GO
Loading...

Knee-deep in earnings, Cramer finds common thread

Jim Cramer believes corporate earnings contain some of the best insights available to an investor.

Therefore, it comes as no surprise that as the deluge of quarterly reports washed over the Street these past weeks, the "Mad Money" host sifted through the results with a fine tooth comb.

Although Cramer found a great deal of company specific information extremely relevant, he also found a common thread among many reports. And he was troubled by it.

Those concerning reports and Cramer's proprietary insights follow:

Jason Butcher | Cultura RM | Getty Images

eBay

The eBay report almost brought Cramer to tears. Although eBay delivered quarterly earnings and revenue that surpassed analysts' estimates on Tuesday, Cramer says "the monumental decline in terms of auctions and the once fast growing Stubhub sent chills down my spine."

"It's pretty obvious to me, that an auction value decline of 9%, is going to lead in some spend to get that thing going again. Also, the "material deceleration" at Stubhub because of "competitive dynamics" sounds like a big problem."

Supermarkets

Commentary from the sector suggests to Cramer that the industry may be changing very rapidly in an attempt to leverage the organic and natural food trend

"So many companies want to take on Whole Foods and its once dominant position that I don't think margins can't stay the same for WFM. Personally, I wouldn't want to own Fresh Market or Fairway under these circumstances."

Athletic apparel

Cramer suspects that Under Armour's interest in becoming the number one athletic apparel maker could be good for consumers but bad for investors.

"UnderArmour is going after rival Nike, not only with technology-infused clothing, but also with price. In this kind of environment, I can only imagine what happens to a niche athletic apparel maker such as Lululemon. Personally, I wouldn't go near LULU."

Spirit Airline

Although Cramer believes Spirit stock is cheap on a relative basis, it may become cheaper.

"I was on the Spirit Airlines conference call yesterday and while I considered the quarter excellent, a major topic in the Q&A was potential competition from discounter Frontier. No thank you!"

Twitter

Cramer worries that Twitter must spend a whole lot of money, simply to fend off the competition.

"Go listen to the Twitter earnings call. That company's spending like crazy to protect its franchise. I had no idea that it even had to do that until its lackluster conference call last night. Too much spend, not enough revenue growth."

Software as a service

Not only has the market turned against many stocks in this sector, especially those that are not yet profitable, but Cramer believes big tech is about to throw another monkey wrench at investors.

"The software as a service companies have experienced decent margins but you have to wonder how long that can last when all Oracle, IBM and Microsoft seem to want to talk about is their suite of cloud products. I think all three companies mean it when they say they are storming the cloud. "

-----------------------------------------------------------------
Read more from Mad Money with Jim Cramer
How similar is this market to 2000?
Under Armour takes NYC by storm
Could this pullback make a terrific entry point?
-----------------------------------------------------------------

Looking at all these quarter reports, Cramer believes there's a common theme. "Companies have to spend considerably to compete, and that's not what the market wants to hear right now." Quite frankly, Cramer thinks the development couldn't be happening at a worse time. "It's not what the market needs with the Nasdaq threatening to roll over the play dead. It's an absolute anathema to what the market wants. But, as long as we know it's out there, we can handle the short-term pain a lot better, or at least understand how the game has changed."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.

Mad Money Moments

Cramer's New Book