maps to offset any softness in retail-related searches.”
Baird: Overweight, target of $2,700
“The rate of recovery in travel/recreation ad spending trends; ongoing growth in Google Shopping/e-commerce across the platform; an accelerating shift toward online video ads/CTVs; GCP growth/margin trajectory; IDFA impact (e.g., shift to Android); and, of course, top investment priorities, margin trend, and capex outlook.”
Monness Crespi Hardt: Buy, target price of $3,000
“We believe Alphabet is well positioned for a continued recovery in digital ad spending in 2021; however, we expect antitrust investigations to continue with vigour and consumer privacy initiatives to expand.”
Credit Suisse expects outperformance, with a $3,350 target.
“Given Google’s global reach, it is worth noting that nearly all advertising sectors are on track to outperform our expectations for 2Q21. While overall ad budget recovery drove recent results, we are shifting our attention to the more important product-driven contributors to ad volume/pricing growth in 2H21 and beyond.”
MKM Partners: Buy, target price of $2,500
“For 2H, Google has three advantages: Search Y/Y comps are relatively “less tough” vs. peers because Google was slower to recover in 2H:20; Search should have relatively less noise or disruption associated with Apple’s IDFA changes vs. peers; and Search tends to skew more towards “late-cycle” recovery plays vs. peers (e.g. travel/hospitality).”